LONDON: The owner of British Airways and Iberia raised its forecast for profits this year and said it was on course for another rise in 2015 despite an increasingly competitive backdrop that has hit rival European airlines.
International Airlines Group's performance contrasts with Air France-KLM and Lufthansa, which have cut forecasts because of strikes and competition from short-haul budget airlines and long-haul Gulf carriers.
IAG Chief Executive Willie Walsh sought to end speculation about the outlook for next year, saying the company had already dealt with the many of the challenges European rivals are now facing and was better placed in faster-growing economies.
IAG prioritised cutting staff costs before its rivals and has already gone through a painful restructuring at Iberia.
It bought discount carrier Vueling in 2013 to compete with budget rivals and added fuel-efficient planes to trim costs. "We're very comfortable that we will achieve our targets for 2015," Walsh told reporters on a conference call on Friday.
IAG is aiming for operating profit of 1.8 billion euros ($2.3 billion) in 2015. For this year, IAG said it now expected operating profit to come in at 1.32 billion to 1.37 billion euros, up from a previous forecast of at least 1.27 billion.
IAG shares rose 4.3 percent to 407.7 pence at 1027 GMT, reaching their highest level since June 12. IAG has outperformed its historic rivals over the last three months, posting a 16 percent gain against a 20 percent fall in Lufthansa's stock and a 22 percent drop in Air France's shares.
LONDON GDP
Air France-KLM and Lufthansa are smarting from an increasingly competitive sector, with more carriers vying for passengers on many routes.
Both are also trying to expand their budget flights while controlling staff pay.
Strikes by pilots and other staff this year have cost Lufthansa about 170 million euros. Air France-KLM said a two-week strike combined with weakening demand would wipe 500 million euros off its profit in 2014.
"I think with Air France and Lufthansa, they've clearly got challenges that we don't face, because we faced up to our challenges earlier," Walsh said. IAG said it was comfortable with capacity, although it would trim it in the fourth quarter by 1.3-1.5 percentage points.
IAG said it was also benefiting from its higher exposure to countries with faster-growing economies than Lufthansa and Air France-KLM, whose key home economies in Germany and France respectively are weaker.
"US GDP is good, UK GDP, and particularly London GDP, is good and as a result, we're benefiting," Walsh said.
Analysts at Jefferies said they believed IAG would give higher targets at its investor update on Nov. 7, when the group may also announce that it will pay its first dividend since British Airways and Iberia merged in 2011.
"IAG continues to distinguish itself, strategically and structurally, translating into superior operational/financial performance. Amongst flag carriers, IAG is the only show in town," Jefferies, who rate the stock a "buy", said.
Walsh also said the Ebola crisis in West Africa, which some experts said could dampen demand for air travel, was not affecting the company. "We're not seeing any impact on bookings," he said.
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