Higher fuel costs and volatile currency movements have failed to hold back British Airways-owner International Consolidated Airlines (IAG) after operating profit rose 7.3% to €2.58bn.
Driving the strong performance was a 7.7% jump in passengers and a 2.7% increase in passenger unit revenue, when currency fluctuations are stripped out, in the nine months to 30 September. Essentially has been able to push through higher fares.
The airline’s strongest performance was in North America, Europe and domestic markets.
Fuel costs, which soared 13.5%, were partially offset by hedging, while the impact from translating financial results from sterling to the euro hit operating profit by €20m.
Shares in International Consolidated Airlines are flying 2.4% higher at 601.6p as the robust results are in stark contrast to the profit warning recently served up by Ryanair (RYA).
‘MINOR TRIUMPH’
AJ Bell investment director Russ Mould says the results are a ‘minor triumph’ with profit ahead of analysts’ forecasts thanks to a cap on non-fuel costs and higher fares.
‘The company has hedged its exposure to fuel prices and this combination of factors should enable it to join a select grouping of airlines which will grow profit in 2018,’ comments Mould.
The airline currently expects operating profit to increase by €200m from €2.95bn in 2017.
Stockbroker Davy notes the returns delivered by the different airlines in IAG's roster.
'At 16.1%, ROIC (return on invested capital) in the last four quarters remains above trend - with Aer Lingus leading the pack at 27.9% followed by BA at 16.7%, Vueling at 13.4% and Iberia at 12.3%.'
