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British Airways parent firm issues profit warning on £121m strike hit

The parent firm of British Airways has issued a profit warning on the back of costly strikes at the airline and weaker bookings.

International Airlines Group (IAG) said the 48-hour action by pilots earlier this month, which forced the airline to scrap almost all its flights over the two days, cost it an estimated €137m (£121m).

It also pointed to a €33m (£29.2m) cost from further passenger disruption as a result of threatened strikes by staff at Heathrow Airport.

In an interview with Sky News, the airline's chief executive Alex Cruz said the action was an "own goal" and part of a "cynical" action by the union.
BA boss: Pilots’ strike an ‘own goal’

Another cost headwind, IAG said, was from weaker booking trends in its budget Vueling and LEVEL operations, with an expected impact of €45m (£40m).

It released the update on its guidance during a period of severe turbulence for the wider airline and holiday sector in the week that saw Thomas Cook crash with the loss of thousands of jobs.

BA is among airlines helping with repatriation efforts through the release of planes to bring stranded Thomas Cook customers home.

The group’s statement said: “At current fuel prices and exchange rates, IAG therefore expects its 2019 operating profit before exceptional items to be €215m (£190.5m) lower than 2018 pro forma (€3.5bn) (£3.1bn).”

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It warned that further walkouts would add to its downgraded full-year outlook.

IAG shares, which have lost almost a quarter of their value in the year to date, lost a further 3% when the FTSE 100 opened for business.

t the time of the strike action, BA boss Alex Cruz told Sky News the action amounted to an “own goal” by the pilots union, Balpa, and the pilots themselves who have rejected an 11.5% pay offer over three years.

They are seeking a share of the airline’s profits in addition to higher wages.

Heathrow Terminal 5 is being described as a 'ghost town' on Twitter. Pic: @rahulkalia99
Tens of thousands of passengers hit by BA strike

It was announced by Balpa a week ago that further strike action, due to be staged on Friday, had been called off – the union arguing that someone had to take the initiative if the dispute was to be resolved.

BA has refused to return to the negotiating table while there are conditions attached to any talks.

Balpa has warned it reserves the right to call additional strike dates should no progress be made.

Members of the British Airline Pilots Association (Balpa) have a long-running dispute with British Airways over pay.
Why BA pilots went on strike

The IAG statement concluded: “There have been no further talks between British Airways and Balpa.

“The airline’s offer of a 11.5% pay increase over three years still stands and has been accepted by British Airways’ other unions, representing 90% of the airline’s employees.

“Clearly any further industrial action will additionally impact IAG’s full year 2019 operating profit.”

Commenting on the updated guidance Neil Wilson, chief market analyst at Markets.com, said: “It’s a pretty chunky warning given this was only a few days of strikes.

“BA pilot strikes left 2,325 flights cancelled at a cost of €137m, while threatened strikes by Heathrow staff cost €33m.

“IAG also flagged ‘adverse booking trends’ in its low-cost divisions (which we assume is code for, not enough bums on seats), which will hit the bottom line to the tune of €45m.

“Capacity growth for the fourth quarter is now expected to be about 2% which is 1.2 points below previous guidance, and full year capacity growth is expected to be about 4%, down from previous guidance for 5% growth.”

He added: “The extent of the IAG warning has had an impact on the rest of the sector, with shares in easyJet and Ryanair also down around 2%.”

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