IAG shares fall despite profit hike

The British Airways owner, IAG (LON: IAG), has reported a six percent rise in quarterly profit to €835 million (£742 million).

Despite the increase in profits, the group did not meet analyst expectations and shares fell almost five percent on Friday morning.

The airline operator has warned of air traffic control strikes in France and how these are weighing on its finances.

IAG has said that months of industrial action has led to thousands of flight cancellations. Airlines including Ryanair (LON: RYA) and EasyJet (LON: EZJ) have complained to European officials.

The IAG Chief Executive Officer, Willie Walsh, said: “We’re reporting another good set of results in quarter two with an operating profit of €835 million before exceptional items, up from €790 million last year.”

“There was a strong performance in both unit revenue and costs. At constant currency, our passenger unit revenue increased by 2.3 percent while non-fuel unit costs went down 2.0 percent.”

“Unfortunately, French Air Traffic Control strikes continued to challenge our airlines’ operations causing disruption to our customers. Vueling was particularly affected and incurred an additional €20 million of disruption costs in the quarter. These strikes are also having a significant negative impact on the Spanish economy and tourism,” he added.

IAG has said that it expects operating profits to grow in 2018.

The British Airways owner has approached budget airline Norwegian for a merger but Norwegian airline has rejected two offers, saying that IAG “devalued” the company.

George Salmon, equity analyst at Hargreaves Lansdown said: “There’s clear upside to combining the two groups, but as ever, whether it’s a good idea or not will depend on price. IAG has been rebuffed twice before, so it’s unlikely to get Norwegian on the cheap. That heightens the risk of overpaying.”

Shares in IAG are currently trading at 661.20 (1029GMT).

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Safiya focuses on business and political stories for UK Investor Magazine. Her interests include international development, travel and politics.