Weak euro softens slow market impact on IAG

British Airways aircraft sit parked at London Heathrow Airport

International Airlines Group (IAG) Cargo was helped by a weak euro to achieve an 8.8 per cent increase in its second quarter (Q2), April, May, June, commercial revenue to 259 million euros.

The carrier has increased its capacity by 2.1 per cent, saw Q2 volumes fall by the same figure, 2.1 per cent and its yields shrank three per cent, but its revenue still increased 8.8 per cent. As a large proportion of IAG Cargo’s income is in US dollars and currencies linked to it, the airline benefitted from the strength of that currency, against the euro. IAG accounts in euros. It claims that the volume fall is because it was still using its Boeing 747-8 Freighters in April last year and if that capacity is excluded from the Q2 comparison, the volume change is zero.

The currency effect was so large, IAG tells Air Cargo Week (ACW) that, “at constant currency we were down four per cent [for revenue].” Speaking to ACW, IAG Cargo chief executive officer, Steve Gunning (see picture below), paints a brighter picture, but warns of a difficult future: “We think those are a strong set of results given the market conditions…in quarter two. Those numbers are helped with a significant foreign exchange benefit, but there are also some strong underlying business performing in them as well,” adding that the second half of the year is expected to be challenging, the market softened in Q2 and that, “this is the new normal for the industry. We expect these conditions to prevail for the next few years, to be honest.”

IAG is continuing to increase its capacity despite the difficult outlook. Its capacity increase to date is due in part to new Boeing 787 at IAG subsidiary British Airways and new routes such as Kaula Lumpur and Havana. Last week, it announced that it is increasing the available freight tonne kilometres it books on the regional routes covered by its Qatar Airways partnership. However, IAG was not available to state how much more tonnage this represented. It is also increasing the routes it uses Qatar capacity on, with an additional Shanghai (China) to Madrid service and a what IAG calls, “a new feed from Islamabad”. Last year, IAG stopped leasing 747-8F and obtained hold space on Qatar Boeing 777 Freighters. Of this Qatar 777 capacity agreement, Gunning, also announced that IAG Cargo was, “extending the deal indefinitely”.

IAG Cargo has also increased its number of flights by 47 for its Euroconnector service, for cargo that can be carried on its European bellyhold routes. Worldwide, IAG Cargo saw its premium product volumes increase 40 per cent, which are its Constant Climate and Prioritise products. IAG Cargo chief financial officer, Rachel Izzard, says it is a, “signficant swing away from general freight to premium products.”