The International Consolidated Airlines Group share price edged northwards on Friday as the travel firm increased its profit expectations.
At 149.25p per share the British Airways owner was last 1.5% higher in end-of-week business.
Thanks to strong first-quarter trading, IAG said it now expects operating profit to exceed its prior guidance of €1.8 billion to €2.3 billion.
The FTSE 100 firm enjoyed “strong customer demand across all our airlines,” it said, with revenues soaring 71% year on year to €5.9 billion. This in turn helped it swing to a pre-tax operating profit of €9 million from a loss of €718 million a year earlier.
Net debt dropped to €8.4 billion from €10.4 billion in the same 2022 quarter.
Passenger Numbers Surge
IAG carried 24.3 million passengers in the first quarter, an increase of 69% from a year earlier.
Its capacity meanwhile improved to 81.5% from 72.2% previously. The business expects full-year capacity to reach 97% of pre-pandemic levels.
IAG said that “we continue to focus our capacity deployment on our core Latin America and North Atlantic markets, which are now back at pre-pandemic levels of capacity, as well as growing Vueling’s year-round leisure network.”
Strong demand in Latin America and Spain — as well as on routes to the US — helped Iberia deliver its best-ever quarter one result, IAG said. Meanwhile British Airways returned to profit for the first time since the first quarter of 2019.
Summer bookings at the group remain strong and around 80% of expected revenues for the second quarter are now booked up.
Chief executive Luis Gallego commented that “IAG has delivered a strong first quarter financial performance,” noting that “all our airlines performed above expectations, benefiting from robust demand and a lower fuel price in the quarter.”
He added that “we are seeing healthy forward bookings with leisure demand particularly strong while business travel continues to recover more slowly.”
What The City Said
Sophie Lund-Yates, equity analyst at Hargreaves Lansdown, commented that “while all pandemic headwinds aren’t fully in the rear-view mirror, namely that business travel, which IAG is highly exposed to, remains sluggish, the group’s in much better shape overall.”
She added that “the main fly in the ointment is continued workforce disputes at major hubs, including Heathrow, which could dent demand and brand appeal if queues and disruption are worse than expected going into the important summer season.”
Adam Vettese, analyst at social investing platform eToro, said that the FTSE firm appears to be “soaring away” from pandemic shutdowns and capacity issues in recent years.
He noted that “leisure demand has fully recovered despite cost-of-living worries” which, he said, “for now appear ungrounded.”
However, Vettese said that while the company’s “extraordinary debt levels” have continued to fall, he added that “until the firm’s cash position looks truly first class however, questions will remain over the firm’s long-term trajectory.”
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