International Airlines Group Full Year Results

IAG has provided a strategic update on its airlines following its annual results.

London Air Travel » International Airlines Group » International Airlines Group Full Year Results

Render of British Airways Boeing 777-9 aircraft
Render of British Airways Boeing 777-9 aircraft (Image Credit: Boeing)

International Airlines Group, the parent company of Aer Lingus, BA, Iberia, LEVEL and Vueling announced its annual results today, Thursday 28 February 2019.

All IAG airlines reported a healthy increase in operating profits for the year. IAG announced an annual operating profit of €3,230m, an increase of 9.5%. By airline this was £1,952m for BA, €305m for Aer Lingus, €437m for Iberia and €200m for Vueling.

Aircraft Order

The big headline announcement has been an order for 18 Boeing 777-9 aircraft with BA, with options for an additional 24 aircraft.

This, together with an existing order for 18 Airbus A350-1000, 4 Boeing 777-300 and 12 Boeing 787-10 aircraft effectively settles BA’s plan to replace the Boeing 747. The Boeing 777-9 will also replace 4 Boeing 777-200 aircraft. It does also provide for a healthy amount of growth at BA.

However, there are still a number of aircraft to be ordered to meet the group’s overall growth ambitions and the planned retirement of Boeing 777-200 aircraft. IAG CEO Willie Walsh said that there were aggressive pitches from all of Airbus, Boeing, General Electric and Rolls-Royce and there is still a lot of play for in terms of future orders.

IAG confirmed that it had looked at second-hand aircraft, but this had been discounted. Whilst nothing was said about the Airbus A380, this does seems to suggest that the prospects for BA acquiring any more aircraft, whether new or second-hand, are very remote.

International Airlines Group Fleet Plan - February 2019
International Airlines Group Fleet Plan – February 2019 (Image Credit: International Airlines Group)

BA Cabin & In-Flight Product Investments

The Net Promoter Score, which IAG uses to measure customer satisfaction, is said to be continuing to improve at BA.

It improved in 2018 over 2017 and is reported to be continuing to improve this year.

Not much more was given away about the new Club World seat and BA’s plans to retrofit the seat to existing aircraft, beyond what was said at last November’s Capital Markets Day.

There is an obvious element of expectations management as a number of airlines have experienced difficulties securing seats from manufacturers. Should additional manufacturing capacity become available, then the programme to retrofit seats will be accelerated.

There are continued references to improvements to Euro Traveller without specifying what they are. IAG still sees scope for profit margin growth at BA and future product investments are likely to remain very targeted.

BA Gatwick

An additional long-haul aircraft will be placed at Gatwick later this year, which will provide for some growth.

Continued growth at Gatwick as the slots BA acquired from Monarch are converted to long-haul use is likely to be at a very steady pace.

BA Industrial Relations

A number of questions were repeatedly asked about the state of industrial relations at BA.

Pay negotiations with BA trade unions are ongoing. There were some signs of disquiet at Gatwick which BA CEO Alex Cruz described as a “minor issue”.

As is standard practice when trade union negotiations are ongoing, IAG did not give much away. There are reasons for this. Trade Unions are very sensitive to negotiation protocols being strictly observed, but negotiations are likely to continue for some time yet.

BA Data Breach

IAG has confirmed that BA is still in discussions with regulatory bodies in the UK and overseas regarding the data breach at ba.com last year.

It has added that there have been no known cases of fraud arising directly from the data breach. BA has received notice of class action claims by law firms in the UK and in the US. However, it intends to defend these.

LEVEL – Amsterdam

IAG’s nascent low cost brand LEVEL is to announce a new base at Amsterdam next month, with three aircraft initially.

It is possible that LEVEL will take over existing Vueling routes from Amsterdam.

Norwegian

IAG confirmed it has sold it has now shareholding in Norwegian.

IAG describes its bid as “a deal that ran out of time” and that Norwegian faces “very very significant challenges”.

IAG is always asked whether it is looking at buying other airlines. There is always a standard reply that it is not actively looking at anything at the moment. That does not mean a bid for another airline won’t be forthcoming.

What wasn’t mentioned…

Curiously, given how vocal Willie Walsh likes to be, nothing was said about at the prospects of success for the Connect Airways consortium purchase of Flybe. Though, when interviewed on BBC Radio 4’s “Today” programme, Willie Walsh accused Flybe of making up excuses (eg Brexit) for poor performance over a number of years.

Nothing was also said about the timescales for Aer Lingus joining the transatlantic joint-venture with American Airlines and BA. However, transatlantic routes are said to be performing strongly for Aer Lingus, particularly for direct traffic between the US and Dublin and premium traffic, which suggests more growth will be forthcoming.

We welcome any thoughts and comments below: