IAG shares rose 5% this morning to 600.17p as the owner of British Airways and Iberia revealed a 10% surge in operating profits – hitting €170m – for the first quarter of 2017. The new numbers appear impressive given that the first quarter is traditionally slow for the airline.
IAG boss Willie Walsh indicated that operating profits for the full year may also climb – as long as fuel prices and exchanges rates avoid volatility. Meanwhile lower oil prices, down 11%, are helping IAG.
Cheaper fuel costs
“A lower fuel bill scenario that is marginally lower than last reported,” said Deutsche Bank analyst Anand Date, “we expect to see FY17E [estimated] consensus increase low-single-digit. Overall we believe IAG’s Q1 results demonstrate good continued progress.”
Date added that IAG also boosted guidance on capacity “but overall continues to plan for low growth in 2017 of +2.8%, previously +2.5%.” Date thinks Q3 capacity growth is expected to near +1.6% from the +0.6% previously indicated “but we believe this is still a very low level of growth that should suggest strong pricing in the quarter.”
The impact of currency exchange on IAG, which also owns Aer Lingus and Spanish low-cost carrier Vueling, was €32m due to converting sterling profit back into euros IAG chief exec Willie Walsh said.