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Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
Britons have a peculiar obsession with certain companies. The likes of British Airways, Marks and Spencer, and Rolls-Royce attract outsized attention compared with competitors. As it happens, all three of these corporate “icons” were once viewed as mature, legacy businesses — or seemed stuck in perpetual restructuring. And all have pulled off remarkable share price rises in the past year.
From a customer satisfaction standpoint, much of the attention given to British Airways is of the less desirable kind. Financial results for parent company IAG, though, tell a different story. Operating profit in 2024 hit a record, up 27 per cent to €4.4bn at the group that also owns Iberia and Aer Lingus. Analysts expect a lesser performance from other European national airlines such as Air France-KLM and Lufthansa, which report this week, based on Visible Alpha estimates.
Admittedly, that may not be the greatest achievement, given Lufthansa’s labour disputes in 2024 and weak demand at Air France during the Paris Olympics. But what does deserve closer attention is the success of IAG — and BA in particular — in bridging the Atlantic. This should help it maintain an enviable cruising speed, as long as geopolitics don’t deteriorate further.
The transatlantic market is, for many airlines, their most profitable. IAG is no exception. On north Atlantic routes, IAG’s passenger revenue per available seat kilometre — a proxy for prices — rose 14.1 per cent in the fourth quarter, compared with a 6 per cent rise for the group as a whole.
Business travel has not returned to full strength since the Covid-19 pandemic but still, an unusually high proportion of transatlantic flyers are willing to pay for premium cabins compared with other markets. Leisure travellers who want a more comfortable journey have helped to fill the gap.
The north Atlantic market accounts for a third of IAG’s total capacity. On US-London routes, specifically, the group has a 58 per cent market share along with its joint business partner, American Airlines. An RBC Capital analysis of airline schedules for the second and third quarters of this year suggests IAG should benefit from another critical factor on the transatlantic corridor: no or relatively modest capacity growth, in part due to the industry’s supply chain challenges.
Scheduled capacity between London and North America, for example, is forecast to be 2 per cent lower year over year in both the second and third quarters, according to the analysis based on OAG data. This should support higher prices and the extent to which IAG can fill planes.
None of this will be popular with customers who berate BA’s service online. But here, too, might lie opportunity: it gives IAG CEO Luis Gallego an additional way to measure success. If his £7bn improvement plan at BA takes flight, poor reviews should become fewer and farther between.
