IAG boss Willie Walsh predicts a summer of low air faresComments Off on IAG boss Willie Walsh predicts a summer of low air fares
Willie Walsh said: “Consumers are clearly benefiting as a result of falling oil prices, although in fact our own fuel bill has gone up.”
European airlines are braced for a fare war led by BA’s arch-rival, Ryanair, which has pledged to lower fares by some 8%.
However, both are better placed than rivals such as Air France and Lufthansa because they have already cut their costs significantly.
Walsh was speaking as IAG, which also owns Iberia and will shortly complete its £950 million takeover of Aer Lingus, reported a 141% jump in first-half operating profits to €555 million (£389.8 million).
Walsh said this was despite a €135 million increase in fuel costs which came largely from the weakness of the euro against the dollar in which airline fuel is priced.
He also warned the profit improvement is likely to be weaker in the second half but said the group was on track to meet its full-year forecasts of operating profits of at least €2.2 billion.
IAG boss Willie Walsh (Picture: Kerim Okten, EPA)
Walsh said the improvement came in part from the 11.6% increase in revenues to €10.4 billion and also from pushing down employee and supplier costs.
He admitted: “We are putting the squeeze on our suppliers but the improvement in employee costs comes from the restructuring we have successfully brought through at Iberia.”
As a result, he said, IAG today announced its first expansion at the Spanish flag carrier, with new, long-haul routes, particularly to the Far East.
He said this meant Madrid airport, already Europe’s biggest hub for Latin American flights, would become a “bridge” between there and the Far East.
Walsh also described the potential cost of a third runway at Heathrow, which was recently approved by the Davies Commission, as “outrageous.”
“I am not sure that the third runway at Heathrow will ever be built,” he said. “Airlines and consumers are looking for lower costs when it comes to flying but airports only seem to be looking at higher costs.”
IAG also announced it has acceptances for 63% of Aer Lingus shares for its takeover bid, which with the 25% pledged by Ryanair but yet delivered, means it has almost 90%.
Walsh said he expects Ryanair to sell its shares to IAG by the middle of next month and the bid has gone unconditional.