TIDMIAG
RNS Number : 5303R
International Cons Airlines Group
27 October 2023
IAG third quarter results 2023
Record third quarter profit with strong trading across the Group
and a significantly stronger balance sheet
Highlights
-- Strong growth of operating profit before exceptional items in
the quarter to EUR1,745 million (Q3 2022: EUR1,216 million) and an
operating margin of 20.2% (Q3 2022: 16.6%) due to:
o Capacity (ASK) increase of 17.9% on last year (95.6% of Q3
2019), with a focus over the summer on European holiday
destinations and further investment across the South and North
Atlantic, supported by 20 aircraft deliveries year to date.
o Passenger unit revenue increased by 2.2% year-on-year (24.6%
vs 2019) due to continued strong demand from leisure travel.
o Non-fuel unit costs for the quarter were 3.5% below Q3 2022.
This was despite a c.1.0 percentage point impact from higher
disruption across the business, including the UK NATS systems
outage in August. The majority of these additional costs were in
British Airways.
o Fuel unit costs for the quarter were down 6.2% year on
year.
-- Continued balance sheet strengthening: Gross debt reduced by
EUR2.4 billion to EUR17.2 billion at September 30, 2023 versus June
30, 2023, with GBP2.0 billion UKEF-backed loan repaid early and
EUR0.5 billion IAG bond repaid on maturity. Consequently S&P
upgraded IAG and British Airways to Investment Grade.
-- Overall customer bookings for Q4 are as expected.
-- We expect 2023 to be a year of strong recovery in our
margins, operating profit and balance sheet and towards
pre-COVID-19 levels of capacity.
Luis Gallego, International Airlines Group's CEO, said:
"This quarter represents a record third quarter performance for
IAG. This is allowing us to invest in the business and reduce a
significant amount of our debt.
"During the third quarter we saw sustained strong demand across
all our routes, in particular the North and South Atlantic and in
all leisure destinations around Europe. We continue to develop our
hubs of Barcelona, Dublin, London and Madrid, supported by our
fleet deliveries and future orders.
"Our strong financial performance is enabling investment in our
people and allowing us to further improve customer experience. At
the same time, we will keep working towards our sustainability
goals.
"We would like to thank all our employees across the Group for
their contribution to this performance ."
Financial summary:
Nine months to September Three months to September
30 30
-------------------------- ---------------------------
Reported results (EUR million) 2023 2022(1) 2023 2022(1)
Total revenue 22,229 16,680 8,646 7,329
Operating profit 3,005 801 1,745 1,218
Profit after tax 2,151 199 1,230 853
Basic earnings per share (EUR cents) 43.6 4.0
--------------------------------------------------- ----------- ------------- ---------- ---------------
Cash, cash equivalents and interest-bearing
deposits (2) 9,218 9,599
Borrowings (2) 17,227 19,984
--------------------------------------------------- ----------- -------------
Alternative performance measures
(EUR million) 2023 2022(1) 2023 2022(1)
Total revenue before exceptional
items 22,229 16,680 8,646 7,329
Operating profit before exceptional
items 3,005 770 1,745 1,216
Operating margin before exceptional
items 13.5% 4.6% 20.2% 16.6%
Profit after tax before exceptional
items 2,151 170 1,230 853
Adjusted earnings per share (EUR
cents) 40.7 0.4
--------------------------------------------------- ----------- ------------- ---------- ---------------
Net debt(2) 8,009 10,385
Net debt to EBITDA before exceptional
items (times)(2) 1.4 3.1
Total liquidity(2,3) 13,697 13,999
--------------------------------------------------- ----------- -------------
For definitions of Alternative performance measures, refer to the Alternative
performance measures section of this report.
(1) The 2022 results include a reclassification to conform with the current
period presentation for the Net gain on sale of property, plant and equipment.
There is no impact on the Profit after tax.
(2) The prior period comparative is December 31, 2022.
(3) Total liquidity includes Cash, cash equivalents and interest-bearing
deposits, plus committed and undrawn general and overdraft facilities and
aircraft-specific financing facilities.
Strategic highlights
Trading and network
-- Record profit and high margins in the third quarter of 2023,
driven by very strong leisure demand across all our airlines
o Aer Lingus total revenue increased by 16% driving strong
profit growth and operating margins of 25.5%, despite cost
headwinds. Capacity increased by 15% across both longhaul and
shorthaul over the summer, with the largest longhaul schedule ever.
Next year Aer Lingus will also return to Minneapolis and fly a new
route to Denver. Premium leisure on the transatlantic network was
particularly strong, driving record load factors in business
cabins.
o British Airways total revenue grew by 20% in the quarter, on
capacity growth of 25%, in particular through strong leisure
demand. Profits increased by 50% year-on-year as capacity increases
drove strong non-fuel unit cost performance (-7.6%), despite
disruption costs. Operating profit was GBP617 million and the
operating margin was 15.3%. Capacity growth focused on increased
frequencies and higher gauge aircraft, as well as rebuilding the
Asian network. British Airways recently announced resumption of
flights to Abu Dhabi in 2024. Further investment in stabilising
operations, despite a challenging external environment and supply
chain constraints, and a more resilient performance expected over
the winter.
o Strong trading across the network at Iberia has driven an
increase in total revenue of 19%, with capacity growth of 18% and
passenger unit revenue growth of 5%, with leisure continuing to be
strong and corporate travel mainly recovered to pre-Covid levels.
Profit increased by 76% to EUR449 million and margins to 23.1%.
Continued network investment in the strong and growing Latin
American and Caribbean markets as well as the announcement of the
new Doha route as a gateway to Asia. Transformation initiatives are
delivering exceptional On Time Performance, cost control and better
aircraft utilisation and maintenance.
o Vueling delivered a record operating profit (EUR282 million)
and margin for the quarter of 26.1%. Transformation initiatives are
driving strong performance across all areas: higher load factors at
94% and ancillary revenue of EUR29 per passenger; robust cost
control to offset inflationary headwinds; and On Time Performance 9
percentage points higher than Q3 2019. Vueling is maintaining
capacity at 2019 levels whilst negotiations continue with pilots
towards agreeing a sustainable collective agreement, with a cabin
crew agreement secured earlier in the third quarter.
