British Airways’ Walsh ups profit forecasts as UK ticket sales surge
Willie Walsh got a new job this month: the Irish government hired the British Airways supremo as chairman of advisers to its state debt agency. And the latest evidence of the impact of Mr Walsh’s drastic cost-cutting at International Airlines Group (IAG) suggests the Irish couldn’t have found a better person for the job.
For IAG – parent company of BA and Spain’s Iberia, where Mr Walsh remains chief executive on top of his part-time Irish job – raised its annual profit forecast yesterday, after benefiting from an impressive and speedy turnaround at Iberia. Buoyant demand for BA’s services out of London has piloted the company higher too – but clearly Mr Walsh’s drastic cost-cutting had a major role to play.
Only eight months ago, as IAG crashed to a €1bn (£834m) pre-tax annual loss, Mr Walsh was admitting that the Spanish economy had deteriorated faster and deeper than BA had expected when it merged with Iberia. While the British flag bearer made an operating profit of €347m in 2012, Iberia wiped that out, slumping to an operating loss of €351m. And City analysts were questioning whether the merger had been a disaster.
But Mr Walsh went to war with Spanish unions, and sacked more than 3,000 staff; yesterday came the first signs of the results of that action: IAG shares flew up 8 per cent to 376.9p after third-quarter profits more than doubled to €690m. That beat City expectations, as did IAG’s forecast for an annual operating profit of €740m. BA’s operating profit was €477m, up from €268m a year earlier, while Iberia turned last year’s tiny €1m profit into a €74m profit this time around.
All the figures are travelling in the right direction: revenues across the airlines group – IAG now also owns Spanish budget carrier Vuelling – flew up by 6.9 per cent and costs were down 1.5 per cent.
What makes it all the more impressive is that the turnaround has come while other airlines flew into turbulence. Lufthansa’s results earlier this month fell well short of expectations, and Ryanair sharecrashed 11 per cent this week after the budget airline struck its second profits warning in two months.
Yet BA has enjoyed steady growth – particularly in lucrative business-class cabins. In October, premium passengers were up by 4 per cent.
“That’s all coming out of London,” Mr Walsh said. “The London economy has performed most strongly, and we’re benefiting from that.”
So why is BA flying high when Ryanair boss Michael O’Leary complained that UK passengers stayed put over the sunny summer and winter fares are falling? Mr Walsh reckons that claim had more to do with his fellow Irish boss than the British market.
“I don’t believe everything O’Leary says,” the IAG chief executive said.
Mr Walsh believes Ryanair’s profit warnings over impending “soft prices” are a way to cut its own fares and may be a route to forcing other, weaker European airlines out of business.
“He’s the price leader, he makes the prices – so when he talks about the market and prices being soft, it’s because he’s sensing weakness in other airlines. One of his best strengths is to get so much free advertising. But [Ryanair’s] problem is unique to Ryanair’s performance,” Mr Walsh said.
In fact, the IAG boss’s view of the European aviation market has perked up over the past few months.
“The mood across Europe is improving,” he said. “People are feeling more confident and I think next year more businesses will be inclined to spend money, investing and maybe creating new jobs. I’m cautiously optimistic about 2014. You can’t relax in this industry – but we’re heading in the right direction.”
Board creates magnetic field to achieve lift
Like Madonna, Sister Cristina Scuccia's video is also set in Venice
Singer says the track was 'force-fed down people's throats'
techThe original free dating app will remain the same, developers say
Endangered species spotted in a creek in the Qinling mountains
Trend which requires crisps, a fork and a strong stomach is sweeping Mexico's streets
Some experiencing postnatal depression don't realise there is a problem. What can be done?
- 1 Jack the Ripper: Scientist who claims to have identified notorious killer has 'made serious DNA error'
- 2 Banksy arrest hoax: Internet duped by fake report claiming street artist's identity has been revealed
- 3 Drink alcohol and eat meat to improve male fertility - but cut down on coffee, studies suggest
- 4 Former East 17 frontman Brian Harvey turns up at Downing Street and 'demands to speak to Prime Minister'
- 5 The inventor of the Facebook 'like' button says he never made a 'dislike' button because he feared the 'unfortunate consequences'
Ukraine crisis: Donetsk 'tactical missile' explosion at factory sends blast wave across rebel-held city
Jack the Ripper: Scientist who claims to have identified notorious killer has 'made serious DNA error'
Oscar de la Renta dead: Legendary US fashion designer dies after long cancer battle aged 82
Banksy arrest hoax: Internet duped by fake report claiming street artist's identity has been revealed
Super-sized ships arrive in Britain: How big can they get?
Cameron is warned 'no possibility' of UK reducing immigration and that bid to bring in quota on migrant workers would be illegal
Residents should throw a street party and mix with immigrant neighbours, councils told
Russell Brand threatened with arrest after filming outside Fox News headquarters
London bus driver 'kicks gay couple off for kissing'
Lord Freud: Tory welfare minister apologises after saying disabled people are 'not worth’ the minimum wage
Lord Freud hangs on as MPs of all parties 'call for his head' over disability comments
iJobs Money & Business
£23000 - £26000 Per Annum: Clearwater People Solutions Ltd: Our client is curr...
£25 - 30k: Guru Careers: A Corporate Actions Administrator / Operations Admini...
£18 - 23k + Benefits: Guru Careers: We are seeking a Customer Service Executiv...
£60 - 65k + Benefits: Guru Careers: We are seeking a ASP.NET Web Developer / ....