IAG profits jump – but Iberia stutters

BRITISH Airways’ parent group IAG has reported a jump in annual profits.

The company, which also owns Spain’s Iberia, yesterday announced pre-tax profits of £425.6m in the year to December 2011. However, it said its underperforming Spanish unit and high fuel costs would dent earnings this year. The company said the improvement in 2011 was against the backdrop of a tough year in 2010.

Chief executive Willie Walsh said: “BA is making money and Iberia is losing money.

“The Spanish economy is weak and operating costs at Iberia are too high, unacceptably so, but this is being tackled

“The challenges Iberia faces are similar challenges BA faced, so we know the problems we face but the Spanish economy will continue to be weak for some time.” IAG said its fuel costs rose nearly a third in 2011 to just over €5bn but that it managed to cut non-fuel costs by 5.6 per cent.

“The company’s fuel bill will rise by another €1bn in 2012 – it more than covered the extra fuel in 2011 and we’re optimistic that it can again in 2012,” said Deutsche Bank analyst Geoff van Klaveren, adding that demand in London remained strong with encouraging trends in long-haul premium, particularly on North Atlantic routes.

IAG has agreed to buy Lufthansa’s British unit bmi for £172.5m to get hold of its coveted runway slots at London’s Heathrow airport. Walsh said he was confident the deal would be cleared by competition regulators.