-- Loyalty continued to drive good revenue growth in Q3 2023 as
total revenue increased by 57%. The quarter was the highest ever
for Avios issued and redeemed by customers, as well as a record
quarter where 1.3 million customers joined IAG programmes. This was
supported by the continuing roll-out of programme enhancements,
including a further tranche of "Avios-only" flights for summer
2024.
-- Our Cargo business continues to see declines in revenue and
profit as industry supply continues to exceed reducing demand for
air freight. Cargo yields remain above 2019 levels.
Other developments
o Our balance sheet continues to strengthen as the business
returns to normal levels of profitability.
o Net debt has reduced by EUR3.1 billion year-on-year to EUR8.0
billion (September 30, 2022: EUR11.1 billion) and leverage was 1.4
times at September 30, 2023 (September 30, 2022: 4.4x).
o We have also reduced our gross debt (September 30, 2023:
EUR17.2 billion; June 30, 2023: EUR19.6 billion): in the quarter we
repaid our GBP2 billion (EUR2.3 billion) UK Export Finance-backed
loan as well as a EUR500 million IAG bond.
o S&P has upgraded both IAG and British Airways to
Investment Grade status at BBB- with a stable outlook.
-- Our fleet deliveries continue to be on schedule. During the
nine months to September 30, 2023 we have had 20 aircraft delivered
as we replace both our longhaul and shorthaul fleets. This
comprised 12 narrowbody aircraft across all our airlines and 8
widebody aircraft to British Airways and Iberia.
-- As announced at our half year results on July 28, 2023, we
have also ordered more aircraft for future delivery to support our
network growth strategy: six Boeing 787-10s for British Airways and
one Airbus A350-900 for Iberia.
-- We continue to monitor and manage the situation with regards
to metal powder contamination in Pratt & Whitney (P&W) GTF
engines. We currently have 32 aircraft that we consider to be in
the scope of the issues that P&W has raised (less than 10% of
IAG's shorthaul fleet) and are taking steps to mitigate prospective
time out of service of those aircraft over the next three
years.
-- We have now secured wage agreements with most of our employee
groups, including all Iberia teams and cabin crew at Aer Lingus,
British Airways and Vueling. Our proposal to British Airways pilots
is currently subject to a ballot having been recommended by BALPA.
Discussions are ongoing with pilots at Vueling; and with pilots and
maintenance teams at Aer Lingus.
Trading outlook
-- We expect full year 2023 capacity to be around 96% of pre-COVID-19 levels.
-- Overall customer bookings for Q4 are as expected with around
75% of the fourth quarter's passenger revenue already booked.
-- Whilst we maintain good forward bookings, we continue to be
mindful of wider macroeconomic and geopolitical uncertainties that
might affect the remainder of this year.
-- We expect non-fuel unit costs for the full year 2023 to be at
the lower end of previous guidance of 6% - 10% improvement on full
year 2022, due to the higher level of disruption.
-- At current fuel prices* and taking into consideration the 73%
of hedging we have in place for the fourth quarter, total fuel
costs would be cEUR7.6 billion for the full year.
-- We expect to generate sustainable free cash flow this year
and for our net debt at December 31, 2023 to reflect the usual
seasonal increase in the fourth quarter.
*Jet fuel forward prices as at October 26, 2023
LEI: 959800TZHQRUSH1ESL13
Forward-looking statements:
Certain statements included in this announcement are
forward-looking. These statements can be identified by the fact
that they do not relate only to historical or current facts. By
their nature, they involve risk and uncertainties because they
relate to events and depend on circumstances that will occur in the
future. Actual results could differ materially from those expressed
or implied by such forward-looking statements.
Forward-looking statements often use words such as "expects",
"may", "will", "could", "should", "intends", "plans", "predicts",
"envisages" or "anticipates" or other words of similar meaning.
They include, without limitation, any and all projections relating
to the results of operations and financial conditions of
International Consolidated Airlines Group, S.A. and its subsidiary
undertakings from time to time (the 'Group'), as well as plans and
objectives for future operations, expected future revenues,
financing plans, expected expenditure, acquisitions and divestments
relating to the Group and discussions of the Group's business
plans. All forward-looking statements in this announcement are
based upon information known to the Group on the date of this
announcement and speak as of the date of this announcement. Other
than in accordance with its legal or regulatory obligations, the
Group does not undertake to update or revise any forward-looking
statement to reflect any changes in events, conditions or
circumstances on which any such statement is based.
Actual results may differ from those expressed or implied in the
forward-looking statements in this announcement as a result of any
number of known and unknown risks, uncertainties and other factors,
including, but not limited to, the current economic and
geopolitical environment and ongoing recovery from the COVID-19
pandemic and uncertainties about its future impact and duration,
many of which are difficult to predict and are generally beyond the
control of the Group, and it is not reasonably possible to itemise
each item. Accordingly, readers of this announcement are cautioned
against relying on forward-looking statements. Further information
on the primary risks of the business and the Group's risk
management process is set out in the Risk management and principal
risk factors section in the Annual report and accounts 2022; this
document is available on www.iairgroup.com. All forward-looking
statements made on or after the date of this announcement and
attributable to IAG are expressly qualified in their entirety by
the primary risks set out in that section. Many of these risks are,
and will be, exacerbated by the ongoing recovery from the COVID-19
pandemic and uncertainties about its future impact and duration and
any further disruption to the global airline industry as well as
the current economic and geopolitical environment.
Alternative Performance Measures:
This announcement contains, in addition to the financial
information prepared in accordance with International Financial
Reporting Standards ('IFRS') and derived from the Group's financial
statements, alternative performance measures ('APMs') as defined in
the Guidelines on alternative performance measures issued by the
European Securities and Markets Authority (ESMA) on October 5,
2015. The performance of the Group is assessed using a number of
APMs. These measures are not defined under IFRS, should be
considered in addition to IFRS measurements, may differ to
definitions given by regulatory bodies relevant to the Group and
may differ to similarly titled measures presented by other
companies. They are used to measure the outcome of the Group's
strategy based on 'Unrivalled customer proposition', 'Value
accretive and sustainable growth' and 'Efficiency and innovation'.
