British Airways-owner IAG SA warned pilot strikes and lower ticket prices will hurt annual profit, the latest in a series of bad news for the European travel and leisure industry.
Operating profit before exceptional items will be 215 million euros ($235 million) lower than 2018 on a pro forma basis, IAG said in a statement on Thursday. Full-year capacity growth is expected to be about 4%, compared with an earlier forecast of 5%.
The shares fell as much as 3.5% in early trade in London, extending the decline for the year to 20%.
“Most airlines are moderating their capacity-growth plans for the fourth quarter this year and into 2020,” Chief Executive Officer Willie Walsh said on a call with analysts. “A number of airlines, weaker ones, are either disappearing or significantly reducing capacity.”
The warning follows this week’s collapse of U.K. tour operator and airline Thomas Cook Group Plc, while eight other European carriers have folded within a little more than a year. In addition to the dispute with pilots, IAG is facing a fluctuation in fuel prices and overcapacity, while a regional economic slowdown is gathering pace.
Slovenian airline Adria Airways this week halted all flights and is trying to raise cash to continue operations while France’s XL, a long-haul low-cost operator, and Aigle Azur have also entered into receivership.
British Airways has been rocked this summer by its first pilot strike since 1979, which led to the cancellation of more than 2,300 flights and a financial hit of 137 million euros. The rest of the shortfall partly comes from lower ticket prices at IAG’s low-cost brands, which include Vueling and LEVEL.
IAG plans to cut capacity growth at British Airways for 2020 as well, Walsh said, adding that more detail would be provided at a capital markets day in November. This year’s reduction is principally at Vueling, he said.
There have been no further talks between British Airways and the main pilots union, and its most recent offer of an 11.5% pay increase over three years still stands.
©2019 Bloomberg L.P.