IAG: British Airways owner brings back dividend for the first time since Covid-19

IAG, the airline conglomerate which owns British Airways, has unveiled plans to reinstate dividend pay-outs for the first time since Covid-19 decimated the aviation industry.

“We see continuing strong demand for travel in the attractive core markets in which we operate: North Atlantic, Latin America and intra-Europe,” chief executive Luis Gallego told investors in a statement.

It came as the London-listed group reported an operating profit of €1.3bn (£1.1bn), a marginal €49m increase on last year’s haul. Total revenue came in at €14.7bn in the six months ended June, up from €13.6bn last year.

The IAG has proposed an interim dividend of 3¢ per share. Shares were up over seven per cent by midday on Friday.

“We are pleased to announce a return to paying a dividend, which reflects our confidence in the business, our performance and our transformation. We are delivering on our strategy and our commitment to sustainable shareholder returns,” Gallego said.

The results will go some way to quelling investor concern over a slowdown in travel demand following a two-year, post-Covid boom in the aviation sector.

Aviation executives at July’s Farnborough Airshow raised questions over the durability of demand over the coming months after Ryanair, Europe’s largest airline by passenger numbers, reported a sharp dip in profit and forecast “materially lower” fares over the peak summer months.

“IAG’s June quarter results came in 15 per cent ahead of consensus and our forecast at the operating profit level. Relative to our forecasts, revenue was slightly light but this was more than offset by a better-than-expected outturn in operating costs,” analysts at Panmure Liberum said in a note.

The IAG also said it had abandoned long-running plans to acquire the Spanish carrier Air Europa, after it failed to convince European antitrust regulators that the deal would not impact competition.

It will pay Globalia, Air Europa’s owners, €50m as part of a termination agreement, while retaining its 20 per cent minority equity stake.

Gallego said the decision was “in the best interests of our shareholders,” adding IAG remains committed to “competing effectively” from its Madrid hub.

Aarin Chiekrie, equity analyst at Hargreaves Lansdown, said: “IAG will keep hold of its current 20 per cent stake in Air Europa but will have to fork over €50mn for backtracking on the deal.

“But on the flip side, that frees up cash to return to shareholders, meaning dividends are back.”

Shares in British Airways’ parent soared on the positive results, up over seven percent by midday.