The owners of British Airways say it doesn't see a long-term risk due to the British exit from the EU — we'll see how that turns out — but in the near term, the vote is expected to hurt profits.
British Airways owner IAG SA lowered its 2016 profit target as the U.K.’s vote to leave the European Union threatens to extend a drop in demand that started in June in the run-up to the historic referendum.
Operating profit this year will no longer increase at a level similar to the 70 percent surge posted in 2015, Chief Financial Officer Enrique Dupuy said in a statement. The company didn’t provide a scale for the earnings adjustment beyond saying that growth will still be “significant.”
European airlines have been hit hard by the upheaval caused by the British vote, which threatens agreements that allow EU and U.K. airlines to fly freely across the region. EasyJet Plc Chief Executive Officer Carolyn McCall said she wrote to European and British officials to “ask them to prioritize the U.K. remaining part of the single EU aviation market, given its importance to trade and consumers.”
The result of the U.K.’s vote is “a shock and a disappointment,” Kenny Jacobs, head of marketing at Ireland’s Ryanair Holdings Plc, which had actively campaigned for the U.K. to remain in the EU, said on Bloomberg TV. “We are going to have a period of great uncertainty for the next two years as the U.K. has to figure out how do you dismantle the past 40 years.”
IAG shares plunged as much as 34 percent in early trading, its biggest fall on record, before trading down 24 percent at 12:51 p.m. in London, wiping 2.66 billion pounds ($3.64 billion) from the company’s market value. EasyJet and Ryanair suffered declines of more than 20 percent before clawing back some of those losses.
Despite the profit warning, IAG downplayed the possible lasting impact of a British exit from the EU. The company, which also owns Spanish carriers Iberia and Vueling and Ireland’s Aer Lingus, doesn’t see a long-term risk to its business from a Brexit. That includes demand for travel in and out of the carrier’s critical hub at London’s Heathrow airport.
©2016 Bloomberg L.P.
This article was written by Benjamin Katz from Bloomberg and was legally licensed through the NewsCred publisher network.
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Photo Credit: A British Airways Boeing 747 taxis away from Terminal 5 at London's Heathrow Airport. Mark Hennihan / Associated Press
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