Home > World > Aer Lingus owner IAG cuts medium-term capacity and profit forecasts

Aer Lingus owner IAG cuts medium-term capacity and profit forecasts

Written by Business World, on 8th Nov 2019. Posted in World

article headline

Aer Lingus owner IAG scaled back its forecast for capacity growth for the next three years on Friday, hitting its outlook for earnings per share but potentially providing relief for rivals in a weak global economy.

IAG said available seat kilometers, a measure of passenger-carrying capacity, was estimated to grow by 3.4% a year between 2020 and 2022, compared to a previous forecast of 6% growth a year for the 2019-2023 period.

The airline group, which also owns Iberia, British Airways and Vueling, said the capacity growth cut would lower its forecast for growth in earnings per share (EPS) to 10%+ a year from a previous forecast of 12%+ a year.

IAG shares were down 3% at 0821 GMT ahead of a strategy update from management at the company's capital markets day later on Friday.

The airline industry has struggled to maintain margins in the face of industry overcapacity and a muted economic outlook which has produced fierce competition over ticket prices.

Chief Executive Willie Walsh said last week that he expected global macroeconomic softness to continue in 2020. The company has also taken a hit from industrial action at British Airways, which has knocked its outlook for profits this year.

IAG said the forecasts for capacity growth numbers were not adjusted for the impact of the pilot strikes. After 48 hours of action in September, no further industrial action is scheduled although the dispute over pay remains unresolved.

The issues at BA, which was forced to ground 1,700 flights during the walkout, was cited by easyJet as helping its performance in the last quarter, while Lufthansa has also said slower capacity growth at rivals was providing relief.

In a further sign of an easing of industry overcapacity, Ryanair is set to grow at its slowest rate in seven years in the year to March 31, 2021, as it expects further delays to its Boeing 737 MAX deliveries and may be without the jets next summer.

Friday's strategy update comes after IAG said on Monday it would buy Spain's Air Europa to boost its presence on routes to Latin America and the Caribbean.

IAG said it expected the deal, which will be funded through external debt, to close in the second half of next year and for it to add to its earnings in the first full year after the closure. (Reuters)

Source: www.businessworld.ie

More articles from World

image Description

Euro zone needs to create its own economic growth at home warns Lagarde

Read more
image Description

WeWork to lay off 2400 employees in SoftBank revamp

Read more
image Description

China says it will strive to reach 'phase one' trade deal with US

Read more
image Description

OECD sees global growth at decade-low

Read more