IAG's Spain performance dented by euro zone crisis

 

International Airlines Group, formed by the merger of British Airways and Iberia, said worsening economic conditions in Spain hit its performance last month, undermining strength in long-haul travel out of London.

IAG on Thursday said traffic, measured in revenue passenger kilometres, rose 6.6% last month versus May 2011, while passenger load factor - a measure of how well it fills its planes - was up 0.5 percentage points at 78.6%.

"Underlying market conditions at our London Heathrow hub continue to be firm, particularly in long haul premium," the company said in a statement.

"However, commercial performance at our Madrid hub has deteriorated further due to the ongoing effects of the Spanish and wider euro zone macroeconomic conditions and, the after-effects of prolonged industrial action."

IAG said its first and business-class travel - the most profitable part of its passenger business - rose 1.7%, while non-premium traffic was up 7.5%. It added that trends in June appeared to be stronger than those in May.

Traffic at Iberia, which made an operating loss of €170 million in the first 3 months of the year fell 1.8% last month, IAG said.

Last month IAG said the prospect of a €1 billion rise in its fuel bill, combined with €90 million worth of restructuring costs stemming from its acquisition of bmi, meant it would struggle to make any money this year, predicting operating results would be "around the breakeven level".

IAG shares, which have risen 5% in the last week, were 0.6% up at 145.45 pence by 1527 GMT, valuing the company at around £2.6 billion.