IAG lifts 2015 profit goal on BA growth, Iberia recovery

Friday 15 November 2013 18.45
IAG raises its profit targets for 2015
IAG raises its profit targets for 2015

International Airlines Group has raised its 2015 profit target, showing confidence in the growth of transatlantic travel and turnaround plans for its Spanish airlines.

The airline continues to buck the trend in a sector hit by weak European markets and high fuel prices.

IAG, which owns British Airways (BA) and Spain's Iberia and Vueling, today raised its 2015 operating profit goal to €1.8 billion from €1.6 billion.

It cited savings from integrating budget carrier Vueling, which it took control of this year, improved margins at BA and a recovery at Iberia.

Analysts had on average pencilled in a 2015 operating profit of €1.63 billion, according to Thomson Reuters data.
              
IAG's optimism contrasts with other European airlines such as Lufthansa and Air France-KLM which have had to cut jobs and rein in growth plans to cope with rising costs and weak economies.
              
IAG, Europe's third biggest airline group by market value, has been helped by the fact BA undertook a restructuring ahead of many rivals, as well as its strength in transatlantic travel, which has proved more resilient than many shorter-haul routes.
              
Last week, IAG reported a doubling in first-half profit and said passenger traffic rose 8.9% year-on-year in October.
              
The group said today it expected €650m of cost savings by 2015, helped by the introduction of new, more fuel efficient planes, as well as moves to outsource administrative work and renegotiate ground handling contracts at seven European airports.
              
That is 16% up on the €560m of cost savings it forecast at the same time last year.
              
Spanish flag carrier Iberia became unprofitable in all markets, including long haul, following its merger with BA in 2011. IAG is in the process of revamping the carrier, which was hit by competition from low-cost airlines and high-speed trains during five years of harsh economic conditions in Spain.
              
Iberia must cut staff by 3,141 before 2015, and reduce average salaries and capacity by 15% and 14% respectively as part of IAG's restructuring plan.
              
Iberia, which is due to make its first annual profit this year since 2010, has cut 1,737 employees so far.
 
BA, meanwhile, is performing consistently well, boosted by strong transatlantic traffic out of its London Heathrow base. IAG increased BA's 2015 operating profit target to £1.3 billion from £1.1 billion.
              
The airline group led by chief executive Willie Walsh also said it was heading for a business model that could sustain underlying revenue growth of 2-3%, excluding Vueling, beyond 2015.
              
It added it was aiming for earnings per share (EPS) of €0.54 by 2015 and capital spending of €2-2.2 billion a year. Analysts expect earnings per share of €0.14 this year and spending of €1.9 billion, according to Thomson Reuters data.
              
IAG last week said it was targeting 2013 operating profit of around €740m, up from a loss of €68m last year.