(Refiles to fix garble in first paragraph)
* Operating profit up 8.6 pct, revenue down 1.3 pct
* 500 mln euro share buyback this year
* CEO dismisses Norwegian's U.S. push
* Expects capacity, profit growth in 2017
By Alistair Smout
LONDON, Feb 24 British Airways owner IAG
said it will return 500 million euros ($529 million) to
investors after reporting higher annual profits on Friday,
helped by cost-cutting and lower fuel costs.
Europe's largest airline group said annual operating profit
rose 8.6 percent to 2.5 billion euros, in line with
expectations, sending shares up 2 percent. It said it expected
higher profits this year.
IAG's British Airways transatlantic business, based at
London's Heathrow, has held up well compared to Europe's highly
competitive budget market. Heathrow on Friday reported record
passenger figures in 2016.
CEO Willie Walsh was bullish in the face of an announcement
by Norwegian Air that it would offer transatlantic
flights on 10 new routes, with tickets starting at $65.
"I've always said we'll compete with Norwegian. The
difference between Norwegian and us is we're profitable," he
said. "The fares that they've launched are clearly just designed
to get some headline media coverage. They're not sustainable."
Walsh said that across IAG he expected 2.5 percent capacity
growth in 2017, with Irish airline Aer Lingus expected to grow
quicker than British Airways.
For 2016, operating profit before exceptional items rose
despite revenue slipping by 1.3 percent to 22.57 billion.
It benefited from a lower fuel price environment and cost
savings, the company said.
The company was hit, however, by an adverse currency impact
of 460 million euros after a slump in the British pound
following Britain's June 23 vote to leave the European Union.
"IAG has reported solid and in-line fourth quarter and
(2016) earnings despite a tough yield environment and currency
headwinds," analysts at Cantor Fitzgerald said in a note.
Analysts expect IAG, which also owns Spain's Iberia, to
achieve a 2017 profit of 2.5 billion euros, in line with this
year, Thomson Reuters data showed.
IAG said it planned to carry out a share buyback of 500
million euros this year, and announced a final dividend of 12.5
euro cents per share.
($1 = 0.9459 euros)
(Editing by Lina Saigol and Jason Neely)