IAG Shares Gain Altitude on 2014 Results

PUBLISHED: 28 Feb 2015 @ 05:23 | Comments (0) | More info about Lou Gutheil

The folks over at International Consolidated Airlines Group (LSE:IAG) are on Cloud 9 today as investor confidence was reflected in a 3.66% share price increase and a volume that was 44% higher than average. IAG closed at 580.00, up 20.50 points on a volume of 10.5 million shares traded. The share’s high for the day was 595.00, establishing a new 52-week high for the parent company of British Airways and Iberian Airlines. This activity was stimulated, at least in part, when the company published its full year results as of 31 December 2014.

CEO Willie Walsh reported that “British Airways’ operating profit increased to €1,215 million up from €762 million last year.” Iberia moved from a €166 million loss in 2013 to a €50 million operating profit in 2014. Even it’s low cost, Barcelona-based carrier, Veuling, brought home an increase in operating profit from €139 million to €141 million, something extremely difficult to do for low cost providers operating on slimmer margins.

Even more significant, especially in the long term, was the company’s ability to reduce operating costs by 4.1% during the period. Although lower fuel costs were a factor, the reduction was also “fueled” by introducing more fuel-efficient aircraft, increased operational productivity and negotiated supplier cost savings. The revenues and profits for 2014 are past history, but the improved efficiency and resultant reduced costs provide a strong performance platform from which the group will be well-positioned to fly into any headwinds or crosswinds in 2015 and beyond.

Looking at the whole, Walsh said that, “We’re reporting strong full year results with an operating profit before exceptional items of EUR1,390 million which is up 80.5 per cent. Total revenue was up 8.0 per cent with non-fuel costs up 7.0 per cent and fuel costs up 0.6 per cent on capacity growth of 9.3 per cent.” Although the group’s load factor decreased by 0.4% during the year, it nonetheless outperformed the IATA industry average.

As for IAG’s stock performance, its current price is up 29% over the past 12 months and up 252% over the last three years.

With the Aer Lingus merger proposal still “up in the air,” Walsh made it clear that the future of IAG is not dependent on the deal. How failure to close the deal might affect the Irish airline remains to be seen.

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