IAG Reports 65 Percent Profit Growth For 2015

February 26, 2016

IAG reported a 65 percent rise in annual profit at EUR€2.3 billion and said for 2016 it expected a further profit increase as it benefits from lower fuel costs.

The group forecast a more than EUR€900 million (USD$991 million) or 40 percent profit rise this year as chief executive Willie Walsh said he planned to steer the group towards further growth.

IAG, whose portfolio includes British Airways, Iberia, Vueling and Aer Lingus, will this year benefit from lower fuel prices, a long-term strategy of reducing costs and growing demand for travel.

But the company faces uncertainty in the shape of volatile currencies, Britain's June vote on leaving the European Union, and pressure on ticket prices from increased competition in Europe and on transatlantic routes.

Walsh said IAG was well positioned to grow in spite of those headwinds. "Clearly it will be a challenging environment but the good news is that we're very confident in terms of our performance," Walsh told reporters.

The 54-year-old, who once said he would retire at 55, is planning to stay to oversee that growth for at least 18 months. "I'll still be 55 until October of 2017, until my 56th birthday, so there's still time for me," he told BBC radio.

The forecast of 40 percent growth in the current year represents a slower pace than the 65 percent jump in operating profit it reported for 2015.

That guidance puts it on course to post a result of EUR€3.2 billion.

Like many European airlines, IAG will this year be helped by an oil price which has almost halved over the past 12 months, as long-term fuel hedges fall away allowing more of the benefits to be felt.

The challenge for IAG is to retain the benefits of cheaper fuel amid pressure on ticket prices from operators such as Ryanair.

Recent falls in the pound on uncertainty about the outcome of a referendum on Britain's EU membership are also a risk to IAG because its major expenditure is on fuel, priced in US dollars.

As for the vote itself, Walsh said that outcome would not affect IAG. "We don't believe it would have a material impact on our business," he told the BBC.

(Reuters)