IAG reports €555 million net profit for 2011

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Published: March 1, 2012

British Airways, Iberia tails. Courtesy, IAG

International Airlines Group (IAG) has reported a solid set of results in its first year as a combined entity of British Airways (BA) and Iberia (IB), with a net profit of €555 million ($ 745.5 million) and an operating profit of €407 million ( ATW Daily News, Jan. 24, 2011 ).

Net earnings rose 455% year-on-year on a pro forma basis and included 21 days of IB pre-merger results from €100 million in 2010. Operating profit increased 81% from €225 million in 2010, which was negatively affected by the volcano ash cloud and 22 days of strikes by BA cabin crew.

BA and IB recorded very different performances. The group told investors and journalists that BA posted an operating profit of £518 million ($ 611.3 million) for 2011 while IB recorded an operating loss of €98 million. BA revenue rose 17% year-on-year to £9.99 billion on a 9.8% hike in ASKs; IB revenue rose 1.4% to €4.87 billion for a 1.2% increase in ASKs.

Group revenue rose 10.4% to €16.3 billion, including an 11% hike in passenger revenue to €13.68 billion against a reported capacity rise of 7.1% to 213.19 billion ASKs. RPKs rose 7.2% to 168.66 billion; load factor inched up marginally 0.1% to 79.1%. RASK and yield were up 3.6% to 6.41 euro cents and €8.11, respectively.

IAG CEO Willie Walsh said the “performance of our airlines reflects the different markets in which they operate. The North Atlantic market remains strong, benefiting British Airways. Iberia’s challenge is its exposure to financial uncertainty in the Eurozone in a highly competitive marketplace with no-frills airlines, high-speed rail and growing competition from more efficient long-haul airlines.”

IB management is addressing its “high cost base and outdated workplace practices” among others through the launch of Iberia Express, Walsh said. The new IB subsidiary for short- and medium-haul flights will launch at the start of the IATA summer timetable initially with four Airbus 320s, despite the IB pilots’ ongoing protest ( ATW Daily News, Jan. 18 ), which costs the airline around €3 million per strike day, Walsh said. “We are fully committed to the project, and believe its benefits will far outweigh the costs.”

Walsh said the company remains confident its acquisition of British Midland International (bmi) from Lufthansa will go ahead as planned ( ATW Daily News, Dec. 23, 2011 ). The EU competition authorities were notified of the acquisition Feb. 10 and its first decision is expected March 16. The company is still in talks with LH about the disposal of bmi’s budget unit bmibaby before the deal closes.

IAG said it expects first-half operating profits to fall compared to the year-ago period because of higher fuel costs, weaker European markets and labor unrest at IB. It forecasts a fuel cost increase of more than €1 billion in the current financial year. Fuel costs for 2011 rose 29.7% to €5.06 billion while other operating costs were up just 1.1% to €10.79 billion.

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