Published: Fri, October 27, 2017
Business | By Max Garcia

BA-owner IAG lags Lufthansa on revenue trend, shares fall

The British Airways owner said operating profit before exceptional items rose to €1.46bn in the three months to 30 September from €1.2bn a year ago, ahead of a company-compiled consensus forecast of €1.4bn.

Fares at European carriers have generally started to improve after price cuts encouraged by the slump in fuel costs drove weaker companies including Alitalia SpA, Air Berlin Plc and the U.K.'s Monarch Airlines into insolvency this year.

"Passenger unit revenue was up 2.2 per cent at constant currency boosted by improvements in the Spanish and Latin American markets". Level, IAG's new low-priced, long-haul unit, and Aer Lingus have rapidly added capacity, especially to transAtlantic routes, diluting the group's revenues per passenger and mile flown.

Shares in the group, which also owns Iberia, Aer Lingus and Vueling, are up almost 50 percent this year.

"We consider the results to be broadly encouraging, but there may be an adverse short-term reaction to the unit revenue trend", Liberum analysts said in a note. By comparison, Lufthansa said its North America unit revenue rose 3.9 percent in the third quarter. "The unit cost is the other part, and clearly both Level and Aer Lingus have very efficient cost performance on the trans-Atlantic".

However, shares tumbled 5% in morning trading as investors focused on IAG's revenue growth per available seat, which fell to 0.7% from 1.5% in the second quarter.

International Airlines Group (IAG) has reported what it described as a strong third quarter, despite disruptions caused by weather and terrorism during the period.

Mr Walsh flagged growth opportunities that Vueling might now have in Italy and Germany.

IAG also re-confirmed a 65 million euro hit as it paid out compensation for a power failure that led to severe disruption at British Airways over the May bank holiday weekend.

At current fuel prices and exchange rates, IAG expects its operating profit for 2017 to be around £2.66bn before exceptional items.

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