BUSINESS LIVE: UK GDP grows 0.6%; IAG profits take off; Rightmove eyes residential market improvement

British Airways owner IAG has posted better than expected first-quarter earnings, with an operating profit of around $73 million, as the group saw strong bookings and projected a busy and profitable summer.

The first quarter is often loss-making for airlines, with fewer bookings at the start of the year.

‘Our transformation initiatives and increased demand, including over the Easter holidays, have delivered another very good set of results with improvement to both revenue and operating profit,’ IAG Chief Executive Luis Gallego said in a statement.

European rivals Lufthansa and Air France-KLM reported worse than expected first quarters as they struggled with a range of issues, including consumer payouts and strikes.

But many airlines have expressed hope that a record summer travel season and lower jet fuel prices will help balance their books by the end of the financial year, and IAG is no exception as it strives to capitalise on strong demand.

Ben Laidler, global markets strategist at eToro:

‘The UK recession has ended, with the green shoots of economic recovery the strongest they have been in over two years. Encouragingly, recovery spanned across sectors from manufacturing to services.

‘GDP grew a greater-than-expected 0.6% in the three months to March, rebounding from the 0.3% contraction at the end of last year. The recovery has been led by rebounding business investment and manufacturing.

‘The stronger economy comes alongside the outlook for summer interest rate cuts and the recently weaker pound. This has been driving a long awaited relief rally in the overlooked FTSE 100, as well as providing some political relief in Downing Street.’

Thomas Pugh, economist at RSM UK:

‘Such a strong rebound in GDP may take a bit of pressure off the MPC to start cutting interest rates as soon as possible. Indeed, with the economy posting strong growth in Q1, the cost of waiting to cut interest rates will probably be seen as lower now.

‘However, the inflation and labour market data will be much more important to the MPCs decision. We still think the first cut will come in June, but it’s a close call between then and August.

‘Overall, today’s data reinforce our view that Q4 last year will represent the nadir of a particularly painful period of stagnation for the UK economy. But Q1 represents a turning point. Interest rate cuts are likely to come in the Summer and growth should continue in the first half of this year and pick up further after the summer and into 2025.’

The British economy exited recession in the first quarter of 2024, expanding by a better-than-expected 0.6 per cent, fresh data from the Office for National Statistics shows.

It compares to forecasts of 0.4 per cent growth and represents an improvement from a 0.3 per cent contraction in the final three months of 2023.