The summer has left significant returns for the group, with an operating profit of 2,013 million in the third quarter, compared to the 1,745 million declared in the same period of 2023 (+15.4%). The net profit between July 1 and September 30 reached 1,435 million, which compares with the 1,230 million harvested in the summer months of last year.
This performance, with an increase in the operating margin of 1.4 points, to 21.6%, has placed the operating profit for the first nine months at 3,322 million, which shows an increase of 10.5% despite unfavorable effects: adverse exchange rates subtracted 96 million and the company paid 50 million to Globalia for breach of contract. The result after taxes in the nine months, of 2,340 million, improved by 8.8%.
All of this, together with the announcement of a share buyback for 350 million, boosted the stock market value by 7.5% around 4:00 p.m.
The airline conglomerate’s income has risen to 24,053 million at the end of September, with an increase of 8.2%. Among the keys that explain higher sales are the volume of passengers served (+8% per kilometer operated compared to a 6.9% increase in capacity measured in seats), a better performance of the capacity offered, the performance in the cargo segment and the contribution of Iberia’s aircraft maintenance business. In the third quarter, ticket revenue per seat per kilometer offered grew by 1.2% compared to a summer, last year, which was already “exceptionally solid.” That metric improves 2.2% over the nine months.
Unit costs excluding fuel also rose 2.2% in the third quarter. In this case, IAG explains that the benefits of transformation and capacity growth partially offset the weight of wage agreements and supply-related inflation. Between July and September, the unit cost of fuel decreased by 4.2% compared to the third quarter of 2023, reflecting the reduction in effective fuel prices net of hedging and also the entry into operation of more efficient aircraft.
The company announced this morning the aforementioned, which is equivalent to 6.4% of the capital, with the intention of amortizing them and creating value for the shareholder. This is, as explained to the market, about returning excess cash to the participants and a show of confidence in the strategy and in the air transport business. The first shareholder, Qatar Airways, will accompany the sale of paper so that the aforementioned amortization does not place it at the threshold of a mandatory 100% takeover bid.
The CEO, Luis Gallego, has highlighted to the media “the effectiveness in the execution of the strategy and the effect of the transformation plan implemented throughout the group during Covid.” The executive has referred to the recent restoration of the dividend, and the treasury stock program as a sign of “fulfillment of our commitment to sustainable remuneration for shareholders.” In the presentation of the annual results, greater visibility will be given to the investor remuneration policy.
In the outlook chapter, IAG foresees a fourth quarter with a 5% increase in the capacity offered, which will place the increase in the supply of seats at 6% for all of 2024. The cost item should rise by 2% in the year as a whole, and the fuel bill is estimated at around 7,700 million for the 12 months, taking into account a coverage level of 76% of consumption in the final stretch of the year.
The investment will total 3.1 billion throughout 2024, after receiving 20 new aircraft (four arriving in this fourth quarter). And the debt will rise slightly.
IAG sees strong demand for travel on each of its airlines. Among the signs supporting optimism regarding the fourth quarter is the improvement in British Airways’ operating margin by 5.4 percentage points during the summer.
The company that brings together British, Iberia, Vueling, Aer Lingus and Level carries 6,189 million of net debt, well below the 9,245 million at the end of 2023 or the 8,000 million it presented a year ago. The ratio against EBITDA is one time, improving the 1.5 times objective set by the group.
Vueling receives good news after announcing yesterday. Visibility on future costs now makes it possible to unlock the allocation of new fleet by IAG and the president of the low costCarolina Martinoli, has announced that three new aircraft will arrive for the 2025 summer season.
The difficulty of returning to Asia
The group’s different airlines are strengthening their presence in strategic markets, but revenue per seat operated is evolving unevenly in them. The difficulties in rebuilding the business towards Asia after the pandemic are obvious. IAG increased its capacity by 17.6% with the reopening of routes between July and September, but unit passenger revenue decreased by 15% in those months. and Gallego appreciates opportunities for Level to exploit its low-cost, long-haul business from Barcelona to Asia. For now it is only a declaration of intent.
In the North Atlantic region, capacity grew by almost 4% in the third quarter, while unit passenger revenue grew by 3.5%. The behavior of British stands out, while Aer Lingus was burdened by the pilots’ strike and the reinforcement of its rivals in Dublin (Ireland).
Between the Iberia and Level brands, they put 10.7% more seats in the Latin American market, but unit passenger revenues fell 2.8%.
IAG put 5.3% more capacity on the intra-European network in the quarter, picking up a 1.4% increase in passenger unit revenue.
The CEO has left his company’s position up in the air regarding the foreseeable capital increase that Air Europa will undertake before the end of the year to balance its balance sheet. IAG maintains a 20% financial stake in the rival airline, but has not yet made a decision on whether it will remain at that level, dilute it or even put the package up for sale.
