IAG in $13bn order for 53 Boeing, Airbus jets as Q1 profits soar

(Sharecast News) - British Airways owner IAG on Friday held annual guidance after a surge in first-quarter operating profits and said it was ordering 53 wide-bodied aircraft from Boeing and Airbus in a deal worth almost $13bn as it bet on future demand for long-haul travel despite global economic uncertainty. IAG which also owns Ireland's Aer Lingus and Iberia of Spain has ordered 32 Boeing 787-10 aircraft for British Airways and 21 Airbus A330-900neo aircraft. The news comes a day after the US and UK agreed the framework of a free trade deal.

The Boeing deal includes an option of buying 10 more aircraft, while IAG could order an extra 13 planes from Airbus under their arrangement.

IAG added that it had negotiated a "substantial discount" from the list price on each of the deals.

"This order marks another milestone in our strategy and transformation programme and underlines our commitment to strengthening our airline brands and enhancing our customer proposition," said chief executive Luis Gallego.

The company said operating profit before exceptional items increased by €130m to €198m as strong revenue growth and a lower fuel price offset expected cost increases, IAG said.

Revenue grew 9.6% to €7bn as the company reported strong demand despite an uncertain macroeconomic environment but warned that there had been some softness in sales of economy tickets in the US offset by purchases of premium seats.

IAG said its Latin America and Europe operations "continue to be strong" with robust demand for North Atlantic routes.

"We continue to see resilient demand for air travel across all our markets, particularly in the premium cabins and despite the macroeconomic uncertainty," Gallego added.

AJ Bell investment director Russ Mould said IAG "faces the worrying prospect of a reduction in transatlantic travel as tariffs prompt European and Asian companies to look at ways to become less reliant on the US for trade, and a backlash against Trump makes the US less appealing to foreign tourists".

"There are certainly signs of weakness, with softer booking for economy travel. However, premium bookings appear to be holding up, which is a surprise."

"One might have thought a lot of businesspeople might would be looking to postpone or cancel planned trips to the US. IAG and the market will be watching the booking trends closely, particularly around the all-important summer season.

"If there's one clear benefit to IAG from Trump returning to the White House, it's that his policies have helped to drive down the oil price amid fears of a slowdown to global economic growth as result of tariffs. That slashes big bucks off IAG's fuel bill."

Reporting by Frank Prenesti for Sharecast.com