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Pilot strike blows hole in British Airways owner's profits

Tom Belger
·Finance and policy reporter
The moon rises as a British Airways aircraft flies on its way to the airport in Frankfurt, Germany, Thursday, June 13, 2019. (AP Photo/Michael Probst)
A pilot strike hit British Airways owner IAG's profits. Photo: Michael Probst/AP

The owner of British Airways has seen its profits slide after a pilot strike forced it to ground 1,700 flights.

Operating profits at the International Consolidated Airlines Group (IAG) dropped 6.9% in the third quarter of the year to €1.43bn (£1.23bn), not including “exceptional items.”

But profits at the airline giant (IAG.L), formed from a merger between BA and Spain’s Iberia, were in line with analyst expectations after the industrial action. IAG shares were trading 0.2% higher at 8.30am in London.

The company said pilot strikes in a row over pay, and other disruption including a threatened strike by Heathrow ground staff, had left a €155m hole in its earnings.

READ MORE: British Airways owner cancels more flights just in time to avoid compensation

BA pilots walked out for the first time in the airline’s history in September, leaving thousands of passengers stranded and more than half its planes at the wrong airports.

The row has rumbled on, with further walkouts announced and then cancelled but no resolution yet reported in the dispute.

The airline’s pilots via the British Airline Pilots’ Association (Balpa) were demanding a larger share of the company’s profits than the 11.5% pay rise offered over three years.

The company reiterated its warning that full-year profits will be €215m (£185.4m) lower than in 2018.

Willie Walsh, IAG’s CEO, said: “These are good underlying results. As we said in September, our performance has been affected by industrial action by pilots' union Balpa and other disruption including threatened strikes by Heathrow airport employees.

"In addition, our fuel bill increased by €136m during the quarter with fuel unit costs up 4.2% at constant currency.”

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Nicholas Hyett, an equity analyst at Hargreaves Lansdown, had noted before the results were published that weak booking trends had contributed to IAG’s September profit warning, particularly in its budget airlines such as Vueling and Level.

“It accounted for a relatively small proportion of the profit miss, but if the trend’s continued over the last month or so it’s concerning. IAG could already be seeing the fallout of wider economic weakness. If booking trends are indeed weakening, keeping costs in line will be crucial to defending margins,” he said.

He said he understood IAG’s pay rise offer was still standing but had not been accepted, and noted the pilots’ union had threatened further strikes.