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Photo: IAG

Fuel costs drag down profit growth at IAG

The group “remained profitable” in Q1 but says it is not expecting to post any growth in operating profit this year.

IAG has blamed rising fuel prices for dragging down profit growth. The group, which includes British Airways, Iberia, Vueling and Aer Lingus, said it was not expecting to post any growth in operating profit this year.

The group posted a first-quarter operating profit of €135 million, down 60% on the same period last year when it raked in €340 million.

Fuel unit costs for the quarter, increased by almost 16% year-on-year, and there was a €61 million hit from poor currency exchange rates. Willie Walsh, the group’s chief executive, talked up the results.

“In a quarter when European airlines were significantly affected by fuel and foreign exchange headwinds, market capacity impacting yield and the timing of Easter, we remained profitable and are reporting an operating profit of €135 million,” he said.

He added that although non-fuel unit costs were down 0.6%, passenger unit revenue decreased by 1.4%.

Looking ahead, IAG says that at current fuel prices and exchange rates it expects to post 2019 operating profit before exceptional items in line with 2018.

“Passenger unit revenue is expected to be flat at constant currency and non-fuel unit cost is expected to improve at constant currency,” it said. “We expect passenger unit revenue at constant currency to improve for the remainder of the year.”

No to Thomas Cook
Also on Friday, Walsh ruled out IAG joining the bidding for Thomas Cook’s airlines. The group had previously expressed an interest in the business, but Walsh said: “In relation to Thomas Cook, we’re not putting in any bid”, according to Reuters.

That leaves Lufthansa, Indigo Partners and Virgin Atlantic as possible suitors, likely to bid for all or parts of the business.

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