IAG encouraged despite higher first-quarter losses

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British Airways and Iberia parent IAG's first-quarter operating loss has increased to €278 million ($363 million), before exceptional items, compared with last year's figure of €249 million.

IAG adds that it took a €311 million exceptional charge during the quarter, principally relating to restructuring at Iberia.

But chief executive Willie Walsh says the operating loss, at constant currency, actually improved by €38 million.

"These results are encouraging with underlying revenue strength in strategic markets. However, while the first step towards restructuring Iberia has been taken, there is more work to be done," he says.

IAG's overall pre-tax loss for the three months to 31 March reached €670 million, nearly treble the figure of €247 million for the first quarter of 2012.

Revenues for the quarter increased by just 0.5% to €3.9 billion. IAG says this included "unfavourable" currency impacts of €46 million. Fuel costs fell by 3.4% to €1.36 billion while non-fuel costs, before exceptionals, were up 3.5% to €2.8 billion.

Traffic was down by 0.5% but a reduction of capacity by 2.1% meant seat factor increased by 1.3 points to 77.4%.

"We are adapting capacity to demand and are reporting a strong group passenger unit revenue performance, despite 10 days of Iberia industrial action and the weak economic situation in Spain," says Walsh.

"Non-fuel unit costs have risen due to two short-term activities which will benefit the group in the long term. Iberia cut capacity in the quarter. However, its reduction in headcount and labour costs began in earnest in April. British Airways has increased its headcount in advance of the new aircraft arriving this year."

IAG says current trading is "in line with our expectations" although it is not giving operating profit guidance for 2013. But it says that, for the year, it expects to reduce capacity across the group by 1.8% and keep non-fuel unit costs flat. This excludes any possible impact from the acquisition of Spanish low-cost carrier Vueling.