Higher prices set course for British Airways recovery as owner IAG returns above pre-pandemic levels despite fewer passengers
British Airways owner’s revenues are back above pre-pandemic levels, despite fewer passengers being flown.
International Airlines Group (IAG) posted £6.3 billion in sales in the three months to September, up 0.9 percent on the same period in 2019.
But the rise was driven by higher prices, with passenger numbers still nearly a fifth lower than before Covid.
Takeoff: International Airlines Group booked £6.3bn in business in the three months to September, 0.9 percent more than the same period in 2019
IAG, which also owns Aer Lingus, Iberia and Vueling, said revenue per passenger was 21.9 percent higher than the same period in 2019.
The rise came despite a summer of travel chaos as flights were canceled and Heathrow limited passengers to 100,000 a day.
The airline said its third-quarter profit was £171 million, reversing a loss of £2.3 billion last year this time around. It expects full-year profits of just under £1bn, providing respite for shareholders after successive years of multibillion-pound losses. But after a warning from boss Luis Gallego, IAG shares fell 3.7 percent, or 4.4p, to 115.3p.
Gallego said: ‘We continue to see strong passenger demand as capacity and load factors recover. Leisure demand is particularly healthy and leisure income has recovered to pre-pandemic levels. Business travel is steadily recovering.’
But the chief executive added: “While demand remains strong, we are aware of uncertainties in the economic outlook and continued pressure on households.”
Hargreaves Lansdown analyst Derren Nathan said the BA owner has made an ‘impressive turnaround’ after Covid. But he added: ‘As the cost of living crisis deepens in many key markets, holidays will disappear from the essentials list, so we are cautious for next year.’ IAG said total capacity in 2022 will be just 78 percent of 2019 levels.
But it expects a popping Christmas, with passenger numbers reaching 87 percent of pre-pandemic levels in the last three months of 2022, rising to 95 percent of 2019 numbers in the first three months of 2023.
Interactive Investor’s head of investment, Victoria Scholar, said the pressure on incomes is putting pressure on IAG.
It is also struggling to win back business travelers due to the shift to Zoom meetings.
Scholar said: “After the catastrophic impact of the pandemic, 2022 was set to be the comeback year for airlines with the resumption of international travel and the release of pent-up demand.
“While demand has certainly recovered, especially for leisure travel, IAG is still under pressure.”