Triple-whammy blow for British Airways owner as turbulence hits
A cocktail of Brexit currency turbulence, air traffic control strikes and terrorism will cost IAG €228 million (£192 million), the British Airways owner has revealed.
The national flag carrier took a €148 million hit from the plummeting pound in the wake of Britain’s decision to leave the EU as it was buffeted by the headwinds facing Europe’s airlines.
Boss Willie Walsh also warned that the Aer Lingus and Iberia parent will take a hit of at least €80 million in the second half as a result of bad weather and French air traffic control strikes, causing over 1000 flights to be cancelled.
IAG posted a €555 million operating profit for the second quarter to June 30, up on €530 million last year but missing City forecasts of €568 million.
Walsh was cautiously optimistic that the impact of the string of terror attacks, which have blighted the crucial summer period for airlines and travel firms, would not last long.
“These events do have a short-term impact [on travellers buying tickets] buy typically they don’t tend to be long lasting,” Walsh said of this month’s attack in Nice.
But, when coupled with uncertainty ahead of the EU referendum in June, IAG said it saw “a softer-than-expected trading environment”.
Walsh said that, in the run-up to the vote, the airline had seen more-subdued demand from business travellers.
The company said it expects 2016 underlying operating profits to rise by a “low-double-digit” percentage. That is down from a 40% increase anticipated prior to the vote.
IAG rapidly issued a profit warning following the result of the referendum, sending shares spiralling.
The firm was one of the biggest fallers on the FTSE 100 in early trading but bounced back, up 4.7p to 414p.
Earlier this week, Ryanair set out plans to move growth away from UK airports in the wake of the vote and slash capacity at Stansted in reaction to the “damaging” effect of Brexit.
It came after easyJet last month said “additional economic and consumer uncertainty is likely this summer”, and warned revenue per seat will drop by “at least” 5% in its crucial second half of the year.
Liberum analyst Gerald Khoo said: “The outlook remains highly uncertain, with no visibility on how business travel trends in particular will develop in the key autumn period.
“Given the downside risks to GDP growth, business sentiment and consumer confidence, we remain cautious for the moment.”
Tom Selby, an analyst at broker AJ Bell, said: “The airline sector has been the real bearer of bad news over the past month. It would be a brave person who wants to invest in this part of the market at the moment.”
Lufthansa and Air France-KLM have also warned of the impact from terror attacks and strikes in France.
