LONDON (Alliance News) - International Consolidated Airlines Group PLC Thursday reported its first ever first-quarter operating profit, as all three of its airlines reported an improved performance and it was buoyed by the earlier timing of Easter and lower fuel prices, and it kept its guidance for the year as a whole.
The owner of British Airways and Spanish airlines Iberia and Vueling reported an operating profit of EUR25 million for the three months to end-March, compared with a loss of EUR150 million a year earlier, as revenue rose 12.0% to EUR4.71 billion.
Airlines typically make little or no profit during the slower winter months, booking most of their profit in the summer months when travel demand hits a peak.
"This is IAG's first ever quarter 1 operating profit in what is traditionally the weakest quarter of the year. There was a strong improvement both at a group level and with all three airlines," Chief Executive Willie Walsh said.
The airline group, which is also trying to buy Ireland's Aer Lingus, got a boost from currency movements, although the strength of the dollar also lessened the benefit of lower fuel prices. If currency rates had remained the same over the past year, revenue would only have risen 3.7%. Operationally, it said it saw a consistent positive performance performance in its key North American market.
It also got a boost from the fall in oil prices, although some of the positive impact was offset by the strength of the dollar, with fuel unit costs down 4.5% in the quarter, or 11.0% on a constant currency basis. Non-fuel unit costs rose 5.9%, but would have been down 2.7% at constant currency.
"We achieved a strong unit cost performance with non-fuel unit costs down 2.7 per cent and fuel unit costs down 11.0 per cent, at constant currency. As before, fuel costs benefitted by operating more efficient aircraft and lower fuel prices though hedging and significant currency headwinds reduced the positive impact of lower oil prices," Walsh said.
Passenger unit revenue was up 6.9%, although it would have been down 0.8% if rates had stayed the same.
IAG's balance sheet also improved, with cash of EUR6.00 billion at the end of March, up EUR1.06 billion compared with the end of 2014. Its adjusted gearing fell 3 percentage points to 48% and adjusted net debt to earnings before interest, tax, depreciation, amortisation and restructuring improved 0.2 points to 1.7 times.
IAG kept is full-year guidance for an operating profit of more than EUR2.2 billion. It said the rate of profit improvement in the second quarter would be slower than in the first quarter due to the timing of Easter this year, as well as an adverse fuel price comparison net of fuel and currency hedging.
By Steve McGrath; stevemcgrath@alliancenews.com; @stevemcgrath1
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International Airlines (IAG)