On Friday 29 October 2010, 13:14 EST
British Airways and Iberia of Spain posted healthy profits on
Friday, mirroring European peers Alitalia and Lufthansa, as the
global economic recovery drives growing demand for air travel.
BA, which is merging with Iberia, said it rebounded to a net
profit of 107 millions pounds (122 millions euros, 170 million
dollars) for the six months to September, its first interim
profit for two years.
“We are … benefiting from an improved economy, which we hope
will pick up in 2011. We don’t see any evidence to support a
double-dip (return to recession),” BA chief executive Willie
Iberia posted a net profit of 53 million euros (73 million
dollars) for the nine months to September, recovering from a
loss of 182 million euros a year earlier.
The healthy results were the latest evidence of a strengthening
recovery in the airline industry which was savaged by the
worldwide economic slump that hammered demand for air travel.
“The general rebound in economic growth since the lows of late
2008 has aided,” said analyst Keith Bowman at the Hargreaves
“Demand for business passenger travel has improved — a rebound
in the fortunes of the world’s financial centres is likely to
be an underlying factor.
“General improvements in trade activity have also assisted
cargo volumes,” he added.
German flag carrier Lufthansa, meanwhile, reported on Thursday
that its net earnings tripled in the third quarter while
Italy’s Alitalia also reported soaring profits for the period.
“A recovery does indeed seem underway — however we are a very
long way off from previous profit margins and even further away
from sustained profitability,” noted FBE Aerospace analyst Saj
“With so many mergers in the pipeline, all the hard work could
be undone as airlines work for synergies and amalgamation of
their businesses — so it’s not over yet.
“There are still significant risks and challenges ahead for
almost every player in Europe,” he warned.
BA’s first-half net profit compared with a net loss of 217
million pounds in the six months to September 2009, the airline
said in a statement.
The performance reflected steep cost-cutting and came despite
recent travel chaos earlier this year that was caused by the
Icelandic volcanic ash cloud and cabin crew strikes.
“Our concerted efforts to introduce permanent structural change
across the airline has led to a reduction in non-fuel costs and
a return to profitability,” Walsh added.
BA revenues rose 8.4 percent to 4.45 billion pounds in the
reporting period, while operating costs declined 1.5 percent.
Pre-tax profit hit 158 million pounds, compared with a
year-earlier loss of 292 million and more than double market
Next month, BA and Iberia shareholders will vote on their
merger deal that is due to be completed in January 2011,
creating the second largest airline group in Europe after
Despite healthy profits, BA saw its share price slide on Friday
as the group warned that the economic outlook was uncertain —
and slammed a tax hike in Britain next week.
On Monday, the British government will ramp up Air Passenger
Duty (APD), which is levied on all flights from British
airports. The tax will rise by 55 percent for the most
“While positive, the economic environment continues to be
subject to uncertainty, to which the increase in APD is
unhelpful. We continue to focus on managing our costs,” the
British carrier said.
The BA-Iberia tie-up will combined Iberia’s strong position in
Latin America with BA’s presence in Africa, Asia and North
Following the merger, Walsh will become chief executive of a
new umbrella company which will control the two airlines,
International Consolidated Airlines Group (IAG), while Iberia
chairman Antonio Vazquez will be chairman.
Earlier this month, BA launched a transatlantic alliance with
Iberia and American Airlines, pledging cheaper fares and more