27th Oct 2023 17:16
(Alliance News) - International Consolidated Airlines Group SA reported a record third-quarter with capacity edging ever-closer to pre-virus levels, though a tough consumer confidence environment and rising oil prices could hurt it going forward.
The Madrid-based owner of British Airways, Iberia, Vueling and Aer Lingus reported pretax profit of EUR1.58 billion in the three months that ended September 30, up 56% from EUR1.01 billion a year before. This put nine-month profit at EUR2.62 billion, up from just EUR166 million in 2022.
Total revenue in the third quarter was EUR8.65 billion, up 18% from EUR7.33 billion. In the nine months, it was EUR22.23 billion, up 33% from EUR16.68 billion.
Within those total figures, passenger and other revenue were up strongly, but cargo was down sharply, by 30% in the third quarter and 29% so far in 2023. IAG said "industry supply continues to exceed reducing demand for air freight". However, cargo only accounts for about 3% of total revenue.
IAG said it increased passenger capacity by 18% on a year before, putting third-quarter capacity at 95.6% of its pre-Covid level in 2019. The airline group said it expects full-year capacity to be around 96% of its pre-pandemic level.
Amid the rising passenger revenue, costs were down, with fuel unit costs down 6.2% and non-fuel unit costs down 3.5%.
IAG said the reduction in non-fuel unit costs was despite a one-percentage-point knock from flight disruption, including the UK air traffic control system outage in August that particularly hurt British Airways. It expects non-fuel unit costs for all of 2023 to be at the lower end of the previously guided 6% to 10% improvement, due to the disruptions.
Fuel costs could be a drag going forward, as events in the Middle East threaten to send oil prices spiralling.
RBC Brewin Dolphin analyst Zoe Gillespie commented: "IAG's performance has soared beyond expectations, with a record profit. The airline group is making good progress, with an improving balance sheet, bookings more or less returning to pre-pandemic levels, and capacity for further growth. BA performed particularly well, with 20% revenue growth.
"However, there are some clouds on the horizon, with waning consumer confidence likely to affect future bookings and fuel costs rising with the price of oil. That said, IAG is reasonably well hedged and bookings for the final quarter are in line with guidance – the group is going from strength to strength despite a turbulent backdrop."
IAG was able to pay down its borrowings to EUR17.23 billion as of September 30 from EUR19.98 billion a year before. It also took delivery of 20 new aircraft during the recent nine months.
Looking ahead, IAG said customer bookings for the fourth quarter are as expected, with 75% of expected revenue already booked.
"We expect 2023 to be a year of strong recovery in our margins, operating profit and balance sheet and towards pre-Covid-19 levels of capacity," the company said.
By Eric Cunha, Alliance News news editor
Comments and questions to [email protected]
Copyright 2023 Alliance News Ltd. All Rights Reserved.
Related Shares:
International Airlines