The owner of British Airways reported “ongoing strong demand” for travel throughout last year and into 2025 but warned of the impact of aircraft delivery delays and engine problems.
International Airlines Group noted that leisure travel “remains robust as a major priority for households” as it delivered a 2.9% rise in annual net profits to €2.7 billion over 2023 as revenue increased by 9% to €31.1 billion.
The sector has been boosted in recent years by a shift as customers “value experiences over material purchases”.
Business travel increased through the year, but the group estimates it will not fully recover to pre-pandemic levels, particularly for short duration and short-haul trips.
Meanwhile, globalisation has created “resilient, reliable demand” for the VFR (Visiting Friends and Relatives) segment to both ends of the route network.
Noting that IAG was focused on a disciplined approach to capacity growth, the company said: “British Airways is continuing to invest where it derives the highest returns, in particular the North American market.
“It is still recovering to its previous levels of capacity, particularly in premium cabins, which reflects its premium offering and affluent customer base and will support higher profitability in the future.
“This continues to be subject to new aircraft delivery delays and engine maintenance issues, which will impact our plans for growth over the next three years.
“Specifically its 2024 and 2025 schedules have been heavily affected by reduced aircraft availability due to problems with engines on the 787 fleet.”
BA “significantly improved” its operational performance in 2024, increasing its on time performance by 12 percentage points, according to IAG.
“This was despite the ongoing challenges related to aircraft availability, particularly the 787 fleet. The wider operating environment also remains difficult, with ATC (air traffic control) restrictions doubling at Heathrow during the year.”
BA will be the only airline flying a first class cabin across the Atlantic from London by the end of 2025 and is adding frequencies across the network, including Washington, Austin, Las Vegas and Vancouver, while Pittsburgh will be served daily.
However, BA is reducing frequency to Santiago de Chile and some flights in the Caribbean covering Aruba, Trinidad.
BA has introduced a new digital rebooking tool for disrupted passengers, enabling it to rebook customers onto other airlines faster and meaning that passengers will need to make fewer calls to contact centres, IAG revealed.
The airline also is using a system called Connected Teams which helps customer care teams on the ground and cabin crew resolve issues in-flight.
BA is investing £700 million in its IT to improve the resilience of its systems; update its website and app; and develop new revenue management and sales platforms.
The carrier is an early partner for Amadeus’s next-generation retailing product Nevio.
Meanwhile,. Aer Lingus will continue to focus on building Dublin as a gateway to the US, “leveraging its geographic and cultural ties, as well as providing a competitive European network”.
IAG chief executive Luis Gallego said: “These results highlight the quality of our businesses and effectiveness of our strategy, underpinned by the successful execution of our transformation programme across the group.
“We are delivering world-class margins and returns, in line with the targets we set out to the market just over a year ago.
“We are focused on continuing to make our brands the first choice for customers, by growing our network and enhancing the customer proposition, while our disciplined capital allocation ensures we can continue to invest in the business, deliver strong financial results and create sustainable value for our shareholders.
“We are particularly pleased to announce that IAG is proposing a final dividend which takes our total dividend for the year to €435 million and intend to return up to a further €1 billion of excess capital to shareholders in up to 12 months.”
Commenting IAG’s full year results, Julie Palmer, partner at insolvency and restructuring specialist Begbies Traynor, said: “British Airways owner IAG has soared to new heights with an impressive set of results that have defied the gloom weighing on many consumer-facing sectors in the UK and beyond.
“The airline operator has been boosted by cheaper fuel prices and resilient demand for travel, as squeezed consumers prioritise travel. This has propelled IAG’s operating profit and its share price to five-year highs.
“Despite current successes, IAG must remain wary of the potential headwinds of a volatile geopolitical climate, the possible impact of tariffs and a highly competitive travel market. There is some careful navigation to be done to capitalise on success and avoid unwanted turbulence in 2025.”