Air France warning spooks industry

The newly-formed parent of British Airways saw shares slide yesterday as the air travel industry digested a profits warning from one of its major players.

International Consolidated Airlines Group (IAG), formed last month when BA merged with Spanish carrier Iberia, suffered as Air France-KLM said its full-year earnings would come in below the forecast 300 million euros (£250m).

The carrier, formed when Air France merged with Dutch airline KLM in 2004, said air traffic control strikes in France and heavy snowfall across Europe had hit its third-quarter sales, while adverse weather in the US and political turmoil in North Africa are expected to further dampen trade.

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The warning spooked investors’ confidence in the industry, as Flybe and easyJet tumbled with IAG, just weeks after British airlines revealed the negative impact December’s weather had on their own profits.

British Airways estimated the disruption caused by heavy snowfall and freezing temperatures cost the airline £50m, while easyJet took a £31m hit and Flybe lost £6m .

IAG shares have dropped around 16 per cent since the company was listed on the London Stock Exchange last month as fears mount over rising jet-fuel prices.

Andrew Fitchie, analyst at brokers Investec, said fears over fuel prices were offsetting the advantages of the BA/Iberia mer- ger.

He said: “Given the uncertain economic backdrop, we are cautious on airlines’ ability to recover fuel cost increases through surcharges.”