For definitions and explanations of APMs, refer to the Alternative
Performance Measures section of this report and to the APMs section
in the most recent published financial report and in the IAG Annual
report and accounts; these documents are available on
www.iairgroup.com.
IAG Investor Relations
Waterside (HAA2),
PO Box 365,
Harmondsworth,
Middlesex,
UB7 0GB
Investor.relations@iairgroup.com
CONSOLIDATED INCOME STATEMENT
Nine months to September 30 Three months to September 30
------------------------------- --------------------------------
Higher/ Higher/
EUR million 2023 2022(1) (lower) 2023 2022(1) (lower)
Passenger revenue 19,517 14,020 39.2 % 7,733 6,416 20.5 %
Cargo revenue 866 1,216 (28.8)% 263 373 (29.5)%
Other revenue 1,846 1,444 27.8 % 650 540 20.4 %
------------------------------------------------- -------- --------- ---------- -------- --------- -----------
Total revenue 22,229 16,680 33.3 % 8,646 7,329 18.0 %
------------------------------------------------- -------- --------- ---------- -------- --------- -----------
Employee costs 3,985 3,417 16.6 % 1,375 1,250 10.0 %
Fuel, oil costs and emissions charges 5,579 4,400 26.8 % 2,029 1,834 10.6 %
Handling, catering and other operating costs 2,891 2,143 34.9 % 1,095 821 33.4 %
Landing fees and en-route charges 1,762 1,391 26.7 % 658 544 21.0 %
Engineering and other aircraft costs 1,862 1,507 23.6 % 654 579 13.0 %
Property, IT and other costs 788 670 17.6 % 273 235 16.2 %
Selling costs 851 671 26.8 % 273 229 19.2 %
Depreciation, amortisation and impairment 1,508 1,531 (1.5)% 525 516 1.7 %
Net (gain)/loss on sale of property, plant and
equipment (15) (31) (51.6)% 2 (10) nm
Currency differences 13 180 (92.8)% 17 113 (85.0)%
------------------------------------------------- -------- --------- ---------- -------- --------- -----------
Total expenditure on operations 19,224 15,879 21.1 % 6,901 6,111 12.9 %
------------------------------------------------- -------- --------- ---------- -------- --------- -----------
Operating profit 3,005 801 nm 1,745 1,218 43.3 %
Finance costs (867) (723) 19.9 % (302) (243) 24.3 %
Finance income 285 11 nm 118 8 nm
Net change in fair value of financial instruments - 132 nm 13 2 nm
Net financing credit relating to pensions 77 19 nm 26 6 nm
Net currency retranslation credits/(charges) 64 (305) nm (85) (108) (21.3)%
Other non-operating credits 51 231 (77.9)% 63 126 (50.0)%
------------------------------------------------- -------- --------- ---------- -------- --------- -----------
Total net non-operating costs (390) (635) (38.6)% (167) (209) (20.1)%
------------------------------------------------- -------- --------- ---------- -------- --------- -----------
Profit before tax 2,615 166 nm 1,578 1,009 56.4 %
Tax (464) 33 nm (348) (156) nm
------------------------------------------------- -------- --------- ---------- -------- --------- -----------
Profit after tax for the period 2,151 199 nm 1,230 853 44.2 %
------------------------------------------------- -------- --------- ---------- -------- --------- -----------
(1) The 2022 results include a reclassification to conform with the current period presentation
for the Net gain on sale of property, plant and equipment within Operating profit. Accordingly,
for the nine month and three month periods to September 30, 2022, the Group has reclassified
EUR31 million and EUR10 million, respectively, of gains from Other non-operating credits to
Expenditure on operations. There is no impact on the Profit after tax.
ALTERNATIVE PERFORMANCE MEASURES
All figures in the tables below are before exceptional items.
Refer to Alternative performance measures section for further
detail.
Nine months to September 30 Three months to September 30
------------------------------- --------------------------------
Before exceptional items Before exceptional items
------------------------------- --------------------------------
Higher/ Higher/
EUR million 2023 2022(1) (lower) 2023 2022(1) (lower)
Passenger revenue 19,517 14,020 39.2 % 7,733 6,416 20.5 %
Cargo revenue 866 1,216 (28.8)% 263 373 (29.5)%
Other revenue 1,846 1,444 27.8 % 650 540 20.4 %
------------------------------------------------- ---------- --------- -------- --------- --------- ----------
Total revenue 22,229 16,680 33.3 % 8,646 7,329 18.0 %
------------------------------------------------- ---------- --------- -------- --------- --------- ----------
Employee costs 3,985 3,417 16.6 % 1,375 1,250 10.0 %
Fuel, oil costs and emissions charges 5,579 4,400 26.8 % 2,029 1,834 10.6 %
Handling, catering and other operating costs 2,891 2,143 34.9 % 1,095 821 33.4 %
Landing fees and en-route charges 1,762 1,391 26.7 % 658 544 21.0 %
Engineering and other aircraft costs 1,862 1,507 23.6 % 654 579 13.0 %
Property, IT and other costs 788 693 13.7 % 273 235 16.2 %
Selling costs 851 671 26.8 % 273 229 19.2 %
Depreciation, amortisation and impairment 1,508 1,539 (2.0)% 525 518 1.4 %
Net (gain)/loss on sale of property, plant and
equipment (15) (31) (51.6)% 2 (10) nm
Currency differences 13 180 (92.8)% 17 113 (85.0)%
------------------------------------------------- ---------- --------- -------- --------- --------- ----------
Total expenditure on operations 19,224 15,910 20.8 % 6,901 6,113 12.9 %
------------------------------------------------- ---------- --------- -------- --------- --------- ----------
Operating profit 3,005 770 nm 1,745 1,216 43.5 %
Finance costs (867) (723) 19.9 % (302) (243) 24.3 %
Finance income 285 11 nm 118 8 nm
Net change in fair value of financial instruments - 132 nm 13 2 nm
Net financing credit relating to pensions 77 19 nm 26 6 nm
Net currency retranslation credits/(charges) 64 (305) nm (85) (108) (21.3)%
Other non-operating credits 51 231 (77.9)% 63 126 (50.0)%
------------------------------------------------- ---------- --------- -------- --------- --------- ----------
Total net non-operating costs (390) (635) (38.6)% (167) (209) (20.1)%
------------------------------------------------- ---------- --------- -------- --------- --------- ----------
Profit before tax 2,615 135 nm 1,578 1,007 56.7 %
Tax (464) 35 nm (348) (154) nm
