Shares in two of Europe’s top flag carriers took opposite trajectories on Thursday after British Airways owner IAG posted record profits for 2023, while its rival Air France-KLM reported it had swung into loss in the final three months of the year due to Middle East disruptions.
IAG, which owns airlines including British Airways, Aer Lingus and Iberia, saw its pre-tax profits hit record highs of €3.06 billion ($3.32 billion) as it profited on “strong and sustained demand” for flights that was largely driven by those traveling for leisure.
Air France-KLM in contrast saw its profits slump in 2023, as disruption in the Middle East and higher costs, partly resulting from a collective pay deal with KLM staff, saw the Paris headquartered airline swing into a loss in the fourth quarter.
IAG’s
IAG,
London listed shares increased 1% on Thursday after increasing by 1% over the past 12 months. Air France-KLM’s
AF,
Paris listed shares plunged 8% on Thursday after losing 41% of their value over the previous year.
IAG’s bumper profits came as the airline owner doubled its operating margins year-on-year, as it successfully cut its costs per passenger by boosting its capacity to 97.5% of pre-COVID levels.
The British Airways owner posted a 32.6% uptick in revenue from transporting passengers, as high tourist demand offset a slow recovery in sales to business passengers. This helped offset a 28.4% drop in revenue from its cargo transportation business.
Air France-KLM in contrast posted a €56 million loss in the fourth quarter of 2023, as the outbreak of fighting between Israel and Gaza in October led to the cancellation of flights that increased the airline’s costs and offset a 6.7% uptick in its final quarter revenue.
Across the full-year 2023, Air France-KLM saw its revenue increase 13.7% to €30 billion, in an uptick that lifted its full-year earnings before interest, tax, depreciation and amortization by 14% to €4.2 billion.
Barclays’ analysts said they expect both Air France-KLM and IAG will benefit from falling fuel costs that will partially offset higher costs across the rest of the business caused by “volatile industrial relations.”
Barclays analysts noted that markets have favored Europe’s low cost airlines over its flag carriers over the previous three months, with EasyJet
EZJ,
Ryanair
RYA,
and Wizz Air
WIZZ,
up 19.6% on average, versus a 6.6% drop in shares in Air France-KLM, IAG, and Lufthansa
LHA,
“Whilst we see strong trading prospects for the low-cost airlines… we think the gloomy outlook for flag carriers is significantly overdone,” Barclays analysts said.
Discussion about this post