31st Jul 2015 10:46
LONDON (Alliance News) - International Consolidated Airlines Group on Friday maintained its targets for the current financial year as its operating profit surged in the first half, though it was forced to extend the deadline for shareholders to accept its bid for Irish flag carrier Aer Lingus Group PLC due to a delay caused by major Aer Lingus shareholder Ryanair Holdings PLC.
IAG, which owns British Airways and Spanish airline Iberia, said its operating profit excluding exceptional items in the first half to the end of June was up to EUR555 million, sharply higher than the EUR230 million it posted a year earlier.
The profit was driven primarily by British Airways, which made a EUR570 million profit in the half, though Iberia also cut its loss to EUR4 million from EUR95 million, while Vueling turned to a loss of EUR5 million having delivered a flat performance a year earlier.
Total revenue for IAG rose to EUR10.36 billion from EUR9.29 billion, as its passenger revenue in the half increased to EUR9.12 billion from EUR8.18 billion. At constant currencies, however, revenue was down by 2%, as the reported figure was flattered by the weak euro.
The carrier said its available seat kilometres capacity measure increased 5.3% in the half, while its load factor improved to 79.3% from 78.9%. IAG said its passenger revenue per available seat kilometre rose 6.1% in the half, while its non-fuel unit costs per passenger rose 4.3%. Passenger numbers in the quarter rose by 8.9% to 38.6 million from 35.5 million.
IAG said its expectations for the year remain unchanged, and it is still targeting an operating profit for the year in excess of EUR2.2 billion.
"We said previously that profit improvement would be slower in the second quarter, and we are on track to reach our full-year targets. We continue to take cost out of the business, with both employee and supplier unit costs down at constant currency, and improvements in productivity levels," said Willie Walsh, IAG's chief executive.
IAG said the first half has seen decreasing fuel prices partially offset by adverse exchange rates. Overall, though, exchange rate movements proved a boon for the carrier in the half, with the weakness of the euro against sterling only partially offset by the strengthening dollar. Fuel prices for the company were down 6.7% in constant currencies in the half, in line with the benefits being felt across the aviation industry from the fall in the oil price in the past year.
European revenue for the group rose by 8% in constant currencies, while capacity in the region rose by 13% in part through higher seat densities on IAG planes but also by increases in capacity for its low-cost Iberia Express and Vueling carriers. Latin American operations were somewhat hit by weakness in the Brazilian and Venezuelan markets, while Africa, Middle East and South Asia revenue fell due the weakening of oil routes. North Atlantic passenger revenue was broadly flat in the half.
Passenger revenue yields in the half were hit by the growth for its low-cost carriers, though British Airways yields also were hurt by increased competitor capacity on transatlantic routes, in addition to currency effects. Cargo revenue fell 8% in constant currencies, reflecting the reduction in its cargo freighter programme, while other revenue rose by 6.3%, including a EUR50 million benefit from Avios, IAG's frequent flyer and travel rewards programmes unit.
IAG has spent the majority of the first half focused on securing the necessary acceptances for its EUR1.4 billion takeover bid for Aer Lingus. On Friday, however, it said it has so far only received 62.5% acceptances from Aer Lingus shareholders, with Ryanair, the budget carrier which owns a 29.8% stake in Aer Lingus, missing the deadline on Thursday to accept the bid. As a result, IAG has extended the bid deadline to August 18.
The Irish Independent reported that Ryanair may have deferred accepting the offer for accounting purposes, allowing it to delay the arrival of the EUR400 million it will get from selling its Aer Lingus stake to IAG. A Ryanair spokesman told the paper on Thursday that the company does not expect to receive the proceeds from the sale until September, and so it is planning to formally accept the offer in mid-August.
IAG's attempt to acquire Aer Lingus has been rumbling on since December, when the pair first entered talks. The Aer Lingus board has consistently backed the deal, but IAG was forced to work harder to get the blessings of both Ryanair and the Irish government. Earlier this month Ryanair said its board had voted in favour of the deal, following on from the Irish government approval in May.
The deal then moved into the final furlong this month when the European Commission gave its approval for the takeover. In order to secure that, IAG said it had to give up five slots at Gatwick airport for flights to Dublin and Belfast. Two of the five must be operated between Gatwick and Dublin and one must be operated to Belfast, under the concessions. Other airlines will be able to apply for seats on the Aer Lingus short-haul network for their transfer passengers on normal commercial terms, IAG said.
By Sam Unsted; [email protected]; @SamUAtAlliance
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