------------------------------------------------- ---------- --------- -------- --------- --------- ----------
Profit after tax for the period 2,151 170 nm 1,230 853 44.2 %
------------------------------------------------- ---------- --------- -------- --------- --------- ----------
Higher/ Higher/
Operating figures 2023 2022(1) (lower) 2023 2022(1) (lower)
Available seat kilometres (ASK million) 242,293 192,544 25.8 % 88,259 74,834 17.9 %
Revenue passenger kilometres (RPK million) 208,079 156,624 32.9 % 78,494 65,078 20.6 %
Seat factor (per cent) 85.9 81.3 4.6pts 88.9 87.0 1.9pts
Passenger numbers (thousands) 87,548 69,504 26.0 % 33,241 29,535 12.5 %
Cargo tonne kilometres (CTK million) 3,362 2,890 16.3 % 1,138 951 19.7 %
Sold cargo tonnes (thousands) 439 407 7.9 % 145 132 9.8 %
Sectors 538,413 456,837 17.9 % 196,377 179,469 9.4 %
Block hours (hours) 1,605,694 1,308,318 22.7 % 587,584 511,599 14.9 %
------------------------------------------------- ---------- --------- -------- --------- --------- ----------
Aircraft in service 573 552 3.8 % n/a n/a n/a
------------------------------------------------- ---------- --------- -------- --------- --------- ----------
Passenger revenue per RPK (EUR cents) 9.38 8.95 4.8 % 9.85 9.86 (0.1)%
Passenger revenue per ASK (EUR cents) 8.06 7.28 10.6 % 8.76 8.57 2.2 %
Cargo revenue per CTK (EUR cents) 25.76 42.08 (38.8)% 23.11 39.22 (41.1)%
Fuel cost per ASK (EUR cents) 2.30 2.29 0.8 % 2.30 2.45 (6.2)%
Non-fuel costs per ASK (EUR cents) 5.63 5.98 (5.8)% 5.52 5.72 (3.5)%
Total cost per ASK (EUR cents) 7.93 8.26 (4.0)% 7.82 8.17 (4.3)%
------------------------------------------------- ---------- --------- -------- --------- --------- ----------
(1) The 2022 results include a reclassification to conform with the current period presentation
for the Net gain on sale of property, plant and equipment within Operating profit. Accordingly,
for the nine month and three month periods to September 30, 2022, the Group has reclassified
EUR31 million and EUR10 million, respectively, of gains from Other non-operating credits to
Expenditure on operations. There is no impact on the Profit after tax.
Developments since the last report (July 28, 2023) .
On August 23, 2023, the Group extended the availability period
for $1.655 billion of its $1.755 billion Revolving Credit Facility,
which is available to British Airways, Iberia and Aer Lingus.
Following the extension, $1.755 billion will be available to March
2025 and then $1.655 billion available to March 2026. At September
30, 2023 the facility remained undrawn.
On September 28, 2023, British Airways repaid its syndicated
loan of GBP2.0 billion (EUR2.3 billion), which was partially
guaranteed by UK Export Finance (UKEF). At the same time, British
Airways entered into a new 5-year Export Development Guarantee
Facility of GBP1.0 billion (EUR1.2 billion), with commitments from
a syndicate of banks, partially guaranteed by UKEF, and available
through to September 2028. The new facility is in addition to the
GBP1.0 billion Export Development Guarantee Facility, which was
entered into in 2021 and which is available through to November
2026. Both facilities were undrawn at September 30, 2023.
Basis of preparation
At September 30, 2023, the Group had total liquidity of
EUR13,697 million, comprising cash, cash equivalents and
interest-bearing deposits of EUR9,218 million and EUR4,479 million
of committed and undrawn general and overdraft facilities.
In its assessment of going concern over the period of at least
12 months from the date of approval of this report (the 'going
concern period'), the Group has prepared extensive modelling,
including considering a plausible but severe downside scenario.
Having reviewed these scenarios, the Directors have a reasonable
expectation that the Group has sufficient liquidity to continue in
operational existence over the going concern period and hence
continue to adopt the going concern basis in preparing this interim
management statement for the nine months to September 30, 2023.
Principal risks and uncertainties
The Group has continued to maintain its framework and processes
to identify, assess and manage risks. The Group monitors the
evolution of the risk landscape and internal and external changes,
particularly considering how risks combine to create increased
threats, re-assessing the potential severity and likelihood
accordingly.
In assessing its principal risks, the Group has considered
operational resilience, supply chain risk, the status of the
financial markets and demand, political risk and government
intervention, pace of transformation, particularly IT, the
industrial relations landscape and people engagement and cultural
change across the Group. No new principal risks were identified
through the risk management discussions and assessments across the
business and the principal risks and uncertainties affecting the
Group, detailed in the Risk management and principal risk factors
section of the 2022 Annual report and accounts, remain relevant at
the date of this report. However, the profile of certain risks has
changed over the past nine months. These include the Group's
exposure and ability to directly manage the external risk
environment, particularly for aircraft, engines and component
availability, which remains a challenge, given the fundamental
weaknesses in the resilience of the aviation sector's supply chain.
Other external threats which remain heightened include: the impact
of inflation on demand and customer confidence; higher costs in the
supply chain; the impact of escalating and ongoing geopolitical
tensions and conflict in various regions, in particular the Middle
East; air traffic control (ATC) resilience issues and industrial
unrest impacting operations; and policy measures taken by
governments to address the economic environment or policy proposals
that could impact the Group's airlines' ability to set capacity
and/or pricing. Further detail on the changes in the risk
environment including management's responses are provided below.
Management remains focused on mitigating risks at all levels in the
business and investing to increase resilience.
