British Airways parent IAG SA will almost halve its planned expansion, reducing expected earnings growth, as it responds to slowing economies and a glut of seats that’s depressed prices.
IAG, which also owns Spain’s Iberia, Aer Lingus of Ireland and discount operators Vueling and Level, will now increase capacity by 3.4% a year in the 2020-2022 period, it said Friday. The previous target was 6% through 2023.
IAG said Oct. 31 that full-year profit will be lower than forecast as it grapples with the impact of BA’s first pilot strike since 1979. Like other European carriers, IAG is seeking to rein in costs and bolster margins amid a slowing regional economy, diminishing fares and uncertainty surrounding Brexit.
Shares of IAG fell as much as 2.9% in London, where the company is based, and were trading 1.8% lower at 531.4 pence as of 8:13 a.m. local time. The stock has declined 8.4% this year.
Capacity growth for 2020 is currently planned to be 3.2%, according to a statement. That compares with 4% for this year, a figure that IAG had revised down earlier.
The company retained its leverage and return on investment targets, as well as an operating margin goal of 12% to 15%.
Chief Executive Officer Willie Walsh will provide more details of the plans at a capital markets day later.
