British Airways owner IAG said it expected rising airfares to boost its annual operating profit, contrasting with more downbeat predictions from some rivals.
IAG, which also owns the Iberia, Aer Lingus and Vueling airlines, said it was now expecting at least a 10 per cent improvement in operating profit year-on-year having previously predicted a rise.
Chief Executive Willie Walsh struck a different tone to competitors such as Lufthansa, Ryanair and easyJet which have warned of a downward pressure on fares over the summer.
“All we can say is what we see. Clearly what we see in terms of our performance does appear to be somewhat different to what others are saying,” Mr Walsh told reporters.
“It may not be different to what they’re seeing, but it’s certainly different to what they’ve said. But we’re calling it as we see it, and our first half performance was very strong.”
The shares initially rose by over three per cent after second quarter profit beat analyst expectations despite a major power outage in May which grounded hundreds of flights. By midday though, the rally had run out of steam and the shares were off 0.6 per cent.
Passenger unit revenue rose 1.5 per cent in the second quarter, delivering the first year-on-year increase in quarterly revenue per passenger mile flown since 2014, and IAG said that revenue per passenger would improve in the second half compared to last year as well.
Air France-KLM also offered more optimism on pricing when it announced results yesterday.
IAG said that non-fuel unit costs before exceptional items were up, including the financial impact of a massive power outage which grounded flights at Heathrow and Gatwick over a holiday weekend in May. The company said that it estimated that the cost from the outage, which left 75,000 passengers stranded, would total €65 million.
But that did not detract significantly from a strong set of results, analysts said. Operating profit for the six months to June 30 before exceptional items was €975 million, up 37.3 per cent compared to the previous year, while the quarterly number was €805 million.
The quarterly figures beat consensus estimates by nine per cent, analysts at RBC said, adding that guidance of a double-digit improvement in operating profits supported their view that summer 2017 would be strong.
Mr Walsh said that a pact between Delta, Air France-KLM and Virgin, which was announced on Thursday, was unlikely to change much in the industry, but that consolidation in the industry was generally positive.