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British Airways owner IAG and Air France-KLM became the latest airline groups to benefit from booming demand for leisure travel, as they reported record profits over the summer.
IAG on Friday reported a 43 per cent increase in third-quarter operating profit before exceptional items to €1.75bn, its second consecutive quarter of record results.
“During the third quarter we saw sustained strong demand across all our routes,” said IAG chief executive Luis Gallego.
The airline group, which also owns Aer Lingus and Iberia, reported particularly strong appetite for travel across the Atlantic and to leisure destinations in Europe.
Rival Air-France KLM said its operating profit reached a record €1.34bn in the third quarter, up 31 per cent from a year earlier driven by strong summer bookings.
The results from two of Europe’s largest aviation groups underline the industry’s rapid recovery from the disruption of the Covid-19 pandemic. Low-cost airline easyJet has said it expects to report record profits over the summer, while London’s Heathrow airport raised its passenger forecasts this week.
However, the rise in the price of oil and growing geopolitical uncertainty have raised questions over the durability of the recovery, and airline shares have fallen since the summer.
IAG said forward bookings were “good”, but added it remained “mindful of wider macroeconomic and geopolitical uncertainties that might affect the remainder of this year”.
Profits at airlines across Europe have been boosted by customers’ willingness to pay high ticket prices for travel. IAG said passenger unit revenue — a measure of average revenues per kilometre flown which is seen by some people as a proxy for ticket prices — was 25 per cent higher than in 2019.
That allowed the airline to report a jump in profit despite operating a smaller flight network than before the pandemic, which the company put down to the retirement of its high-capacity jumbo jets and the slow return of travel to Asia. The group expects to fly 96 per cent of 2019 capacity this year.
Air-France KLM, which recently said it would take a 20 per cent stake in Scandinavian airline SAS, maintained its capacity outlook for the year at 95 per cent of 2019 levels.
Operating profits at Air France-KLM were slightly lower than the €1.37bn consensus forecast cited by analysts at Bernstein, while revenues of €8.66bn slightly undershot expectations as well. But costs were better than expected, Bernstein added, as airlines counter rising jet fuel prices with hedging.
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