British Airways owner IAG enjoys soaring profits despite computer chaos

iag profits

British Airways owner IAG has reported a surge in profits, despite taking a hit from a major IT failure that caused travel chaos for tens of thousands of passengers in May.

International Airlines Group (IAG) said operating profit before exceptional items rose 37 per cent to €975m (£871m) in the six months to June 30 as it was helped by lower fuel costs and a strong Easter, the Telegraph reports.

Pre-tax profits rose 28 per cent to €706m while revenue edged up 0.9 per cent to €10.9bn. The strong performance gave the company the confidence to slightly increase its guidance for the full year with it now expecting operating profits to grow by a double-digit percentage compared to 8.6 per cent in the comparable period.

IAG also said it doled out €65m in additional compensation fees and baggage claims related to the IT meltdown over the spring bank holiday weekend. Besides this mention though, there was no elaboration on the company’s ongoing investigation into the causes of the incident that grounded flights at Heathrow and Gatwick airports.

Passenger numbers also seemed relatively unaffected by the incident, with the group carrying 48.8m passengers in the period, 4.6 per cent more than the same six months last year. New British Airways routes to Santiago de Chile and Oakland as well as increased demand for Shanghai, Tokyo and Johannesburg helped make its planes fuller. 

A key factor in the group’s performance was a steeper drop in costs than the fall in the amount of revenue it makes per seat. Its cost per available seat kilometre – a key industry metric – dropped 4.5 per cent compared to the 2.6 per cent fall in revenue per available seat kilometre.

Besides the helpful tailwind from a decrease in its fuel costs, it also saw employee costs drop nearly 4 per cent to €2.44bn.

Boss Willie Walsh said: “We’re reporting a very strong performance in quarter two.

“The underlying trend in unit revenue improved, benefiting partially from Easter and a weak base last year.”

The firm also was forced to stomach a €44m hit from the collapse in the value of the Brexit-hit pound.

IAG issued a profit warning after the referendum on June 23, and in October warned that ticket prices may have to rise as a result of sterling’s slump.

In March, the group, which also owns the Aer Lingus and Iberia airlines, launched Level, a new long-haul, low-cost airline brand.

Mr Walsh said Level was proving a success and the group plans to expand the operation.

“In June, Level started long-haul flights from Barcelona to four destinations. Sales continue to be well ahead of our expectations. We’ve ordered three additional aircraft and are considering other European bases for the operation.”