International Consolidated Airlines Group SA has upgraded its full-year profit expectations after reporting higher-than-expected sales for the third quarter with prices increases leading to revenues having “fully recovered” from the pandemic despite capacity remaining lower.
The British Airways owner revealed operating profits of €1.21bn for the third quarter, a swing from a €452mln loss a year ago and broadly in line with City forecasts.
For the first nine months of the year, IAG's operating profits were €770mln, with profit after tax and exceptional items at €199mln versus a loss of €2.6bn this time last year.
For the full year, the Anglo-Iberian group guided to profits of “approximately €1.1bn”, which is around €300mln higher than the market has been expecting, with net cash flow from operations predicted to be “significantly positive for the year” – assuming COVID-19 does not make a strong comeback.
In the results statement, IAG chief executive Luis Gallego said: “All our airlines were significantly profitable and we are continuing to see strong passenger demand, while capacity and load factors recover.”
Total revenue for the third quarter was €7.3bn, 0.9% higher than in 2019, despite restrictions imposed at London Heathrow airport and the Asia Pacific network remaining substantially closed, meaning passenger capacity was just over 81% of the same quarter in 2019, albeit up from 78% in the second quarter.
Total liquidity stood at €13.5bn at the end of September, of which cash was at €9.3bn, while net debt was €11.1bn, up from €10.98bn at the end of June. Net debt is expected to increase by year-end.
Fourth quarter capacity is expected to be approximately 87% of 2019, resulting in full-year 2022 capacity of around 78% of the 2019 level. Capacity in the first quarter of 2023 is expected to be approximately 95% of 2019.
“Leisure demand is particularly healthy and leisure revenue has recovered to pre-pandemic levels,” noted Gallego. “Business travel continues to recover steadily.”
On the slowing macro backdrop he added: “While demand remains strong, we are conscious of the uncertainties in the economic outlook and the ongoing pressures on households. Against this backdrop, we are focused on adapting our operations to meet demand, strengthening our balance sheet by re-building our profitability and cashflows and capitalising on our high level of liquidity. This will allow us to allocate capital while investing in a disciplined way in our service and our people, to build capacity and enable future growth.”
IAG shares have fallen 25% this year, back to levels seen two years ago.