The head of British Airways parent IAG has dismissed concerns that the cost of living and recession fears will hit demand and insisted the group will be profitable for the remainder of the year.
IAG chief executive Luis Gallego said high demand had enabled the group to increase revenue despite cuts to BA’s schedule to reduce the incidence of flight disruption.
Gallego said: “We are aware of inflationary and recession concerns and the operational challenges we face, but we don’t see any signs of weakness in booking behaviour.”
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He acknowledged the group is “looking at this very closely” but insisted: “We expect to be profitable for the rest of the year. Forward bookings continue to be strong, especially in the leisure segment.”
Speaking as IAG reported a profit of €133 million for the three months to June despite a substantial first-half loss of €654 million, Gallego said: “We are above the level of 2019 [on revenue] for the rest of the year.”
This is despite flying with reduced capacity, with BA operating at 69% of the level of 2019 over the April-to-June quarter and at 75% for the three months to September.
Gallego said the revenue increase was due to higher fares, saying: “The biggest factor is increased yield.”
He explained: “The load factor for BA is minus two percentage points on 2019 in premium and minus seven points in non-premium, but yield on long haul is around 120% on premium and non-premium [seats]. Short-haul yields are 100% of 2019.”
Gallego argued: “We don’t see any sign of weakness for the future. We understand there is a risk of recession. But the capacity we’re flying is below the 2019 level and we can adjust. We’re comfortable with where we are.”
He added: “Demand remains very strong. Forward bookings in the last five weeks have been running at 85% of 2019 levels in volume and 95% in revenue.
“These higher levels reflect higher pricing. Premium leisure revenue is particularly strong.”
He reported “a slight slowdown in short-haul bookings in the last three weeks, but this mainly reflects the capacity cap at Heathrow”.
Gallego said: “It’s difficult to see the last quarter of the year, but we don’t see any signs of weakness in demand.”
IAG chief financial officer Nicholas Cadbury said: “We’re very aware of the risks of recession. But hopefully, if we go into a recession the fuel price will be pulled down.”
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