International Airlines Group, formed from the merger of British Airways and Spain’s Iberia, announced yesterday net profits of €555 million for 2011 on first-year cost savings.
IAG estimated that a combined group would have recorded a far lower profit after tax of €100 million in 2010, according to an earnings statement.
British Airways and Iberia merged in January 2011 to slash their costs as the global economic downturn and the rise of low-cost airlines resulted in steep losses for traditional carriers.
In the wake of the earnings update, IAG’s share price jumped 3.25 per cent to 168.5 pence in early deals on London’s FTSE 100 index, which was flat overall.
“The performance of our airlines reflects the different markets in which they operate,” IAG chief executive Willie Walsh said in the statement.
“The north Atlantic market remains strong, benefitting British Airways.”
Mr Walsh added that “Iberia’s challenge is its exposure to financial uncertainty in the eurozone in a highly competitive marketplace with no-frills airlines, high speed rail and growing competition from more efficient long haul airlines.”
IAG said that higher fuel costs, weaker European markets and strike action by Iberia’s pilots would reduce the group’s operating profits during the first half of 2012 compared with the equivalent period last year.
“We expect the year-over-year cost pressures to reduce as we move through the second half of the year,” it added.
Iberia’s pilots are holding a series of one-day strikes in protest at the creation of low-cost offshoot Iberia Express, which IAG plans to launch on March 25.
Meanwhile in November last year, IAG unveiled a deal to buy loss-making airline bmi from German carrier Lufthansa.
IAG was attracted to bmi by the latter’s attractive take-off and landing slots at London’s Heathrow airport – Europe’s biggest airport in terms of passengers handled.
“While subject to regulatory approval, we plan to integrate bmi into British Airways following agreement by British Airways pilots to make productivity changes that justify the integration,” Mr Walsh said in yesterday’s earnings statement.