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British Airways owner IAG and Air France-KLM have said they expect a surge in summer bookings as the post-pandemic travel boom gathers pace.
IAG, which also owns Iberia, Aer Lingus and Vueling, on Friday raised its annual profit forecast, helped by consumers’ willingness to stomach higher ticket prices, as well as a drop in fuel costs across the sector.
The volume of wealthier passengers taking business class to Paris is buoying demand, according to Air France-KLM, which said that it had repaid all of the state aid it received during the pandemic.
The two European airlines join Germany’s Lufthansa in reporting an optimistic outlook for the summer travel season. IAG said it had “healthy forward bookings” from leisure travellers in particular.
As a result, the company expects full-year operating profit before exceptional items to surpass the €1.8bn to €2.3bn range it had forecast in February.
The industry’s recovery from the pandemic has outpaced the expectations of many senior executives and investors, with consumers appearing to prioritise travel amid the surge in inflation across large western economies.
For the first time since 2019, IAG began the year with a profitable quarter. Its earnings before exceptional items were €9mn compared with a loss of €741mn a year before.
“All our airlines performed above expectations,” said chief executive Luis Gallego.
Analysts at Bernstein said IAG’s first-quarter performance “put other legacy airlines in the shade” in what is a typically lossmaking quieter period.
The group expects to fly 97 per cent of its 2019 capacity this year, and highlighted strong demands on routes including in Spain and Latin America. The rebuilding of British Airways’ flight schedules is lagging behind the rest of the group, largely due to the slower reopening of Asia, and is forecast to hit 92 per cent this year.
IAG made an annual profit for the first time since 2019, following more than €10bn of losses during the pandemic.
While the leisure market is booming, corporate travel has been slower to recover.
Gallego said BA corporate bookings over the past five weeks were at 65 per cent of 2019 volumes, while at Spain’s Iberia they recovered to 95 per cent.
“SMEs are travelling more than large corporates, and some sectors are more affected than others. Financial services are recovering faster than other sectors like tech . . . but the trend is good,” he said.
Air France-KLM forecast it would return to 95 per cent of its 2019 capacity this year. That was slightly lower than its previous 100 per cent guidance, at a time when the carrier is operating far fewer flights to China and other Asian destinations, and as staffing issues continue to take a toll.
The group shrugged off a series of air controller strikes in France during the first quarter, saying these had cost it less than €10mn at its main Charles de Gaulle and Orly airports in Paris. Operating income still fell short of analyst expectations, however, while the group’s net loss in the first quarter, of €344mn, narrowed from €552mn a year earlier.
Shares in IAG rose more than 1.5 per cent in morning trading on Friday, while Air France-KLM fell 6 per cent.
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