The Board reviews and challenges management on the risk
landscape and its management in the light of changes that influence
the Group and the aviation industry. Where further action has been
required, the Board has considered potential mitigations and, where
appropriate or feasible, the Group has implemented or confirmed
plans that would address those risks or retain them within the
Board's determined Group risk appetite. In addition, the Board and
its sub committees have been appraised of regulatory, competitor
and governmental responses on an ongoing basis.
From the risks identified in the 2022 Annual report and
accounts, given the current environment, the main risks that
continue to be a key area of focus, due to their potential
implications for the Group, are outlined below.
-- Brand and customer trust. Operational resilience and customer
satisfaction underpin customer trust. Reliability, including
on-time performance, service and product delivery, are key elements
of brand value and of each customer's experience. The Group
continues to improve its disruption management capabilities given
the extent of external disruption due to ATC resilience issues
because of staff shortages and/or industrial unrest. All of the
Group's airlines continue to support their customers through any
disruption including schedule adaptions where required. They are
also enhancing cabin and service propositions to help ensure that
our customers choose to fly with the Group's airlines.
-- Critical third parties in the supply chain. The aviation
sector continues to be affected by global supply chain disruption
which has impacted aircraft deliveries, component availability,
resource availability and/or threat of employee industrial action
in critical third parties and airport services, airports'
resilience weaknesses, particularly London Heathrow, and ATC
restrictions and strikes. Delays in new aircraft and spare engine
availability continue to impact operations and increase turnaround
times for aircraft. The Group proactively assesses its schedules
for operability and continues to work with all critical suppliers
to understand any potential disruption within their supply chains
from either a shortage of available resource, strike action or
production delays which could impact the availability of new fleet,
engines or critical goods or services.
-- Cyber attack and data security. The threat of sophisticated
ransomware attacks on critical infrastructure and services remains
high with the Group exposed to threat actors targeting both the
Group's operating companies and its suppliers. The Group continues
to improve its cyber security posture either through major IT
transformational change or additional monitoring through tools as
well as better understanding the risk presented by its
suppliers.
-- Economic, political and regulatory environment. The economic
impact of increases in commodity and wage costs has driven
significant inflation and impacted on interest rates as governments
seek to moderate inflation, which may result in demand softening.
As interest rate increases start to materially pass through to
customers for their personal debt, they may need to reduce their
spend on travel to accommodate the increase in their cost of
borrowing. Recent European governments' proposals to set floor or
ceiling caps on pricing may impact the ability to freely set
pricing and/or capacity.
-- IT systems and IT infrastructure. The Group is reliant upon
the resilience of its systems for key customer and business
processes and is exposed to risks that relate to poor performance,
obsolescence or failure of these systems. The Group continues with
major programmes and upgrades to modernise, including new
commercial capabilities and customer centric enhancements using
agile based models, as well as replacing core IT infrastructure and
improving network connectivity and redundancy. Mitigating actions
that prioritise operational stability and resilience have been
built into all cutover plans for the go-live of IT systems related
changes.
-- Operational resilience. Ongoing labour shortages,
particularly for engineers, industrial unrest and strike action in
the aviation sector, shortages in the supply chain and airspace and
ATC restrictions can all impact the operational environment of the
Group's airlines as well as the operations of the businesses on
which the Group relies. The Group continues with its ambitious IT
infrastructure transformation agenda to modernise and digitalise
its IT estates. The Group is focused on minimising any unplanned
outages or disruption to customers with additional resilience built
into the airlines' networks.
-- People, culture and employee relations. Our people, their
engagement and cultural appetite and mindset for change are
critical to the Group's current performance and future success. Our
leadership recognises the efforts of our staff and their commitment
through the continued operational challenges facing our airlines.
Our businesses continue to build the knowledge and experience of
their new starters and manage the cultural impacts of onboarding at
scale to ensure they have the right capabilities to operate.
Shortages of licensed engineers with aircraft experience across the
aviation sector and in the Group's airlines combined with aircraft,
engines and component shortages are significantly impacting
maintenance delivery timelines and may challenge morale. The Group
is investing in apprenticeship programmes and retention initiatives
to help secure and train engineers. Across the Group, collective
bargaining is in place with various unions. Where agreements are
open, our operating companies continue to engage in discussions
with unions to secure sustainable agreements and address concerns
arising within the negotiations.
-- Sustainable aviation. The plan to decarbonise aviation has
resulted in fragmentation of policy measures and support offered by
governments for green initiatives across the different regions in
which the Group airlines operate. As Sustainable Aviation Fuel
(SAF) infrastructure and availability still lags demand, mandates
and other tax-based measures may disproportionately impact the
Group's airlines versus their competitors.
Operating and market environment
The average jet fuel spot price for the first nine months of
2023 was $873 per metric tonne, 22 per cent lower than the average
spot price of $1,118 per metric tonne in the same period in 2022.
Prices were volatile over the course of the first nine months of
2023, falling from a peak of $1,142 per metric tonne in January to
$769 per metric tonne at the end of June, and then rising again to
reach $1,055 per metric tonne at the end of September. In 2022, the
shape of price movements was markedly different, with fuel prices
rising significantly from late February, following the outbreak of
the war in Ukraine; prices rose from $708 per metric tonne at the
start of January to $1,236 per metric tonne at the end of June 2022
and then fell to $965 per metric tonne at the end of September.
The average foreign exchange rates for the first nine months of
2023 resulted in the US dollar weakening by 1 per cent against the
euro and strengthening by 3 per cent against the pound sterling,
compared with the average of the first nine months of 2022. The
closing foreign exchange rates, applied for balance sheet
translations, were close to those at December 31, 2022, with the US
dollar weakening by 1 per cent against the euro and 2 per cent
against the pound sterling since December 31, 2022.
The net impact of transaction and translation exchange for the
Group for the nine months of 2023 was EUR50 million favourable
versus the first nine months of 2022, with the net impact EUR54
million adverse in quarter 1, EUR69 million favourable in quarter 2
and EUR35 million favourable in quarter 3.
From a transactional perspective, the Group's financial
performance is impacted by fluctuations in exchange rates,
primarily from the US dollar, euro and pound sterling. The Group
generates a surplus in most currencies in which it does business,
except for the US dollar, as capital expenditure, debt repayments
and fuel purchases typically create a deficit. The Group hedges a
portion of its transaction exposures. The net transaction impact on
the operating result was favourable by EUR81 million for the first
nine months, increasing revenues by EUR65 million and reducing
costs by EUR16 million, with the impact EUR48 million adverse in
quarter 1, EUR93 million favourable in quarter 2 and EUR36 million
favourable in quarter 3.
