28th Feb 2020 08:37
(Alliance News) - British Airways parent International Consolidated Airlines Group SA on Friday posted a substantially lower annual profit, weighed down by a pilot strike and high fuel costs, and warned of a coronavirus impact.
Shares in IAG were down 8.0% in London on Friday morning at 474.80 pence each, the worst performer in the blue chip index.
IAG - which also owns Spanish carriers Iberia and Vueling, Level in Austria, and Irish airline Aer Lingus - reported a EUR2.28 billion pretax profit for 2019, down 35% from EUR3.49 billion the year before.
Revenue was 5.0% higher at EUR22.47 billion versus EUR21.40 billion but expenses were 11% higher at EUR22.89 billion compared to EUR20.58 billion.
Expenses included a 14% rise in fuel, oil costs and emissions charges to EUR6.02 billion from EUR5.28 billion as well as a 29% increase in employee costs to EUR5.63 billion from EUR4.35 billion.
Group capacity, measured in available seat kilometres, grew by 4.0% to 337.75 billion from 324.81 billion the prior year. Group traffic, measured in revenue passenger kilometres, rose by 5.6% to 285.75 billion from 270.66 billion reported in 28.
The company noted that strike action by British Airways employees during the year had weighed down performance.
It raised its annual ordinary dividend 1.6% to 31.5 euro cents per share from 31.0 cents in 2018.
IAG said it could not provide profit guidance for 2020 "given the ongoing uncertainty on the potential impact and duration of COVID-19", the coronavirus which originated in China and has spread to many other countries.
"We are currently experiencing demand weakness on Asian and European routes and a weakening of business travel across our network resulting from the cancellation of industry events and corporate travel restrictions," IAG said.
"In Asia, flights to mainland China have been suspended. On January 29, British Airways suspended its daily flight to both Beijing and Shanghai and Iberia suspended its three times weekly service to Shanghai on January 31. In addition, some services on other Asian routes have been reduced. From February 13, British Airways reduced its daily Hong Kong service from two to one. From March 13, it will reduce its daily service to Seoul to 3-4 times weekly," the airline added.
IAG said it also saw a drop in capacity on Italian routes in March "through a combination of cancellations and change of aircraft gauge", with more capacity reductions to be made in Italy "over the coming days" as well as across its short haul network.
"The net impact of current flight cancellations and redeployed capacity is to lower IAG's 2020 planned capacity by approximately 1%in terms of available seat kilometres to 2% for the year. Our operating companies will continue to take mitigating actions to better match supply to demand in line with the evolving situation. Cost and revenue initiatives are being implemented across the business.
"IAG is resilient with a strong balance sheet and substantial cash liquidity to withstand the current weakness. We have a management team experienced in similar situations and have demonstrated that we can respond quickly to changing market conditions. We are strongly positioned for the expected recovery in demand," IAG added.
By Anna Farley; [email protected]
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