British Airways owner IAG and Air France-KLM report record profits

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IAG, the owner of British Airways, and Air France-KLM are the latest airline groups to report record profits as resilient demand for travel and high ticket prices have powered the industry’s recovery from the pandemic.

IAG on Friday reported record operating profit before exceptional items of €1.25bn for the second quarter, the start of the peak summer season, more than quadruple the €295mn a year earlier.

The Anglo-Spanish company, which owns a clutch of airlines including Iberia and Aer Lingus, said demand for flying remained strong and reported “no sign of weakness in forward bookings”.

Rival Air France-KLM meanwhile reported rising revenues and a record operating margin and profit in the second quarter, as passenger numbers increased and demand for long-haul flights rebounded.

The two full-service carriers followed record earnings from budget airlines easyJet and Ryanair, underlining booming demand for travel in spite of the weak economic backdrop in Europe.

Airline revenues have also been boosted by passengers’ willingness to pay high ticket prices. Fares have risen as a result of airlines’ increased costs and elevated consumer demand amid an industry-wide shortage of planes. Airport trade body ACI Europe last month said ticket prices had risen 30 per cent year on year in Europe.

IAG said “very strong leisure demand” across all its airlines and cabins had offset a slower recovery for corporate travel and that it believed customers had “prioritised holidays and visiting friends and relatives”.

The airline group reported a 36 per cent year-on-year rise in passenger revenue in the second quarter to €6.7bn, even as passenger numbers rose more slowly, by 17 per cent.

The company did not change its outlook, last updated in May, of a full-year operating profit before exceptional items surpassing the €1.8bn-€2.3bn range.

The results beat market expectations, in part because of better than forecast passenger yields, analysts at Goodbody said.

Still, IAG conceded it had suffered some operational challenges this year, with British Airways “particularly affected” because of its exposure to London’s congested airspace and “complex schedule”.

“Some of our operations are not where we would want them to be and this is affecting our overall customer service,” IAG said.

Meanwhile, Air France-KLM said operating profit more than doubled to €733mn in the second quarter, a record.

Steven Zaat, the group’s chief financial officer, said its performance had also been driven by strong leisure traffic, including in premium cabins.

Like IAG, Air France-KLM reported no sign of a slowdown in demand, or ticket yields, into the second half of the year.

Revenues at Air France-KLM increased by 14 per cent from the second quarter of last year to €7.6bn, and the group’s operating margin reached 9.6 per cent, above a mid-term goal of 7-8 per cent. 

The group’s capacity in Asia and the Middle East increased in the second quarter compared with a year ago, as China reopened after Covid-19 lockdowns, but remained 34 per cent below 2019 levels, it said.

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