British Airways owner IAG shares grounded as profit outlook disappoints

Agreeing to pay its first dividend and raising profit guidance was not enough to stop shares in British Airways’ owner plummeting to the bottom of the Footsie on Friday.

The City was disappointed airline owner IAG could not emulate the success of rivals over a bumper summer as Brits escaped the washout weather.

The shares dived 24p, or 4%, to 573.37p despite a 43.5% rise in pre-tax profits to €1.1 billion (£788 million) in the three months to September 30.

It came as IAG, which snapped up Ireland’s Aer Lingus in August, nudged up its forecast annual operating profits to between €2.25 billion and €2.3 billion, ahead of the €2.2 billion previously expected.

Liberum analyst Gerald Khoo said: “The minor improvement to guidance may disappoint the market” given raised forecasts by European rivals.

Lufthansa and Air France-KLM are among carriers that this week recorded better-than-expected quarterly results.

However, IAG boss Willie Walsh shrugged off the shares fall and toasted a 15.2% sales rise in the quarter to €6.7 billion.

He told the Standard: “The summer was very strong, with mixed weather in Britain leading to demand for sun holidays. There were still some concerns over travelling to north African countries such as Egypt and Tunisia,” but holiday hot-spots such as Spain remained popular with Brits.

Walsh was speaking a day after the firm revealed it would be paying a dividend of 10 euro cents per share.

It has not paid a dividend since the company was created through the merger of BA and Iberia in 2011.

Walsh said that Aer Lingus made an operating profit of €45 million since it joined IAG. “It’s a great asset for the group.”

Walsh added that he wants to see the UK remain part of the EU “on a personal basis” but admitted that it “should and could” be better than it is.