British Airways owner back in profit despite weeks of passenger misery

Huge surge in leisure demand overcomes costs of lost baggage and cancelled flights

The owner of British Airways and Iberia has seen its revenues recover to pre-pandemic levels and revealed it returned to profit in the third quarter (PA Wire)

The owner of British Airways, Aer Lingus and Iberia is back in profit, despite a summer of chaos and cancelled flights that stranded thousands of passengers, ruined holidays and saw fares skyrocket.

International Consolidated Airlines Group (IAG) reported operating profits of £1bn in the three months to 30 September, compared with a loss of £390m the previous year.

The group took a heavy hit during the pandemic and was still loss-making earlier in 2022 after the Omicron variant disrupted schedules and drastically reduced passenger numbers.

But it reported strong passenger demand in its latest results and saw its revenues just overtake pre-pandemic levels by 0.9%.

However, average spot prices of jet fuel almost doubled this year compared with last. Prices shot up after Russia’s war in Ukraine began at the end of February and sparked rising costs for commodities around the world.

IAG said it now expects its full-year operating profits, before exceptional items, to be about £95m.

British Airways was among the worst hit by schedule disruption caused by staff shortages over the summer, leading to the cancellations of thousands of flights.

With a drastically-reduced schedule and capacity, passengers faced a sustained period of abnormally high fares on many key routes – in some cases a deliberate tactic to dampen demand.

The airline is refusing to pay statutory compensation to affected passengers, blaming the “extraordinary circumstances” of similar capacity constraints imposed by its home hub airport, London Heathrow.

Luis Gallego, IAG’s chief executive, said: “All our airlines were significantly profitable and we are continuing to see strong passenger demand while capacity and load factors recover.

“Leisure demand is particularly healthy and leisure revenue has recovered to pre-pandemic levels. Business travel continues to recover steadily.

“While demand remains strong, we are conscious of the uncertainties in the economic outlook and the ongoing pressures on households.

“Against this backdrop, we are focused on adapting our operations to meet demand, strengthening our balance sheet by rebuilding our profitability and cashflows, and capitalising on our high level of liquidity.”

Meanwhile, Air France-KLM also beat earnings expectations despite ongoing chaos at its own home base, Amsterdam Schiphol.

Problems at Schiphol “are costing KLM a great deal of money and limiting the number of flights [it] can operate”, KLM’s chief executive officer, Marjan Rintel, said.

Air France-KLM said it planned to operate about 85% of network airlines’ pre-pandemic capacity in the fourth quarter, against an earlier range set between 85% and 90%.