IAG turnaround takes off as profits soar, guidance lifted

Full year profits soared at International Consolidated Airlines in 2014 as its turnaround looks to be truly taking off, with the Anglo-Spanish carrier steering toward a near-doubling of operating profits this year.

The British Airways and Iberia owner reported operating profits 80.5% higher for 2014 at €1.4bn, thanks partly to cheaper fuel and capacity growth of 9.3% that lifted revenues 8% to €20.2bn.

IAG increased productivity and supplier cost savings and reduced fuel unit costs thanks in part to the lower oil price in the final quarter and the introduction of more efficient aircraft.

However, the benefit of the oil price slump was partly offset by hedging and significant currency impact.

Nevertheless, profit before tax rocketed almost sevenfold to €1bn from €151m in 2013 as Spanish arm Iberia returned to profitability with an operating profit of €50m compared to a €166m loss the prior year.

"[Iberia's] turnaround has been remarkable, both financially and operationally, and we're very proud of its achievement especially its strong cost discipline," said group chief executive Willie Walsh.

Profits at British Airways profit surged 59.4% to €1.2bn, which Walsh said showed significant progress towards its long term targets.

Spanish budget arm Vueling lifted profits 1.4% to €141m.

Looking forward, Walsh issued strong profit guidance for 2015, saying that at current fuel prices and exchange rates he expects to almost double operating profits to "in excess of €2.2bn", from total fuel costs of around €5.9bn and capacity growth of roughly 5.5%.

The FTSE 100 group, which tabled a €1.4bn offer for Irish budget carrier Aer Lingus in January, continued to hold back on its dividend however and made no further comment on its potential resurrection.