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IAG warns on profits due to BA pilot strikes and higher competition

Strikes by BA pilots led to the cancellation of 2,325 flights in a week during September

International Consolidated Airlines Group - BA pilots

British Airways owner International Consolidated Airlines Group (LON:IAG) has warned that profits will be €215mln lower than expected due to competition for its other budget airline brands and strikes by pilots and airport workers.

The Anglo-Iberian carrier said €45mln of the profit impact is expected from the latest booking trends among low-cost airlines, where its Vueling and LEVEL brands operate.

Strikes by BA pilots, meanwhile, led to the cancellation of 2,325 flights in a week during September, while allowing customers to re-book flights or receive a refund all combined to produce an estimated financial impact of €137mln. 

On top of this, threatened strikes by workers at Heathrow Airport saw IAG bag a further hit of €33mln.

Overall, this means full year profit guidance has been cut to €3.27bn from €3.49bn.

The FTSE 100 outfit said revenue per passenger is also likely to be “slightly down” compared to the previous indication that it would be flat, while there was no change in guidance for non-fuel costs to improve. 

Flight capacity is expected to grow only 4% for the year, compared to 5% previously as the fourth quarter is not expected to expand as much as had been predicted.

IAG shares were down 3% to 467.1p by early afternoon on Thursday.

Analysts at UBS noted that the consensus forecast for the year was already €3.29bn, so they "do not see a material change" coming to 2019 forecasts.

There could be more to come, however, UBS noted.

"The company estimates the net impact from industrial action is €137m given British Airways pilot strikes/potential strikes.

"Currently there have been no announced further strikes from BALPA (BA pilots union), but with no talks taking place it cannot be ruled out, and should further strikes occur this would place further downward pressure on IAG’s guidance.

"Indeed it was a little over two weeks ago when the CFO confirmed guidance, so the industry is prone to guidance changes given limited visibility."

-- Adds broker comment and share price -- 

Quick facts: International Consolidated Airlines Group

Price: 287.5094 GBX

LSE:IAG
Market: LSE
Market Cap: £5.7 billion
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