LONDON, UK — The Anglo-Spanish aviation giant International Airlines Group (IAG) has turned its attention towards acquisitions after a substantial revenue increase during the year's first three quarters. The Group, the owner of British Airways, Iberia, Aer Lingus, Level, and Vueling, said last week that its revenues had returned to pre-pandemic levels and increased its full-year profit forecast.
IAG is now ailing rivals thought to be in its sights.
In light of the good financial figures, Chief executive Luis Gallego confirmed that IAG is a platform for consolidation.
"We will only do what makes sense, but we see there are opportunities to be stronger. We are a group that wants to consolidate the industry," he said.
While IAG has seen passenger numbers bounce back following the removal of restrictions, other airlines continue to struggle. The Portuguese government seeks to sell the country's loss-making flag carrier, TAP, while UK's budget carrier, easyJet, is expected to report losses of £180m this year.
IAG said it expected pre-exceptional operating profits for the 12 months to December 31 of €1.1bn, an upgrade from a mid-year projection that results for 2022 would be "positive."
The company's shares, which had risen 26 percent in October until Thursday's close on optimism about the aviation recovery, were down 3.3 percent at lunchtime on Friday at 116p. IAG's figures are the latest evidence of a strong rebound in the fortunes of airlines after 18 months when operations were severely constrained by travel restrictions imposed to combat Covid.
IAG had already announced on October 13 that results for the quarter were better than expected and said it anticipated operating profits for the three months of €1.2bn — the same figure it announced in Friday's results. That compares with a €452mn loss for the same period in 2021 when operations were heavily affected by coronavirus curbs. Pre-tax profit was €1bn, against a pre-tax loss of €714mn for the same period of 2021. In the third quarter, IAG operated at 81 percent of the capacity it did in the same quarter of 2019.
It said it expected to operate 87 percent of pre-pandemic capacity in the fourth quarter of 2022 and 95 percent in the first quarter of 2023. The recovery came despite restrictions on passenger numbers at London's Heathrow, the Group's most important hub, imposed by the airport's owner to cut queues. Since July, the airport has imposed a 100,000-a-day limit on the number of departing passengers, although it announced this week that the cap would be lifted from this Sunday. IAG's chief executive Luis Gallego called the results a "strong performance."
"All our airlines were significantly profitable, and we are continuing to see strong passenger demand while capacity and load factors recover," he said. Gallego said leisure demand was "particularly healthy." IAG said in its results that premium leisure travel had "fully returned" to 2019 levels.
Business travel continued to "recover steadily," Gallego added. The company said business travel in the quarter was running at about 75 percent of pre-pandemic levels. However, Gallego acknowledged "uncertainties" in the economic outlook and the "ongoing pressures on households."
"Against this backdrop, we are focused on adapting our operations to meet demand, strengthening our balance sheet by rebuilding our profitability and cash flows and capitalizing on our high level of liquidity," he said.
Nicholas Cadbury, finance director, predicted that yields — the revenue for each available seat kilometer, a standard industry measure — would remain stronger than pre-pandemic. IAG earned 8.57 euro cents per ASK for the third quarter of 2022, against 7.08 cents for the same period in 2019.
"There's less capacity in the marketplace, locked in," Cadbury said.
"Demand from leisure is incredibly strong, and business is recovering, so I think you're still likely to see higher yields than we saw in 2019. I think you'll still see yields up but not as high as they are at the moment."
