IAG celebrates stellar Q3 performance, anticipates robust 2023 recovery

International Consolidated Airlines Group (IAG) (LSE: IAG) announced a robust ‘record third-quarter performance’ on Friday, showcasing a pre-tax profit surge of 56% to €1.58 billion, compared to €1.01 billion the previous year. The Madrid-based aviation giant, which oversees British Airways, Iberia, Vueling, and Aer Lingus, attributed this impressive growth to an 18% rise in total revenue, reaching €8.65 billion in Q3 and €22.23 billion in the nine months ended September 30.

Despite this overall success, IAG experienced a sharp decline in cargo revenue, dropping by 30% in Q3 and 29% in 2023 due to a surplus in supply surpassing the demand for air freight. However, this setback only accounted for about 3% of the company’s total revenue.

Rising passenger revenue offset cargo losses as the company expanded its passenger capacity by 18% compared to the previous year. IAG’s third-quarter capacity reached 95.6% of its pre-Covid level in 2019, and it anticipates the full-year capacity to stabilise around 96% of its pre-pandemic benchmark.

Cost management played a pivotal role in IAG’s success story, with fuel unit costs declining by 6.2% and non-fuel unit costs dropping by 3.5%. Despite disruptions like the UK air traffic control system outage in August, which particularly impacted British Airways, the company remains optimistic. IAG expects non-fuel unit costs for 2023 to fall within the lower end of the 6% to 10% improvement range.

IAG’s prudent financial strategies were highlighted as it managed to reduce its borrowings to €17.23 billion as of September 30, compared to €19.98 billion a year earlier. Additionally, the company welcomed 20 new aircraft into its fleet during the past nine months.

Looking forward, IAG reported that customer bookings for the fourth quarter are on track, with 75% of anticipated revenue already secured. The company expressed confidence in a strong recovery throughout 2023, aiming to restore margins, operating profit, and balance sheets to pre-Covid-19 levels of capacity.

IAG shares, which saw a minor dip of 1.4% to 140.90 pence early Friday in London trading, are up by 17% over the past 12 months.