British Airways-owner IAG (>> International Consolidated Airlns Grp SA) trimmed growth plans for 2016 further and gave a cautious outlook for annual earnings due to weaker trading and the slump in sterling after Britain's vote to leave the European Union.
The EU referendum outcome has caused the value of the pound to fall versus the dollar and euro, making it more expensive for Britons to travel abroad, and prompting consumer and business uncertainty.
In addition, attacks in Europe and a failed coup in Turkey have hit demand for travel, prompting rival airlines easyJet (>> easyJet plc), Lufthansa (>> Deutsche Lufthansa AG) and Air France-KLM (>> Air France-KLM) to warn on the impact of political upheaval and security concerns.
IAG, which includes carriers Iberia, Vueling and Aer Lingus, said on Friday it would now cut its capacity growth to 4.5 percent this year, down from the 4.9 percent rise planned in April.
Chief Executive Willie Walsh said the cuts would be across the group and added the group would look for opportunities to further trim growth later this year.
He told Irish radio that IAG was not planning similar capacity cuts in the UK to low-cost rival Ryanair (>> Ryanair Holdings plc).
IAG said it was also putting 2017 capacity and capex plans under review, but Walsh declined to comment further when asked for details.
Shares in the group, which have lost about a third of their value since the beginning of the year, fell 1.5 percent on Friday after the group said it expects 2016 underlying operating profit to rise by a "low double digit" percentage.
It had in February forecast it would grow 2016 profit by more than 900 million euros ($998 million), equivalent to a 40 percent rise on last year's result.
IAG, which reports in euros but gets a third of its revenues from Britain, said its second quarter results were hit by a negative currency effect of 148 million euros, and that would also impact third-quarter results, usually the most profitable time of the year thanks to the European summer holiday season.
Walsh said IAG had seen more subdued demand from business travellers in the run-up to the Brexit vote and that had continued since.
Surveys have shown consumer confidence has plunged since the vote, while companies are reviewing investment plans and jobs in the country.
"It's unclear when UK corporates will regain confidence in terms of travelling and doing business," Walsh told journalists. "It will have to happen... whether that's later this year or early next year we'll have to wait and see,"
IAG reported underlying operating profit up 4.7 percent to 555 million euros for the three months ended June 30, its second quarter, behind a consensus forecast of 562 million euros.
($1 = 0.9016 euros)
(Reporting by Victoria Bryan, editing by James Davey and Adrian Croft)
By Victoria Bryan