The owner of British Airways has notched up record annual earnings after cashing in on the bounce back in global travel demand.

International Airlines Group (IAG) reported underlying operating profits of 3.5 billion euros (£3 billion) for 2023, nearly three times the 1.3 billion euros (£1.1 billion) in 2022 and higher than its pre-pandemic peak.

The group – which also owns airlines Iberia, Vueling and Aer Lingus – said demand continues to be robust, particularly from leisure travellers, with the group’s airlines 92% booked for the first quarter of the year and 62% booked up for the first half.

Its results showed that pre-tax profits for the year jumped to 3.1 billion euros (£2.7 billion) from 415 million euros (£355 million) in 2022 on revenues up 27.7% at 29.5 billion euros (£x billion).

In the fourth quarter, underlying earnings lifted 5% to 502 million euros.

Luis Gallego, IAG chief executive, said: “In 2023, IAG more than doubled its operating margin and profits compared to 2022… recovering capacity to close to pre-Covid 19 levels in most of its core markets.”

The group said capacity for the final three months of 2023 was at 98.6% of the levels seen before the pandemic struck in 2019, with full-year capacity at 95.7% of those levels.

At BA, capacity recovered more slowly to 90.1% of 2019 levels, largely due to the slower rebound in Asia Pacific.

The group said it expects to grow overall capacity by around 7% in 2024.

But shares in the group fell 2% in morning trading on Thursday.

Mr Gallego shrugged off the impact of a recession in the UK on demand, saying it “continues to be very strong, particularly in leisure”.

“We don’t see any weakness in the market,” he added.

He remained tight-lipped on the outlook for air fares this year, saying only that they would be “determined by the market”.

The group said corporate passenger demand in North America was impacted at the end of last year and into the first quarter of 2024 by the Gaza conflict and concerns over instability in the Middle East.

But he said demand in the US market was showing signs of recovery in the second and third quarters.

He added that punctuality was improving at BA, with levels in January close to where they were before Covid.

It is investing heavily in its operations at Heathrow after service was hampered in recent years by disruption and air traffic control (ATC) problems.

The group is spending £7 billion overall on BA over the next three years – on areas such as IT and new aircrafts.

“British Airways is our biggest asset with huge potential and that’s the reason we are investing,” Mr Gallego said.