IAG: British airways owner to report record £3bn profit

British Airways owner IAG is set to report a record €3.5bn (£3bn) annual operating profit next week after cashing in on the boom in travel demand last year.

Total sales are also expected to reach historic levels of €29.4bn, marking a 27 per cent year-on-year increase.

Flight demand soared in 2023 as consumers around the world started travelling again as Covid-era travel restrictions were dropped.

But despite a string of record results, shares in British airways parent company, which also owns Iberia, Aer Lingus and Vueling, have fallen around 10 per cent in the last 12 months.

Investors are frightened that IAG is losing out in to short-haul, low-cost carriers such as Easyjet, Ryanair and Wizz Air.

Those concerns come alongside geopolitical uncertainty in the Middle East and Ukraine, and the UK’s gradual slide into recession.

“Increased oil prices, higher labour costs and increases in capacity (and thus more competition on key routes) are all possible concerns,” analysts at AJ Bell said in a recent note.

Fourth quarter sales, which are typically weaker for the IAG, are still forecast to rise 11 per cent year-on-year to €7.1bn, with operating profit growing 18 per cent to €508m.

Investors will also be keeping a close eye on the IAG’s debts. The group has continued to whittle down its debt pile, earning an upgrade from S&P at the end of last year.

“At the end of Q3 2023, net debt was €8.0bn, and the FTSE 100 firm had paid back 2020’s £2bn UK Export Finance (UKEF) loan three years early. That could, conceivably, clear the way for a return to the dividend list in 2024, after a four-year absence,” the AJ Bell analysts said.