British Airways owner IAG weathers recent storms in airline sector to post 55 per cent rise in second quarter profits

By Natalie Wain

Updated: 06:45 EDT, 1 August 2014

British Airways owner International Airlines Group has overcome turbulence in the airline sector to post a 55 per cent rise in second quarter operating profits today.

The airline group's profits of £301million marked a turnaround in fortunes for the company, after it posted a loss of £119million in the first quarter of the year.

A strong performance from BA - which posted operating profits of £263million, up 34 per cent in the second quarter - and improvements at Spanish carrier Iberia - which posted profits of £13million - have been seen as the impetus behind the firm's 'solid progress.'

Come fly with me: British Airways owner International Airlines Group posted a 55 per cent rise in second-quarter operating profits of £301 million today.

IAG, which also owns Spain-based budget airline Vueling, said its half-year operating profits rose to £182million from a 33million euro loss in the same period last year.

The growth came despite what some carriers have dubbed the 'stay-at-home World Cup effect', as many people put off traveling in order to watch the tournament at home.

But although profits were up, capacity was actually down during the period, prompting the group to trim 3 per cent of its planned capacity for the coming winter.

The reduction will mean that, in the fourth quarter, growth is to be 5.8 per cent as opposed to the predicted 8.7 per cent.

It's been a difficult time lately for the airline sector with industry players experiencing wildly differing fortunes.

Stiff competition in the lucrative business routes prompted Germany's Lufthansa to post a profit warning last month, which was swiftly followed by fellow European carrier Air France-KLM.

Meanwhile, political unrest in in Egypt, Israel and Russia saw easyJet shares take a nosedive towards the end of last week as the budget carrier was forced to pull back it's profit forecast.

But there was good news from low-cost rival Ryanair on Monday with the airline raising its forecast for full year profits after its first quarter earnings more than doubled.

IAG chief executive Willie Walsh was cautiously optimistic about the group's progress.

'Our disciplined approach to capacity continues and we will make reductions where it makes sense as we go through the year.

'We are, therefore, trimming planned IAG capacity by around three percentage points for the winter 2014 season.

'All of our airlines had their highest second quarter operating result since 2007.'

Mr Walsh said continued restructuring at Spain's Iberia was having a positive impact. Last week it signed an agreement that could see a further 1,427 job cuts, which he said could help enhance profitability over the next two to three years.

He also revealed that Iberia was adding 16 new Airbus aircraft to its long-haul fleet.

Commening on the results, Mike van Dulken, head of research at Accendo Markets said: 'News of further cost cutting via across-the-board winter capacity reduction to help hold up full-year margins on expected flat revenues is also being well received, as is Iberia now being worthy of investment
in the form of new more efficient aircraft.

'The news bodes well for the group whose shares fell over 20 per cent from the beginning of the year, 30 per cent from their February highs, but look to have found support around 325p in July.'

Shares in IAG were up 1.2 per cent, or 4.1p during early morning trading.