British Airways and Iberia parent IAG’s operating profit before exceptional items slipped 5.7% for the full year in 2019 to €3.29 billion ($3.6 billion) as its fuel costs rose.
However notably the group says the impact of the coronavirus outbreak, which has already caused a drop in air travel demand in its short and long-haul business, makes it impossible to issue guidance for the year ahead.
For 2019 IAG lifted group revenues 5.1% to €25.5 billion including positive currency effects, while total costs rose 7% to €22.8 billion. Notably its fuel, oil and emissions costs were 10% higher, largely as hedging benefits from 2018 unwound.
The Group’s operating margin slipped by 1.5 points to 12.9 per cent.
”These results reflect the industrial action at British Airways and disruption at London Heathrow in the summer, which had an adverse impact of approximately €170 million. In the second half of the year, weakness and disruption faced by the Group’s low-cost segments had a further adverse impact of approximately €45 million,” IAG says.
BA still delivered the bulk of group profits for 2019. The UK carrier delivered an operating profit before exceptional items of €1.92 billion - down 5.1%. Iberia profits were down 6.7% to €497 million; Aer Lingus profits fell 11.4% to €274 million; while Spanish low-cost operator Vueling recorded a 9.3% fall in profits to €240 million.
IAG chief executive Willie Walsh - who steps down in June - says: ”These are good results in a year affected by disruption and higher fuel prices. We demonstrated our robust and flexible model once again through additional cost control and by reducing capacity growth to reflect market conditions.”
But the group adds the earnings outlook is adversely affected by weaker demand as a result of coronavirus outbreak.
”We are currently experiencing demand weakness on Asian and European routes and a weakening of business travel across our network resulting from the cancellation of industry events and corporate travel restrictions,” IAG says.
The carrier has suspended flights to malnland China and reduced capacity on some other Asian services. It has also reduced capacity on Italian routes, following the spread of the outbreak to northern Italy.
“Further capacity reductions will be activated over the coming days. We also expect to make some capacity reductions across our wider short-haul network. Short-haul capacity is not being redeployed at this stage,” it adds.
”Our operating companies will continue to take mitigating actions to better match supply to demand in line with the evolving situation. Cost and revenue initiatives are being implemented across the business.
”Given the ongoing uncertainty on the potential impact and duration of COVID-19, it is not possible to give accurate profit guidance for full-year 2020 at this stage,” IAG says.