U.S. Markets closed

British Airways owner IAG stays profitable in challenging environment

FILE PHOTO: British Airways logos are seen on tail fins at Heathrow Airport in west London, Britain, February 23, 2018. REUTERS/Hannah McKay

By Alistair Smout

LONDON (Reuters) - British Airways owner IAG on Friday reassured investors with profits in line with expectations despite a tough fuel and trading environment which has hit other airlines.

Rivals such as easyJet and Lufthansa have reported losses for the early months of 2019, but IAG said first quarter operating profit was 135 million euros (116 million pounds) versus consensus expectations of 136 million euros.

However, IAG, which also owns Iberia, Aer Lingus and Vueling reiterated that operating profit in 2019 would be in line with 2018 due to the pressure from the higher fuel prices.

"For a lot of airlines, Q1 has been very difficult. Most of the European airlines are reporting losses in the quarter. I think that's what sets us apart from our competitors," Chief Executive Willie Walsh told reporters.

"In what has been a challenging quarter, we have continued to be profitable."

Shares in IAG rose 3.7%, bouncing back from a two-year low hit in the previous session.

Analysts at RBC said the results were good, especially against the backdrop of losses for other airlines and a lack of clarity over Britain's final exit date from the European Union.

In April, easyJet said that European travellers were holding off booking their summer holidays in the face of uncertainty over and when how the Brexit process will end, weakening demand for tickets and prices.

Prime Minister Theresa May has been unable to secure a Brexit deal and has been forced to delay Britain's departure from March 29 to October 31. But Walsh said he had not seen similar trends to easyJet at IAG.

"We can see no evidence of any Brexit impact in our results, and we see no evidence of it impacting on forward booking trends or behaviours," he said, adding that weakness was mainly in countries like Argentina or Brazil where there were economic difficulties.

The firm said that profit after tax before exceptional items was down 62.6% to 70 million euros.

It added that passenger unit revenue was down 0.8 percent for the three months to March 31, but was expected to improve over the rest of the year.

(Reporting by Alistair Smout; editing by James Davey and Elaine Hardcastle)