BA owner IAG’s profits hit by weak pound

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By BBC

Airline group IAG, which owns British Airways and Iberia, has reported a rise in profits despite being affected by last year’s fall in the pound.

Pre-tax profits at the company rose by nearly a third last year to 2.4bn euros (£2bn), with operating profits up 8.6% to 2.5bn euros.

IAG said the fall in the value of the pound last year cost it 460m euros.

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Willie Walsh, IAG’s chief executive, said: “It was a good performance in a challenging environment.”

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He added that IAG had continued to make good progress.

“In 2016, we carried more than 100 million passengers – double the number British Airways and Iberia carried in 2010, a year before IAG was created.”

The rise in profits came despite revenues dipping 1.3% to 22.5bn euros, while revenue per passenger fell 5.4%.

The airline group said it intended to carry out a share buyback of 500m euros during the course of 2017.

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Expansion plans

IAG issued a profit warning after the Brexit referendum in June, and in October it warned that ticket prices might have to rise as a result of sterling’s fall.

Airlines normally buy their fuel in dollars, but a sharp drop in fuel costs has helped counter some of the adverse currency fluctuations.

IAG’s fuel costs fell by nearly 20% last year. It is also continuing to re-structure and cut costs.

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The company added that, at current fuel prices and exchange rates, it expects to report an increase in operating profit this year.

IAG is planning to start low-cost transatlantic flights from Barcelona this year to destinations in the US. The Spanish airport is home to IAG’s low-cost carrier Vueling.

It is going head-to-head with budget operators such as Norwegian Air Shuttle ASA, which is expanding.

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