British Airways owner IAG to buy back shares after strong recovery

The recovery at the British Airways owner IAG following the mortgaging of the company during the pandemic is so strong that it is to begin buying back its own shares.
A €350 million share buyback, a device used by companies with excess cash to boost the rating of their stock price, is to commence in addition to the already announced resumption of dividend payments to shareholders.
Having flatlined for much of the previous three years, shares in IAG rose after the dividend announcement in August and this week touched their highest levels since the market collapses that greeted the arrival of Covid-19 in early 2020.
IAG shares, which have risen 45 per cent in the last three months, added 15¾p, or 7.2 per cent, on Friday to close at 234½p.
International Consolidated Airlines Group is a stable of carriers based at Heathrow, Madrid-Barajas and Dublin airports consisting of the formerly state-owned national flag carriers British Airways, Iberia and Aer Lingus, plus Vueling, a short-haul Spanish holiday airline. Its core markets are flying the North and South Atlantic routes to the US and Latin America, and within Europe.
In the third quarter of the year, the peak summer season, IAG reported a 15 per cent increase in operating profits to just over €2 billion, on revenues that rose nearly 8 per cent to €9.3 billion. The company achieved profit margins of 21.6 per cent in the quarter, the sort of returns much sought after in the airline industry but rarely achieved.
For the first nine months of the year IAG reported pre-tax profits of €2.34 billion, an increase of nearly 9 per cent.
Although by no means a close comparison in terms of who or where it flies, the short-haul carrier Ryanair, Europe’s biggest airline, reported an 18 per cent drop in profits this week, attributed to passengers pushed away by fare rises.
IAG appears to have had no such problems and reported a rise of 1.2 per cent in revenues per passenger per kilometre flown.
It reported “strong customer demand in our intra-European network … a structurally growing Latin America market [and] the North Atlantic region [which] continues to be a major area of strength”. British Airways flights between London and New York are one of the world’s marquee routes and highly lucrative in the good times.
With cash cascading into the business it has eliminated more than €3 billion of its net debt position, taking its net borrowing down to less than €6.2 billion. In its darkest days during the groundings and travel restrictions of Covid, IAG’s net debt topped €12 billion.
Luis Gallego, the chief executive who steered the company through the pandemic, said: “We achieved a very strong financial performance in the third quarter. Demand remains strong across our airlines and we expect a good final quarter of 2024 financially.”
The standout performance came from BA. While not filling the business and first-class cabins as it did before the pandemic, it is reporting strong demand for its premium economy class from passengers who are prepared to pay around double what they would in economy.
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BA, which is making more profit than the rest of the carriers in the group put together, reported operating earnings up 43 per cent year-on-year at €830 million in the summer quarter. For the first nine months of the year it is 28 per cent ahead of 2023 at nearly €1.4 billion of operating profits.
That offset a near halving in profits at Aer Lingus following a strike by pilots over pay.
BA’s recovery has come even without a full restoration of its network to the east. Sean Doyle, BA’s chief executive, said the airline would continue to focus on the North Atlantic until the arrival of new planes into the fleet, when it will properly re-enter the competitive market from Europe to China and the Asia-Pacific region.