LONDON (dpa-AFX) - Shares of International Consolidated Airlines Group S.A. (ICAGY.PK, IAG.L) were gaining around 3 percent in London trading after the airline reported Friday higher profit in its second quarter, benefited by higher passenger revenues, despite weak cargo revenues.
Based on current fuel price and currency levels, and given high visibility over the second-half period cost reductions, the company now expects low double digit percentage growth in pre-exceptional operating profit in 2016.
In June, the company had said, responding to UK Referendum result, that it continues to expect a significant increase in operating profit this year, but no longer expects to generate an absolute operating profit increase similar to 2015.
For the second quarter, profit before tax increased 11 percent to 564 million euros from 449 million euros in the prior year. Profit after tax was up 10.6 percent 450 million euros. Operating profit increased 4.7 percent from last year to 530 million euros.
Excluding exceptional items in the latest quarter, adjusted profit before tax was 498 million euros and adjusted profit after tax was 396 million euros in the second quarter 2016.
Total revenue edged up 0.9 percent to 5.708 billion euros from 5.656 billion euros in the prior year. Passenger revenues increased 1.2 percent to 5.074 billion euros, while cargo revenues declined 12 percent to 241 million euros.
The latest results reflected a negative currency impact, primarily due to the weak pound. According to the firm, the impact of terrorism, uncertainty around the UK's EU referendum and Spain's political situation as well as increased weakness in Latin American economies, led to a softer than expected trading environment, especially in June.
In addition, passenger revenues were hurt as the airlines' operations have been considerably disrupted by 22 air traffic control strikes in Europe so far this year.
Passenger revenue per RPK dropped 10.4 percent and passenger unit revenue for the quarter was down 10.2 percent. Available seat kilometres or capacity increased 12.7 percent to 76.76 billion ASKs and revenue passenger kilometresor traffic grew 12.9 percent to 62.07 billion RPKs.
Seat factor was 80.9 percent, up 0.2 percentage points from 80.7 percent last year.
Regarding its trading outlook, the company said it has continued to experience a weaker trading environment in UK point-of-sale business, representing around one third of total revenue.
The company expects at least 80 million euros disruption costs to be booked in the second half of the year.
Further, the company said cost initiatives currently in the planning stage will benefit earnings from 2017.
Willie Walsh, IAG Chief Executive Officer, said: 'Although visibility of revenue trends for quarter 4 remains low, we already have 74 per cent of our expected revenue booked for quarter 3.'
The company also expects full year equity free cash flow to be within long-term 1.5 billion euros to 2.5 billion euros range.
In London, IAG shares were trading at 422.93 pence, up 3.33 percent.
Copyright RTT News/dpa-AFX