The owner of British Airways, International Airlines Group (IAG), has reported its first annual profit since the onset of the pandemic, as demand for leisure travel picks up and business travel
steadily improves. The group, which also owns Iberia, Vueling, and Aer Lingus, reported operating profits before exceptional items of €1.26bn (£1.1bn) in 2022, a significant increase from a loss of €2.97bn the previous year. All of its airlines were profitable last year, with passenger capacity reaching 87% of pre-pandemic levels in the quarter up to the end of December.
The recovery in the leisure segment of the airline industry has been particularly strong, with premium leisure travellers leading the way as they splurge on luxury seats with more amenities. This trend has helped lift airline profits even as business travel continues to lag. While carriers are struggling to meet pent-up demand from travellers eager to fly after being held back by pandemic-related restrictions, staff shortages and restrictions at major hubs like Heathrow and Schipol have limited their ability to get aircraft back in the air. As a result, there are fewer planes in operation, which has kept prices for air travel high.
Despite this, British Airways is the latest airline to report strong figures, indicating that the aviation industry is recovering more quickly than experts had anticipated. Qantas, Air France-KLM, and Singapore Airlines have also reported profits, demonstrating a rebound in global travel demand. However, IAG shares finished down by six per cent despite the positive news. Some investors remain concerned about the company's high levels of debt and whether it is preventing the group from making necessary investments in its business.
IAG CEO Luis Gallego remains optimistic about the future, stating that demand continues to be strong, with robust forward bookings across all routes. He added that 2022 was a year of strong recovery, driven by sustained leisure demand and markets reopening, and that the company was transforming its businesses with the intention of returning IAG to pre-Covid levels of profit within the next few years.
In a move to strengthen its position in the aviation industry, IAG has also announced that it has agreed to buy the remaining 80% stake it does not already own in Air Europa, Spain's third-largest airline, subject to regulatory approval. The €400m deal would help grow Madrid as a hub and open up Latin America and beyond, with benefits for customers, employees, and shareholders.
In conclusion, IAG's return to profitability is a significant milestone for the company and the aviation industry as a whole. Despite ongoing challenges, including staff shortages and high levels of debt, airlines are continuing to adapt to changing market conditions and are optimistic about the future. As travel restrictions ease and demand for air travel continues to grow, airlines will need to focus on providing excellent service and adapting to new trends in order to maintain their profitability in the long term. Photo by Steve Lynes from Sandshurst, United Kingdom, Wikimedia commons.