The Wall Street Journal
By Robert Wall
Updated Oct. 31, 2014 6:00 a.m. ET
LONDON—British Airways
parent International Consolidated Airlines Group SA on Friday raised its
full-year earnings guidance as a turnaround at Spanish unit Iberia
spurred a 30% rise in third-quarter operating profit.
The company said it
expects operating profit to rise by between €550 million ($878 million)
and €600 million this year, having previously projected a €500 million
rise from last year’s €770 million.
Operating profit in the
third quarter was €900 million, up from €690 million a year earlier. Net
profit rose 3.1% to €598 million on an 8.5% rise in sales to €5.87
billion.
Shares rose more than 3% in early London trading.
IAG’s results contrast
with those of rivals Air France-KLM SA, Europe’s largest carrier by
traffic, and Deutsche Lufthansa AG. Both warned of overcapacity this
week, and Lufthansa on Thursday cut its profit forecast for next year.
“We are in a completely
different position,” IAG Chief Executive Willie told reporters Friday.
“We addressed challenges that they are facing up to much earlier than
they did.”
Air France-KLM and
Lufthansa both have faced labor unrest amid efforts to cut costs. IAG
faced similar disruptions last year as it tried to stem losses at
Spanish unit Iberia. The airline reached an agreement with labor groups
for deep structural changes, including more than 3,000 job cuts.
Iberia’s operating profit
more than doubled in the third quarter to €162 million, while British
Airways delivered an operating profit of €607 million, 27% higher than
last year’s level. Barcelona-based discount unit Vueling’s operating
profit was little changed at €140 million.
IAG is benefiting from
strong economic growth in the U.S.—crucial to its trans-Atlantic
routes—and in the U.K. Mr. Walsh said that, following its cost cuts, the
company is “growing into areas where others are retreating because they
are unable to compete effectively.”
“We see these results as
further evidence of IAG’s superior financial performance and earnings
momentum compared with its network carrier peers,” Liberum analyst
Gerald Khoo said.
Mr. Walsh said he was
“confident” the company will meet its operating profit target of €1.8
billion next year. Analysts widely expect IAG to beat that figure amid
lower fuel prices and cost cuts, and even lift the goal at a capital
markets day next week. Mr. Walsh said the airline would also provide an
update then on its dividend plans.
IAG is modernizing its
fleet to replace gas-guzzling planes with more fuel-efficient ones.
British Airways last year introduced Airbus Group NV A380 superjumbo and
Boeing Co. 787 Dreamliner long-range jets.
The company had held off
on buying new planes for Iberia until restructuring measures were
showing success. IAG last month ordered eight Airbus A330-200 long-range
jets for Iberia for delivery from next year, alongside a deal for eight
A350-900 jets to replace less efficient four-engine A340 planes.
“We continued to grow
capacity efficiently and both our non-fuel and fuel unit cost
performances were strong with the latter boosted by the introduction of
new, more efficient aircraft into our flee,” Mr. Walsh said. Still, the
carrier has trimmed its fourth-quarter growth plans to around 6%
capacity growth from about 7.5%, he said.
- Source: http://online.wsj.com
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