International Airlines Group, formed by the merger of British Airways and Iberia, said first quarter losses more than doubled as higher fuel costs and weakness in Spain undermined strength in premium long-haul travel out of London.
"Demand in London remains strong," IAG said in a results statement today. "The Spanish and wider euro zone macro-economic background deteriorated in Q1, and this is reflected in a worsening commercial performance from our Madrid hub."
The company reported an operating loss of €249 million before exceptional items in the traditionally weak first quarter of the year, up from a €102 million loss a year ago.
Analysts had expected a figure of between €230 million and €250 million, according to the company.
Revenue for the quarter rose 7.8 per cent versus a year earlier to €3.9 billion.
Chief executive Willie Walsh said strong demand for premium long-haul flights out of London, particularly on transatlantic routes, showed no sign of abating with the British capital having apparently sidestepped the latest recession.
"The sales and revenue side of the (British Airways) business is doing very well, it's the fuel cost that's the main headwind we face," he told reporters during a conference call.
The group's fuel costs for the quarter were 24.9 per cent higher than a year earlier at €1.4 billion.
Traffic figures from British airport operator BAA, which is majority owned by Spain's Ferrovial, also indicated that premium and business travel remains strong out of London, even if the lower end of the market is still shrinking.
The operator said 5.8 million passengers passed through Heathrow during April, marginally up on a year earlier after what it described as "another record month" for London's main long-haul hub.
Reflecting the broader economic weakness, traffic at Stansted airport, which is popular with budget airlines flying into London, was down 2.7 per cent and group-wide cargo was 1.1 per cent weaker, driven by a 2.5 per cent drop at Heathrow.
The airline operator said Iberia made an operating loss of €170 million in the first three months of the year while the loss at British Airways was less than half that at £62 million.
For the full year IAG said the prospect of a €1 billion rise in its fuel bill, combined with €90 million worth of restructuring costs stemming from its acquisition of bmi, meant it would struggle to make any money this year, predicting operating results would be "around the breakeven level".