British Airways parent IAG will almost halve its planned expansion, reducing expected earnings growth, as it responds to slowing economies and a glut of seats that’s depressed prices.
IAG, which also owns Spain’s Iberia, Aer Lingus of Ireland and discount operators Vueling and Level, will now increase capacity by 3.4 per cent a year in the 2020-2022 period, it said Friday. The previous target was six per cent through 2023.
As a result, earnings per share will rise at a 10 per cent pace instead of 12 per cent, the company said. Capital spending will rise 80 per cent to 4.7 billion euros (Dh19bn).
IAG said on October 31 that full-year profit will be lower than forecast as it grapples with the impact of BA’s first pilot strike since 1979. Like other European carriers, IAG is seeking to rein in costs and bolster margins amid a slowing regional economy, diminishing fares and uncertainty surrounding Brexit.
Shares of IAG fell as much as 2.9 per cent in London, where the company is based. The stock has declined 8.4 per cent this year.
Capacity growth for 2020 is currently planned to be 3.2 per cent, according to a statement. That compares with four per cent for this year, a figure that IAG had revised down earlier.
The company retained its leverage and return on investment targets, as well as an operating margin goal of 12 to 15 per cent.
Chief executive officer Willie Walsh will provide more details of the plans at a capital markets day later.
