IAG sees break even for full year 2012

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International Airlines Group (IAG) expects to break even at an operating level this year, as an expected €240 million ($311 million) hit from its purchase of BMI is set to wipe out profit from the rest of the year.

The British Airways and Iberia parent today revealed operating losses for the first quarter had deteriorated to €249 million - or €212 million before exceptionals - compared to €102 million at the same stage last year. While revenues were up nearly 8%, profits were hit by its fuel bill jumping nearly a quarter.

"As we anticipated, quarter one has been a difficult one for all the European network carriers and IAG," explained IAG chief financial officer Enrique Dupuy. "The first quarter is exacerbated by the impact of the Iberia pilots strike.

"But we see a positive pattern [for the rest of the year] that will more than offset losses in the first quarter."

He says that before the impact of BMI - both through continued losses and the €90 million restructuring costs it will book this year - the full-year profit for IAG is expected to be in the region of €240 million. IAG has estimated the combined BMI hit this year will cost it around €240 million, putting its full year at around break even.

Passenger revenues were up nearly 9% in the first quarter on an only fractional increase in capacity. Dupuy notes unit revenues are now higher than the previous high water mark of the first quarter of 2009.

The first quarter saw continued financial pressure on Iberia - racking up losses of €170 million - but an encouraging performance out of the London market for BA. The UK carrier lost €62 million in the quarter.

"Although the UK economy is in recession, we are not seeing any evidence of that in our Heathrow hub," says IAG chief executive Willie Walsh. He also points a strong performance in the premium market. "Our seat factors in premium are pretty good, particularly in long-haul. Seat factors in long-haul premium have been over 70%," he says.