IAG beats guidance despite strengthening dollar -UPDATE

-Adds broker comment

International Airlines Group (IAG) has this morning announced a large drop in profitability as higher fuel costs and non-cash charges compensated for an improvement in passenger yields as airlines reduced capacity in response to the adverse economic environment.

The company incurred in losses before tax for the year of €997m (£862.89m), versus €503m one year ago. Those were the result of a 20.4% increase in fuel oil costs and emission charges to €6.1bn from €5.068bn one year ago.

Dollar strength takes its toll

Total exchange rate impacts resulted in a net adverse effect on IAGs operating loss of €107m.

As well, the company incurred in a restructuring charge of €202m for the Iberia transformation plan and €343m of impairments of Iberias intangible assets

Even so, after exceptional items the operating loss for the year - not including Iberias restructuring and impairments was €68m - compared to company guidance in November of €120m, the company explained.

Before exceptional items, British Airways made an operating profit of €347m in the year to December 31st and Iberia made an operating loss of €351m.

Revenue for the year was up 10.9% to €18,117m, including €872m or 5.4% currency impact.

Passenger yields in terms of revenue per passenger kilometre rose by 7.6% to 8.73 euro cents.

Cash at the end of the year was €2.9bn, down by €826m. Group net debt increased by €741m to €1.9m.

The company invested €1,239m during the year, versus €1,071m in 2011, including over €400m on pre-delivery payments for future aircraft.

Tender offer for Vueling authorised

As regards the companys outlook, Chief Executive Willie Walsh said that: "the outlook for 2013 will be impacted by the outcome of the Iberia transformation plan negotiations, and any associated costs and losses. Subject to these, we would expect a better pre-exceptional operating result to the one achieved in 2011."

For their part, and commenting on the figures analysts at Investec said that: "IAG has reported a 2012 fiscal year loss that is lower than guidance and our expectations. Continued yield (+8% year-on-year) and load factor (+120bps) strength have offset higher unit fuel (+17%) and underlying (+9%) costs.

We welcome the aggressive tone being taken by the management on Iberia ('must adapt to survive') and we are encouraged by the continued strength of trading at British Airways. Iberia strikes are likely to continue, but we see Willie Walsh winning the battle on driving the required turnaround and we retain our BUY."

Before the opening bell shares of IAG were being called to rise by 2%.

AB

Recommended

Aviva: a share for income investors to tuck away
Share tips

Aviva: a share for income investors to tuck away

Insurance giant Aviva is one of the highest yielding stocks in the FTSE 100 – and it’s cheap, too, making it a tempting target for income investors. R…
18 May 2022
The ten highest dividend yields in the FTSE 100
Income investing

The ten highest dividend yields in the FTSE 100

Rupert Hargreaves looks at the FTSE 100’s top yielding stocks for income investors to consider.
18 May 2022
Three fast-growing, undervalued UK mid-cap stocks to buy now
Share tips

Three fast-growing, undervalued UK mid-cap stocks to buy now

Professional investor Katen Patel of the JPMorgan Mid Cap Investment Trust picks three fast-growing UK mid-cap stocks to buy now.
18 May 2022
Should you buy Vodafone shares, or steer clear?
Share tips

Should you buy Vodafone shares, or steer clear?

Vodafone grew revenue by 4% and profit by 11% last year, and offers investors a 6.4% dividend yield. So should you buy Vodafone shares? Rupert Hargrea…
17 May 2022

Most Popular

Get set for another debt binge as real interest rates fall
UK Economy

Get set for another debt binge as real interest rates fall

Despite the fuss about rising interest rates, they’re falling in real terms. That will blow up a wild bubble, says Matthew Lynn.
15 May 2022
Is the oil market heading for a supply glut?
Oil

Is the oil market heading for a supply glut?

Many people assume that the high oil price is here to stay – and could well go higher. But we’ve been here before, says Max King. History suggests tha…
16 May 2022
Value is starting to emerge in the markets
Investment strategy

Value is starting to emerge in the markets

If you are looking for long-term value in the markets, some is beginning to emerge, says Merryn Somerset Webb. Indeed, you may soon be able to buy tra…
16 May 2022