Following the Brexit vote, however, the company said it expects its annual profit to rise by a “low double digit”, citing a weaker pound and a lack of consumer confidence as the main reasons behind its revised forecast. This falls to €487 million without Aer Lingus, which…
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IAG said first half operating profit rose to €710 million from €555 million.
“We have continued to experience a weaker trading environment in our United Kingdom point-of-sale business, which represents around one third of total revenue”.
“Our non-fuel unit costs fell 1.1 per cent but are up 0.8 per cent at constant currency, following the significant cost reductions achieved past year”.
IAG, which reports in euros but gets a third of its revenues from Britain, said its second quarter results were hit by a negative currency effect of 148 million euros, and that would also impact third-quarter results, usually the most profitable time of the year thanks to the European summer holiday season. Aer Lingus contributed €68million towards the profit.
The group said it had continued to experience a weaker trading environment in its United Kingdom point-of-sale business, which represents around one third of Total revenue.
IAG said it was seeing continued weakness in its United Kingdom operations, and that the fall in the pound was also hurting its results, which are reported in euros, in what is traditionally the most profitable part of the year for airlines.
In addition, attacks in Europe and a failed coup in Turkey have hit demand for travel, prompting rival airlines easyJet, Lufthansa and Air France-KLM to warn on the impact of political upheaval and security concerns.
IAG is expecting air traffic disruption to cost the company at least €80 during the rest of this year – mainly due to the effect on its Spanish low-priced subsidiary Vueling.
But IAG has more to deal with than just a weak pound. However, we also expect reductions in underlying non-fuel unit cost of around 1 per cent at constant currency in 2016 (the same as our previous guidance).
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“We have reduced our planned capacity growth for the second half of the year, and have 2017 capacity growth and capex under review”, he added. “This provides a high degree of coverage for ongoing ordinary dividends”, said Mr Walsh.
