IAG losses narrow as fuel costs lessen and revenues rise in Q1 - UPDATE

9th May 2014 08:00

First quarter operating losses narrowed at British Airways- and Iberia-owner IAG, helped by higher revenue and reduced fuel costs. For the three months ended March 31st, the group reported an operating loss of €150m (2013 Q1: €278m) before exceptional items, on revenue of €4,203m (2013 Q1: €3,939), while fuel unit costs fell 8.9%, or 7.4% at constant currency. However, non-fuel costs were up 3.8%, up 4.8% at constant currency.Willie Walsh, IAG Chief Executive Officer, said: "We're pleased that our quarterly operating loss has reduced significantly [...], especially as Vueling's quarterly losses were not included last year as they weren't in the group. "[...] Iberia has almost halved its losses from quarter one last year with an operating loss of €111m compared to €202m. The airline continues to benefit from restructuring and these figures don't reflect the impact of recent pay and productivity agreements which took effect in April. While the restructuring remains work in progress, Iberia is gradually resuming some routes including longhaul services to Santo Domingo and Montevideo. "British Airways made an operating loss of €5m in the quarter, compared to a €72m operating loss in 2013. The airline has increased capacity within a controlled cost environment and benefited from the efficiency of its new Airbus A380 and Boeing 787 aircraft." Southern Europe-focused Vueling, which the group acquired in April last year, reported an operating loss of €30m, while growing capacity. Looking ahead, the group said it expects to improve operating profit for the 2014 full-year by at least €500m, from a 2013 base of €770m. Unit revenues should remain relatively flat, with margin expansion driven by a reduction in unit costs, it predicted. At the period end, IAG had cash of €4,004m, up €371m compared to the 2013 year-end. Adjusted gearing remained at 50%. Monthly traffic stats riseThe group also reported its monthly traffic numbers, which when measured in revenue passenger kilometres, climbed 18% increase in April. On an available seat kilometres basis, the rise was 16.6% month-on-month, or 7.6% on a pro-forma basis. Group premium traffic for April climbed 4% compared to a year earlier.Hargreaves Lansdown remains a 'strong buy'Keith Bowman, Equity Analyst at Hargreaves Lansdown Stockbrokers, said: "The reduced loss at the airline is better than forecast. Cost reduction at the company remains central, with areas such as handling, catering, property and IT still very much in focus." He also noted that increased staff productivity, particularly at Iberia, was playing its part, saying it and the broader industry's move to more fuel efficient aircraft "remains a key theme".However, he also highlighted that the cyclical nature of the company continued to make it dependent on the state of the global economy, adding that "uncontrollable fuel costs remain an uncertainty, whilst the gain already seen in the share price, up 140% over the last 18 months, provides some room for caution".In all, IAG is clearly making progress, he said. NR