British Airways-owner IAG says strong summer demand and low fuel prices are behind a massive rise in annual profit. Can it maintain a stellar performance? Hayley Platt reports.
Low oil prices are finally paying off for British Airways owner IAG. Europe's second largest airline group reported a 65 percent rise in annual profits of 2.3 billion euros. And it expects similar soaraway profits of 910 million euros for 2016. IG's Alastair McCaig said the addition of Aer Lingus and Iberia to the fold should help achieve it. SOUNDBITE (English) IG, MARKET ANALYST, ALASTAIR MCCAIG, SAYING: "The taking on Aer Lingus might, to many companies, and people, be considered a risk and a potential liability but quite frankly with the skills set shown in turning Iberia around, battling the unions and making them considerably more profitable outfit, you'd have to expect especially with Willy Walsh's historical ties to Aer Lingus and his fuller understanding of that company that he'll be able to absorb them and create assets rather than costs." The group also benefitted from strong summer travel. Savings from consolidating some of its back office operations. And renegotiating better deals with suppliers. But it hasn't been able to fully benefit from weaker oil prices. That's because airlines generally lock in prices early, known as fuel hedging, to reduce the risk of potential price rises. It can work the other way too as oil has lost almost half its value from a year earlier. The challenge for IAG - to hold on to all the benefits in the future. While at the same time, hang on to its margins as budget airlines like Ryanair slash fares.