BA owner IAG tanks as Q3 operating profit, revenue miss expectations

(Sharecast News) - British Airways and Iberia owner IAG tanked on Friday as it posted weaker-than-expected third-quarter operating profit and revenues and highlighted "some softness" in the North American market. Operating profit rose to €2.05bn from €2.01bn in the same period a year earlier, but this was weaker than the €2.19bn forecasts by analysts, while pre-tax profit was down 2.1% to €1.87bn.

Total revenue was flat in the third quarter at €9.33bn, missing forecasts for an increase to €9.43bn, while passenger revenue per available seat kilometre was down 2.4%. North Atlantic passenger revenue per ASK fell 7.1%.

IAG said it had been a good performance overall, on top of a record third quarter in 2024. As expected, the North Atlantic market saw some softness in US point-of-sale economy leisure.

It also said that unit prices across its airlines were lower in the European market due to a combination of high growth by British Airways and more competitive markets elsewhere.

The South Atlantic and Asia Pacific markets were strong, IAG said.

The company, which also owns Vueling and Aer Lingus, backed its full-year outlook.

Chief executive Luis Gallego said: "We delivered a strong performance in the third quarter and remain on track to deliver another year of growth in revenues, profit and shareholder returns. So far this year we have grown our operating profit by 18% and adjusted earnings per share by 27% and increased our interim dividend.

"Having nearly completed a €1 billion share buyback, we intend to update the market about further shareholder returns when we report our 2025 full year results in February. We remain focused on long-term value creation for our shareholders, helping to deliver our financial ambitions through disciplined investment for the future to improve customer experience and operational efficiencies."

At 1335 GMT, the shares were down 9.4% at 375p.

Russ Mould, investment director at AJ Bell, said: "For decades British Airways' transatlantic routes have been a mainstay of the business so it's not a surprise to see weakness in this area provoke a negative market reaction for parent company IAG.

"Passenger demand in Europe for flights to America has been affected by strict immigration controls under the Trump administration and a scaling back in corporate activity between the US and Europe.

"This contributed to a disappointing set of third-quarter results which saw the shares lose some altitude after a heady ascent over the last 12 months.

"On the plus side, IAG continues to believe it can navigate its way to its full-year guidance and it is seeing strong demand in the premium passenger segment.

"After a fairly untroubled flight for the stock to pre-pandemic levels, the latest update is a reminder that the seatbelt sign might still go on from time to time and shareholders have to be prepared for some turbulence along the way."