August 3, 2018 / 6:26 AM / 2 years ago

British Airways owner IAG misses profit forecasts, shares drop

LONDON (Reuters) - IAG (ICAG.L) shares fell on Friday after the British Airways owner’s quarterly profit missed forecasts and it reported a weaker than expected performance on trans-Atlantic travel compared to peers.

FILE PHOTO: British Airways logos are seen on tail fins at Heathrow Airport in west London, Britain, February 23, 2018. REUTERS/Hannah McKay/File Photo

Although IAG stuck with its guidance for 2018 profit to rise, its shares were down 3.9 percent to 657 pence at 0821 GMT, the biggest faller on Britain's bluechip index .FTSE.

The owner of Iberia, Vueling, Aer Lingus and Level reported second quarter operating profit before exceptional items of 835 million euros ($968 million), up 6 percent on last year but slightly missing a 848 million euro consensus analyst forecast.

This was due to negative currency moves and a 20 million euro hit at Vueling from disruption caused by French Air Traffic control strikes, IAG said.

While IAG stuck to its outlook, earlier this week major European rivals Air France-KLM (AIRF.PA) and Lufthansa (LHAG.DE) both upgraded their forecasts for unit revenue for 2018, citing buoyant North American trade.

IAG maintained its annual forecast for passenger unit revenue to improve at constant currency. While its unit revenue result (RASK), a measure of pricing, was up 2.3 percent overall, the North American portion was down 0.9 percent.

“The surprise component of that was that the North Atlantic looks to be weaker than the market might have anticipated,” Goodbody analyst Mark Simpson said.

“All the commentary from its peer group has been about positive pricing on North America.”

However, IAG chief executive Willie Walsh said he was happy with the performance, telling reporters on a call that the trans-Atlantic performance was “very good”.

“The fact that we’ve reported an improvement in profitability in the first half and we’re saying we’ll improve profitability in the full year puts us apart from many other airlines,” he said.

IAG continues to want to add new airlines to its portfolio and Walsh told BBC radio that IAG remained interested in Norwegian (NWC.OL), the struggling low-cost carrier it had approached earlier this year.

“I think Norwegian as part of IAG could be transformed. We’re not in any active discussions with them at the moment. We continue to look at Norwegian and we continue to have some interest in it,” he said.

In April, IAG acquired a 4.6 percent stake in Norwegian with a view to starting takeover discussions but in May Norwegian said it had rebuffed two approaches from IAG.

Reporting by Sarah Young; editing by Kate Holton and Alexander Smith

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