International Airlines Group, the parent company of British Airlines, announced historic annual profits, capitalizing on the renewed demand for travel, particularly from leisure passengers opting for premium economy and business class seats.
IAG Records Record Profits Amidst Headwinds and Boost from Leisure Travel
Underlying operating profits at International Airlines Group (IAG), encompassing British Airways, Iberia, Vueling, and Aer Lingus, soared to £3 billion in 2023, more than doubling its pre-pandemic peak in 2019. Despite the UK's economic challenges, IAG's CEO, Luis Gallego, remains optimistic, citing robust demand, especially in the leisure segment. However, concerns arise from British Airways' performance at London Heathrow, with only 60% of flights meeting schedule times in 2023.
“As a result, significant resources have been invested to drive better performance and some early initiatives are now starting to deliver improvement,” highlighted IAG in its results' presentation.
Despite the slow resurgence of business travel, the International Airlines Group (IAG) reported a compensating trend, driven by an upswing in leisure travellers opting for premium seats. This strategic shift has proven effective in navigating the challenges posed by the lingering impact on business travel.
IAG's Recovery, Expansion, and Strategic Investments
In the concluding quarter of 2023, IAG's operational capacity rebounded significantly, reaching an impressive 98.6% of pre-pandemic levels observed in 2019. The robust performance extended throughout the entire year, with full-year capacity standing at 95.7% of the benchmark levels recorded before the onset of the global health crisis.
Looking ahead, IAG is poised for further expansion, with expectations to boost overall capacity by approximately 7% in the year 2024. This forward-looking strategy positions the airline group to capitalize on the evolving dynamics of travel demand and solidify its presence in the post-pandemic aviation landscape.
Mr Gallego remarked: “In 2023, IAG more than doubled its operating margin and profits compared to 2022… recovering capacity to close to pre-Covid 19 levels in most of its core markets.”
The CEO chose to keep information on airfare outlook for the year under wraps, indicating that pricing will be solely "determined by the market."
Corporate passenger demand in North America faced challenges at the end of last year and into the first quarter of 2024 due to concerns over instability in the Middle East. However, demand in the US market displayed signs of recovery in the second and third quarters.
IAG also announced plans to allocate £7bn for British Airways over the next three years, focusing on areas such as IT and new aircraft. Luis Gallego, the CEO, emphasized, "British Airways is our biggest asset with huge potential, and that’s the reason we are investing."
Regarding on-time performance for BA at Heathrow, IAG reported improvement to almost 80 per cent in January. This positive shift was attributed to "integrated planning, ongoing recruitment and training, and better performance management."