(News Bulletin 247) – IAG revealed revenues and operating income above expectations in the first quarter. On the other hand, the costs are a little higher than Stifel expected.

If Air France-KLM had published results lower than expected in the first quarter, penalized by maintenance problems, this is not the case for IAG.

The parent company of British Airways, Iberia, Vueling and Level, published accounts better than expectations. This allows its action to gain some ground on the London Stock Exchange, with an increase of 1% around 10:40 a.m.

For its part, Air France-KLM gained 3% on the Paris Stock Exchange, while Lufthansa advanced 1.1% in Frankfurt.

Over the first three months of the year, IAG generated revenues of 6.43 billion euros, an increase of 9.2%. Turnover from passenger activity jumped 11.7% to 5.63 billion euros while cargo fell 12.4% to 283 million euros.

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A “very robust” activity

Relative to the number of seats available per kilometer (which amounts to calculating the unit revenue), passenger revenues increased by 4.4%, thanks to the earlier Easter holidays (in March and not in April) as well as ” continuing the strong recovery in leisure traffic, with business traffic recovering more slowly,” explains the company.

Unit revenue increased by 6.5% on transatlantic flights, by 6.9% in the group’s “domestic” countries (United Kingdom and Spain) and by 5.7% in the rest of Europe. The company’s operating profit stood at 68 million euros, compared to 9 million euros a year earlier. The net loss stood at 4 million euros compared to 87 million euros in the first quarter of 2023.

Stifel notes that the turnover exceeded its own expectations by 2% while the operating profit was significantly higher than the consensus (68 million euros against 48 million euros expected). The establishment appreciates the “very robust” activity on revenues in the first quarter.

Towards stable operating profit in 2024?

In more negative points, the bank underlines that the company’s unit costs increased by 3.7% excluding fuel costs, more than what it expected (+3.5%). Stifel also notes that the company has not given an outlook for its financial year on its operating income or on pricing dynamics (“yields”).

IAG, on the other hand, confirmed that it is counting, for the whole year, on an increase in its capacities, i.e. to simplify the number of flights put in place, of 7%. The company also anticipates a slight increase in its unit costs excluding fuel over the whole of 2024.

“We believe that IAG operates the most advanced airline group model in Europe, with a clear focus on profitability and leveraging its unprecedented position of strength on transatlantic routes. That said, we are concerned about costs, which results in a generally stable 2024 operating result (expected, Editor’s note) and falling margins”, underlines Stifel.

“We also believe that free cash flow will remain below pre-pandemic levels due to investment needs,” continues the bank, which confirmed its recommendation to “hold”.