IAG Performance Dented By Euro Zone Crisis

June 7, 2012

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International Airlines Group, formed by the merger of British Airways and Iberia, said worsening economic conditions in Spain hit its performance last month, undermining strength in long-haul travel out of London.

IAG on Thursday said traffic, measured in revenue passenger km, rose 6.6 percent last month versus May 2011, while passenger load factor was up 0.5 percentage points at 78.6 percent.

"Underlying market conditions at our London Heathrow hub continue to be firm, particularly in long haul premium," the company said in a statement.

"However, commercial performance at our Madrid hub has deteriorated further due to the ongoing effects of the Spanish and wider euro zone macroeconomic conditions and, the after-effects of prolonged industrial action."

IAG said its first and business-class travel - the most profitable part of its passenger business - rose 1.7 percent, while non-premium traffic was up 7.5 percent. It added that trends in June appeared to be stronger than those in May.

Traffic at Iberia, which made an operating loss of EUR€170 million (USD$212.5 million) in the first three months of the year fell 1.8 percent last month, IAG said.

Last month IAG said the prospect of a EUR€1 billion rise in its fuel bill, combined with EUR€90 million worth of restructuring costs stemming from its acquisition of bmi, meant it would struggle to make any money this year, predicting operating results would be "around the break even level".