(Bloomberg) -- IAG SA said it’s enjoying strong bookings into this year, led by holiday travel and stable business trips, and predicted profit could almost double as the industry continues its recovery from the pandemic. 

Full-year operating profit will reach about €1.8 billion to €2.3 billion ($1.9 billion to $2.4 billion), compared with €1.2 billion in 2022, the parent of British Airways said in a statement on Friday. Fourth-quarter operating income slightly exceeded estimates at €486 million.

IAG said late yesterday that it agreed to buy full control of Spanish airline Air Europa for €400 million, more than a year after the Covid pandemic and antitrust concerns scuttled a previous accord. While investors have supported the idea of industry consolidation, IAG’s high level of debt — which stood at €10.4 billion at the end of the year and will remain similarly high in 2023 — has been a cause for concern for some analysts questioning if acquisitions should be the company’s focus right now. 

“We are not convinced by the company’s rationale for the deal,” Barclays analysts led by Andrew Lobbenberg wrote in a note. “We see the deal adding further leverage to the company, whose share price is already held back by leverage concerns.” Barclays estimates that the acquisition will cost the company around €2.8 billion euros, accounting for Air Europa’s balance sheet and lease debt.

IAG declined as much as 3.3% to 160.02 pence, after initially rising at the open. The stock has gained about 32% this year, after losing 13% in 2022. IAG said it won’t pay a dividend for 2022. 

The Air Europa brand will remain under the management of Iberia, the Spanish flag carrier that’s also part of IAG, and the company said the asset will help bolster Madrid as an aviation hub to compete with Europe’s largest airports. There’s a breakup fee of €50 million linked to the transaction going through. 

The company expects “full restoration” of 2019 level of capacity by the fourth quarter of this year, while cautioning that it remains “mindful of uncertainty in the macro environment and fuel and non-fuel cost inflation.” The upbeat outlook on capacity mirrors the view of Air France-KLM, which said last week that it also predicts a full recovery by the end of the year. 

“We are transforming our businesses, with the intention of returning IAG to pre-Covid levels of profit within the next few years, through major initiatives to improve customer experience and operational performance,” Chief Executive Officer Luis Gallego said in the statement.

Business travel is currently at 65% of the volume seen in 2019, Gallego said during a call with journalists. The technology and pharmaceutical industries are still lagging behind, while bookings from smaller and mid-sized companies are recovering more strongly.

(Updates with breakup fee details in sixth paragraph. A previous version of the story corrected the currency in the share paragraph.)

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