Support Skift’s Independent JournalismMake a Contribution Now
British Airways parent IAG SA said demand for flights has been hurt by the Brussels terror attacks, weaker bookings in oil-based economies and the possibility of the U.K. exiting the European Union, causing the company to add fewer seats than planned for the spring season.
Shares of London-based IAG fell as much as 5 percent after Chief Executive Officer Willie Walsh said Friday that the developments have impacted revenue trends and that he’ll be limiting capacity growth to 4.9 percent compared with the 5.2 percent increase originally planned.
Demand is likely to revive in the third quarter as tourist travel from markets such as the U.S. and Japan recovers and a decision is reached on a so-called Brexit following Britain’s June 23 referendum, Walsh said on a conference call.
IAG reported an operating profit of 155 million euros ($177 million) for the first quarter, excluding items, up from 25 million euros a year earlier, as it tapped lower oil prices. Analysts had expected earnings of 139 million euros, based on data compiled by Bloomberg.
The March 22 attacks at Brussels airport and on the city’s subway, together with the increased prominence of the Brexit debate, have since taken a toll on bookings, Walsh said.
IAG stock fell as much as 27.5 pence to 523.5 pence and was trading 4.3 percent lower at 527.5 pence as of 8:48 a.m. in London.
“We’re reacting fast to what we believe is a softening in some markets,” the CEO said. “That’s a feature of our business now; we don’t wait around. The pattern of behavior after the Brussels events is very similar to what we saw in the market post the attacks in Paris, however I think it went a bit deeper.”
Walsh added that “there’s probably a case to be made for Brexit having an impact. Anecdotally you hear of U.S. corporates slowing investment to consider what Brexit could mean.”
IAG’s units are also seeing reduced demand on routes to oil-based economies in Africa, including Nigeria and Angola, as well as in Latin America, where the Brazilian presidential crisis is weighing on the region’s economy, Walsh said.
Walsh said that for the full year he still expects earnings gains similar to those of 2015, when IAG’s operating profit jumped 68 percent to 2.34 billion euros.
First-quarter sales increased 7.9 percent to 5.1 billion euros, spurred by last year’s acquisition of Dublin-based Aer Lingus, which IAG plans to use to add trans-Atlantic flights as BA struggles for growth at its crowded London Heathrow hub. Excluding the Irish carrier, which made a negative earnings contribution, revenue was up only 0.7 percent.
Walsh formed IAG via a merger of BA and Spain’s Iberia before purchasing British Midland, Barcelona-based discount carrier Vueling and Aer Lingus to establish the company as Europe’s leading network airline just as Air France-KLM Group and Deutsche Lufthansa AG tussle with unions over cost cuts.
Qatar Airways Ltd. CEO Akbar Al Baker said Wednesday that his airline, the biggest stakeholder in IAG, as International Consolidated Airlines Group SA is known, had lifted its holding close to 12 percent.
Walsh said IAG has given Bombardier Inc.’s C Series jet “very close scrutiny” and would consider the plane for future orders, welcoming Thursday’s contract from Delta Air Lines Inc. as likely to “make a difference” to the project.
To contact the reporter on this story: Benjamin Katz in London at firstname.lastname@example.org. To contact the editors responsible for this story: Chris Reiter at email@example.com, Christopher Jasper, Benedikt Kammel
©2016 Bloomberg L.P.
This article was written by Benjamin Katz from Bloomberg and was legally licensed through the NewsCred publisher network.