BA parent IAG cuts growth plans

BA parent IAG Friday said it was further cutting back growth plans in the face of fare weakness following terrorist events and the UK’s Brexit vote. IAG is being hit by a combination of factors, including slack demand in the UK and the weakness of the British pound. Sterling’s weakness comes during the critical summer period when airlines make most of their profit. European airlines have been battered by a flurry of bad news. Terrorist attacks have spooked passengers, the Brexit vote has dented consumer confidence, and air-traffic control strikes have caused thousands of flights to be canceled. Capacity growth, a measure of seats for sale, would now expand only 4.5% compared with 5.5% originally planned, IAG CE Willie Walsh said. By year-end capacity may be curtailed even more, the company indicated. Cuts would be made across the network and all airlines, including Aer Lingus and Spanish carriers Iberia and Vueling, Walsh said. IAG this year already pared growth plans and is reviewing capacity and capital expenditure plans for next year. Full-year operating profit before exceptional items is now projected to grow at a low double-digit percentage, less than had been expected. IAG had already cut its full-year profit growth projection after the EU referendum. Walsh said the outlook was conservative. Walsh said “numerous external factors affected our airlines, including the impact of terrorism, uncertainty around the UK’s EU referendum and Spain’s political situation, and increased weakness in Latin American economies. This led to a softer-than-expected trading environment, especially in June.” Operating profit before exceptional items was E555m compared with E530m a year earlier. <br/>