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British Airways Owner Suffers From Pilot Strike

British Airways Owner Suffers From Pilot Strike

(Bloomberg) -- British Airways owner IAG SA reported a drop in third-quarter earnings after the U.K. carrier’s first pilot strike since 1979 disrupted flights and held back sales.

The airline group, which also includes Spain’s Iberia and Aer Lingus of Ireland, had an adjusted operating profit of 1.43 billion euros ($1.6 billion), according to a statement Thursday, down 7% compared with 2018 on a pro forma basis. Analysts had predicted a figure of 1.44 billion euros.

Key Insights

  • Full-year earnings will be 6% or 215 million euros lower than first forecast due to the strikes and depressed fares at low-cost arms Vueling and Level, IAG said, confirming guidance from last month.
  • The September walkout upset travel plans for almost 200,000 people and led to 155 million-euro hit on operating profit. Chief Executive Officer Willie Walsh said that the disruption aside, IAG had reported “good underlying results,” while echoing rival Air France-KLM in warning that the economic outlook remains soft.
  • IAG has lowered capacity growth this quarter, trimming the 12-month figure to 4%, while also reining in expansion for 2020. Walsh said he won’t provide details until a capital markets day next month.
  • Like its peers, IAG has been grappling with the impact of a glut of seats across Europe together with fluctuations in fuel prices -- factors that contributed to the collapse of U.K. tour operator Thomas Cook Group Plc and eight other carriers in a little more than a year. Walsh said none of the failures have come as a surprise to him.
  • The CEO expressed confidence that Boeing Co. will get the 737 Max flying again after it was grounded following two fatal crashes, saying the manufacturer is “doing all the right things.” He added that IAG is in no rush to sign off on an order for 200 of the planes since they’re not due for delivery until 2022 or 2023.

Market Reaction

IAG shares fell as much as 3.9% before trading 1.9% lower at 510 pence as of 8:10 a.m. in London, taking the decline this year to 12%.

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To contact the reporter on this story: Siddharth Philip in London at sphilip3@bloomberg.net

To contact the editors responsible for this story: Anthony Palazzo at apalazzo@bloomberg.net, Christopher Jasper

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