Willie Walsh, the chief executive of Aer Lingus and British Airways owner IAG has said he plans to retire within the next two years.

"I have indicated that I'm clearly getting closer to retirement... the board has been working for some time, as you would expect, on succession planning," Walsh said at IAG's annual capital markets day.

Mr Walsh, a former Aer Lingus chief executive and pilot, plans to retire before his sixtieth birthday on October 25, 2021, he said.

"I still love what I do, but my intention is to be retired within the next two years."

Mr Walsh made his comments while speaking to analysts during a capital markets briefing.

The company also scaled back its three-year capacity growth forecast, hitting its earnings per share outlook but protecting its margins in the face of a weak global economy and a highly competitive marketplace.

"We're well-prepared for anything that comes at us. We've seen a softening economic environment, and therefore we're adjusting our growth plans," Mr Walsh said.

The airline industry has struggled to maintain margins in the face of industry overcapacity and a muted economic outlook, which has produced fierce competition over ticket prices.

Germany's Lufthansa has said slower capacity growth at rivals was providing relief, with Ryanair set to grow at its slowest rate in seven years in the year to March 31, 2021.

"We still see growth ... but we're moderating our growth. Even in that environment ... we will be generating very significant amounts of cash to be able to ensure that our shareholders get rewarded for their faith," Walsh added.

IAG, which has cut its outlook for capacity growth in 2019 as the year has progressed, estimated available seat kilometres will grow by 3.4% a year between 2020 and 2022. It had previously forecast 6% annual growth for 2019-2023.

The owner of Iberia, Aer Lingus and Vueling, said the capacity growth cut would lower its forecast for earnings per share (EPS) growth to 10%+ a year from 12%+ a year.

However, it reiterated its targets for operating profit margins of 12-15% and return on invested capital, and shares recovered from a steep early fall to trade just 0.2% lower.

Chief Financial Officer Steve Gunning said IAG had probably had too much capacity in the market in first quarter, adding that there would be no growth at Vueling next year.

IAG has also taken a hit from pilot strikes at British Airways, which has knocked its profit outlook, but it said the forecasts for capacity growth were not adjusted for these.

Although the dispute over pay remains unresolved, there is no further industrial action scheduled and British Airways CEO Alex Cruz said that people could look forward to Christmas.

IAG's strategy update comes after it said on Monday it would buy Spain's Air Europa to boost its presence on routes to Latin America and the Caribbean.

IAG said it expected the deal, which will be funded through external debt, to close in the second half of 2020 and for it to add to its earnings in the first full year after closure.