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

How to profit from pampered pets beyond the pandemic
Share tips

How to profit from pampered pets beyond the pandemic

Covid-19 has greatly boosted ownership. But the market had been expanding for years, and demographic, cultural and medical trends all point to long-te…
30 Jul 2021
Share tips of the week – 30 July
Share tips

Share tips of the week – 30 July

MoneyWeek’s comprehensive guide to the best of this week’s share tips from the rest of the UK's financial pages.
30 Jul 2021
Robinhood is going public – should you invest?
US stockmarkets

Robinhood is going public – should you invest?

Online stockbroking app Robinhood is going public on the US stock exchange. Saloni Sardana looks at whether it's worth a punt.
29 Jul 2021
Three sustainable stocks that are doing well by doing good
Share tips

Three sustainable stocks that are doing well by doing good

Professional investor Peter Michaelis of the Liontrust Sustainable Investment Team picks three stocks to buy that are helping to create a cleaner, saf…
26 Jul 2021

Most Popular

Why the UK's 2.5% inflation is a big deal
Inflation

Why the UK's 2.5% inflation is a big deal

After years of inflation being a financial-assets problem, it is now an “ordinary things” problem too, says Merryn Somerset Webb. But central banks st…
16 Jul 2021
The MoneyWeek Podcast: Asia, financial repression and the nature of capitalism
Economy

The MoneyWeek Podcast: Asia, financial repression and the nature of capitalism

Russell Napier talks to Merryn about financial repression – or "stealing money from old people slowly" – plus how Asian capitalism is taking over in t…
16 Jul 2021
Cryptocurrency roundup: Twitter founder’s “DeFi” platform
Bitcoin & crypto

Cryptocurrency roundup: Twitter founder’s “DeFi” platform

In crypto this week: regulators are getting worried; Jack Dorsey’s bitcoin DeFi platform; and dogecoin’s co-founder lambasts cryptocurrencies.  Salon…
16 Jul 2021