British Airways owner IAG reported a 16 percent drop in
second-quarter profit, citing higher fuel prices and weaker demand linked to
the Middle East conflict. However, the group said corporate travel demand
remained "strong" throughout the quarter, a trend it expects to
continue into the second half of the year.
During an earnings call on Friday, IAG chief executive Luis
Gallego said "robust" corporate travel demand continued to drive
revenue growth for BA and Iberia, particularly across the North Atlantic
market, which accounts for 30 percent of the group's overall capacity.
"Corporate revenue in Q2 was very strong, with [growth]
in the high single digits year over year, driven by volume and yield,"
Gallego said.
BA CEO Sean Doyle added that corporate demand from the
technology and financial services sectors remained "strong," while
the carrier also recorded volume increases from SMEs and growth in 'bleisure'
travel, which he said has been "a growing segment."
North Atlantic corporate travel revenues for the British
flag carrier increased 16 percent year over year in Q2, while US point-of-sale
was "much stronger," Doyle said, with growth of more than 22 percent year
over year.
"Looking at [traffic] flows from North America to
India, for example, we're doing very well on business traffic, and a lot of
that traffic is bypassing the Gulf hubs," Doyle said. "We've added
more capacity into those markets to build on that momentum and we're seeing
that trend continue into the second half of the year."
Iberia, meanwhile, reported an 8 percent year-on-year rise
in corporate traffic during the quarter, with demand extending across its
long-haul network, particularly in North America.
IAG, which also owns Aer Lingus, Vueling and Level, said
higher fuel prices affected all its airlines in the three months to 30 June,
with fuel costs and emissions charges rising nearly 23 percent to €2.22
billion.
Gallego said IAG offset 60 percent of the increase through
higher ticket pricing and cost initiatives, alongside its fuel hedging
strategy.
The group now expects its full-year fuel bill to range from
€8.3 billion to €8.6 billion, slightly below the €9 billion forecast
in May.
After revising down its full-year capacity forecast in the
previous quarter, IAG now expects 2026 capacity to be flat compared with 2025.
The update follows similar downward capacity revisions from European rival Air
France-KLM, which this
week also reported a decline in profits amid rising fuel costs and the
prolonged conflict in the Middle East.
IAG Q2 metrics
IAG reported a 0.2 percent year-on-year increase in
second-quarter revenue to €8.9 billion. The group posted an operating profit
before exceptional items of €1.41 billion for the period, down 16.3 percent
from €1.68 billion a year prior.
IAG's total capacity for the quarter, measured in available
seat kilometers, fell 0.5 percent year over year, while passenger revenue per
ASK increased 1.6 percent. Load factor rose 0.2 percentage points to 85.6 percent.
British Airways posted an operating profit of £886 million
for the first six months of the year, up £61 million year over year. Iberia
reported a profit of €526 million, down €38 million from the same period last
year. Vueling saw H1 profit fall €49 million year over year to €46 million,
while Aer Lingus posted a €34 million loss, with the Irish carrier recently
announcing capacity and job cuts as part of a plan to return to
profitability.
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Q1 performance