Operating profit at Aer Lingus owner IAG plummets 60%

Boss Willie Walsh said loss was mainly driven by fuel costs and timing of Easter

Willie Walsh, chief executive of IAG.

Willie Walsh, chief executive of IAG.

 

Aer Lingus’s owner could allocate more new aircraft to the Irish airline to aid further expansion in coming years.

Rising fuel costs and other factors left operating profit at International Airlines’ Group (IAG), which owns Aer Lingus and British Airways, trailing by more than 60 per cent during the first three months of the year, results published yesterday show.

Speaking after IAG published the figures, chief executive Willie Walsh indicated that the group could allocate extra new craft to Aer Lingus in 2020 and 2021 to follow the 12 new Airbus A321 long-range planes that the airline will begin receiving this year.

Aer Lingus will use the additional new craft to further expand its transatlantic services, which have been driving the Irish carrier’s growth for the past five years.

IAG saw operating profit fall to €135 million during the quarter, a decrease of €205 million on the same period in 2018.

The group blamed fuel costs which rose almost 16 per cent, excess capacity in the market and the fact that Easter fell in late April, after the quarter ended, for the fall in profits.

Elsewhere, passenger unit revenue for the quarter was down 0.8 per cent, while non-fuel unit costs before exceptional items for the quarter were up 0.8 per cent.

Fuel unit costs for the quarter were up 15.8 per cent, and net foreign exchange operating profit impact for the quarter was adverse €61 million.

The company had cash of €7.5 billion at March 31st, which was broadly in line with the same point last year.

IAG said profit after tax before exceptional items was €70 million, which was a drop of 62.6 per cent. Adjusted earnings per share were down 57.5 per cent.

Profitable

Mr Walsh welcomed the fact the company remained profitable during the period.

“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 €135 million,” he said.

IAG also published its traffic statistics for April. It carried 9.9 million passengers during the month, which was up 7.3 per cent on the same month last year.

In terms of the year to date, it carried 34.2 million, which was up 6.5 per cent from 32.1 million for the same period last year.

In Aer Lingus’s case, the airline carried 997,000 passengers in April, which was up 9 per cent from 915,000 in the same month the year before.

In terms of the year to date, Aer Lingus’s passenger numbers totalled 3.2 million, which was up 7.9 per cent on the same period last year.

In terms of outlook, IAG expects its 2019 operating profit before exceptional items to be in line with 2018 at current fuel prices and exchange rates.

Passenger unit revenue is expected to be flat and non-fuel unit cost is expected to improve. “We expect passenger unit revenue at constant currency to improve for the remainder of the year,” said the company.

IAG announced that it did not intend to make an offer for Norwegian Air Shuttle ASA and consequently sold its 3.93 per cent shareholding.

British Airways orders

IAG placed an order for 18 Boeing 777-9 aircraft, plus 24 options, for British Airways, to replace 14 Boeing 747-400s and four Boeing 777-200s between 2022 and 2025. Each aircraft will be fitted with 325 seats in four cabins.

The company said fuel costs increased 22.8 per cent from higher average fuel prices net of hedging, mainly due to hedging profits in 2018 not repeated in 2019. The introduction of new fleet “continued to drive efficiencies”.

Supplier costs increased by 8.6 per cent. Ownership costs increased 6.2 per cent on the previous year, while the number of aircraft in service grew from 551 to 582. Ownership costs on a unit basis were broadly in line with 2018.