News Column

IAG Loss Narrows As Iberia Turnaround Continues

May 8, 2014

Steve McGrath

LONDON (Alliance News) - International Consolidated Airlines Group Friday predicted that its operating profit will rise in 2014, after its operating loss almost halved in the first quarter as the continued restructuring of Iberia drove down losses at the Spanish airline.

The parent of British Airways and Spanish airlines Iberia and Vueling said it now expects its 2014 operating profit to be at least EUR500 million above the EUR770 million it booked in 2013. It reiterated that it expects revenue to remain relatively flat, but cost cutting will push up its profit margin.

IAG has been restructuring Iberia since it was created through the merger of the Spanish airline and British Airways in 2011. Legacy issues that meant Iberia's staff costs were comparatively high in an airline industry that has been seeking to reduce those costs over the last decade.

The group's operating loss before exceptional items narrowed to EUR150 million in the first quarter of 2014, compared with a loss of EUR278 million a year earlier, as the loss at Iberia narrowed to EUR111 million, from a loss of EUR202 million. The group loss after tax was EUR184 million, narrowed from EUR630 million in the first quarter of 2013.

"The airline continues to benefit from restructuring and these figures don't reflect the impact of recent pay and productivity agreements which took effect in April. While the restructuring remains work in progress, Iberia is gradually resuming some routes including longhaul services to Santo Domingo and Montevideo," IAG Chief Executive Willie Walsh said in a statement.

The operating loss at British Airways narrowed to EUR5 million, from a loss of EUR72 million in the first quarter of 2013. IAG cited cost cutting and the addition of more fuel efficient Airbus A380 and Boeing 787 planes to BA's fleet.

Vueling made an operating loss of EUR30 million.

Airlines traditionally make low profits or losses during the winter months, earning most of their profits and revenues in the peak summer travelling season.

IAG's revenue rose to EUR4.20 billion in the first quarter, from EUR3.94 billion a year earlier, while passenger revenue rose to EUR3.66 billion, from EUR3.35 billion, mainly due to the addition of Vueling, which IAG bought in May last year.

The group's fuel costs were down 8.9% on the year in the first quarter, but non-fuel costs rose 3.8%.

In a separate statement, IAG said group traffic measured in revenue passenger kilometres increased by 18.0% on the year in April. The rise was 9.5% when Vueling is excluded. Group capacity measured in available seat kilometres rose by 16.6%, or 7.6% excluding Vueling. Group premium traffic rose 4.0% on the year.

Most airline have been reporting big increases in traffic in April, mainly because Easter fell in that month this year, but in March in 2013.

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Source: Alliance News

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