IAG share price edges higher after full-year results beat expectations

The British Airways owner managed to overcome rising fuel costs and exceed analysts earnings call, but with no formal plan for handling Brexit investors sentiment remains subdued.

International Consolidated Airlines (IAG) posted a strong set of full-year 2018 results, despite rising fuel costs and air traffic control strikes threatening to hurt the company’s profits.

In fact, the British Airways owner exceeded analysts’ forecasts for the fiscal year, with the company planning to order 18 Boeing 777-9 planes to boost capacity, with the positive set of results helping to send its share price a touch higher on Thursday morning.

‘Yet again, we’ve improved our operating profit this year and our adjusted earnings per share grew by 15.1%,’ IAG CEO Willie Walsh said.

IAG results: key figures

Operating profit rose to €655 million in IAG’s fourth quarter, up from €550 million in the same period a year prior, with passenger unit revenue for Q4 18 climbing 1.6%.

Non-fuel unit costs for the quarter edged higher by 0.9%. Meanwhile, operating profit for the year reached €3.2 billion, up from €2.95 billion last year, representing a 9.5% increase.

IAG ended the fiscal year with €6.3 billion of cash on its balance sheet, down by €402 million compared with last year, while adjusted net debt to EBITDAR increased from 0.1x to 1.6x.

IAG lacks Brexit contingency plan

The group’s share price may have climbed higher if it had made some mention of how it plans to handle airline disruption in the wake of Brexit.

Brexit regulation with regards to air travel was a key concern raised by analysts with the UK scheduled to leave the bloc on March 29.

At the start of the new year, Brussels warned IAG that it must be able to show it is more than 50% owned and controlled by EU investors if it is to retain flying rights in the bloc, leading to the group blocking non-EU investors from buying stock, which hurt its share price.

Rising fuel costs fail to bring down IAG profit

Fuel unit costs for the quarter climbed 9.5% as oil prices have begun to stabilise following the implementation of OPEC supply cuts in January, sending Brent crude above $60 a barrel level after coming close to falling below $40 late last year.

‘This was a very good performance despite three significant challenges: fuel prices increasing 30%, considerable air traffic control disruption and an adverse foreign exchange impact of €129 million,’ Walsh said.

‘At constant currency, passenger unit revenue improved by 2.4 per cent while non-fuel unit costs decreased by 0.8 per cent on capacity growth of 6.1 per cent,’ he added.

IAG lifts dividend despite challenging future

The group managed to increase the size of its dividend payout to shareholders ahead of its results with a special dividend of 35 cents per share, reprsenting an additional €700 million on top of a final proposed dividend of 16.5 cents per share.

In the last two days, IAG’s stock fell a little over 7% after the company was removed from several MSCI global equity indices after failing to comply with US index compilers rules on foreign ownership of shares.

Its removal from major indices has seen passive investment funds that have invested in IAG through index trackers to sell their stakes in the group, applying further downward pressure on its share price.


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