LONDON: International Airlines Group reported a 9 per cent rise in operating profit for 2016 and announced its first ever share buyback, worth €500m, as the company disclosed a €460m hit to earnings mainly stemming from sterling’s weakness after Brexit. IAG’s performance last year was partly fuelled by the acquisition of Irish flag carrier Aer Lingus, although two of the company’s other airlines also recorded increases in profit. The European airline industry has been struggling with economic uncertainty unleashed by Brexit, the effect of terror attacks in the EU and a glut of new capacity that is pushing down fares. IAG was among several airlines that issued profit warnings soon after the UK’s vote last June to leave the EU, saying it had experienced weaker trading in the run-up to the referendum. The group said on Friday that its underlying earnings for last year were reduced by €460m because of adverse currency movements – notably sterling’s weakness after the referendum. IAG reported operating profit before one-off items of €2.5bn for 2016, up 9 per cent compared with 2015. Pre-tax profit rose 31 per cent to €2.4bn last year, on revenue down 1 per cent to €22.6bn. Free cash flow rose 39 per cent to €2.1bn last year. Willie Walsh, chief executive, characterised IAG’s results for 2016 as “a good performance in a challenging environment”. “We have great confidence in IAG’s future prospects and are increasing cash returns to our shareholders,” he added. IAG, formed in 2011, proposed an 18 per cent rise in its full-year dividend, to €0.24, and said it planned to buy back €500m of its own shares during 2017. The group said that — based on current fuel prices and exchange rates — it expected its operating profit to increase this year compared to 2016. In Friday morning trading, IAG’s shares rose 2 per cent to 515p.