Yahoo Finance IAG boss Willie Walsh's bold growth plans fail to impress investors
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 bombastic chief executive of IAG, which owns British Airways and Aer Lingus, said he expected to grow his trans-Atlantic 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 expand 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 nearly 4.5pc to 594.8p even though sales at the airline group rose nearly 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 which 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 which 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.”
George Salmon, of Hargreaves Lansdown, said: “The boost from cheaper oil will start unwinding from here on, so it would be great to see some meaningful progress made on non-fuel operating costs, which have so far ticked up broadly in line with the extra capacity added.”
Elsewhere, Mr Walsh said he expected air fares to fall in 2018, continuing the trend seen last year. While the company saw passenger numbers rise more than 4pc to 104m, passenger revenue only rose 1.6pc to €20.2bn.
