BA owner IAG sees profit surge despite IT failure

Business & Economy 31 Jul 2017
BA owner IAG sees profit surge despite IT failure

Profits surge at British Airways owner IAG despite IT failure in May

The bank holiday IT failure cost the owners of British Airways an extra £58m, but the group expects its profits to keep rising.

Image: IAG expects profits to continue improving during the coming year

By Sharon Marris, Business Reporter

Profits for British Airways owner IAG have surged, despite the costs from a massive IT failure that caused travel problems in May.

International Airlines Group reported that its operating profit before exceptional items in the six months to June 30 was up 37% to €975m (£871m).

Operating profit after exceptional items was up 13.8% and profit after tax was up by 2.3% compared to the same period last year.

The group, which also owns Aer Lingus and Iberia, had to pay around £58m in additional compensation and baggage claims after the IT problems during the spring bank holiday weekend.

The failure saw 726 flights cancelled and left around 75,000 passengers stranded over three days of chaos that began on 27 May.

People wait with their luggage at Heathrow Terminal 5 in London, Britain May 27, 2017
Image: Thousands of passengers were stranded after an IT meltdown in May

The falling value of the pound also cost the firm about £39.3m.

But IAG boss Willie Walsh described the second quarter performance, which was helped by lower fuel costs, as "very strong".

He added: "The underlying trend in unit revenue improved, benefiting partially from Easter and a weak base last year."

The group launched long-haul, low-cost brand Level in March, which Mr Walsh said was proving successful.

"In June, Level started long-haul flights from Barcelona to four destinations," he said.

"Sales continue to be well ahead of our expectations.

"We've ordered three additional aircraft and are considering other European bases for the operation."

Looking ahead, IAG said: "At current fuel prices and exchange rates, IAG expects its operating profit for 2017 to show a double-digit percentage improvement year-on-year.

"The group expects second-half passenger unit revenue to show an increase versus last year, at constant currency."

The optimism was in contrast to competitors such as Lufthansa, Ryanair and easyJet, which have warned that pressure on fares may impact on their performance.

Mr Walsh told reporters: "All we can say is what we see.

"Clearly what we see in terms of our performance does appear to be somewhat different to what others are saying.

"It may not be different to what they're seeing but it's certainly different to what they've said.

"But we're calling it as we see it and our first half performance was very strong."

Demonstrators hold placards and wave flags as they protest against the low wages and 'poverty pay' of British Airways' staff, outside the Houses of Parliament in London on February 7, 2017. The trade union Unite claims British Airways cabin crew are on 'poverty' pay, with many forced to take on second jobs or turn up for shifts if they are sick because they cannot afford to be off ill. Another three-day strike is set to start on Thursday
Image: Demonstrators protesting against the low wages of BA staff in February

Unite said that the firm's profits showed British Airways could afford to resolve the industrial dispute with its mixed-fleet cabin crew workers.

Oliver Richardson, Unite's national officer for civil aviation, said: "It is, frankly, obscene to keep thousands of BA's workforce on poverty pay at the same time as the company makes millions of pounds."

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