Iberia Dominates IAG's Strong Second Quarter Results

25.08.2023 - 13:07 / skift.com / Aer Lingus / Edward Russell / Luis Gallego / Sébastien Bazin / Airlines

Asked point blank if International Airlines Group, the owner of British Airways and Iberia, saw any declines in airfares or travel demand, CEO Luis Gallego was blunt. “We don’t see that,” he said.

The group, one of the largest in Europe that also includes Aer Lingus and discounter Vueling, is doing extremely well. Travel demand is robust with about 80% of its third-quarter schedule already booked, IAG reported in its first-half results Friday. And that is driving higher yields — a rough proxy for airfares — across its businesses, and not just long-haul international markets.

In fact, IAG made its largest gains in domestic markets — Spain and the UK — and in Europe where yields, measured in passenger unit revenues, were up 19% and 18%, respectively, in the second quarter. Group yields increased just over 13% with improvements in every segment.

“We continue to see strong demand in the third quarter,” IAG Chief Financial Officer Nicholas Cadbury said, indicating the yield increases will continue.

Air France-KLM, which also reported its second-quarter results Friday, sees similar demand trends. Group yields increased 12%. The airline said it sees a “strong yield environment” in the second half of the year.

U.S. airlines are seeing different yield trends. There, domestic yields are falling as highlighted this week by primarily-domestic carriers Alaska Airlines and Southwest Airlines.

But that is not indicative of travel demand, which remains robust. It’s more about comparisons to the record yields airlines made last year, and elevated levels of capacity growth in the U.S. as the industry pushes towards a full recovery.

Results at U.S. legacy carriers American Airlines, Delta Air Lines, and United Airlines were all buoyed by their long-haul international networks where travel demand has surged.

Travel demand strength, despite economic concerns in Europe and the U.S., is proving true across industries. French hotel group Accor saw its profits surge in the second quarter with CEO Sébastien Bazin saying they expect the momentum to “continue for the coming months.” Hilton reported similar trends in its record second quarter results.

Here are three other takeaways from IAG’s second-quarter call.

Corporate traffic is “recovering more slowly than we thought,” Gallego said. That’s no surprise given the similar comments from other airlines around the world.

What stands out though is the differences within IAG. At British Airways, corporate volumes are only back to roughly 61% of 2019 levels while revenues are at roughly 69%. But at Iberia, the same two metrics are 82% and 95% recovered. Gallego attributes that gap to different return-to-office rates in Spain and the UK.

IAG maintains expectations that corporate