Fuel costs a worry for IAG

28th Feb 2012 17:04

International Airlines Group (IAG) will present its annual results on Wednesday morning. Analysts at Nomura weighed in on what they expect. They currently have a buy recommendation with a price target of 160 pence. The good news, according to the Japanese brokerage, is that plans to increase capacity are headed in the right direction.Nomura expects operating earnings of €500m without accounting for the cost of labour strikes over the creation of low-cost airline Iberia Express. "With the strikes costs, we expect our full-year operating profit to be closer to the consensus of €470m ... but pre-bmi, we forecast a €200m operating profit, which is a touch lower than the €240m consensus forecast," explained these analysts.They believe that the main near-term driver is fuel prices although they may be offset by capacity recovery in Madrid-Europe routes following the demise of Spanair and a more benign outlook for premium travel.VUELING WILL TAKE ADVANTAGE OF SPANAIR BANKRUPTCYLow-cost airline Vueling's Chief Executive Alex Cruz explained on Tuesday morning in the company's own earnings presentation that the airline expects to increase the number of passengers by 3 to 4 million. He added that Spanair had 6 million seats in the markets Vueling operates and that he sees an opportunity to keep between 3 and 4 million of those seats.Vueling remains optimistic although the creation of Iberia Express will put an end to its agreement with IAG to fly Barcelona - Madrid. Vueling expects to grow in 2012 by more than double the growth seen in 2010 with ten new aircraft. In total, it expects a million interconnection passengers from Barcelona.Concerning fuel costs, Cruz said that the company is satisfied as it is the only Spanish airline that turned a profit in 2011 and among the few profitable airlines in southern Europe. He added that current oil prices will provoke many more bankruptcies in Europe. "Our intention is to do everything possible to keep Vueling a profitable company; we have done so in a very challenging year."M.G.