International Airlines Group (IAG) is expecting its full-year operating profit to be down on 2018, after taking a £170 million ($186.6 million) hit from industrial unrest among its pilots and Heathrow Airport workers.

Updating the market Sept. 26, IAG CFO Steve Gunning said IAG is expecting its 2019 operating profit before exceptional items to be €215 million lower than the €3.5 billion equivalent profit posted for full-year 2018.

Gunning said a British Airways (BA) pilots’ strike, planned for Sept. 9, 10 and 27, led to 4,521 flight cancellations over a seven-day period. Ultimately 2,196 of these canceled flights were reinstated, but 2,325 did not operate.

BA also offered rebooking or refunds on 4,070 flights not directly affected by the industrial action.

“The net financial impact of the [pilot] industrial action is estimated to be €137 million. In addition, there were further disruption events affecting British Airways in the quarter, including threatened strikes by Heathrow Airport employees, which had a further net financial impact of €33 million,” Gunning said.

While the Sept. 27 strike was suspended, IAG and its pilots’ union BALPA remain in a stalemate.

“There have been no further talks between British Airways and BALPA,” Gunning said. “The airline’s offer of a 11.5% pay increase over three years still stands and has been accepted by British Airways’ other unions, representing 90% of the airline’s employees. Clearly any further industrial action will additionally impact IAG’s full-year 2019 operating profit.”

Responding to the IAG comments, BALPA said: “The airline’s tactic to lay the blame for a fall in profits at the door of the pilots, and without any mention of the impact their IT issue or GDPR fine, is completely disingenuous.”

BALPA said it offered a compromise on Sept. 4 and subsequently called off the Sept. 27 strike. With no response on further negotiations, BALPA said the BA pilots are now asking the union to consider further strike dates.

UK-based data and analytics company GlobalData said the announcement had weakened BA’s negotiating position.

“A resolution must now be found swiftly, but BALPA will be aware of the airline’s pressing need to draw a line under this episode and consequently, BA may well find its negotiating position has been weakened,” GlobalData head of research and analysis for travel & tourism Nick Wyatt said.

“An end to the dispute between BA and its pilots still looks a long way off and this leads to the inevitable question of whether more strikes will take place and further weigh on profits.”

The situation has been compounded by adverse booking trends at IAG’s Spanish LCC Vueling and long-haul LCC Level, causing a further €45 million hit.

“At current fuel prices and exchange rates, IAG therefore expects its 2019 operating profit before exceptional items to be €215 million lower than 2018 pro forma (€3.5 billion). Passenger unit revenue is expected to be slightly down at constant currency, compared to flat guidance previously, and nonfuel unit costs are expected to improve at constant currency, unchanged from previous guidance.

“Capacity growth, measured in ASKs, for the fourth quarter is now expected to be about 2%, which is 1.2 points below previous guidance, and full-year capacity growth is expected to be about 4%, compared to 5% previously,” IAG said.

Victoria Moores