british airways owner cuts profit forecast on pound slump
Friday 27 December 2024
Last Updated : GMT 09:40:38
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British Airways owner cuts profit forecast on pound slump

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Themuslimchronicle, themuslimchronicleBritish Airways owner cuts profit forecast on pound slump

International Airlines Group, owners of British Airways
London - AFP

The parent group of British Airways on Friday lowered its annual earnings forecast for a second time since Britain voted for Brexit, blaming the downgrade mainly on a plunging pound.

It follows a similar profits downgrade earlier this month from Irish no-frills airline Ryanair, highlighting the impact of Britain's sliding currency on companies that report in euros.

International Airlines Group, owner of BA and Spanish carrier Iberia, said it expects full-year operating profit of 2.5 billion euros ($2.7 billion), or 7.0 percent higher compared with 2015. 

That was less than an estimate provided by IAG in July for a rise of more than 10 percent, which had also been a downgrade.

Britain voted June 23 in favour of exiting the European Union, triggering a plunge in the pound to 31-year lows against the dollar and 7.5-year troughs versus the euro.

This has particularly hit IAG since tickets for its main carrier BA are mostly sold in pounds.

"Foreign exchange is becoming a material headwind, mainly on the translation of sterling profits at British Airways, and recent exchange rate moves suggest this challenge will continue to grow," broker Liberum said in a note to clients.

IAG chief executive Willie Walsh on Friday said that the group's third quarter was affected by "a very significant negative currency impact of 162 million euros, primarily due to sterling weakness, and continued disruption due to air traffic control strikes".

Nevertheless IAG, owner also of Irish carrier Aer Lingus and Spanish budget airline Vueling, posted a 10-percent rise in net profit for the three months to September 30 compared with one year earlier on lower costs, notably thanks to falling oil prices.

IAG shares were up 2.9 percent at 425.6 pence in morning deals on London's benchmark FTSE 100 index, which was down 0.7 percent overall.

"The fall in sterling since the Brexit vote had a significant impact on the group... Despite this, operating and after-tax profits rose and the interim dividend is up 10 percent," said AJ Bell Investment Director Russ Mould.

The pound's retreat is affecting also airlines competing with BA for Europe's short-haul market.

Ryanair recently cut its full-year profits forecast by five percent, while EasyJet warned that annual earnings would slump by almost a third on Brexit, industrial action and unrest in Egypt and Turkey. 

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british airways owner cuts profit forecast on pound slump british airways owner cuts profit forecast on pound slump

 



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