IAG profits ascend above forecasts as passenger numbers rise
International Consolidated Airlines beat profits forecast for the second quarter as the British Airways and Iberia owner enjoyed a 5.6% increase in passengers.
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Second quarter operating profit of $530m was well up on forecasts of €494m and 39% higher than the €380m in the same period last year.
This revenue down 1.2% at constant currencies to €5.66bn. The top line was 11.2% higher at the statutory level.
For the first half of the year, operating profits were up 141% to €555m. Basic earnings per share soared to €0.158 from €0.042.
Passenger unit revenue rose 5.0% in the quarter, but was down 6.6% at constant currency as fuel unit costs for the quarter increased 3.0% but was 12.0% lower at constant currency.
Chief executive Willie Walsh said: "We said previously that profit improvement would be slower in the second quarter and we are on track to reach our full year targets.
"We continue to take cost out of the business, with both employee and supplier unit costs down at constant currency, and improvements in productivity levels."
Speaking later, Walsh said the group did not support the building of a new runway at London's Heathrow Airport due to the costs the airline would incur.
"We think the costs associated with the third runway are outrageous and certainly from an IAG point of view we will not be supporting it and we will not be paying for it,” he said.
Read more: IAG CEO Walsh opposes Heathrow expansion
Current non-fuel unit costs were 3.25% higher for the quarter, though down 6.9% at constant currency.
Cash stood at €6.4bn at the 30 June period end, up 30%, with adjusted gearing down eight points to 43% but no interim dividend was proposed.
Analysts at Nomura said while the cost performance was impressive, it expected some market concerns over the reducing revenue per passenger (passenger RASK) trend that has moved from -0.8% in 1Q to -6.6% in 2Q.
RBC Capital Markets pointed out that, as winter schedules settle, there was "little sign of higher growth from BA, while into 2016 Virgin's Heathrow seat count looks set to shrink next summer, and effectively BA is removing ~33-44 seats from each of up to 18 Boeing 747s it reconfigures to a higher business seat mix".
IAG shares were down 1.94% to 531.5p by late afternoon on Friday.