Posts Tagged ‘budget carriers’

IAG prepares for drop in demand in the Middle East

Tuesday, March 1st, 2011

The newly formed International Airlines Group has announced a €90 million net profit for the final quarter of last year ending 31 December. The figure is an improvement on a deficit of €130 million recorded for the same period a year earlier. The reversal of fortune is mainly due to better yields and revenue on a limited growth in capacity.

IAG’s chief executive, former BA boss Willie Walsh, said the airline was following the events in the Middle East and watching for the impact on the price of oil. He added that the group was prepared to begin reducing capacity in the region if the price of oil began affecting demand.

Both Iberia and BA recently passed on around 50 per cent of the increasing price of oil to customers as a fuel surcharge. However, the airlines claim that so far they have not seen any significant drop in demand from passengers on long-haul services. Walsh went on to say that if Middle Eastern traffic was to fall away it would only affect some six per cent of IAG’s business.

The group said it continued to see strong performance in its long-haul services across the board, especially in the premium sector. Short-haul business in Europe is however still struggling against extremely strong competition, especially from the budget carriers.

Before completing the merger with Iberia, BA was able to turn a loss of £245 million in 2009 into £170 million net profit in 2010. This was despite continuing problems with cabin crew, air traffic control strikes and disruption caused by severe winter weather in December.