International Airlines Group 1st Quarter Results

IAG has released its financial results for the 1st quarter of 2019 and provided a strategic update on the group.

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International Airlines Group and its subsidiaries
International Airlines Group and its subsidiaries

International Airlines Group has today, Friday 10 May 2019, reported an operating profit of €135m for the first quarter of 2019.

This compares to a profit of €340m for the previous year. The fall in profit is principally due to the timing of the Easter holidays, but also fuel prices and increased capacity in Europe.

IAG’s results compare to widening losses of €303m at Air France-KLM and €344m at Lufthansa. However, of IAG’s five principal airline brands, only BA was profitable in the quarter.

The first quarter results announcement is a relatively quiet one for news and strategic updates, but IAG provided the following commentary to analysts:

Market Performance

In terms of market performance, UK based demand and North Atlantic routes are holding up well.

Weak areas are demand from some countries in mainland Europe and routes to Argentina, Brazil, Hong Kong and South Africa.

In the case of Hong Kong, IAG has cited increased capacity from Europe to the region by carriers in mainland China. Cathay Pacific has also added significant capacity to London and other airports in mainland Europe in recent years. Weakness in other regions is principally due to macroeconomic factors. Argentina and Brazil are expected to improve later in the year.

IAG has already cut capacity to South Africa by suspending Iberia’s route from Madrid to Johannesburg and moving four weekly BA Boeing 787 flights from Heathrow to Johannesburg to Mumbai. It is unlikely that these flights will return for the winter season.

Elsewhere, LEVEL is performing well and is profitable in Barcelona. However, performance in Paris Orly is behind expectations. IAG has cited competitive activity in the market.

As for JetBlue’s plans to launch flights from Europe to Boston and New York, IAG is adopting a wait and see approach until JetBlue confirms which airports it will operate from.

Acquisitions

Unsurprisingly, IAG has no interest in bidding for any of part of Thomas Cook’s airline business.

Lufthansa is a likely candidate to acquire Thomas Cook’s Condor airline in Germany. Sky News has also reported that Virgin Atlantic has expressed an interest in acquiring Thomas Cook’s long-haul business in the UK.

In terms of future acquisitions, IAG had a standard response that there’s no activity at the moment. IAG confirmed that there no regulatory reasons why it could not make another bid for Norwegian, but has no plans to do so.

British Airways

During the full year results presentation IAG were asked repeatedly about industrial relations at BA and pay negotiations with its trade unions.

There’s been little news since, and all IAG would say today is that negotiations were ongoing.

IAG expects to receive further compensation from Rolls-Royce due to the grounding of Boeing 787 aircraft for additional engine checks and maintenance. BA has today announced a number of tactical cancellations up until the end of August.

What wasn’t said..

There were no updates on ongoing regulatory issues, such as Aer Lingus seeking approval to join the AA/BA transatlantic joint-venture and the review by the Competition & Markets Authority of the joint-venture.

There were also no updates on regulatory approval for the joint-venture between BA, Iberia and LATAM, which subject to an appeal in Chile. Nor were there are any updates on investigations in to the data breach of ba.com last year.

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