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International Consolidated Airlines Group (LSE:IAG) issued its First Quarter Results today, reporting a €230 million loss just inside the upper limits of market expectations of a loss of €230 million to €250 million. Shareholder response to the news seems to underline that it was not totally unexpected, especially during the traditionally weakest quarter of the year. In fact, share prices increased by a modest 1.1% to 164.80p at mid-afternoon.
First Quarter Highlights
All information is this section is direct from the official company release.
- Pre-tax loss was €263 million, nearly 2.5 times the loss recorded during the same period last year.
- Revenues increased by 7.8% to €3,919 million. This includes 1.1% favorable impact from currency exchange rates. Passenger revenue, accounting for €3,290 million, was up 9.0%.
- Rising fuel costs was one of the major contributing factors to the loss, up nearly 25% to €1,409 million.
- Non-fuel costs, by comparison, rose only 5.7%.
- Cash on hand at the end of the quarter was down €161 million to €3,574 million.
- Net debt was reduced by €19 million to €1,129 million.
- CEO Willie Walsh said that “The financial performance of our business continues to be undermined by government actions. In addition to the UK government increasing the world’s highest aviation tax – Air Passenger Duty – by double the inflation rate, the Spanish government plans to increase departure taxes from Spain by up to 10 Euros per passenger.”
- Given the need to overcome the first quarter results, the company is indicating that it will need a solid performance for the next three quarters to break even for the year.
- The Iberian Airlines operation contributed heavily to the overall loss, especially as it was beleaguered by strikes against the company by Spanish pilots. The airline also blamed government policy for some of the loss, especially the impact of the EU’s carbon dioxide emissions regulations and increases in airport taxes in the UK.
- Mr. Walsh pointed out that “Iberia’s performance reflects the weakness of the Spanish domestic market and industrial action by pilots opposed to actions to improve the airline’s efficiencies.”
- The company continues to enjoy nearly unmitigated success on long-haul flights from Heathrow, carrying 5.8 million passengers in a record-setting month in April.
- The group is expected to add to its long-haul business as it gains additional operating slots, which are scarce at Heathrow, as a result of its recent acquisition of BMI.
Company Spotlight
International Consolidated Airlines Group is a merger of British Airways and Iberia Airlines with a combined fleet of 348 aircraft flying in 200 destinations across the globe.
References
↑ Company Overview
↑ The Telegraph
↑ Official Company Report
↑ Market Watch
↑ Bloomberg Business Week
