UPDATE 2-BA owner IAG cuts medium-term capacity and profit forecasts

(Adds shares, background)

LONDON, Nov 8 (Reuters) - British Airways owner IAG
scaled back its forecast for capacity growth for the next three
years on Friday, hitting its outlook for earnings per share but
potentially providing relief for rivals in a weak global
economy.

IAG said available seat kilometres, a measure of
passenger-carrying capacity, was estimated to grow by 3.4% a
year between 2020 and 2022, compared to a previous forecast of
6% growth a year for the 2019-2023 period.

The airline group, which also owns Iberia, Aer Lingus and
Vueling, said the capacity growth cut would lower its forecast
for growth in earnings per share (EPS) to 10%+ a year from a
previous forecast of 12%+ a year.

IAG shares were down 3% at 0821 GMT ahead of a strategy
update from management at the company's capital markets day
later on Friday.

The airline industry has struggled to maintain margins in
the face of industry overcapacity and a muted economic outlook
which has produced fierce competition over ticket prices.

Chief Executive Willie Walsh said last week that he expected
global macroeconomic softness to continue in 2020. The company
has also taken a hit from industrial action at British Airways,
which has knocked its outlook for profits this year.

IAG said the forecasts for capacity growth numbers were not
adjusted for the impact of the pilot strikes. After 48 hours of
action in September, no further industrial action is scheduled
although the dispute over pay remains unresolved.

The issues at BA, which was forced to ground 1,700 flights
during the walkout, was cited by easyJet as helping its
performance in the last quarter, while Lufthansa has also said
slower capacity growth at rivals was providing relief.

In a further sign of an easing of industry overcapacity,
Ryanair is set to grow at its slowest rate in seven years in the
year to March 31, 2021, as it expects further delays to its
Boeing 737 MAX deliveries and may be without the jets next
summer.

Friday's strategy update comes after IAG said on Monday it
would buy Spain's Air Europa to boost its presence on routes to
Latin America and the Caribbean.

IAG said it expected the deal, which will be funded through
external debt, to close in the second half of next year and for
it to add to its earnings in the first full year after the
closure.

(Reporting by Alistair Smout; Editing by Kate Holton and Dale
Hudson)