International Airlines Group (LON:IAG) expects full-year profits to rise by some €200mln after it reported a robust third quarter performance despite significant fuel costs and foreign exchange headwinds.
The Anglo-Spanish airline group on Friday said its operating profit rose 0.7% to an expected €1.46bn in the three months to the end of September on revenues of €7.14bn, as stronger ticket prices helped offset a 15% rise in fuel costs during the period.
READ: European airline stocks ready to take off again with IAG leading the way - Deutsche Bank
IAG, the owner of British Airways and Aer Lingus as well as Spanish carriers Iberia, Vueling and Level, said passenger unit revenue for the quarter rose 2.4% at constant currency. Non-fuel unit costs before exceptional items for the quarter fell 0.7% at constant currency as the group absorbed an €11mln foreign exchange hit.
IAG said its operating profit before exceptional items for the nine months to the end of September rose 7.3% to €2.57bn.
The airline group, which completed its second €500mln share buyback programme earlier this week, upped the interim dividend to 14.5 euro cents per share from 12.5 euro cents a year ago.
"These were strong results despite significant fuel cost and foreign exchange headwinds,” IAG’s CEO Willie Walsh said in a statement.
“At current fuel prices and exchange rates, IAG expects its operating profit before exceptional items for 2018 to show an increase of around €200mln from a base of €2.95bn in 2017. Both passenger unit revenue and non-fuel unit costs are expected to improve at constant currency for the full year,” he added.
Shares in IAG were 1.74% up at 597.6p in early trade.
"On our current published forecasts, IAG trades on a 2018E P/E of 5.4x and EV/EBITDAR of 3.8x. We continue to believe this undervalues the group, with inadequate credit given for the structural improvements in profitability delivered by management that put IAG’s financial returns on a par with the leading low-cost carriers," LIberum analysts - who maintained their 'buy' rating on the stock - wrote in a note to clients.
On Thursday, the Anglo-Spanish group said the cyber attack by hackers on British Airways between April 21 and July 28 had been larger than it initially realised.
BA said it would notify the holders of 77,000 payment cards that their name, billing address, email address, and card payment details including card number and card verification value - the three-digit number on the back of the card – may have been compromised.
A further 108,000 customers may also have had their information compromised, though not including their CVV numbers, the airline said.
“While British Airways does not have conclusive evidence that the data were removed from its systems, it is taking a prudent approach in notifying potentially affected customers, advising them to contact their bank or card provider as a precaution," it said.
- updates to add share price, analyst comment -