International Airlines Group net profits more than doubled in three months to end of 2011, despite fuel increase.
International Airlines Group (IAG), the company formed by the $8bn merger of British Airways and the Spanish carrier airline Iberia, has reported a six-fold increase in its annual profits to £425m (€503m). At €16.3bn, the company's revenue for 2011 is up 10.4 per cent on 2010 when IAG was formed. That year, annual profits were €84m.
Willie Walsh, the chief executive of IAG, told reporters:
BA is making money and Iberia is losing money. The Spanish economy is weak and operating costs at Iberia are too high, unacceptably so, but this is being tackled.
The rise in IAG's profits comes despite an increase of almost 30 per cent in fuel costs. In a statement on the full year results, Walsh warned that this, along with and tax increases, would be a factor in 2012:
The performance of our airlines reflects the different markets in which they operate. The north Atlantic market remains strong, benefitting British Airways. However, British aviation's competiveness is undermined by the UK government's determination to continually increase Air Passenger Duty with the latest rise due this April. In 2011 British Airways paid almost £500 million in APD. As a result of the latest increase, the airline is reducing by around half the number of new jobs it's creating this year and has postponed plans to bring an extra Boeing 747 back into service.
On Wedesnday's BBC Radio 4 Today programme, Walsh defended the announcement on the halving of new jobs by fiercely attacking the British coalition for falsely claiming to have a growth agenda. Walsh said "government policy is destroying jobs in aviation and tourism in UK".
Currently Europe's fourth biggest airline group, IAG announced in December that it had agreed to buy BMI from the German carrier Lufthansa for £172.5m. BMI holds 11 per cent of take-off and landing slots at London Heathrow, the busiest airport in the UK and third busiest in the world by passenger traffic. Completion of the takeover was predicted to take place early this year. Virgin Atlantic responded by calling to the European Competition Commissioner for an outright ban on the bid, which would see BA holding over half of all of Heathrow's take-off and landing slots. Virgin argued:
There are no appropriate remedies to negate the anti-competitive harm arising from the proposed transaction.
Richard Branson, the Virgin chairman, stepped in earlier this month, calling on a block to the merger:
This takeover would take British flying back to the dark ages. For years pioneering airlines have fought to provide consumers with more choice and lower fares. This move will see British Airways unravel all of this progress made. BA has a track record of dominating routes, forcing less flying and higher prices. BA is already operating on 60 per cent of BMI's routes so this move is clearly about knocking out the competition.
On Today, Walsh came out against Virgin's claims, saying IAG was "stepping in to rescue what is [basically] a bankrupt company and turn that into profitability as quickly as possible." He rejected claims that the price on some flight routes would be "jacked-up" by IAG.
Elsewhere in the year-end statement, Walsh said of the buy-out:
In December, we signed a binding agreement with Lufthansa to buy BMI. While subject to regulatory approval, we plan to integrate BMI mainline into British Airways following agreement by BA pilots to make productivity changes that justify the integration.