IAG shares hit turbulence despite 2pc jump in sales

WILLIE WALSH has pledged to add more seats this year even though rising concerns about industry capacity and costs knocked investor confidence in his airline group – despite solid earnings growth.

The chief executive of IAG, which owns British Airways and Aer Lingus, said he expected to grow his transatlantic business, increase the frequency to key short-haul summer destinations, and even potentially launch an assault on the Austrian market after his bid to buy Niki was thwarted by courts in the European nation.

The plans to grow capacity so forcefully come amid rising costs as it expands, particularly those linked to baggage handling and engineering. The company’s fuel bill, while down overall in 2017, started to rise in the final three months, which prompted some investors to question whether it can meet some of its performance targets.

Shares in the company fell 5.7pc to 587.20p even though sales at the airline group rose by almost 2pc to €22.9bn (£20.1bn) and the boost from a drop in fuel costs powered pre-tax profits up by 5.5pc to €2.4bn.

IAG also showed its confidence by announcing a €500m share buyback, its third investor windfall since 2015.

Mr Walsh disputed claims that such a move represented top-of-the-market behaviour that had led to airlines of the past becoming unstuck.

“We are not your typical airline group,” he said. “Our return on invested capital is high and we have demonstrated this can be done in an industry that is brutal and competitive, and we can sustain it.

“Our excess cash will be used efficiently in the business and if it cannot be then we will return it to shareholders.”

Elsewhere, Mr Walsh said he expected air fares to fall in 2018, continuing the trend seen last year.