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Profits up at IAG but French air traffic control strikes take toll

06 August 2018

"If we decide that we're not going to proceed we will not hold on to the shares", IAG CEO Willie Walsh said on an analyst call on Friday. Vueling was particularly affected and incurred an additional €20 million of disruption costs in the quarter.

"These strikes are also having a significant negative impact on the Spanish economy and tourism", he added.

Another challenge facing the group is industrial action and as part of that IAG has joined rivals Ryanair and EasyJet in filing a complaint with the European Commission about strikes by French air traffic controllers.

"Although the trading environment may not be as supportive as previous year, with toughening unit revenue comparatives and rising fuel prices, we see IAG as the best positioned of the network carriers to deal with these potential challenges", they said.

The company, which also owns the Iberia, Vueling and Aer Lingus airlines, posted operating profit before exceptional items of 835 million euros ($967.51 million), slightly behind a consensus forecast of 848 million euros.

"In July, Level started flights from Paris Orly to Montreal and Guadeloupe", added Walsh.

The long-haul fleet will grow to seven A330-200 aircraft in Paris and Barcelona next year.

At current fuel prices and exchange rates, IAG still expects its operating profit for 2018 to show an increase year-on-year.

However, the future of Level may well be thrown into doubt should IAG complete its proposed takeover of Norwegian. Nothing concrete has materialized and Bjorn Kjos, the CEO of Norwegian, has since said other airlines are interested in doing a deal as well.

"There's some good news on this front, with costs falling at a faster rate than we've seen recently". "There is a demand for the product they offer - low haul, low-cost is underserved". We haven't had any discussions with them since April.

In April, IAG acquired a 4.6 per cent stake of the struggling low-priced carrier with a view to starting takeover discussions.

Profits up at IAG but French air traffic control strikes take toll