International Consolidated Airlines Group S.A. (LON:ICAG) announced underwhelming first-quarter figures. Operating profit dropped by 34% to €135 million, and the consensus estimate was €136 million. The company cited the timing of Easter, fuel costs and market capacity for the decline. Revenue increased by 5.2%, but passenger unit revenue dipped by 1.4% - due to lower yields.
On the bright side, net debt dropped by 18.7%, and the group confirmed that operating profit in 2019 should be in line with 2018’s performance. Given the surge in fuel prices in 2019, it’s no surprise that profit was hit, but that is likely to impact the whole sector. Ryanair and easyJet (LON:EZJ) have had their own problems in recent months, and it seems that IAG are in a better position to weather the storm of higher fuel costs. IAG have proved to be more reliable than the likes of Ryanair in terms of flights actually taking-off, and that will stand to the airline.
IAG had a strong 2018 as full-year operating profit increased by 9.5% to €3.23 billion, which topped the forecast of €3.16 billion, and revenue increased by 6.3% to €24.41 billion – broadly in line with analysts’ expectations. In a sign of how well the company is performing, the group revealed a special dividend of €700 million, and that is on top of the €327 million ordinary dividend. In March, the company cautioned that cash flow will be lower this year as the group intends to increase capital expenditure, but it predicts that operating profit will hold steady.
Brexit is hanging over the stock, and now that the UK’s exit from the EU has been deferred to possibly late October, some of the potential pain might be deferred too. The stock took a knock in late February, when the MSCI said it would be removed from its global indices. The airline announced that the maximum level of shares that can be owned by non-EU citizens is 47.5%, and it was speculated that the ownership rules prompted the decision by MSCI.
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