IAG's results are impacted by exchange rates used for the
translation of British Airways' and IAG Loyalty's financial results
from pound sterling to the Group's reporting currency of euro. For
the nine months, the net impact of translation was EUR31 million
adverse versus the first nine months of 2022, with the impact EUR6
million adverse in quarter 1, EUR24 million adverse in quarter 2
and EUR1 million adverse in quarter 3.
Unless stated otherwise, all variances quoted below compare the
first nine months of 2023 with the first nine months of 2022 on a
reported basis (including exceptional items). Results for 2022
include a reclassification to conform with the 2023 presentation
for Net gain on sale of property, plant and equipment within
Operating profit, with EUR31 million of gains in 2022 reclassified
from Other non-operating credits to Expenditure on operations.
Capacity and passenger traffic
The Group continued to restore its passenger capacity, following
the significant reductions due to COVID-19, with passenger capacity
now close to that of 2019. In the first nine months of 2023, IAG
capacity, measured in available seat kilometres (ASKs), was 25.8
per cent higher than in the first nine months of 2022, which was
impacted by the Omicron variant of COVID-19, particularly in
January and February. Passenger capacity was only 5.3 per cent
lower than in the first nine months of 2019. Passenger load factor
for the nine months was 85.9 per cent, up 4.6 points on the
previous year and 1.2 points higher than in the first nine months
of 2019.
Summary of passenger capacity and load factor by region
ASKs higher/(lower) Passenger load factor
--------------------- -------------------------------------
higher/(lower) higher/(lower)
Nine months to September 30, 2023 vs 2022 vs 2019 (%) vs 2022 vs 2019
----------------------------------- --------- ---------- ----- -------------- --------------
Domestic 8.9% 8.3% 89.8 4.4 pts 2.0 pts
Europe 17.6% (5.1%) 86.5 5.0 pts 2.7 pts
North America 27.8% 3.1% 83.6 5.0 pts (0.4) pts
Latin America and Caribbean 17.4% (3.9%) 88.2 4.0 pts 1.6 pts
Africa, Middle East and South Asia 41.6% 2.1% 83.6 3.1 pts 0.5 pts
Asia Pacific nm (60.4%) 89.3 7.2 pts 3.7 pts
----------------------------------- --------- ---------- ----- -------------- --------------
Total network 25.8% (5.3%) 85.9 4.6 pts 1.2 pts
----------------------------------- --------- ---------- ----- -------------- --------------
As can be seen in the table above, the remaining capacity
shortfall to 2019 is principally attributable to the pace of
capacity restoration in the Asia Pacific region, linked to the late
lifting of COVID-19 restrictions. The Group has increased its
schedule to the region during 2023. British Airways services to
Shanghai and Beijing resumed in the summer travel season and the
airline has increased frequencies to Hong Kong and Tokyo
Haneda.
Revenue
Passenger revenue rose EUR5,497 million from the first nine
months of 2022 to EUR19,517 million, reflecting the 25.8 per cent
increase in capacity operated, together with the positive impact of
the 4.6 point increase in the passenger load factor and passenger
yields per revenue passenger kilometre (RPK) up 4.8 per cent. The
resulting passenger unit revenue (passenger revenue per ASK) was
10.6 per cent higher than the previous year and 20.6 per cent
higher than the first nine months of 2019. Leisure traffic
performed particularly strongly, with corporate traffic continuing
to recover more slowly.
Cargo revenue was down EUR350 million versus the previous year
to EUR866 million. Cargo carried, measured in cargo tonne
kilometres (CTKs), rose by 16.3 per cent. Yields were 38.8 per cent
lower than in the previous year, reflecting the substantial
increase in global passenger airline capacity across the industry
and the impact of market demand decline due to the change in
macro-economic conditions. Cargo revenue was up EUR41 million, or
5.0 per cent, versus the first nine months of 2019, with cargo
yields up 29.5 per cent versus 2019, despite weaker market demand
and reduced cargo capacity from the Asia Pacific region.
Other revenue increased by EUR402 million to EUR1,846 million,
reflecting the growth of IAG Loyalty and the recovery in Iberia's
third-party maintenance business and BA Holidays. Other revenue was
32.9 per cent higher than in the first nine months of 2019.
Costs
Costs were impacted by the 25.8 increase in capacity versus
2022, with Total expenditure on operations 21.1 per cent higher
than the previous year and non-fuel costs per ASK down 5.8 per
cent.
Employee costs increased by EUR568 million versus the first nine
months of 2022 to EUR3,985 million, reflecting the increase in
airline operations and the related increase in employee numbers,
together with pay increases. On a unit basis per ASK, Employee
costs were down 7.3 per cent.
Fuel, oil costs and emissions charges increased by EUR1,179
million to EUR5,579 million, principally reflecting the impact of
the higher capacity operated. The significant increase in commodity
fuel prices in the first nine months of 2022 was mitigated by
hedging gains from hedging placed when the fuel prices were lower
in 2021 and previously, whereas in the first nine months of 2023
there was a small net cost of hedging, due to the sustained
increase in fuel prices since the start of 2022. The net result was
that on a unit basis per ASK, Fuel, oil costs and emissions charges
were up 0.8 per cent. Fuel costs continue to benefit from the
Group's investment in new, more fuel-efficient aircraft.
Supplier costs increased by EUR1,605 million to EUR8,167
million, mainly linked to the increase in capacity operated,
together with inflationary increases and disruption costs, partly
offset by the Group's procurement initiatives. On a unit basis per
ASK, Supplier costs were down 1.4 per cent.
Depreciation, amortisation and impairment costs for the first
nine months were EUR1,508 million and the Net gain from the sale of
property, plant and equipment was EUR15 million, reflecting the
disposal of aircraft withdrawn from service and related spare
parts. On a unit basis per ASK, Ownership costs (which include
Depreciation, amortisation and impairment costs, and the Net gain
from the sale of property, plant and equipment) were down 21.3 per
cent.
