BA forecasts profits surge

 

The owner of British Airways has said it expects profits to soar over the next four years as it benefits from its merger with Iberia.

International Airlines Group (IAG), which was formed through the merger in January, expects operating profits of 1.5 billion euros (£1.3 billion) in 2015.

The figure - its first target to look this far in advance - compares to forecasts of about 450 million euros (£383.4 million) for 2011.

Greater than expected cost savings from the merger, efficiencies through buying planes that use less fuel, and organic growth will deliver most of the expected gains.

IAG also plans to snap up smaller airlines as the rising cost of fuel and the squeeze in consumer spending drives consolidation in the industry.

Earlier this month it agreed to buy troubled airline BMI in a move which will increase its hold on the take off and landing slots at Heathrow airport.

IAG shares rose 4% today.

IAG was formed to allow BA and Iberia to make cost savings and give the combined companies the firepower to buy up smaller rivals.

The merger gave the group some 350 aircraft, flying to about 200 destinations, making it Europe's second biggest airline by market value after Lufthansa.

It said at the time of the merger that it already had a list of 12 companies it was hoping to buy as it looked to aggressively expand.

Today's profit targets are for the current group and do not take into account its current deal with BMI or any future merger plans.

It today revealed it expected an additional 50 million euros (£42.6 million) in revenue and cost synergies from the merger with Iberia, taking the total to an annual 450 million euros by 2015.

And some 250 million euros (£213 million) of the operating profit improvement will stem from the modernisation of its fleet with fuel efficient planes.

Meanwhile, its trans-Atlantic tie-up with American Airlines should also deliver about 150 million euros (£127.8 million) in benefits by 2015.

BA and Iberia have linked with the US carrier as key members of the oneworld alliance, which means the trio are represented at the four largest premium passenger airports globally - Heathrow, New York JFK, Los Angeles and Hong Kong.

PA

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