BA owner IAG's profits hit by weak pound

Airline group IAG, which owns British Airways and Iberia, has reported a rise in profits despite being affected by last year's fall in the pound.

Pre-tax profits at the company rose by nearly a third last year to 2.4bn euros (£2bn), with operating profits up 8.6% to 2.5bn euros.

IAG said the fall in the value of the pound last year cost it 460m euros.

Willie Walsh, IAG's chief executive, said: "It was a good performance in a challenging environment."

He added that IAG had continued to make good progress.

"In 2016, we carried more than 100 million passengers - double the number British Airways and Iberia carried in 2010, a year before IAG was created," he said.

The rise in profits came despite revenues dipping 1.3% to 22.5bn euros, while revenue per passenger fell 5.4%.

The airline group said it intended to carry out a share buyback of 500m euros during the course of 2017.

Expansion plans

IAG issued a profit warning after the Brexit referendum in June, and in October it warned that ticket prices might have to rise as a result of sterling's fall.

Airlines normally buy their fuel in dollars, but a sharp drop in fuel costs has helped counter some of the adverse currency fluctuations.

IAG's fuel costs fell by nearly 20% last year. It is also continuing to restructure and cut costs.

The company added that, at current fuel prices and exchange rates, it expected to report an increase in operating profit this year.

IAG is planning to start low-cost transatlantic flights from Barcelona this year to destinations in the US. The Spanish airport is home to IAG's low-cost carrier, Vueling.

It is going head-to-head with budget operators such as Norwegian Air Shuttle ASA, which is expanding.