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British Airways owner IAG lowers profits forecast on Brexit and terror BA owner IAG lowers profit forecast on terror attacks and Brexit vote
(35 minutes later)
British Airways owner IAG has reported disappointing profits and lowered its full-year forecast, blaming terror attacks, the Brexit vote and strikes for a downturn in travel. British Airways owner International Airlines Group has reported disappointing profits and lowered its full-year forecast, blaming terror attacks, the Brexit vote and strikes for a downturn in travel.
International Airlines Group, which also owns Iberia, Vueling and Aer Lingus, had forecast in February that 2016 profits would rise by 40% to more than €900m (£757m), but is now forecasting a “low double digit” percent rise. It was quick to warn on profits the day after the Brexit vote on 23 June, having already suffered weak trading in the runup to the poll. IAG, which also owns Iberia, Vueling and Aer Lingus, had forecast in February that 2016 profits would rise by 40% to more than €900m (£759m), but is now forecasting a “low double-digit” percent rise. It was quick to warn on profits the day after the Brexit vote, having already suffered weak trading in the runup to the poll on 23 June.
The company’s share price, which has fallen sharply from 528p on 23 June, was up about 1.5% on Friday morning at 416p. The company’s share price, which had fallen sharply from 528p on the day of the EU referendum, was up by about 1.5% on Friday morning, at 416p.
Britain’s decision to leave the European Union has triggered a sharp fall in the value of the pound versus the dollar and the euro, making it more expensive for Britons to travel abroad. It has also caused a slump in consumer confidence. The latest poll from market researchers GfK recorded the biggest slide in sentiment for more than 26 years in July. Britain’s decision to leave the EU has triggered a sharp fall in the value of the pound versus the dollar and the euro, making it more expensive for Britons to travel abroad. It has also caused a slump in consumer confidence. The latest poll from market researcher GfK recorded the biggest slide in sentiment for more than 26 years in July.
IAG posted an operating profit before one-off items of €555m in the second quarter, up from €530m a year earlier, but less than the €562m predicted by analysts. The group took a currency hit of €148m in the quarter, mainly due to the weak pound, as it reports its results in euros. Traditionally, the quarter is the most profitable part of the year. IAG posted an operating profit before one-off items of €555m in the second quarter, up from €530m a year earlier, but less than the €562m predicted by analysts. The group took a currency hit of €148m in the quarter, mainly due to the weak pound, as it reports results in euros. Traditionally, the second quarter is the most profitable part of the year.
The company has scaled back expansion plans for the next six months and is reviewing plans for capacity growth and spending next year. The company has scaled back expansion plans for the next six months and is reviewing ideas for capacity growth and spending next year.
Willie Walsh, the chief executive, said: “Numerous external factors affected our airlines including the impact of terrorism, uncertainty around the UK’s EU referendum and Spain’s political situation and increased weakness in Latin American economies. This led to a softer than expected trading environment, especially in June. In addition, the airlines’ operations have been considerably disrupted by 22 air traffic control strikes in Europe so far this year. This has impacted our passenger revenues.” Willie Walsh, the IAG chief executive, said: “Numerous external factors affected our airlines, including the impact of terrorism, uncertainty around the UK’s EU referendum and Spain’s political situation, and increased weakness in Latin American economies. This led to a softer than expected trading environment, especially in June. In addition, the airlines’ operations have been considerably disrupted by 22 air traffic control strikes in Europe so far this year. This has impacted our passenger revenues.”
Other airlines such as easyJet, Lufthansa and Air France-KLM have also warned about the impact of terrorism and a failed coup in Turkey on travel. In addition, the air traffic control strikes and bad weather in Europe led to more than a thousand flights being cancelled. IAG expects to book disruption costs of at least €80m in the second half of the year, with an additional impact on revenues. Other airlines such as easyJet, Lufthansa and Air France-KLM have also warned about the impact of terrorism and the failed coup in Turkey on travel. In addition, the air traffic control strikes and bad weather in Europe led to more than 1,000 flights being cancelled. IAG expects to book disruption costs of at least €80m in the second half of the year, with an additional impact on revenues.
Shares in IAG have lost about a third of their value since the start of the year. Shares in IAG have lost about one-third of their value since the start of the year.