IAG profits surge despite IT failure in May

Profits for British Airways owner IAG have surged, despite the costs from a massive IT failure that caused travel problems in May.

International Airlines Group reported that its operating profit before exceptional items in the six months to June 30 was up 37% to €975m (£871m).

Operating profit after exceptional items was up 13.8% and profit after tax was up by 2.3% compared to the same period last year.

The group, which also owns Aer Lingus and Iberia, had to pay around £58m in additional compensation and baggage claims after the IT problems during the spring bank holiday weekend.

The failure saw 726 flights cancelled and left around 75,000 passengers stranded over three days of chaos that began on 27 May.

The falling value of the pound also cost the firm around £39.3m.

But IAG boss Willie Walsh described the second quarter performance, which was helped by lower fuel costs, as "very strong".

He added: "The underlying trend in unit revenue improved, benefiting partially from Easter and a weak base last year."

The group launched a long haul, low-cost brand called Level in March and Mr Walsh said this was proving successful.

He added: "In June, Level started long-haul flights from Barcelona to four destinations.

"Sales continue to be well ahead of our expectations.

"We've ordered three additional aircraft and are considering other European bases for the operation."

Looking ahead, IAG said: "At current fuel prices and exchange rates, IAG expects its operating profit for 2017 to show a double-digit percentage improvement year-on-year.

"The group expects second half passenger unit revenue to show an increase versus last year, at constant currency."

The optimism was a contrast to competitors such as Lufthansa (Xetra: LHAB.DE - news) , Ryanair and easyJet, which have warned that pressure on fares may impact on their performance.

Mr Walsh told reporters: "All we can say is what we see.

"Clearly what we see in terms of our performance does appear to be somewhat different to what others are saying.

"It may not be different to what they're seeing but it's certainly different to what they've said.

"But we're calling it as we see it and our first half performance was very strong."

Unite said that the firm's profits showed British Airways could afford to resolve the industrial dispute with its mixed fleet cabin crew workers.

Oliver Richardson, Unite's national officer for civil aviation, said: "It is, frankly, obscene to keep thousands of BA's workforce on poverty pay at the same time as the company makes millions of pounds."

Shares (Berlin: DI6.BE - news) in IAG were up 1.44% in early trading.