British Airways fares will increase as its parent company, International Airlines Group (IAG), seeks to recover most of a €2bn (£1.7bn) rise in fuel costs caused by the Iran war. The group expects to offset about 60% of the additional fuel bill through 'revenue and cost management actions', with fare rises primarily applied to BA rather than its sister airlines.
IAG's annual fuel bill is now forecast at €9bn, up from €7.1bn, as 70% of its supply is hedged, limiting the impact of soaring jet fuel prices. Luis Gallego, IAG's chief executive, said BA, being a more premium brand, would see a higher pass-through of costs compared to low-cost carrier Vueling. Recovering €1.2bn could add an estimated 8% to BA's fares based on 2025 revenues.
Gallego noted that the group is 'actively managing the uncertainty created by the fuel price increase' but acknowledged that higher fuel costs will 'inevitably lead to lower profit this year than we originally anticipated'. IAG had been expected to post operating profits of about €5.2bn, above last year's record €5bn.
Global oil prices have reached $126 a barrel during the conflict, up from $72 before the war. On Friday, oil traded just above $100 per barrel. About 2 million airline seats have been cut from April schedules industry-wide, according to Cirium data. While only 111 flights have been removed at London Heathrow, BA's main base, fears persist over jet fuel shortages causing further summer cancellations.
IAG said that if the conflict continues, there is potential for global jet fuel supply restrictions. However, BA's chief executive Sean Doyle stated the airline has 'advantageous resilience' due to its own inventory and supplies. IAG reported a pre-tax profit of €422m for the first quarter, up 77% year-on-year, with revenue rising 1.9% to €7.2bn.
