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Will Heathrow airport’s resurgence boost the profits of British Airways’ owner IAG?

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British Airways has unveiled plans to spend £7bn on a raft of new changes to its business.
British Airways has unveiled plans to spend £7bn on a raft of new changes to its business.

British Airways’ parent company is set to return to profit for the past year as it continues its turbulent recovery.

International Consolidated Airlines (IAG), which also runs Spanish operator Iberia, will reveal its latest annual financial figures on Friday February 24.

It comes amid early positivity in the sector, which has helped support a 30 per cent improvement in IAG shares since the start of 2023, amid indications that holiday and travel spending is holding up better than many expected during the cost-of-living crisis.

Heathrow – British Airways’ main base – revealed earlier this week that has posted its busiest start to the year since before the coronavirus pandemic.

The UK’s busiest airport revealed more than 5.4 million passengers travelled through Heathrow in January, reaching levels not seen since the start of 2020, prompting hopes for bumper returns for airliners.

Market analysts have predicted that IAG will report operating profits of 1.2 billion euro (£1.07 billion) for 2022 in its new update.

It will represent a major improvement after the group recorded a 2.8 billion euro (£2.45 billion) operating loss in 2021 as travel restrictions still held the business back.

Sophie Lund-Yates, lead equity analyst at Hargreaves Lansdown, said: “While their clientele might be different, we’re cautiously encouraged by what IAG will have to say judging by the impressive boosts to passenger numbers Tui has recently reported.

“It seems IAG’s planes are now full enough on each of its flights that profits can start flowing, despite the considerable costs associated with getting capacity back up to pre-pandemic levels.

“The bigger question is how forward bookings are shaping up.”

Investors will be hopeful that IAG can match its competitors with robust winter passenger numbers but will be particularly interested in the outlook, so will be on the look out for guidance about summer bookings.

Nevertheless, experts have highlighted that shareholders should recognise that there is still a significant way to go within the company’s post-Covid trajectory.

Liberum analyst Gerald Khoo stressed that industry is “in only the early stages of recovery from the pandemic” but highlighted that this means there is more “headroom” for potential growth this year.

Henry Saker-Clark, Press Association