Changes to employee bonuses at British Airways owner International Consolidated Airlines (IAG) are behind a full year earnings miss.
Operating profit of €3.015bn failed to live up to expectations of €3.046bn in the year to 31 December 2017.
Shares in the airline operator shed 4.5% to 594.4p on the news.
Passenger unit revenue is more positive, up 1.5% over the same period. Lower oil prices earlier in the year provided a boost, but fuel costs started to rise in the last quarter.
Looking ahead, International Consolidated Airlines anticipates operating profit this year will rise and passenger unit revenue and non-fuel unit costs will improve.
A €500m share buyback is also on the table this year, implying the company believes its shares are currently undervalued.
Stockbroker Investec analyst Alex Paterson expects operating profit to rise 8.3% to €3.266m in 2018 and unit sales to increase 1%.
Paterson flags that International Consolidated Airlines trades on a forecast five times earnings per share in 2018. This is lower than its US peers including American Airlines, Delta and United Airlines.
Davy Research’s Stephen Furlong is impressed by the continued strong performance of Irish airline Air Lingus, flagging operating profit flew €36m higher to €269m last year, driven by 12.1% more capacity.
