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Photo: IAG

High fuel costs hit IAG, AA and others

BA and Iberia owner IAG is warning of “significant” fuel costs this year. But US airlines are passing the costs onto consumers.

Aviation giant IAG has posted a small rise in Q3 profit and is warning of “significant” fuel costs. The British Airways and Iberia owner revealed today a Q3 operating profit of €1.46 billion.

This is an increase of €10 million on this time last year. But fuel unit costs for the quarter rose 15% at constant currency.

The news comes a day after Norwegian and Finnair warned that rising fuel costs would have an increasing impact on the aviation industry. Flybe and Ryanair have also issued profit warnings due to rising fuel costs. (Read our analysis on the issue here.)

IAG’s passenger unit revenue for the quarter rose 1.3%, 2.4% at constant currency, while non-fuel unit costs before exceptional items for the quarter increased 0.5%, although down 0.7% at constant currency, TTG reports.

Q3 operating profit before exceptional items is up 7.3% to €2.575 billion from €2.4 billion this time last year.

Unit revenue
“We’re reporting a good quarter three performance with an operating profit of €1,460 million before exceptional items, up from €1,450 million last year,” said IAG chief executive Willie Walsh.

“These were strong results despite significant fuel cost and foreign exchange headwinds. At constant currency, our passenger unit revenue increased by 2.4% while non-fuel unit costs went down 0.7%”

Looking ahead, the group is forecasting full-year operating profits up €200 million on last year, despite the fuel-cost challenges.

In related news, IAG has revealed further details of the recent security breach affecting BA customers, admitting that details of a further 185,000 payment cards may have been stolen in the attack in addition to the 380,000 already stated.

Fuel hit
American Airlines, meanwhile, says that an additional $750 million in fuel costs dragged down its quarterly results along with disruptions from recent hurricanes in the US. The costs pulled its profit 48% downwards, the airline said yesterday.

However, other airlines in the US are keeping ahead of rising fuel costs, finding other ways to compensate, the Wall Street Journal reports. Some are earning more from high-paying business travellers, while others have raised baggage and other fees – passing the additional costs onto consumers.

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