Airlines post record profits as demand continues to fly high

Europe’s International Airlines Group (IAG) has announced record profits for the first half of 2023, with air fares up almost 10% on last year. IAG is one of the world's largest airline groups, and the parent company for British Airways, Iberia, Aer Lingus, Vueling, and Level - with a fleet of 500 aircraft, operating to over 250 destinations and carrying more than 90 million passengers each year.In its latest financial results, IAG said demand for flying remained strong and reported "no sign of weakness in forward bookings”. IAG expects its flight capacity across the group to recover to pre-pandemic levels by the end of the year, with booming demand pushing it to a half-yearly operating profit of €1.3bn from losses of €446mn for the first six months of 2022. Qatar Airways is IAG’s largest shareholder, with a 25.1% holding. The airline group is a Spanish registered company with shares traded on the London Stock Exchange and Spanish Stock Exchanges.British Airways chief executive, Sean Doyle, said the airline was much more resilient than it was last year and had "navigated through to the end of July, I think at a much better place”.French air traffic control strikes were still causing disruption, with BA particularly affected because much of its operation relies heavily on French airspace, given its proximity to the UK.IAG said leisure demand remained strong across all its airlines – which include Aer Lingus and Spanish carriers Iberia and Vueling – for the summer months, with around 80% of all seats already booked until the end of September.Luis Gallego, the chief executive of IAG, said: "Our strong profits since the start of the year are helping to fund investment for our customers, and to improve our balance sheet by reducing debt. We don’t see any sign of a slowdown in the demand.”Air France-KLM meanwhile reported rising revenues and a record operating margin and profit in the second quarter, as passenger numbers increased and demand for long-haul flights rebounded.Revenues at Air France-KLM increased by 14% from the second quarter of last year to €7.6bn, and the group’s operating margin reached 9.6%, above a mid-term goal of 7-8%. "I am very glad to see that the situation at airports is much better, including at KLM’s hub at Amsterdam Schiphol Airport,” CEO Benjamin Smith said in a statement. "This season notably serves as a test run for 2024, when France will host the Olympic and Paralympic Games, of which Air France is an official partner.”The group’s capacity in Asia and the Middle East increased in the second quarter compared with a year ago, as China reopened after Covid-19 lockdowns, but remained 34% below 2019 levels, it said.It follows recent record earnings from European low-cost airlines easyJet and Ryanair.Globally, airline revenues have been boosted by passengers’ willingness to pay high ticket prices. Fares have risen for a variety of reasons, including as a result of airlines’ increased costs and elevated consumer demand amid an industry-wide shortage of commercial airline jets, and engines. Airport trade body ACI Europe last month stated that flight ticket prices had risen 30% year on year in Europe, but the higher fares are not yet putting off passengers. Hopper, a US travel app, estimated that fares from the US to Europe are up 23% on 2019. Virgin Atlantic says North Atlantic fares on its routes are up 35% over the same period.Qatar Airways reported a $1.2bn profit for the past fiscal year, ascribing its strong performance to last year’s FIFA World Cup 2022. "Profitability has been driven by a 100% increase in passenger revenues in the last year,” the Group’s chief executive HE Akbar al-Baker said in a statement. "We maintained our position as the airline of choice for millions of passengers worldwide and our team carried 31.7mn passengers, which is an increase of 71% over last year.”In Asia, this week Singapore Airlines reported its biggest quarterly net income ever and said it expects demand for air travel on all routes to remain robust through the summer peak season as it expands capacity.Net income in the three months through June climbed 98% from a year earlier to $555mn, the carrier said in a statement. Revenue rose 14%, despite flight capacity being lower than in 2019, reflecting the positive impact of higher airfares on the company’s overall financial performance.Group passenger capacity expanded by 32.4% year-on-year as restrictions on international air travel eased globally. SIA and Scoot carried 8.4mn passengers during the quarter, 65.5% higher than a year before, with strong demand across all route regions and market segments. Passenger traffic and load factors improved across all markets, with the year-on-year traffic growth of 49.0% outpacing the capacity expansion. The Group achieved a record quarterly passenger load factor (PLF) of 88.9%, with SIA’s PLF at a record 88.1% and Scoot’s at a record 91.7%.Elsewhere, the Japan Airlines Group swung back to profitability in its fiscal first-quarter, amid an increase in passenger revenues beyond pre-pandemic levels. The Tokyo-based airline group reported an operating profit of $219mn for the three months to 30 June, reversing heavy losses it posted in the year-ago period. International traffic rose 88% compared to the year-ago period, while capacity grew 66%.Japan Airlines noted that while strong demand remains for inbound flights to Japan, it is beginning to see demand recovery in outbound flights, which were slower to recover following the reopening of Japan’s borders in late-2022.Also in Japan, All Nippon Airways (ANA) recorded a profitable first quarter for the first time in over four years following a strong recovery in passenger traffic. International revenue was up almost three times versus last year, while domestic revenue increased by 40%.In the US, United Airlines reported a 42% increase in revenue from flights to Europe in the latest quarter compared with the same period last year while Delta reported a 65% surge in sales of transatlantic flights.American Airlines followed rivals by raising its guidance for the year as strong demand continues. Operating revenue rose 4% to $14.1bn in the second quarter compared with the same period in 2022, a record for the airline. The company said it earned an adjusted $1.88 per share in the second quarter, beating Wall Street expectations of $1.59.American airline projected earnings of an adjusted $3-3.75 per share in 2023, compared with an earlier range of $2.50-3.50. Chief executive Robert Isom said the operation "is performing at historically strong levels”.

• The author is an aviation analyst. Twitter handle: @AlexInAir