British Airways owner IAG posts record profits on leisure travel boom

British Airways owner International Airlines Group (IAG) has revealed record annual profits after cashing in on resurgent travel demand, including from leisure travellers booking premium economy, and business class seats.

Underlying operating profits at the group, which also includes Iberia, Vueling and Aer Lingus, more than doubled to £3bn for 2023, higher than its previous pre-pandemic peak in 2019.

The chief executive, Luis Gallego, shrugged off the impact of the recession in the UK on demand, saying it “continues to be very strong, particularly in leisure”.

“We don’t see any weakness in the market,” he added.

However, the group admitted poor performance from BA at its London Heathrow hub, where only 60 per cent of flights departed or arrived within 15 minutes of schedule during 2023.

“As a result, significant resources have been invested to drive better performance and some early initiatives are now starting to deliver improvement,” IAG said in its results presentation.

Business travel has been slow to bounce back, but has been offset by leisure travellers booking premium seats, it said.

Capacity for the final three months of 2023 was at 98.6 per cent of the levels seen before the pandemic struck in 2019, with full-year capacity at 95.7 per cent of those levels. It expects to grow overall capacity by around 7 per cent in 2024.

Mr Gallego said: “In 2023, IAG more than doubled its operating margin and profits compared to 2022… recovering capacity to close to pre-Covid 19 levels in most of its core markets.”

He remained tight-lipped on the outlook for airfares this year, saying only that they would be “determined by the market”.

Corporate passenger demand in North America was impacted at the end of last year and into the first quarter of 2024 by the Gaza conflict and concerns over instability in the Middle East.

But demand in the US market was showing signs of recovery in the second and third quarters.

IAG also claimed it will spend £7bn overall on BA over the next three years on areas such as IT – after a string of systems-related operational meltdowns – and new aircraft.

“British Airways is our biggest asset with huge potential and that’s the reason we are investing,” Mr Gallego said.

On-time performance for BA at Heathrow improved to almost 80 per cent in January, IAG said, thanks to “integrated planning, ongoing recruitment and training and better performance management”.

It also said: “A new operating model for London Heathrow will be rolled out for the summer.”

IAG Loyalty, its reward business which oversees its frequent flyer currency, Avios, also recorded a record operating profit of £280m up 17 per cent year-on-year and 59 per cent higher than 2019.