Leisure travel fuelling ‘robust’ demand for British Airways owner IAG

British Airways owner International Airlines Group today hailed “particular strength” in leisure travel for continuing to fuel “robust” demand.

The company plans to expand capacity by 7% this year, with BA continuing to rebuild to its pre-pandemic long-haul capacity.

IAG reported being 92% booked for the first quarter of 2024 and 62% for the first half of the year – ahead of the same period in 2023.

The group, which also owns Aer Lingus, Iberia, Vueling and Level, restored more than 95% of 2019 capacity last year, rising to 98.6% in the final three months.

BA plans to return to pre-pandemic levels of non-premium capacity in 2024; long-haul capacity by 2025; and premium capacity by 2026.

IAG said: “Airline markets worldwide were particularly strong in 2023 as demand for experiences increased and lifestyle priorities changed post-Covid-19. 

“Leisure travel has been the strongest driver of passenger demand across all of our cabins. 

“Corporate travel continues to return more slowly, in particular in short duration and short-haul trips.”

Total net profit rose to €2.6 billion from €431 million in 2022 on the back of an increase in revenue to €29.4 billion from €23 billion.

But IAG disclosed that disruption was “a major cause of cost inflation” in 2023, as well as impacting customer NPS (net promoter score). 

BA has “invested significantly” to improve its on time performance in 2024, “which will lead to cost savings through greater productivity and efficiency, as well as reducing EU261 costs and improving customer satisfaction,” IAG added.

The UK carrier is focused on investing in a premium proposition across its cabins, including lounges at Heathrow, Edinburgh, Glasgow, Miami, New York JFK, onboard food and in-flight entertainment content. 

BA’s “investment in all of its customers across every cabin includes further development of its call centre in Delhi, using better IT and systems as well as a proactive customer care team”.

IAG said: “As well as supporting revenue growth, New Distribution Capability (NDC) will drive cost savings across all of our carriers

“Third party supplier costs have seen significant inflation over the past couple of years and this is a big area of focus across all parts of IAG

“Savings will be made through procurement in engineering and maintenance, and food and beverage; efficiencies in handling; and pricing across the supply chain.”

IAG expects a result from the European Commission into a competition probe into the planned takeover of Spanish carrier Air Europa to develop its Latin American network in “late 2024”. 

Group chief executive Luis Gallego said: “In 2023, IAG more than doubled its operating margin and profits compared to 2022, generated excellent free cash flow and strengthened its balance sheet position, recovering capacity to close to pre-Covid-19 levels in most of its core markets.

“In 2024, we will execute on our strategy, building long-term value into the business. 

“We will focus on strengthening our core airline businesses and on developing IAG Loyalty and our other asset-light growth opportunities, and we will do this while operating under a strong financial and sustainability framework. 

“Our airlines operate in the largest and most attractive markets globally and we will continue to invest in our brands to transform the business, improve the customer experience and support the delivery of sustainable growth and world-class margins.”

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