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IAG Seeks to Expand British Airways Fleet as Profit Jumps

Published on Feb 26 2016 10:40 AM in General Industry tagged: Aer Lingus / IAG / airline

IAG Seeks to Expand British Airways Fleet as Profit Jumps

British Airways owner IAG said it’s making progress in talks to add more wide-body jets at the UK carrier in order to tap surging demand after profit across the group jumped 68 per cent in 2015.

Chief Executive Officer Willie Walsh (pictured) said Friday that he’s in detailed discussions with potential suppliers of used Boeing Co. 777-300ER aircraft and is continuing to look at leasing a batch of A380 superjumbos. Operating profit increased to €2.34 billion from €1.39 billion in 2015, IAG said, with a similar gain forecast this year.

IAG is establishing itself as Europe’s most profitable airline as Air France-KLM Group and Deutsche Lufthansa grapple with unions over cost cuts. Ireland’s Aer Lingus, added to the books in August, will provide a full year of earnings in 2016, while a potentially lucrative joint venture deal with Latam Airlines Group SA could spur profit from next year.

“We’ve made good progress on 777-300s, had discussions with a number of potential suppliers,” Walsh said on a conference call. “We’re very encouraged, we like that aircraft. We’ve had some discussions on A380, not as detailed as the discussions we’ve had on the 777-300 ERs.”

The CEO said that it’s “undoubtedly been a good year, but it’s also been challenging with extreme volatility in the currency and fuel markets.” The trans-Atlantic and European markets are performing best, he said.

Full-year earnings were in line with IAG’s forecast for adjusted operating profit between €2.25 billion and €2.3 billion, while analysts had predicted a figure of €2.3 billion, and €3.1 billion this year. The company’s shares traded two per cent lower at 547 pence as of 8:11am in London.

Walsh’s rush for growth following the formation of IAG via a merger of BA with Spain’s Iberia in 2011 has seen a succession of deals securing takeovers of British Midland, Barcelona-based discounter carrier Vueling and Aer Lingus.

IAG’s passenger traffic surged 9.6 per cent in the year, making it bigger than Lufthansa and bringing it within range of Air France-KLM by the most popular measure for ranking airlines. It is already the top network carrier by value, with a market capitalisation of £11.3 billion versus €6.4 billion at Lufthansa and €2.5 billion at Air France-KLM.

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