Lower fuel prices help profits take-off at British Airways owner

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The owner of British Airways International Airlines Group (IAG) reported a 65 per cent rise in annual profit, at the top end of guidance, and said profit would grow by a similar £720m this year, helped by the lower oil price.

IAG, whose portfolio of airlines also includes Iberia, Vueling and Aer Lingus, posted operating profit of £1.82bn, the highest end of its forecast, for 2015.

Profit was boosted by strong demand for summer travel and cheaper fuel, and the group also reduced costs through renegotiating contracts with suppliers and consolidating some back-office operations.

IAG said this year it expected to grow profit by £720m again, putting it on course to post a result of £2.53bn, slightly ahead of a current £2.45bn analyst forecast.

Like many European airlines, IAG is expected to be helped by an oil price which has almost halved over the past 12 months. A pre-existing fuel hedging strategy has stopped all of the benefits of lower prices being fully felt to date.

The challenge for IAG will be to retain all of the hold onto the benefits of cheaper fuel amid pressure on ticket prices as operators like budget airline Ryanair slash fares.

Willie Walsh, IAG chief executive officer, said: “It’s undoubtedly been a good year but it’s also been challenging with extreme volatility in the currency and fuel markets. The benefits gained from lower fuel prices have been partially offset by the stronger US dollar.”

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