Fuel costs deepen IAG’s first quarter losses

Losses at British Airways/Iberia parent International Airlines Group deepened in the three months to March as fuel prices soared by almost a quarter.

The pre-tax loss increased from €47 million a year earlier to €263 million as the group was also hit by strikes by Iberia pilots.

Fuel costs for the carrier’s first quarter rose by 24.9% to €1.4 billion from €1.1 billion while revenue was up by 7.8% to €3.9 billion.

Iberia’s overall operating loss deteriorated to €170 million from €100 million while BA’s operating loss was £62 million before exceptional items against £5 million a year earlier.

IAG expects its operating result to be around the breakeven level for the full year, after exceptional items, including the €240 million cost of BMI including €90 million of non-recurring restructuring costs

Chief executive Willie Walsh revealed plans to launch BA flights from Heathrow to Leeds/Bradford, Rotterdam and Zagreb and increase frequencies to existing key destinations following the takeover of BMI.

He said: “Total revenue in the quarter was up 7.8% with passenger unit revenue up 8.5% based on a capacity increase of 0.6%.

“Despite this, we’ve made an operating loss of €249 million before exceptional items. This is mainly due to a €281 million, 24.9% rise in fuel costs, driven by higher prices, the reduced impact of hedging and emissions charges. The Iberia pilots’ strike cost €25 million this quarter.”

Iberia’s performance reflects the weakness of the Spanish domestic market and industrial action by pilots opposed to actions by Iberia’s management to improve the airline’s efficiencies, he said.

“For British Airways, although the London market and demand for transatlantic travel remains strong, its performance has been affected by rising fuel costs,” Walsh said.

And he warned: “The financial performance of our business continues to be undermined by government actions. In addition to the UK government increasing the world’s highest aviation tax – Air Passenger Duty – by double the inflation rate, the Spanish government plans to increase departure taxes from Spain by up to €10 per passenger.”

“In late April, we completed our purchase of BMI. As a result, British Airways is able to manage its wider Heathrow slot portfolio more effectively and is launching a new route to Seoul later this year.

“Consultation continues with BMI mainline staff and their trade unions about plans to integrate the business into British Airways,” added Walsh.

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