BA owner raises profit forecasts as airline revenues return to pre-Covid levels

Airline revenues at British Airways’ owner have returned to pre-Covid levels, the group has announced, as it increased its profit forecasts despite a summer of disruption.

Higher fares drove IAG’s revenues for the last quarter above €7.3bn, despite the cap on flying imposed at its main base, London Heathrow airport, and the continued closure of key routes to Asia.

It said leisure travel was the main driver of resurgent operating profits of just over €1.2bn in the three months to 30 September, compared with a €452m loss for the summer season in 2021.

The group said all its airlines – Iberia, Aer Lingus and Vueling as well as BA – had turned a profit in the quarter, underlining a significant recovery after the devastating losses during the pandemic.

Overall passenger capacity was still only 81% of pre-Covid levels, although European short-haul and transatlantic routes were back to more than 90% of 2019 capacity.

Operating profits were expected to exceed €1.1bn for the full year, IAG said, despite increased costs from jet fuel and the strong dollar.

Luis Gallego, the chief executive, said: “All our airlines were significantly profitable and we are continuing to see strong passenger demand while capacity and load factors recover.

“Leisure demand is particularly healthy and leisure revenue has recovered to pre-pandemic levels. Business travel continues to recover steadily.

“While demand remains strong, we are conscious of the uncertainties in the economic outlook and the ongoing pressures on households.”

Nonetheless, the group said it expected to operate 95% of its 2019 equivalent capacity during the first quarter of 2023.

BA slashed its schedules this year when labour shortages, particularly among ground handlers, led to widespread cancellations and disruption, but appeared confident that it could now operate more flights.

Gallego said BA was opening new routes again and working hard to improve its service for customers. He said almost 6,000 staff had joined the airline and recruitment would continue well into 2023.

BA’s chief executive, Sean Doyle, said the carrier had “made very good progress on bringing people in” and was about two-thirds of the way towards the recruitment and training it needed for next summer.

The limit imposed on departing passengers at Heathrow, where about half of flights are BA’s, will be lifted this weekend. However, the airport said this week it was discussing a fresh “mechanism to align supply and demand” during the Christmas peak.

Doyle said: “From our perspective, what we have published we can operate, and we would encourage Heathrow to give us the same confidence.”