IAG issues profit warning due to pilot strikes

British Airways parent IAG Group has issued a profit warning due to the impact of this month’s pilots strikes and other disruptions.

It estimated the strikes by BALPA pilots cost the airline more than £120 million while other disruptions, such as threatened strikes by Heathrow Airport staff, had a further impact of just under £30 million.

At current fuel prices and exchange rates, IAG therefore expects its 2019 operating profit before exceptional items to be €215 million (£190 million) lower than 2018 pro forma (€3,485 million).

In a statement today, IAG said: "There have been no further talks between British Airways and BALPA. The airline’s offer of a 11.5% pay increase over three years still stands and has been accepted by British Airways’ other unions, representing 90% of the airline’s employees. Clearly any further industrial action will additionally impact IAG’s full year 2019 operating profit."

BA was forced to cancel 4,521 flights over seven days due to BALPA’s industrial action. Subsequently, 2,196 flights were reinstated, when BALPA called off a strike scheduled for tomorrow, leaving 2,325 cancellations.

BA also introduced flexible commercial policies on 4,070 flights not directly affected by the industrial action.

Nick Wyatt, head of research and analysis for Travel and Tourism at GlobalData, said: "BA’s statement confirms that the financial impact of the strike reached an eye-watering €137 million. There have been no further talks between the airline and the union and given this significant financial impact, this is concerning.

"The airline is acutely aware of the ongoing saga’s negative impact and has been, to its credit, open about the cost of industrial action throughout. This does not however, change the fact that this, and any subsequent strike impact, will weigh heavily on IAG’s profits.

"A resolution must now be found swiftly, but BALPA will be aware of the airline’s pressing need to draw a line under this episode and consequently, BA may well find its negotiating position has been weakened.

"The company’s own projections state that it expects operating profit to be down by €215 million, in large part due to this action and the €33 million hit it took due to threatened action at Heathrow Airport.

"The markets will have priced this in as IAG has been up front about the expected impact but it’s the uncertainty over a resolution that could create issues. An end to the dispute between BA and its pilots still looks a long way off and this leads to the inevitable question of whether more strikes will take place and further weigh on profits."