Sparks - International Airlines Group

International Airlines Group’s (IAG’s) Q225 results are better than expected, with operating profit before exceptionals growing at over 35% to €1,680m, which is above the top end of the company-compiled consensus. Revenue grew by 8% during H1 as management highlighted strong demand across the network and the transformation programme led to a 2.9% increase in the operating margin to 11.8% in H125. Revenue growth was a little weaker in Q225 at c 7% versus the 9% reported for Q125.

Following a strong Q125 in North America, management highlights seasonal competitor growth and some weakness in the point-of-sale economy leisure demand in Q2. Europe is described as robust (despite passenger unit revenue declining) and there was good growth in Rest of the World.

Regarding the outlook for the year, management is confident in delivering good earnings growth, margin progression and strong returns to shareholders. From a financial perspective, they are guiding to slightly slower capacity growth (2.5% versus 3% previously), non-fuel cost growth is lower (around 3% from 4% previously), fuel costs are now expected to be lower (€7.1bn versus €7.5bn previously), and fx is now expected to be a small tailwind in H225.