BA and partner Iberia's losses down

British Airways and merger partner Iberia posted smaller losses today in the pair's first set of results since joining forces in January.

International Airlines Group said it benefited from improved passenger volumes, including from premium seats, as revenues for the three months to March 31 rose by 15% to 3.6 billion euro (£3.2 billion).

While fuel costs jumped by 31% to 1.1 billion euro (£985 million) in the period, pre-tax losses narrowed sharply to 47 million euro (£42.1 million), from 273 million euro for the equivalent three months a year earlier.

Former BA boss Willie Walsh, who is now chief executive of the combined group, said the integration of the business remained on track.

BA and Spain's Iberia have retained their brands in the merger, which is expected to save 400 million euro (£358.3 million) a year by its fifth year.

It is now the third largest scheduled airline group in Europe and the sixth largest in the world, based on revenues. The pair fly to more than 200 destinations on more than 400 aircraft and last year carried 55 million passengers.

IAG plans to expand aggressively and has reportedly drawn up a list of 12 other airlines it will consider buying.

Mr Walsh said costs excluding fuel were down 5.2% in the quarter after supplier and employee overheads both fell by 4.7% in the period.

He added: "The continued focus on cost control has been achieved while we have seen some measured increases in capacity.

"We have been able to increase capacity without additional aircraft and employees, highlighting the good work that has been done in previous years."

IAG's shares opened more than 3% higher after today's first-quarter update.

While the airline expects significant growth in operating profits this year, it warned recent events such as Japan's earthquake and upheaval in North Africa could dent profits by up to 100 million euro (£89.5 million).

It added: "Our long-haul business is stable, with strength in the premium sector, but the short-haul European market remains highly competitive."

Total fuel costs for the year will be 100 million euro higher than previously expected at 5.2 billion euro (£4.65 billion) and IAG warned that after recovering 50% of the cost impact through revenues in the first quarter it expected the task to become "progressively harder" as the year wore on.

The other area of concern for investors has been the Spanish domestic market, which has a high level of penetration by low-cost carriers.

Tony Shepard, an analyst at Charles Stanley stockbrokers, said: "Excluding the uncontrollable events, the operating performance of the new airline has been good."