Losses Soar For BA Owner As Fuel Costs Rise

Quarterly losses have risen four-fold at the owner of British Airways, as the company feels the effect of the economic crisis in Spain and rising fuel costs.

International Airlines Group (IAG), which also owns the Spanish carrier Iberia, reported a pre-tax loss of 263m euros (£211m) for the three months to March 31, compared to a 47m euros (£37.7m) loss in the same period in 2011.

Despite strong demand in London for transatlantic travel for BA, a 281m euros (£225m) rise in fuel costs overall meant first quarter losses at its parent company grew 460%.

At current levels, fuel costs are on track to rise by more than 1bn euros (£802m) over the financial year.

IAG's losses also reflected the worsening of Iberia's performance in its home market and the 25m euros (£20m) cost of industrial action by its pilots.

Although total revenue rose by nearly 8% in the quarter, operating losses stood at 100m euros (£80.2m) for the Spanish airline and £62m for BA.

The group, which recently acquired bmi, also highlighted the impact of government taxes.

"The financial performance of our business continues to be undermined by government actions," chief executive Willie Walsh said.

"In addition to the UK Government increasing the world's highest aviation tax - air passenger duty - by double the inflation rate, the Spanish government plans to increase departure taxes from Spain by up to 10 euros (£8) per passenger."

After an 80% rise in profits in 2011, thanks largely to the return of business travellers, IAG expects to break even for the current financial year.

It announced on Thursday that it had agreed the sale of the regional division of bmi to a consortium of businessmen for £8m.