British Airways' parent company, International Airlines Group (IAG), has warned that its profits will be impacted as it anticipates spending approximately two billion euros (£1.72 billion) more than originally budgeted on fuel this year, amid the ongoing Iran oil crisis.
Managing Uncertainty
IAG chief executive Luis Gallego stated that the company is "managing the uncertainty" caused by the fuel price increase by "taking the necessary action on yields, costs and capacity." He added, "Whilst the impact of the higher fuel price will inevitably lead to lower profit this year than we originally anticipated, we are confident in our business model and strategy."
Mr Gallego noted that IAG is "not currently seeing any jet fuel supply disruptions across our main hubs or markets" and is "confident in fuel availability through the summer."
Iran's Stranglehold
Iran continues to exert control over tankers passing through the Strait of Hormuz, leading to a surge in oil prices and concerns over jet fuel shortages. Global figures released this week by aviation analytics company Cirium show that 13,005 flights planned for May were cancelled between April 10 and April 21, equivalent to 1.5% of scheduled flights.
Demand and Financial Performance
IAG reported "strong demand across most of our markets" but noted "softer demand" in the eastern Mediterranean. The company recorded a pre-tax profit of 422 million euros (£365 million) during the three months to the end of March, a 76.6% increase from 239 million euros (£207 million) a year earlier.
Mr Gallego attributed the firm's "strong first quarter" to "continued strong demand for our networks and airline brands." He concluded, "IAG is uniquely positioned to navigate the current headwinds created by the Middle East conflict thanks to our leading positions across diverse markets, strong brands, structurally high margins and strong balance sheet, as well as a strong track record of execution."
