British Airways owner International Consolidated Airlines Group SA (LSE:IAG) said it is to start paying dividends again as it dropped its move to buy the outstanding 80% stake of Spanish budget carrier Air Europa
Luis Gallego, IAG chief executive, said “We are pleased to announce a return to paying a dividend, which reflects our confidence in the business, our performance and our transformation”.
IAG added it will pay Air Europa vendor Globalia €50 million as a break fee following the deal termination but continue to hold a 20% minority stake.
Gallego added: "We believe this decision is in the best interests of our shareholders. IAG remains committed to its strategy, including competing effectively from its Madrid hub.
Madrid would continue to develop as a rival to Europe's largest hub airports, he added.
IAG made the announcements alongside half-year results showing revenues and profits both rising due to good performances on its core transatlantic routes between Europe, the US and Latin America.
Dublin and Asia were weaker, but both are small relative markets it added.
Revenues in the six months to June rose 2.8% to €14.7 billion with operating profits up 3% at €1.3 billion.
Second quarter revenues were up 7.7% though operating profits eased slightly to €1.2 billion
Gallego, said: “We see continuing strong demand for travel in the attractive core markets in which we operate: North Atlantic, Latin America and intra-Europe.
“We delivered a good performance in the first half of 2024, with operating profit €49 million ahead of the same period last year.”
For the full year, IAG forecasts continued strong demand for transatlantic travel, with capacity to grow by 7% though costs, not including fuel, will rise slightly over the whole of the year.
First half free cash flow was €3.2 billion and IAG said it expects to generate more significant amounts of cash in the second half.
The interim dividend is 3c.
Gallego added that IAG aircraft deliveries this year should be broadly as planned with 20 new aircraft in 2024 and 27 aircraft in 2025, with one Boeing 787 moving from 2024 to 2025.
“In line with the rest of the sector there continues to be some risk of slippage from both Boeing and Airbus,” he said, adding it is expecting its first A321 XLR, the new Airbus super long-range narrow-body jet, later this year.