Olympics 'will hit demand for business flights'

The owner of British Airways – the official airline of the Olympics – has warned that the Games will "dampen" demand for its flights, particularly in the lucrative business market.

Willie Walsh, chief executive of International Airlines Group (IAG), which owns BA and Spain's Iberia, said: "Airlines that have hosted the Olympics previously say it disrupts the normal flow of business. Business travellers tend to reschedule to avoid the Olympics. While the Olympics will be positive for the long-term position of London as a global destination, at best it will be neutral for us in the short term."

Mr Walsh also warned of fares hikes this year, saying it was "deeply regrettable but there's nothing we can do" due to higher fuel costs.

That is despite IAG's operating profit more than doubling in 2011 to €485m (£409m) as business travellers returned in droves.

IAG, created by a merger between BA and Iberia in 2010, saw a 15 per cent increase in business travellers last year, particularly between the US and UK, and overall revenues rose by more than 10 per cent to €16.3bn. It shaved nearly 6 per cent off its non-fuel costs last year, but the high oil price meant IAG's fuel bill rose by nearly 30 per cent to €5.1bn over the 12 months.

"We're facing a €1.2 bn increase in our fuel bill this year and we can't bear that cost ourselves," Mr Walsh said.

Air passenger duty (APD) is also due to rise in April. BA paid £500m in APD last year and claimed that it was undermining British aviation's competitiveness.

IAG said higher fuel costs plus weaker demand in Europe will leave results for 2012 lower in this first half compared to last.