Shares in International Consolidated Airlines Group SA (LSE:IAG) rose 2.3% on Friday after the British Airways owner posted stronger-than-expected first-quarter results and kept its full-year outlook unchanged, reassuring investors who had feared a slowdown in global travel demand.
The stock has now gained 27% over the past month, recovering ground lost earlier this year as concerns over macroeconomic pressures, geopolitical tensions, and weaker US leisure travel began to ease.
Panmure Liberum said the results were “ahead of consensus” and delivered an operating profit of €198 million, nearly triple the €68 million recorded in the same period last year. That was well above the broker’s forecast of €125 million and ahead of the market consensus of €133 million.
The outperformance, it said, was mainly driven by stronger revenue, particularly in the “other revenue” line, which more than offset higher-than-expected non-fuel costs.
Passenger unit revenue rose 3.2%, broadly in line with Panmure’s estimate of 3.3%, and was led by a 13% jump on the North Atlantic. This is IAG’s most important route by capacity and helped absorb softer demand in parts of the US economy segment.
The timing of Easter, which fell in March this year, was a modest headwind to the reported growth rate, according to the broker.
Costs excluding fuel rose 8.8%, compared with Panmure Liberum’s estimate of 5.5%.
Around 1% of the increase was attributed to the one-day closure of Heathrow in March, while roughly 2.5% was linked to non-airline businesses, an area that Panmure said may correlate with the strength in Other Revenue.
Despite these cost pressures, the group’s full-year outlook remains unchanged. Panmure said this likely reflects a mix of revenue conservatism and an improved fuel bill, which is now expected to be €400 million lower than previously forecast.
Management acknowledged ongoing geopolitical and macroeconomic uncertainty, but said demand remained robust. North Atlantic bookings were described as “solid”, with premium cabins offsetting weakness in US-originating leisure travel.
Demand in Europe and Latin America is also holding up well.
Panmure Liberum said the trading update should reinforce investor confidence, particularly given the stronger visibility on fuel costs and the resilience in core routes.
The broker did not change its earnings forecasts but said the improving market backdrop and IAG’s diversified network continue to support the investment case.
The group’s performance will be closely watched over the coming months for signs of booking momentum into the peak summer season. But for now, investors appear satisfied that IAG is weathering the turbulence better than feared.
The stock 6.7p to 297p.