Smoother flight path for British Airways’ owner

BRITISH Airways’ owner IAG has shrugged off a slump in profits as investors seemed relieved that the results weren’t worse.

The airline group said profit tumbled 62.6pc to £60m in the first three months of the year, compared with the same period last year, as it was battered by rising fuel costs and poor foreign exchange rates.

The revenue it was making from every available seat, per kilometre flown, also slipped by 0.8pc to 5.3p. But shares ended up 1.9pc, or 9.3p, at 498.6p.

George Salmon, an analyst at Hargreaves Lansdown, said: ‘It’s not every day you see a company’s profits fall so sharply and the shares still rise.

‘But when your competitors have slipped into a loss, it’s perhaps not a surprise.’

Norwegian, Easyjet (down 0.1pc, or 1.5p, to 1034p) and Ryanair (down 0.8pc, or €0.1, to €10.7) are just a few of the airlines to warn of losses recently, with a glut of capacity causing a vicious price war. IAG, on the other hand, which also owns Iberia, Aer Lingus and Vueling, retained its fullyear profit guidance and said it expects costs to improve.

Chief executive Willie Walsh confidently said that the results ‘set us apart’ from competitors. He added that last week’s washout May bank holiday pushed Britons to book a trip abroad to escape the gloomy weather.

But IAG will not be throwing its hat into the ring to bid for Thomas Cook’s struggling airline operations, Walsh confirmed. They were put up for sale earlier this year. Thomas Cook’s shares did rise 6.6pc, or 1.4p, to 22.66p on reports that Virgin Airlines, the carrier part-owned by Sir Richard Branson’s Virgin Group, was interested in buying its long- haul flights branch.

Germany’s Lufthansa and Wizz Air’s private equity backer Indigo Partners are also rumoured to be sniffing around, and investors will be hoping for a bidding war that drives up the price of their shares.

The long-haul business accounts for around 20pc of all seats sold by Thomas Cook.

Virgin Airways was also part of the consortium which snapped up troubled Flybe in February.

IAG’s gains helped the FTSE 100 to make up for losses at Bunzl, although the blue-chip index did fall slightly, by 0.1pc, or 4.1 points, to 7203.29.

Bunzl, which supplies businesses with essentials from coffee cups to safety gear, announced that its finance head, Brian May, would be stepping down after more than 13 years in the role.

The veteran will be replaced by Richard Howes, chief financial officer of car retailer Inchcape.

Shareholders seemed sad to see May go, however, as Bunzl slipped 3pc, or 65p, to 2125p, while Inchcape investors were gloomy at Howes’ departure, sending shares down 1.4pc, or 8.5p, to 596.5p.

Astrazeneca was also pulling the FTSE 100 down, after trials of a new anaemia drug produced lacklustre results.

Though the medication was passed as safe, the analysis showed no meaningful difference in results between it and its competitors. Shares slid by 2.3pc, or 134p, to 5692p.

Struggling retailer Mothercare, which was forced to complete a rescue deal with its lenders last year, welcomed a vote of confidence as Prudential increased its stake in the company. The insurer ramped up its holding from 16pc to 19pc, buying a chunk of shares worth around £2m at last night’s closing price. Mothercare edged up by 2.1pc, or 0.4p, to 19.65p.

Pharma firm Scancell Holdings was also on the rise as it added six cancer experts to its clinical advisory board.

Shares jumped by 17.1pc, or 0.65p, to 4.45p.