Airlines’ profits are rising, offering in-flight luxury to lure pandemic-weary travelers.

IAG, which owns British Airways, has posted its first annual profit since the pandemic as the aviation industry continues to recover from Covid-19 due to a pent-up desire to shed productivity gains.

The company, which also owns Iberia, Vueling and Aer Lingus, said it was in positive territory for the first time since the start of the pandemic.

The increased demand has led to a significant recovery in passenger traffic and a steady increase in business traffic. He said its premium leisure segment “performed very well” as travelers opted for luxury locations. Analysts say the demand for luxury travel — more spacious seating with more amenities — is boosting airline profits while business travel continues to lag.

The airline group reported an operating profit of €1.26bn (£1.1bn) in 2022 after a loss of €2.97bn the previous year. All airlines were profitable last year, with ridership at 87 percent of pre-pandemic levels in the quarter ending December.

Luis Gallego, CEO of IAG, said demand remains strong and there is “reliable pre-booking” on all routes at this time of year. He said 2022 was “a year of strong recovery driven by continued demand for entertainment and the reopening of markets.”

“We are transforming our business to bring IAG back to pre-pandemic profit levels within a few years,” he added.

British Airways has become the latest airline to report strong numbers, indicating that the aviation industry is recovering from the pandemic faster than experts initially thought. Australian airline Qantas and Singapore reported growth, while Air France-KLM said it also benefited from rising global travel demand.

Overall, the aviation industry has suffered losses of around $370 billion (£309 billion) in global revenue due to Covid-19.

Airlines continue to struggle to meet much of the pent-up demand from travel-loving consumers after they were frustrated by coronavirus-related restrictions.

Airlines are hampered by a shortage of staff, which means they have less ability to get planes back in the air. Restrictions at hubs like Heathrow and Schiphol added to their problems. Fewer planes mean fewer seats, so airfare remains high everywhere.

With demand for business travel still well below pre-pandemic levels, so-called premium travelers are helping airlines boost revenue. Some airlines are now reporting that their premium seats are selling out earlier than economy seats – the exact opposite of what happened before Covid hit.

Despite initial gains, IAG shares closed down six percent. Russ Mold, chief investment officer at AJ Bell, said “Better to travel than to arrive” could be a great slogan for International Consolidated Airlines, owner of British Airways, that celebrates the joys of air travel, and instead emphasized that wisdom of the stock market as a stock. the company fell even after it posted its first post-pandemic annual profit.

“As a legacy of Covid, debt levels are very high. This could cause concern in the market, especially if there are indications that it is preventing IAG from making necessary investments in its business.

“The promise to return to pre-pandemic profit levels in the coming years gives investors something to look forward to, but also requires some patience – and there is no dividend to reward shareholders for staying close.”

IAG also announced that it had agreed, subject to regulatory approval, to buy out the remaining 80% stake in Air Europa, Spain’s third largest airline, which it does not yet own.

The €400 million deal will help Madrid become a transportation hub, opening up Latin America and beyond, with “benefits for customers, employees and shareholders,” the company said.