International Airlines Group 2018 Half-Year Results

IAG has released its financial results for the first half of 2018.

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International Airlines Group - Aer Lingus, BA, Iberia, Vueling
International Airlines Group

International Airlines Group, the parent company of Aer Lingus, BA, Iberia, LEVEL and Vueling, has yesterday, Friday 3 August 2018, released its half-year results for 2018.

The numbers contain few surprises. IAG reported an operating profit of €1,115m, compared to €950m for the previous year.

Air France-KLM reported a first half operating profit of €228m compared to €553m for the previous year. Lufthansa Group reported an operating profit of €967m compared to €987m for the previous year.

There are familiar themes for airlines in Europe, namely increased fuel prices and intense irritation at disruption caused by Air Traffic Control delays.

Such is the importance of expectations, IAG’s share price actually fell after its results were announced, whereas Air France-KLM’s increased as revenue held up in spite of prolonged industrial action at Air France.

IAG also provided an update in its presentation to analysts on a number of current issues. Arguably, it is more interesting for what wasn’t said, rather than what was said:

IAG & Norwegian

There is no progress at all to report on IAG’s bid for Norwegian.

IAG CEO Willie Walsh indicated that IAG would sell its shareholding in Norwegian as it has no intention in being a long-term minority investor.

That said, I would not infer that this means IAG is going to give up on Norwegian easily. Whilst Willie Walsh has said he would not countenance a hostile take-over bid, I expect IAG will sit this one out for a while.

Transatlantic Routes

IAG was keen to talk up the success of new transatlantic routes.

The performance of BA’s new route from London Heathrow to Nashville was described as “stunning”. New Aer Lingus routes from Dublin to Philadelphia and Seattle are reported to be performing well.

Aer Lingus CEO Stephen Kavanagh has also separately told reporters that Aer Lingus is expected to announce its first Airbus A321 Long Range transatlantic routes from Dublin in the next few weeks. The performance of this aircraft will strongly influence whether BA and Iberia order the aircraft.

There’s no update at all on Aer Lingus joining the transatlantic joint-venture with American Airlines and BA. There were no questions on IAG’s response to the enlarged Air France-KLM, Delta and Virgin Atlantic joint-venture which Air France-KLM confirmed this week is planned to launch on 1 April 2019.

Latin American routes are also reported to be performing well.

Very little was said about Asia-Pacific routes and, in the absence of new airlines joining the group, IAG is likely to remain heavily geared towards transatlantic traffic.

Other Developments

In terms of other developments, BA seems to have largely recovered from Boeing 787 Dreamliner issues so schedules should largely return to normal from the end of August.

IAG reiterated that it will not support a third Heathrow runway at any price and will lobby the Civil Aviation Authority to ensure costs are controlled.

Nothing was also said about a prospective aircraft order which was raised during first quarter results.

The next big strategy update for IAG and its member airlines is likely to be its annual Capital Markets Day in early November.

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