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BA owner cuts long-term forecasts amid 'challenging conditions'

Published 04/11/2016

The aviation industry has been stung by a slump in demand for travel in the wake of terror attacks, air traffic control strikes and extreme currency fluctuations
The aviation industry has been stung by a slump in demand for travel in the wake of terror attacks, air traffic control strikes and extreme currency fluctuations

The owner of British Airways (BA) has trimmed its long-term forecasts in the face of challenging market conditions.

International Airlines Group (IAG) said on Friday that average annual earnings will come in at 5.3 billion euro (£4.7 billion) between this year and 2020, down from 5.6 billion euro (£5 billion) previously.

The airline, which also owns Aer Lingus and Vueling, said that its capital expenditure will also be slashed to 1.7 billion euro (£1.5 billion) a year on average, falling from 2.5 billion euro (£2.2 billion).

The aviation industry has been stung by a slump in demand for travel in the wake of terror attacks, air traffic control strikes and extreme currency fluctuations.

IAG also said cut its long-term goal for capacity growth to around 3% per year from 3%-4% previously.

To compound matters, IAG warned in October that ticket prices may have to rise as it endured a bumpy ride in the third quarter.

Willie Walsh, IAG chief executive, said the group may increase BA ticket prices to offset the collapse in the pound, as he revealed that industrial action and sterling's weakness had dealt a 162 million euro (£145 million) blow to operating profit in the three months to the end of September.

Operating profits before exceptional items came in shy of expectations, falling 3.6% to 1.205 billion euro (£1.08 billion) in the third quarter, down from 1.250 billion euro (£1.12 billion) over the same period last year.

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