IAG, parent group of British Airways and Spanish carrier Iberia, grew profits in 2016 as lower fuel costs helped to offset the impact of a weaker pound, results showed Friday. Net profit rose almost a third to 1.93 billion euros ($2.0 billion) compared with 2015, IAG said in an earnings statement. Lower oil prices resulted in the company's jet fuel costs falling by 20 percent last year.
However IAG's "performance was affected by an adverse currency impact of 460 million euros", chief executive Willie Walsh said in an earnings statement. "In particular, this was due to the weak pound following the UK's EU referendum." Sterling slumped by around 15 percent in value last year, largely owing to Britain voting in June to exit the European Union, hurting IAG as it converts income from BA ticket sales into euros.
"While a low oil price helped boost profitability, 2016 was a difficult year for the airlines," Hargreaves Lansdown stockbrokers said in a note to clients. "As economic uncertainty rocketed, sentiment around the sector plummeted... IAG has been caught up in the trend for lower fares as increasing supply squeezes pricing," it added. Shares in IAG, which also owns Irish airline Aer Lingus, were up 2.4 percent at 516.50 pence in London morning deals, outperforming the FTSE 100 index, which was down about half a percent.
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