UK's BAA stated (12-Mar-2012) the group saw "strong demand for all destinations except the UK and Ireland" in Feb-2012. North Atlantic traffic was up 7.4%, with other long-haul destinations up 1.3%. Passenger numbers on European scheduled routes were up 2.8%, whilst European charter traffic benefited from good skiing conditions and was up 17.1%. At London Heathrow, the best performing sector was South America which saw passenger numbers rise 51.5%, with Brazil showing an increase of 89.0%. North Atlantic passenger numbers were up 7.5%. Domestic traffic was again the worst performing market, with passenger numbers down 2.8% compared with a year earlier. European scheduled traffic was up 4.6%, with some of the fastest passenger growth seen by non-EU countries such as Iceland (27.1%), Norway (20.0%) and Switzerland (11.5%). Feb-2012 also saw Heathrow announce the first ever service between London and Guangzhou, with China Southern Airlines to commence service on the route in Jun-2012. BAA said, "the deal has taken eight years to complete following initial discussions between BAA and the airline in 2004. Because Heathrow is operating at 99.2% of its permitted capacity, China Southern has had to wait for suitable take-off and landing slots to become available from other airlines before it has been able to add the new route". It continued, "In the meantime, China Southern has been operating flights to and from Paris, giving French companies an eight year head start in building new trade links with China. Even now, Paris will still have four times as many flights to Guangzhou than the UK". BAA continued, "While the UK is adding one new route to the world’s most important emerging market in 2012, its European competitors will serve a further seven additional routes to China’s interior. Paris, Frankfurt or Amsterdam airports will boast direct flights to Chengdu, Hangzhou, Wuhan, Xiamen, Nanjing, Shenyang and Qingdao this year".
BAA sees strong demand for all destinations except UK and Ireland
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To its credit, IAG has responded to the more challenging trading conditions by lowering its planned capacity growth and capital expenditure during its 2016-2020 strategic plan. These steps are necessary if it is to have a chance of meeting its ambitious goal to sustain a 15% return on invested capital. This target is unchanged, despite the lower profit outlook.
In 3Q2016, IAG's rolling four quarter return on capital fell, after rising more or less continuously since it began to target this measure in 2013. It has consistently been more profitable than either of its two main European legacy airline group rivals (Air France-KLM and Lufthansa). Nevertheless, the downward step highlights the challenge in meeting its own demanding target.