IAG Profits Rise 40% As Aer Lingus Deal Nears

The owner of British Airways has reported a 40% rise in quarterly profits - as it comes closer to completing a takeover of Irish carrier Aer Lingus (Other OTC: AELGF - news) .

International Airlines Group posted operating profits of €530m (£372m) in the three months to 30 June, considerably ahead of its own supplied forecast of €494m (£347m).

Meanwhile, pre-tax profits stood at €449m (£315m) for the second quarter.

The €1.3bn (£910m) acquisition of Aer Lingus could be completed in mid-August after two of the airline’s biggest shareholders, the Irish government and Ryanair, gave the deal their backing.

However, Ryanair is yet to formally accept IAG’s bid for its 30% stake.

Once the deal is finalised, Aer Lingus will become part of IAG’s portfolio of airlines, which also include Iberia and Vueling, the Spanish budget carrier.

IAG hopes the acquisition will help to expand capacity for profitable transatlantic routes out of Dublin Airport.

Europe’s airline industry is already preparing for a price war, as Ryanair slashes fares in response to lower fuel costs.

This could cause a headache for the likes of Lufthansa and Air France-KLM (Other OTC: AFLYY - news) , which only began cost-cutting fairly recently.

However, IAG began agreeing deals with staff unions years before, which means it could be better placed to offer competitive prices.

IAG chief executive Willie Walsh said: "We continue to take cost out of the business, with both employee and supplier unit costs down at constant currency, and improvements in productivity levels."