The parent group of British Airways cut its long-term profits outlook Friday, blaming the downgrade mainly on a plunging pound following the shock Brexit vote. International Airlines Group forecast in a statement that earnings before interest, tax, depreciation, amortization and aircraft rental will average 5.3 billion euros ($5.9 billion) over 2016 to 2020.
That was down from its previous guidance of 5.6 billion euros for the period. The company, which also owns Irish carrier Aer Lingus and Iberia of Spain, said capacity will now increase by 3 percent a year over the period, compared with 3 to 4 percent under previous plans.
Capital spending will average 1.7 billion euros, against prior guidance of below 2.5 billion euros. The revision comes after IAG said last month that it anticipated an operating profit of 2.5 billion euros for 2016, up about 7 percent from 2015's 2.34 billion euros, having previously forecast low double-digit growth. That downward revision in operating profit guidance was the second since Britain voted to quit the European Union.
It followed a similar profits downgrade from Irish no-frills airline Ryanair, highlighting the impact of Britain's sliding currency on companies that report in euros. Britain voted June 23 in favour of exiting the EU, triggering a plunge in the pound to 31-year lows against the dollar and 7.5-year troughs versus the euro. This has particularly hit IAG since tickets for its main carrier BA are mostly sold in pounds. This week, however, the pound jumped against the dollar and euro after the High Court struck a blow to the government's plans for leaving the EU.
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