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IAG operating profit at 68 million in Q1, compared to 9 million last year
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CEO says IAG could scrap Air Europa bid, not at that point yet
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Shares up 1.4% in early trading
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European airlines hope for record summer demand
LONDON, May 10 (Reuters) - British Airways owner IAG reported a surge in first quarter earnings on Friday helped by rising demand over the Easter holiday and said it was seeing strong summer bookings.
Chief Executive Luis Gallego said the group, which also owns Iberia, Aer Lingus and Vueling airlines, had already secured more than 80% of projected bookings for the second quarter and over 40% for the third quarter.
IAG's exposure to the Middle East was very small so it hadn't seen a big impact from the conflict there, he said.
Shares in IAG rose 1.4% by 0815 GMT after the group said operating profit totalled 68 million euros ($73 million) in January-March.
That topped analysts' forecasts of 49 million euros, according to a company-compiled consensus, and compared with a profit of just 9 million euros in the same quarter of last year.
"Our transformation initiatives and increased demand, including over the Easter holidays, have delivered another very good set of results with improvement to both revenue and operating profit," Gallego said in a statement.
The first quarter is often weak for airlines, with fewer bookings at the start of the year.
Investors said IAG's first quarter performance showed the strength of its long-haul traffic and its success in reducing debt built up during the pandemic when airports and borders shut and planes were grounded.
RIVALS STRUGGLE
European rivals Lufthansa and Air France-KLM reported worse than expected first quarters as they struggled with a range of issues.
"Lufthansa had strikes which was the big problem. Air France-KLM had some one-offs, but IAG was still better. IAG is the higher-margin group anyway: double digit margins vs single digits at the others in general," Bernstein analyst Alex Irving said.
Gallego pointed to the group's smaller exposure to Asia, where traffic has recovered slowly, compared to rival European airline groups and to particularly strong results in its core markets like Southern Europe.
However, Gallego also said IAG could pull the plug on its takeover bid for Spain's Air Europa if conditions demanded by regulators prove too cumbersome, but told analysts on a call that the group wasn't yet at that point.
EU antitrust regulators warned in April that IAG's bid to secure full control of Air Europa may reduce competition and lead to price increases.
In its statement, IAG said it expected slightly higher costs this year, but that it saw 7% growth in passenger capacity in 2024.
Airlines have complained that delayed deliveries from planemakers will further constrain capacity and limit their ability to meet record demand this year.
IAG said its non-fuel unit costs increased by 3.7% in January-March from a year earlier, driven by investments in the business and the impact of wage settlements agreed in 2023.
($1 = 0.9280 euros) (Reporting by Joanna Plucinska; editing by Mark Potter, Jason Neely and Susan Fenton)
