International Consolidated Airlines Group SA (BABWF) Q1 2025 Earnings Call Highlights: Strong ...

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Sat, May 10, 2025, 1:01 AM 5 min read

Revenue Growth: Increased by 9.6% to EUR7 billion.
Operating Profit: Grew by EUR130 million to EUR198 million.
Operating Margin: Increased by 1.7 percentage points to 2.8%.
Net Profit: EUR176 million, an increase of EUR180 million from the previous year.
Net Debt: Decreased by over EUR1.4 billion to EUR6.2 billion.
Gross Debt: Reduced by EUR1.9 billion.
Non-Fuel Costs: Increased by approximately 3%.
Fuel Unit Costs: Reduced by about 7%.
Capacity Growth: Increased by 3.2%.
Aircraft Orders: 53 widebody aircraft ordered, with 18 orders in Q1.
Dividend: Proposed final dividend of EUR0.06 per share.
Share Buyback: EUR530 million of shares purchased, with a program of up to EUR1 billion announced.

Warning! GuruFocus has detected 2 Warning Sign with BABWF.

Release Date: May 09, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

International Consolidated Airlines Group SA (BABWF) reported a 9.6% increase in revenue for Q1 2025, driven by strong performance in core markets, particularly the North and South Atlantic.
Operating profit increased by EUR130 million to EUR198 million, with a margin improvement of 1.7 percentage points to 2.8%.
The company announced an order for 53 widebody aircraft and 18 orders in Q1, signaling confidence in long-term growth.
Net debt decreased by over EUR1.4 billion to EUR6.2 billion, strengthening the balance sheet and positioning the company for shareholder returns.
Iberia and Aer Lingus showed strong performance, with Iberia achieving a 7.5% operating margin and Aer Lingus improving its operating results by EUR27 million.

Negative Points

The closure of Heathrow Airport in March cost British Airways approximately EUR50 million, impacting overall performance.
Non-fuel unit costs increased by 8.8% in Q1, driven by foreign exchange impacts and costs from non-airline businesses.
The US point-of-sale for economic leisure travel showed some softness, although premium cabins remained strong.
Visibility for the second half of the year is limited, with only 29% of bookings confirmed, creating uncertainty.
Asia Pacific remains the smallest market for the company, with capacity still only at 50% of 2019 levels.

Q & A Highlights

Q: Can you speak about the trends on the North Atlantic and any recent weaknesses in US sales? Are you seeing any weakness in European sales? A: Luis Gallego Martin, CEO: It's difficult to compare due to changes in Easter timing and other factors. For Q2, booking levels are close to 80%, above last year. However, visibility for H2 is limited at 29%. South America is strong, and Europe, Africa, and the Middle East are performing well. North America shows softness in US economy sales, but premium cabins remain strong, offsetting the weakness.

Q: Regarding the aircraft order, are there concerns about potential EU tariffs on Boeing aircraft? A: Luis Gallego Martin, CEO: The decision to allocate capital to our fleet is a long-term strategic investment. We welcome the framework of the deal announced, and it's good news that there will be no tariffs on Boeing products. We will continue working with the government to expand this to the entire supply chain.

Q: How is corporate travel performing across various regions? A: Nicholas Cadbury, CFO: Corporate travel is in line with the rest of the business and holding up well. There is a mix difference in British Airways, with a shift from Hong Kong and China to more Middle East routes, which are slightly less corporate. Overall, it aligns with expectations.

Q: Are there any concerns about the outlook for the core Spanish business, given recent domestic traffic growth slowdown and anti-tourism protests? A: Marco Sansavini, CEO of Vueling: We reported solid Q1 results, and the Easter shift had a relevance for the quarter result. For Q2, we don't see weaknesses, and the market is developing solidly. Carolina Martinoli, Chief People, Corporate Affairs, and Sustainability Officer, echoed that demand is healthy.

Q: Can you provide details on the unit cost ex-fuel guidance and any changes in the split of underlying versus FX? A: Nicholas Cadbury, CFO: We maintain full-year guidance of a 4% increase, with a slight increase in underlying costs due to Heathrow and Madrid costs. The split is now slightly higher on underlying and lower on FX compared to previous guidance.

Q: How does the recent plane order affect capacity growth expectations in the medium to long term? A: Luis Gallego Martin, CEO: The fleet order is partly for replacing aging aircraft like the 777 in BA and partly for growth, consistent with our previous guidance of 4-5% growth per year.

Q: Are shorter booking windows contributing to the transatlantic volume gap? A: Nicholas Cadbury, CFO: It might be speculative, but we have seen strong short bookings, particularly in Ireland and Europe. However, it's speculative to attribute the volume gap solely to shorter booking windows.

Q: How do you see industry trends in capacity reacting to demand softening, and what flexibility do you have? A: Luis Gallego Martin, CEO: In Q2, North Atlantic traffic is expected to fall slightly, with growth in Dublin. In Q3, capacity is expected to increase by 2%. Overall, the environment is good, and we plan a 3.4% capacity growth for the year. Nicholas Cadbury, CFO, added that the North Atlantic remains a strong market in the medium to long term.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.

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