BA owner IAG almost triples first-quarter operating profit to beat expectations

By Joanna Plucinska and Shashwat Awasthi

(Reuters) -British Airways owner IAG reported better than expected first-quarter profit on Friday and maintained its outlook for 2025, with resilient demand helping to almost triple earnings year on year.

Shares were up 2.5% at 0847 GMT, as analysts and investors expressed optimism about IAG's prospects and strategy, bolstered by a strong performance across its British Airways, Aer Lingus and Iberia brands.

European airlines in general have delivered strong quarterly results despite global economic uncertainty stoked by U.S. President Donald Trump's tariff policies.

Concern over an economic downturn has cast a shadow over transatlantic routes that have helped to drive IAG's strong results in recent years, but the company's first-quarter statement said that part of the business remained a "major area of strength". 

The company said it was seeing some softness in bookings from the U.S. in the economy cabin, but that was being offset by strength in premium bookings.

Chief Executive Luis Gallego told reporters that bookings to South America in particular were very strong, with Europe and Africa also robust. 

IAG also announced a new order for Boeing and Airbus jets, a day after Britain and the United States announced a trade deal. Gallego said IAG had been working on the deal "for a long time".

European peers Air France-KLM and Lufthansa last week cautioned about potential economic headwinds but did not declare any notable impact on business so far.

U.S. airlines such as Delta pulled their financial forecasts in April on the back of demand uncertainty resulting from Trump's tariffs. Virgin Atlantic also said it had noticed a slowdown in travel from the United States to Britain. 

IAG reported operating earnings of 198 million euros ($222 million) for the three months to March 31, against 68 million euros a year earlier and analysts' consensus estimate of 158 million euros, as compiled by the company.

IAG shares bucked the wider sector trend by performing well last year as its transatlantic advantage helped to bolster investor confidence. 

They reached a five-year high in February before drifting lower, but they have been climbing again since early April.

Gallego told reporters it was too early to tell if demand on transatlantic routes would soften in later quarters. 

"With 80% of flights for the second quarter already booked, the outlook is brighter than many expected," Aarin Chiekrie, an equity analyst at Hargreaves Lansdown, said in a note.

"After such a strong start to the year and demand holding up well, there could be room for markets to turn more positive on IAG and the industry as a whole."

Other analysts sounded more cautious, particularly for the second half of the year, given lower bookings at 29% for the third quarter.

"We expect profits in this (the third) quarter to be vulnerable to Atlantic unit revenues, despite the tailwind from fuel," Barclays said in a note.

The first quarter is often the weakest for airlines, which rely heavily on the busy summer travel season.

($1 = 0.8902 euros)

(Reporting by Joanna Plucinska and Shashwat Awasthi. Editing by Shri Navaratnam and Mark Potter)