IAG reports 55% rise in Q2 profit as Spain's Iberia sees recovery

Friday 01 August 2014 11.12
International Airlines Group aims to increase 2014 operating profit to at least €1.27bn
International Airlines Group aims to increase 2014 operating profit to at least €1.27bn

International Airlines Group reported a 55% rise in second-quarter profit driven by a recovery at Spanish airline Iberia and signalled its confidence in the carrier with plans to renew its long-haul fleet.

Iberia, which has undergone a deep restructuring to cut staff and costs, will start receiving eight Airbus A350-900s and another eight A330-200 aircraft next year, IAG has said.

The Spanish airline swung to a second-quarter operating profit from a year-ago loss and is on track to return to profit for the full year for the first time since 2008.

"This performance shows that we are making further solid progress," IAG Chief Executive Willie Walsh told reporters.

IAG, Europe's second-largest airline by market value, stuck to its annual profit target, unlike rival former state-owned carriers Lufthansa and Air France-KLM which have both issued profit warnings in recent weeks.

The group aims to increase 2014 operating profit by at least €500m from the €770m it made last year.

Its outlook shows IAG is weathering an increasingly competitive European airline market better than peers, helped by low-cost Spanish airline Vueling which it acquired last year.

Lufthansa and Air France-KLM have said they are focusing on ramping up their presence in Europe's low-cost short-haul market, dominated by easyJet and Ryanair.

"We think this update provides relief. IAG is not immune from the pricing pressures of industry capacity expansion, but structurally it is better protected," Jefferies said in a note to clients.

Second-quarter operating profit before exceptional items rose to €380m, ahead of a company-supplied consensus forecast of €354m.

IAG said it would trim around three percentage points off capacity across its network for the winter season, mainly due to slower than expected growth on Transatlantic routes.

"We continue to see it as a growth market but we're going to adapt our capacity to better match the rate at which the market is growing," Mr Walsh said.

BA's operating profit rose 34% to €332m in the quarter, while Iberia made an operating profit of €16m versus a loss of €35m last year.

Vueling's operating profit rose 11% to €30m.

Iberia said today that it was starting to sell its stake in technology company Amadeus, held through derivatives, in a deal that will generate capital gains.