IAG SA raised its full-year earnings outlook after reporting a surprise profit in the typically weak first quarter, highlighting how the airline industry has rapidly bounced back from the depths of the pandemic slump.
(Bloomberg) — IAG SA raised its full-year earnings outlook after reporting a surprise profit in the typically weak first quarter, highlighting how the airline industry has rapidly bounced back from the depths of the pandemic slump.
The parent company of British Airways and Iberia now expects operating profit to exceed the upper end of its previous guidance, which called for a range of €1.8 billion ($2 billion) to €2.3 billion, London-based IAG said on Friday. IAG also said its net debt will come down by the end of the year, after previously saying the figure would remain flat.
IAG rose as much as 5.5% to 155.3 pence, the most since the start of the year. The stock has gained about 24% in value this year, the second-best performer on the 29-member Bloomberg World Airlines Index in the period behind low-cost specialist EasyJet Plc.
Operating profit in the first quarter came in at €9 million ($9.9 million), compared with a €718 million loss reported a year earlier. Analysts surveyed by Bloomberg had predicted a €186.3 million average loss. Airlines typically report losses for the first quarter because of slow travel demand and make up for the deficit in the stronger Easter and summer seasons.
“We are seeing healthy forward bookings with leisure demand particularly strong while business travel continues to recover more slowly,” Chief Executive Officer Luis Gallego said in the statement.
IAG has benefited from lower fuel prices and robust demand for air travel that’s driven up fares faster than inflation. Air France-KLM also reported earnings today, saying it’s preparing for a busy holiday season amid strong summer ticket sales, while Deutsche Lufthansa AG said May 3 that demand remains high for tourism travel to places like Spain as well as city breaks.
The group said Iberia contributed record profit in the quarter, while British Airways returned to profit in the period. Demand for corporate travel is recovering slightly faster at Iberia than at other airlines, IAG said.
The carrier said that outlook for the summer is “encouraging,” with about 80% of second-quarter revenue now booked.
(Updates with stock return in third paragraph.)
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