29th Apr 2016 14:21
LONDON (Alliance News) - International Consolidated Airlines Group on Friday warned the terrorist attacks in Brussels in March have had a negative effect on revenue trends so far in the second quarter of 2016, sending the airline operator's shares down.
Shares in IAG were trading down 4.9% at 524.00 pence on Friday afternoon, the second worst performer on the FTSE 100.
This came despite IAG swinging to a pretax profit in the first quarter of 2016, boosted by growth in traffic, passenger numbers and revenue. The first quarter of the year is traditionally quiet for airlines.
IAG - which owns British Airways, Ireland's Aer Lingus, and Spanish carriers Iberia and Vueling - said it made a pretax profit of EUR124 million in the three months to March 31, having suffered a EUR37 million pretax loss in the first quarter of 2015.
Operating profit increased to EUR168 million from EUR25 million a year before.
Revenue grew to EUR5.08 billion from EUR4.71 billion, boosted by 14% growth in traffic measured in revenue passenger kilometres, and a 22% rise in passenger numbers.
The comparative period in 2015 excludes the contribution from Aer Lingus, as IAG only acquired the Irish airline last August. Passenger revenue rose by 8%, but would have only risen by 0.7% excluding Aer Lingus.
IAG said revenue in January and February was in line with the trends seen in the fourth quarter of 2015, while March revenue was helped by the earlier timing of Easter but hurt by the terrorist attacks in Brussels. It said the effects of the Brussels attacks are continuing into the second quarter.
In a conference call with analysts, IAG Chief Executive Willie Walsh also cited uncertainty ahead of the Brexit referendum as a reason for depressed demand for flights. He said demand is likely to revive in the third quarter as tourist travel from the US and Japan recovers once the decision about the UK's place in the EU is made.
"Revenue trends in quarter two have been affected by the aftermath of the Brussels terrorist attacks, as well as some softness in underlying premium demand. As a result, IAG has moderated its short-term capacity growth plans. The group also expects to reduce its underlying ex-fuel unit costs for the full year by around 1%. Consequently, in 2016, IAG still expects to generate an absolute operating profit increase similar to 2015," IAG said in a statement.
Liberum analyst Gerald Khoo was wary of the group's outlook, noting the unchanged guidance implies full-year results will be more weighted to the second half.
"Given the apparent downside risk from premium traffic softness and a more protracted recovery from the Brussels attacks than expected, we would not be surprised to see consensus slip," Khoo said.
Earlier in the week, the Financial Times reported Qatar Airways had increased its stake in IAG to just under 12% from 9.99% previously, deepening the relationship between the two companies.
By Karolina Kaminska; [email protected] @KarolinaAllNews
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