IAG’s Midas Touch

To our American readers still digesting their turkeys, happy belated Thanksgiving. It’s the busiest holiday of the year for U.S. airports. And this year was the busiest one ever, with an estimated 30 million people flying over the nine-day holiday stretch. Give credit to America’s air traffic controllers, who are moving all those planes while understaffed by about 3,000 people.

Alright people, what’s the strongest intercontinental airline in the world? You won’t get much pushback if you answer IAG. That’s in fact a collection of airlines that together seems to turn everything it touches to gold. British Airways, Iberia, Aer Lingus, Vueling, and Level are all prospering, producing industry-leading profits. Air Europa will join the group if regulators allow. And TAP Air Portugal could be next.

Icelandair joined IAG in delivering an investor deep-dive last week. Though it skates on thinner ice given the smallness of its Reykjavik hub, geography allows that hub to support a growing list of North American destinations. Narrowbodies with increasingly longer ranges are likewise enhancing Icelandair’s capabilities. In the opposite corner of Europe, meanwhile, Aegean Airlines discussed its tremendous summer quarter, underpinned by Greece’s booming tourist sector. That’s in turn boosting the Greek economy, which was a decade ago mired in a great depression. Warning though: Aegean is one of the many airlines stricken with geared turbofan engine woes.

Aegean is also witnessing weaker demand from markets affected by the latest Middle Eastern conflict. That’s not just Israel, which Aegean temporarily exited, but also Egypt, Jordan, and Lebanon. Airlines are on guard for signs of broader contagion, spooked perhaps by a Bloomberg report last week flagging a trend of some Americans canceling premium travel to Paris.

In East Asia, Cathay Pacific is seeing an increase in premium business travelers attending conferences and expositions in Hong Kong and nearby Guangzhou. It’s also seeing strong demand from the U.S. to mainland China via Hong Kong. It’s encouraged by cargo trends too, and feels optimistic overall: “We expect that the second-half profit in 2023 will surpass the result from the first half, and that the group will achieve a consolidated profit for the year overall, which will be our first profitable year since 2019.”

Mainland China and the U.S. are in the meantime working to resume more nonstops. To China’s south, Thai Airways plans a giant widebody order, emboldened by its incredible turnaround — Thai was the most profitable airline in the world based on operating margin for the 12 months to September (see the earnings scoreboard chart in our previous issue). Elsewhere, SAS is on the verge of exiting bankruptcy with help from Air France-KLM. AirAsia X is now officially out of a bankruptcy-like status. And several major U.S. labor unions are out of patience, threatening strikes if they don’t get new contracts. Among them: Southwest’s pilots and Ameircan’s flight attendants.