The International Airlines Group (IAG) posted an operating profit of €1.3 billion for the year’s first half, €49 million ahead of H1 2023, with “steady growth” in business travel volumes.
The parent company of British Airways, Iberia, Aer Lingus, LEVEL and Vueling recorded total H1 revenues of €14.7 billion, up 8.4 per cent year on year.
Passenger revenue increased 10.7 per cent to €13 billion for the six months to 30 June and in Q2 saw a 9.9 per cent year-on-year increase to €7.4 billion, largely driven by leisure demand.
H1 group capacity, measured in available seat kilometres, increased 7.5 per cent year on year, while load factor increased 0.9 percentage points to 85 per cent. Passenger revenue per available seat kilometres also increased 2.9 per cent, backed by “strong demand” in the group’s core markets of the North Atlantic, Latin America and intra-Europe.
IAG CEO Luis Gallego during an earnings call on Friday (2 August) said business travel continues to recover, but at different rates across the group’s airlines.
“British Airways is seeing volumes of 65 per cent and revenues at around 80 per cent of 2019 levels, even though BA hasn’t recovered capacity to 2019 levels,” he said.
Meanwhile, corporate travel volumes at Iberia have reached 90 per cent of 2019 levels, with revenues exceeding pre-pandemic figures due to an increase in capacity.
Business travel at Aer Lingus is “close to 100 per cent and revenues at 95 per cent” of 2019 levels, Gallego said.
British Airways chairman and CEO Sean Doyle added that Q2 business volumes for the carrier in the North Atlantic were up 13 per cent year on year, but flagged challenges in capturing accurate volumes due to fragmented distribution.
“There are a lot of factors that we're navigating through,” he said on the call. “What we see through corporate channels is 65 per cent [compared to 2019], but when we look at purpose of travel across all channels it’s a little bit higher, so we think [corporate] volumes are probably up to 70 per cent and revenue more like 85 per cent [of 2019 figures] because we see traffic that used to book through a business channel now booking through direct channels.
“Generally speaking, we’re seeing steady improvements and steady growth, particularly across North Atlantic routes,” Doyle said.
Iberia’s recently appointed CEO and chairman Marco Sansavini was also on the call and said the Spanish carrier’s Q2 corporate revenues to and from Latin America were above that of 2019 for the first time, “demonstrating resilience in demand”.
Looking ahead, IAG expects Q3 capacity growth to increase by some 7 per cent, and full year 2024 capacity to also increase by 7 per cent, in line with previous estimates.
After paying an interim dividend of €3 cents per share in H1, the airline group said it expects to generate significant free cash flow and maintain a strong balance sheet throughout the rest of the year.
Gallego also addressed IAG’s decision this week to withdraw from its proposed acquisition of Air Europa, saying the decision “was in the best interests of our shareholders”.
During the call Gallego said IAG “worked very hard to put forward a very ambitious remedy package” to address the European Commission’s competition concerns. This included transferring 52 per cent of Air Europa’s 2023 frequencies to two rival carriers.
“Unfortunately this wasn’t enough… and [anything] above that doesn’t make sense for the group. And that’s the reason we are abandoning the deal,” he said.