The Brexit vote, the weak pound, terrorism, and network disruption all negatively hit International Airlines Group in the nine months to September.
The British Airways owner today revealed that it suffered from weak trading conditions leading up to and following June’s UK referendum vote to leave the European Union, particularly in premium travel.
The vote to exit also created volatility in the foreign exchange markets.
“Weakening of the pound sterling impacted the translation of the group’s sterling subsidiaries and reduced the group’s profits, net assets and other reserves,” IAG said while disclosing a drop in third quarter operating profit to €1.205 billion from €2.250 billion in the same period last year.
“Throughout the period, the group has suffered network disruption. Although management has plans to mitigate these risks to the extent feasible, there has been an impact on our short-term profitability.”
IAG said its performance in the nine months to September 30 was negatively impacted by terrorist attacks, the UK referendum vote, operational disruption including air traffic control industrial action and adverse exchange rates, partially offset by lower fuel prices.
Chief executive Willie Walsh said that while strong, the third quarter operating results were affected by “a tough operating environment with a very significant negative currency impact of €162 million, primarily due to sterling weakness, and continued disruption due to air traffic control strikes”.
He added: “Despite this, our unit revenue performance was better than in quarter two and our quarterly profit after tax was €970 million before exceptional items, an improvement of 9.9% on last year.
“In the nine months, we made an operating profit before exceptional items of €1,915 million, up 6.1% versus last year.”
IAG expects to deliver a full year operating profit of around €2.5 billion from €2.3 billion in 2015 and said it had seen “no significant change” in short-term trading conditions.
IAG increased capacity by 11.3% in the first nine months of the year, with traffic volume up by 11.8% and a passenger load factor of 82.1%.