Operating result
The Group's operating profit for the nine month period was
EUR3,005 million, an improvement of EUR2,204 million versus the
operating profit of EUR801 million for the first nine months of
2022. Excluding exceptional items, the operating result improved
EUR2,235 million versus the first nine months of 2022.
The breakdown of the operating result between the Group's main
operating companies, for the nine months and quarter 3, is shown
below.
Nine months to September 30
2023 higher/(lower) % of 2019 capacity
------------------------
Operating profit/(loss) before exceptional
items, EUR million, and passenger capacity
(ASKs) 2023 2022(1) 2019(2) vs 2022(1) vs 2019(2) (ASKs) operated
----------------------------------------------- ----- ------- ------- ------------ ---------- ------------------
British Airways 1,320 46 1,567 1,274 (247) 89.6
Iberia 821 257 382 564 439 100.9
Vueling 378 201 235 177 143 106.2
Aer Lingus 236 56 247 180 (11) 103.4
IAG Loyalty 249 215 148 34 101 n/a
Other Group companies 1 (5) (78) 6 79 n/a
----------------------------------------------- ----- ------- ------- ------------ ---------- ------------------
Total Group 3,005 770 2,501 2,235 504 94.7
----------------------------------------------- ----- ------- ------- ------------ ---------- ------------------
Three months to September 30
2023 higher/(lower) % of 2019 capacity
------------------------
Operating profit/(loss) before exceptional
items, EUR million, and passenger capacity
(ASKs) 2023 2022(1) 2019(2) vs 2022(1) vs 2019(2) (ASKs) operated
----------------------------------------------- ----- ------- ------- ------------ ---------- ------------------
British Airways 718 482 710 236 8 92.4
Iberia 449 255 264 194 185 99.0
Vueling 282 259 230 23 52 101.9
Aer Lingus 196 139 169 57 27 103.1
IAG Loyalty 89 63 50 26 39 n/a
Other Group companies 11 18 (10) (7) 21 n/a
----------------------------------------------- ----- ------- ------- ------------ ---------- ------------------
Total Group 1,745 1,216 1,413 529 332 95.6
----------------------------------------------- ----- ------- ------- ------------ ---------- ------------------
(1) Figures for 2022 restated for change in classification of the Net gain on sale of property,
plant and equipment within Operating profit to conform with the 2023 presentation.
(2) Figures for 2019 adjusted for impact of change to accounting for pension administration
costs for British Airways in 2021 and the change in classification of Net gain on sale of
property, plant and equipment within Operating profit to conform with the 2023 presentation.
Restoration of capacity in British Airways has been lower than
in the other operating companies, reflecting the retirement of
British Airways' Boeing 747-400 fleet in its response to the
COVID-19 pandemic and the slower restoration of capacity in the
Asia Pacific region. Both Iberia and Vueling have performed
strongly in the first nine months of 2023, with operating profit
before exceptional items exceeding that achieved in 2019. IAG
Loyalty continues to increase its base of collectors of the Group's
loyalty currency, Avios, with its operating profit for the nine
months significantly increased versus the same period in 2019.
Exceptional items
There were no exceptional items in the first nine months of
2023. In the first nine months of 2022, the Group recorded an
exceptional credit of EUR23 million, relating to the partial
reversal of a fine previously issued by the European Commission, in
2010, to British Airways, and an exceptional credit of EUR8 million
reflecting the partial reversal of aircraft impairments made in
2020. See Alternative performance measures section for further
information.
Net non-operating costs, taxation and profit after tax
The Group's net non-operating costs for the first nine months of
2023 were EUR390 million, compared with EUR635 million in the first
nine months of 2022, mainly reflecting: net finance costs of EUR582
million, down EUR130 million, driven by the significant increase in
interest received on deposits, net of increases in finance costs,
linked to rising interest rates; EUR64 million of Net currency
retranslation credits in 2023, versus charges of EUR305 million in
2022; no net change in the fair value of financial instruments,
versus a credit of EUR132 million in 2022, principally due to
changes in the mark-to-market of the IAG EUR825 million convertible
bond, which is held at fair value; and other non-operating credits
of EUR51 million in 2023 versus credits of EUR231 million in 2022,
mainly related to fair value movements on derivatives for which
hedge accounting is not applied.
The tax charge on the profit for the period was EUR464 million
(2022: tax credit of EUR33 million), and the effective tax rate was
18 per cent (2022: negative 20 per cent).
The substantial majority of the Group's activities are taxed
where the main operations are based: in the UK, Spain and Ireland,
which have corporation tax rates during 2023 of 23.5 per cent, 25
per cent and 12.5 per cent, respectively. The expected tax rate for
the Group is determined by applying the relevant corporation tax
rate to the profits or losses of each jurisdiction. The
geographical distribution of profits and losses in the Group
results in the expected tax rate being 23 per cent for the nine
months to September 30, 2023. The difference between the actual
effective tax rate of 18 per cent and the expected tax rate of 23
per cent is primarily due to the partial recognition of previously
unrecognised deferred tax assets in the Group's Spanish
companies.
The profit after tax for the first nine months of 2023 was
EUR2,151 million (2022: EUR199 million).
Cash, debt and liquidity
The Group's cash balance (defined as cash, cash equivalents and
current interest-bearing deposits) of EUR9,218 million at September
30, 2023 was down EUR381 million on December 31, 2022, mainly
driven by repayments of debt described further below.
During the nine months, the Group took delivery of 20 aircraft
and drew financing for 19 aircraft as set down below.
Delivered in the nine Of which financed in the
months to September 30, nine months to September Aircraft delivered in 2022
Number of aircraft 2023 30, 2023 and financed in 2023
---------------------------- --------------------------- -------------------------- ---------------------------
Airbus A320neo (British
Airways) 1 1 2
Airbus A320neo (Iberia) 2 - -
Airbus A320neo (Aer Lingus) 1 1 -
Airbus A321neo (Iberia) 4 2 -
Airbus A321neo (Vueling) 4 4 -
Airbus A350-900 (Iberia) 3 2 -
Airbus A350-1000 (British
Airways) 3 2 3
Boeing 787-10 (British
Airways) 2 2 -
----------------------------- -------------------------- -------------------------- ---------------------------
Total 20 14 5
----------------------------- -------------------------- -------------------------- ---------------------------
The five aircraft for British Airways delivered in 2022 and
financed in 2023 had financing secured but undrawn at December 31,
2022, which was reported within committed and undrawn aircraft
financing facilities. The Group continues to have a number of
options available to it to finance its deliveries of aircraft.
