IAG profits soar but Walsh warns of trouble ahead
British Airways’ parent IAG more than doubled its operating profit last year to €485m and its pre-tax profit rose to €503m compared with just €84m in 2010.
Revenue for the year to December 31 was up 10.4% and although fuel costs rose 21.4%, other costs fell 5.6%.
IAG chief executive Willie Walsh said the group’s performance had been boosted by net cost and revenue synergies of €74m, which was €64m more than target, in the first year since the merger of BA and Iberia.
However, he said the outlook for 2012 was subject to a number of uncertainties. While North Atlantic routes remain strong, benefitting BA, Iberia is challenged by its exposure to financial uncertainty in the Eurozone. It also faces competition from low-cost airlines, high-speed rail and more efficient long-haul airlines, said Walsh.
"Its management has been focused in addressing this, however, the challenge remains for Iberia to become more competitive especially as it has a high cost base and outdated workplace practices.
"The launch of Iberia Express in late March, alongside the restructuring of its network and hub, will enable Iberia to become more customer-focused and cost effective."
He said IAG remained committed to Iberia Express, despite opposition from Iberia pilots, who have been out on strike for several days – including today – at a cost to IAG of €3m per strike day.
BA, meanwhile, is planning to launch further long-haul routes from Heathrow following the acquisition of bmi, which is still subject to regulatory approval.
"We plan to integrate bmi mainline into British Airways following agreement by BA pilots to make productivity changes that justify the integration. This deal gives us the ability to grow at Heathrow by launching new long-haul routes to growth economies and supporting our short-haul network.
"We have already committed to continue flights from Heathrow to Belfast and will increase services to Scotland. Without this deal, links to the UK regions would not be safeguarded".
Walsh confirmed BA’s decision, announced late last year, to reduce by half the number of new jobs it’s creating this year due to the latest rise in air passenger duty. He said the airline paid £500m in APD last year.
BA is also bracing itself for a drop in traffic during the Olympics. "While the Olympics will be positive for the long-term position of London as a global destination, past experience in other host cities suggests that demand could be dampened during the games," he said.
By Linsey McNeill
Linsey McNeill
Editor Linsey McNeill has been writing about travel for more than three decades. Bylines include The Times, Telegraph, Observer, Guardian and Which? plus the South China Morning Post. She also shares insider tips on thetraveljournalist.co.uk
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