British Airways parent IAG swings back to black after Covid gloom

IAG forecast earnings could jump by about 90% in 2023 as it reports its first annual profit since the onset of the pandemic

Chief executive Luis Gallego says IAG is confident of robust forward bookings but remains conscious of global uncertainty. PA

British Airways parent company IAG has returned to profit as it rebounds from Covid-enforced lockdowns that ravaged large sections of the travel and airline industries.

IAG made an operating profit before exceptional items of €1.26 billion (£1.1 billion) in 2022, a swing from a loss of €2.97 billion (£2.62 billion) the year before, and all of its airlines were profitable last year.

Chief executive Luis Gallego said 2022 was “a year of strong recovery, driven by sustained leisure demand and markets reopening”.

IAG, reporting its first annual profit since the pandemic, forecast that earnings could jump by about 90 per cent in 2023.

Mr Gallego said IAG, which also owns Iberia, Vueling and Aer Lingus, was confident of robust forward bookings but remained conscious of global uncertainty.

“We are transforming our businesses, with the intention of returning IAG to pre-Covid levels of profit within the next few years, through major initiatives to improve customer experience and operational performance,” he said.

“Our unique group structure allows us to maximise revenue and cost synergies, and invest capital to achieve strong returns while continuing progress towards net zero by 2050.”

The group agreed on Thursday to pay €400 million to Spain's Globalia for the remaining 80 per cent of Spain-based Air Europa that it did not already own, a deal aimed at expanding its position in the Latin American market.

“With the acquisition of Air Europa now agreed but subject to regulatory and other approvals which could take around 18 months, we are intending to welcome another leading airline to the group,” said Mr Gallego.

“This acquisition will enable us to grow Madrid as a hub, offering a gateway to Latin America and beyond, with benefits for customers, employees and shareholders.

“I would like to thank the teams across IAG for their exceptionally hard work in addressing the challenges of ramping up the operation throughout the year.”

Even if IAG meets a forecast 2023 operating profit in the range of €1.8 billion to €2.3 billion, it would still be well below pre-pandemic levels of €3.3 billion in 2019.

IAG shares have soared 30 per cent since the start of 2023.

“The star of the show is a renewed deal for Air Europa,” said Alex Irving, an analyst at Bernstein Research.

“While terms are not as favourable as the group acquires a more indebted business, we still see this as the right strategic move for the company and accretive to medium-term earnings.”

Fares could come down along with unit costs once the group reaches 100 per cent of 2019 capacity, Mr Gallego said.