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Airline Stocks Performance in Europe


IAG Achieves Record Profits

Shares in two of Europe’s top flag carriers moved in opposite directions as British Airways owner IAG posted record profits for 2023. The company, which owns airlines including British Airways, Aer Lingus, and Iberia, saw pre-tax profits soar to €3.06 billion ($3.32 billion). This impressive performance was fueled by strong demand for leisure travel.

Air France-KLM Reports Losses

On the other hand, rival Air France-KLM reported losses in the final quarter of the year due to disruptions in the Middle East and higher costs. This led the Paris-headquartered airline to swing into a loss, with profits taking a hit in 2023.

Stock Performances

IAG’s London-listed shares saw a 1% increase on Thursday and have risen by 1% over the past year. In contrast, Air France-KLM’s Paris-listed shares plunged by 8% following a 41% decrease in value over the previous year.

IAG’s Success Strategy

The success of IAG can be attributed to doubling its operating margins year-on-year and cutting costs per passenger by increasing its capacity to 97.5% of pre-COVID levels.

Aviation Industry Trends in 2023

British Airways Owner Sees Increase in Passenger Revenue

The British Airways owner reported a 32.6% increase in passenger revenue, driven by high tourist demand which offset slower sales to business passengers. However, the company experienced a 28.4% drop in revenues from its cargo transportation business.

Air France-KLM Faces Challenges

In contrast, Air France-KLM recorded a loss of €56 million in the fourth quarter of 2023, attributed to the cancellation of flights due to the outbreak of conflict between Israel and Gaza. This event increased the airline’s costs and overshadowed a 6.7% increase in final quarter revenues.

Positive Year-End Results for Air France-KLM

Despite challenges, Air France-KLM saw a 13.7% increase in revenues to €30 billion for the full year 2023. This growth also contributed to a 14% rise in earnings before interest, tax, depreciation, and amortization to €4.2 billion.

Analysts’ Projections for the Aviation Sector

Barclays analysts predict that both Air France-KLM and IAG will benefit from lower fuel costs, which may help offset other rising expenses within the industry. While low-cost carriers like easyJet, Ryanair, and Wizz have seen positive market sentiment with a 19.6% average increase, traditional flag carriers like Air France-KLM, IAG, and Lufthansa have experienced a 6.6% average decline.

Outlook for Flag Carriers

Barclays analysts remain optimistic about the trading prospects for low-cost airlines but believe that the negative outlook for flag carriers may be overstated. Despite challenges, they see potential for recovery in the sector.

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