IAG share price steady, reports rising profit, reaffirms strong outlook

International Consolidated Airlines Group SA (IAG), owner of British Airways and Iberia, posted robust earnings today, with increasing revenues and profit. The company restated a positive profit guidance and announced plans to further restructure Iberia.

The company reported revenue of €5.1 billion in the three months to end-June, 6.7% higher than a year ago, as operating profit rose 55% to €380 million. Net profit was €280 million, 121% on top of the figure from last year.

“This performance shows that we are making further solid progress,” Willie Walsh, IAG Chief Executive Officer, said in a statement. “All of our airlines had their highest second quarter operating result since 2007.”

British Airways (BA) contributed an operating profit of €332 million in the quarter, up 34% from last year. Iberias operating profit was at €16 million, compared with a €35 million loss the year before, while Vueling, a Barcelona-based budget airline, logged an operating profit of €30 million, up from €27 million last year.

The company also confirmed its previous guidance figure for an operating profit of at least €1.27 billion through years end, 65% higher than 2013.

IAG increased capacity 11.3% in the first half, compared with a passenger traffic growth of only 10.4%, lowering its seat factor to 78.9, down from 79.5 for Q213. Addressing the issue and broader market developments, the company said it is trimming capacity by 3% for winter. Other companies are also struggling with overcapacity, with Lufthansa cutting capacity expansion in half, while Air France lowered its profit target by 10% on account of overcapacity.

Mr. Walsh said IAG has been “more disciplined than our competitors who are having to make bigger adjustments because maybe they saw the sweets on the table and got a little bit greedy.”

IAG’s confirmation of its full-year profit guidance “will likely reassure the market in what is an excellent performance relative to peers,” Stephen Furlong, analyst at Davy, said for the Wall Street Journal.

In contrast, Ryanair, Europe’s largest discount airline, announced soaring profits and plans to “aggressively expand capacity for the winter”.

International Consolidated Airlines Group SA was down 0.03% to trade at 330.66 pence per share at 10:12 GMT today, standing for a market capitalization of £6.75 billion. Shares were up 11.14% from a year ago.