British Airways owner International Consolidated Airlines (IAG) delivers an impressive first half performance despite an IT meltdown over the second May bank holiday weekend. The shares are up 0.5% to 591p in response.

IAG says it expects operating profit in 2017 to show a double-digit improvement year-on-year. Consensus is pencilling in profit growth of 10.8%.

The computer system crash that disrupted thousands of passengers cost the company €65m but first half operating profit was still up to €805m to 30 June 2017. This was due to a later Easter, better passenger yields (a measure of average fare paid per mile, per passenger) and lower unit fuel costs.

Overall, operating costs are up 11.2% excluding currency fluctuations - although this was lower than an 11.7% rise over the same period last year when the airline was affected by air traffic strikes.

POTENTIAL RISKS ON THE HORIZON

Cantor Fitzgerald’s Robin Byde notes profit for the six months of the year beat consensus expectations by 9% but he is wary over a lack of visibility and several potential risks facing the business.

These include demand for short and long-haul passenger and cargo services, capacity yields, fuel costs, operational disruption and the impact of Brexit negotiations.

Davy Research analyst Stephen Furlong is more optimistic, noting the company is continuing ‘the positive momentum from the beginning of the year.’

Furlong hints at a potential hike in his estimates for the second half of the year.

International Consolidated Airlines currently trades on a forecast 6.1 times earnings per share in the year to 31 December 2018.

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Issue Date: 28 Jul 2017