Friday 10 May 2019 8:26 am

Fuel and currency costs hit profit at British Airways owner IAG

Profits shrank at British Airways’ owner in the first three months of the year as fuel costs and other headwinds hit the airline, it revealed today.

But shares rose as International Airlines Group (IAG) said full-year profits would replicate 2018’s success, when income rose almost 10 per cent to €3.2bn (£2.76bn).

Read more: British Airways owner International Airlines Group profits soar

The figures

Profit before tax fell 61.3 per cent to €86m year on year between January and March 2019, International Airlines Group revealed.

However, passenger revenue rose 5.2 per cent to €4.6bn , helping push total revenue up almost six per cent to €5.3bn.

Passenger unit revenue also slipped 0.8 per cent, while fuel costs rose 22.8 per cent as higher oil prices hurt the flyer.

Currency fluctuations also cost IAG €61m, though it improved net cash to €7.5bn, up €1.2bn on the end of 2018.

Why it's interesting

IAG blamed Easter, fuel costs and market capacity for its early 2019 stumble.

However, shares still flew higher this morning, climbing up 4.5 per cent to 511.40p.

David Madden, analyst at CMC Markets, said that may be because IAG is better prepared for the headwinds than budget rivals Ryanair and Easyjet.

“IAG are in a better position to weather the storm of higher fuel costs. IAG have proved to be more reliable than the likes of Ryanair in terms of flights actually taking-off, and that will stand to the airline,” he said.

“Brexit is hanging over the stock, and now that the UK’s exit from the EU has been deferred to possibly late October, some of the potential pain might be deferred too,” Madden added.

IAG told investors that it would not see a full-year profit jump, but said income would remain in line with 2018 despite the fuel and currency obstacles.

“At current fuel prices and exchange rates, IAG expects its 2019 operating profit before exceptional items to be in line with 2018 pro forma,” it said.

“Passenger unit revenue is expected to be flat at constant currency and non-fuel unit cost is expected to improve at constant currency.

“We expect passenger unit revenue at constant currency to improve for the remainder of the year.”

Read more: British Airways settles long-running pensions battle with trustees

What IAG said

Chief executive Willie Walsh said: “In a quarter when European airlines were significantly affected by fuel and foreign exchange headwinds, market capacity impacting yield and the timing of Easter, we remained profitable and are reporting an operating profit of €135m.

“At constant currency, non-fuel unit costs were down 0.6 per cent while passenger unit revenue decreased by 1.4 per cent.”