LONDON (dpa-AFX) - International Consolidated Airlines Group (IAG.L), formed by the merger of British Airways plc and Spanish carrier Iberia, Friday reported a decline in third-quarter profit, reflecting higher fuel and oil costs. The company noted that for the fourth quarter, it is confident of a higher level of profitability and expects full-year 2011 operating profit to be around double that of 2010.
Separately, IAG said it has agreed in principle with Germany's Deutsche Lufthansa AG (DLAKY.PK, DLAKF.PK) to buy Lufthansa's subsidiary British Midland Ltd. The sale and closing of the deal remain subject to conditions including a binding purchase agreement, further due diligence and regulatory clearances.
The companies plan the purchase agreement to be signed 'in the coming weeks.' The transaction is expected to be completed in the first quarter of 2012.
In the third quarter, the company's profit before tax declined 34.4 percent to 316 million euros from 482 million euros in the previous year. Before exceptional items, the company posted quarterly pre-tax profit of 332 million euros. Excluding 21 days Iberia pre-merger, pre-tax profit in the prior year was 392 million euros.
Profit for the period declined 26.2 percent to 267 million euros from 362 million euros in the prior-year quarter. Third-quarter operating profit was 351 million euros, down from 528 million euros a year ago.
Total revenues for the quarter grew 2.2 percent to 4.49 billion euros from 4.39 billion euros in the same period last year.
Willie Walsh, International Airlines Group Chief Executive said, 'Our revenue is up 2.2 per cent in the quarter driven primarily by volume. However, high fuel costs continue to have a significant impact on our business. This quarter fuel costs are up 23.7 per cent, compared to last year, while non- fuel costs are flat.'
Fuel and oil costs were 1.39 billion euros, up 25 percent from the preceding year.
'The main challenge for 2012 will be to offset increased fuel costs, as our hedges unwind, against a background of potentially weaker demand,' Walsh added.
Looking ahead, the company said, 'Given the disruption and non-recurring accounting items in Q4 2010, we are confident of a higher level of profitability in Q4 this year, even after the negative impact of the high fuel price. We expect to deliver a 2011 full-year operating profit of around double the year 2010 profits.'
International Airline Group also provided traffic and capacity statistics for the month of October. Traffic, measured in Revenue Passenger Kilometres rose 1.9 percent from the prior year.
Capacity, measured in Available Seat Kilometres for the month increased 2.7 percent from the same month a year ago. Total number of passengers carried decreased 4 percent to 4.56 million.
Passenger load factor declined 0.7 points to 80.1 percent from 80.8 percent last year.
IAG.L is currently trading at 163.8 pence, down 4.6 pence or 2.73 percent, on a volume of 8.68 million shares on the LSE.
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© 2011 AFX News
