British Airways owner IAG second-quarter profit drops 16% on Iran war hit
Profit Decline and Contributing Factors
July 31 (Reuters) - British Airways owner IAG reported a 16% drop in second-quarter profit on Friday, weighed down by soaring fuel costs and weak travel demand linked to the Middle East conflict, and said it now expects capacity to be flat this year.
Fuel Costs and Financial Forecasts
IAG, which also owns Iberia and Aer Lingus, said its fuel costs for the year would range between €8.3 billion and €8.6 billion, slightly lower than the roughly €9 billion ($10.36 billion) forecast in May.
Impact of Middle East Conflict
The quarterly results reflect the pressure and uncertainty highlighted by fellow carriers Ryanair and easyJet this month, as a prolonged and escalating war raises costs and weakens travel demand.
Rising Fuel Prices and Emissions Charges
All of IAG's airlines saw an adverse impact from higher fuel prices from March onwards, as fuel costs and emissions charges jumped nearly 23% in the second quarter to €2.22 billion, IAG said.
Transatlantic Routes and Booking Trends
IAG has long relied on strong demand on its core transatlantic routes, but the war is now undermining that key source of earnings. The airline was forced to warn on profit and capacity in May.
It said it was around 57% booked for the second half of the year, with booked revenue in line with a year ago. It continues to expect to offset around 60% of its higher fuel bill through higher ticket pricing and cost initiatives.
Quarterly Profit and Analyst Expectations
The carrier posted an operating profit before exceptional items of €1.41 billion for the quarter on Friday, below the €1.68 billion reported a year earlier, but slightly ahead of the €1.37 billion forecast by analysts in a company-compiled poll.
($1 = 0.8692 euros)
(Reporting by Shashwat Awasthi in Bengaluru and Joanna Plucinska in London; Editing by Subhranshu Sahu and Tomasz Janowski)
