International Airlines Group (IAG) warned of “weaker demand” as a result of the coronavirus epidemic as it reported a €1.7 billion profit after tax for 2019, 41% down on the previous year.
IAG, parent group of British Airways, Iberia, Aer Lingus and Vueling, reported: “Demand weakness on Asian and European routes and a weakening of business travel across our network resulting from cancellation of industry events and corporate travel restrictions.”
The group warned of “further capacity reductions over the coming days”.
However, IAG chief executive Willie Walsh described the results for 2019 as “good results in a year affected by disruption and higher fuel prices”.
Walsh, who will step down as chief executive in March and retire in June, said: “We’re reporting an operating profit of €3,285 million before exceptional items, down by €200 million compared to 2018.
“We’ve increased investment in new aircraft, customer products and operational resilience.”
Walsh also noted: “We will have returned more than €4.4 billion to our shareholders since 2015.”
Current Iberia chief executive Luis Gallego will take over as head of IAG next month.
IAG Coronavirus cancellations
Of the current situation, IAG noted: “In Asia, flights to mainland China have been suspended. In addition, some services on other Asian routes have been reduced.
“Some of the freed-up long-haul capacity is being redeployed to routes with stronger demand.
“BA has announced additional flights to India, South Africa and the US, while Iberia is increasing capacity on US and domestic routes.”
The group also noted: “Capacity on Italian routes for March has been significantly reduced through a combination of cancellations and change of aircraft gauge.”
It said: “We expect to make some capacity reductions across our wider short-haul network. Short-haul capacity is not being redeployed at this stage.”
IAG said the net impact of the current cancellations and redeployed capacity would “lower IAG’s full-year 2020 planned capacity by approximately 1% to 2% for the year”.
It added: “Cost and revenue initiatives are being implemented across the business.”
2019 ‘a positive year’ for air traffic
The IAG results statement noted of 2019: “The air traffic industry had a positive year. However, performance was impacted by a softer global economic backdrop, slightly affecting demand.
“Global capacity grew at a slower pace than demand.
“Airline capacity growth in Europe softened, in line with slowing economic activity [and] declining business confidence heightened by industrial strikes, Brexit uncertainty and the collapse of several airlines.
“Capacity [in Europe] still grew 3.6 per cent over the previous year and passenger load factor increased, reaching 85.2 points, the highest throughout all regions.
“North America performed slightly better than other regions, sustaining a solid upward trend throughout the year. [But] growth eased slightly from softer US economic activity and weaker business confidence.
“Latin America’s airline capacity growth slowed due to social unrest and economic difficulties.
“Africa benefited from a generally supportive economic landscape in 2019 and capacity grew significantly more than in 2018.”
Airline capacity growth in the Asia Pacific region was slower than in 2018, but remained relatively high with an increase of 4.5%.
Middle East airline industry growth “showed the slowest growth of all regions year on year” despite a sharp increase in capacity in the last quarter of 2019.
Group operating profit for the full year was down 5.7% on 2018 at €3,285 million, with passenger revenue up 1%, but fuel costs up almost 10%.
IAG reported a fourth-quarter operating profit in 2019 of €765 million compared with €715 million in the same period in 2018, with passenger revenue for the quarter up 2.2%.