International Airlines Group’s (IAG) is updating its full–year 2019 operating profit guidance based on recent events.
During September, BALPA’s (British Airways main pilots’ union) industrial action initially scheduled for the 9, 10 and 27 led to an initial cancellation of 4,521 flights over a period of seven days. Subsequently, 2,196 flights were reinstated leaving 2,325 cancellations.
British Airways also introduced flexible commercial policies on 4,070 flights not directly affected by the industrial action. These policies enabled customers to re-book flights or receive a refund. The net financial impact of the industrial action is estimated to be €137 million. In addition, there were further disruption events affecting British Airways in the quarter, including threatened strikes by Heathrow Airport employees, which had a further net financial impact of €33 million.
IAG estimates that the latest booking trends in its low cost segments (primarily Vueling and LEVEL) will have an adverse financial impact of €45 million.
At current fuel prices and exchange rates, IAG therefore, expects its 2019 operating profit before exceptional items to be €215 million lower than 2018 pro forma (€3,485 million).
Passenger unit revenue is expected to be slightly down at constant currency, compared to flat guidance previously, and non-fuel unit costs are expected to improve at constant currency, unchanged from previous guidance. Capacity growth, measured in ASKs, for the fourth quarter is now expected to be about 2 percent, which is 1.2 points below previous guidance, and full-year capacity growth is expected to be about 4 percent, compared to 5 percent previously.
There have been no further talks between British Airways and BALPA. The airline’s offer of an 11.5 percent pay increase over three years still stands and has been accepted by British Airways’ other unions, representing 90 percent of the airline’s employees. Clearly, any further industrial action will additionally impact IAG’s full–year 2019 operating profit.