The Group's total borrowings at September 30, 2023 were
EUR17,227 million, down EUR2,757 million from December 31, 2022.
The reduction was mainly due to the Group's repayments of debt,
including the early repayment of British Airways' GBP2.0 billion
(EUR2.3 billion) loan partially guaranteed by UKEF and an IAG
unsecured bond of EUR500 million, which was redeemed at its
maturity on July 4, 2023.
Net debt (total borrowings less cash, cash equivalents and
current interest-bearing deposits) was EUR8,009 million at
September 30, 2023, a reduction of EUR2,376 million since December
31, 2022, mainly due to the increase in cash outlined above, driven
by the profitability in the first nine months, inflows of forward
bookings for future travel, partially offset by capital expenditure
and net interest. The normal seasonal pattern of cash flows
typically results in an increase in net debt in the final quarter
of the year.
The Group's EBITDA before exceptional items for the rolling four
quarters to September 30, 2023 was EUR5,529 million. Net debt to
EBITDA before exceptional items was 1.4 times at September 30,
2023. See Alternative performance measures section for further
information.
Total liquidity at September 30, 2023 was EUR13,697 million,
down EUR302 million from EUR13,999 million at December 31, 2022,
linked to the Group's debt repayments net of cash generation in the
first nine months of 2023. Committed and undrawn general and
overdraft facilities were EUR4,479 million (December 31, 2022:
EUR3,284 million), with the increase mainly reflecting the new
GBP1.0 billion (EUR1.2 billion) British Airways facility outlined
above; there were no committed and undrawn aircraft specific
facilities (December 31, 2022: EUR1,116 million).
ALTERNATIVE PERFORMANCE MEASURES
The performance of the Group is assessed using a number of
alternative performance measures (APMs), some of which have been
identified as key performance indicators of the Group. These
measures are not defined under International Financial Reporting
Standards (IFRS), should be considered in addition to IFRS
measurements, may differ to definitions given by regulatory bodies
applicable to the Group and may differ to similarly titled measures
presented by other companies. They are used to measure the outcome
of the Group's strategy based on 'Unrivalled customer proposition',
'Value accretive and sustainable growth' and 'Efficiency and
innovation'.
During the nine months to September 30, 2023, the Group has made
no changes to its pre-existing disclosures and treatments of APMs
compared to those disclosed in the Annual Report and Accounts for
the year to December 31, 2022.
The definition of each APM, together with a reconciliation to
the nearest measure prepared in accordance with IFRS is presented
below.
a Profit after tax before exceptional items
Exceptional items are those that in the Board's and management's
view need to be separately disclosed by virtue of their size or
incidence to supplement the understanding of the entity's financial
performance. The Management Committee of the Group uses financial
performance on a pre-exceptional basis to evaluate operating
performance and to make strategic, financial and operational
decisions, and externally because it is widely used by security
analysts and investors in evaluating the performance of the Group
between reporting periods and against other companies.
While there have been no exceptional items recorded in the nine
months to September 30, 2023, exceptional items in the nine months
to September 30, 2022 include: significant changes in the long-term
fleet plans that result in the reversal of impairment of fleet
assets and legal re-imbursements.
The table below reconciles the statutory Income statement to the
Income statement before exceptional items of the Group:
Nine months to September 30
----------------------------------------------------------------------------------------------------
Before Before
Exceptional exceptional Statutory Exceptional exceptional
EUR million Statutory 2023 items items 2023 2022(1) items items 2022
---------------- -------------- --------------- --------------- --------------- ---------------- ---------------
Passenger
revenue 19,517 - 19,517 14,020 - 14,020
Cargo revenue 866 - 866 1,216 - 1,216
Other revenue 1,846 - 1,846 1,444 - 1,444
---------------- -------------- --------------- --------------- --------------- ---------------- ---------------
Total revenue 22,229 - 22,229 16,680 - 16,680
---------------- -------------- --------------- --------------- --------------- ---------------- ---------------
Employee costs 3,985 - 3,985 3,417 - 3,417
Fuel, oil costs
and emissions
charges 5,579 - 5,579 4,400 - 4,400
Handling,
catering and
other operating
costs 2,891 - 2,891 2,143 - 2,143
Landing fees and
en-route
charges 1,762 - 1,762 1,391 - 1,391
Engineering and
other aircraft
costs 1,862 - 1,862 1,507 - 1,507
Property, IT and
other costs(2) 788 - 788 670 (23) 693
Selling costs 851 - 851 671 - 671
Depreciation,
amortisation
and
impairment(3) 1,508 - 1,508 1,531 (8) 1,539
Net gain on sale
of property,
plant and
equipment (15) - (15) (31) - (31)
Currency
differences 13 - 13 180 - 180
---------------- -------------- --------------- --------------- --------------- ---------------- ---------------
Total
expenditure on
operations 19,224 - 19,224 15,879 (31) 15,910
---------------- -------------- --------------- --------------- --------------- ---------------- ---------------
Operating profit 3,005 - 3,005 801 31 770
Finance costs (867) - (867) (723) - (723)
Finance income 285 - 285 11 - 11
Net change in
fair value of
financial
instruments - - - 132 - 132
Net financing
credit relating
to pensions 77 - 77 19 - 19
Net currency
retranslation
charges 64 - 64 (305) - (305)
Other
non-operating
credits 51 - 51 231 - 231
---------------- -------------- --------------- --------------- --------------- ---------------- ---------------
Total net
non-operating
costs (390) - (390) (635) - (635)
---------------- -------------- --------------- --------------- --------------- ---------------- ---------------
Profit before
tax 2,615 - 2,615 166 31 135
Tax (464) - (464) 33 (2) 35
Profit after tax
for the period 2,151 - 2,151 199 29 170
---------------- -------------- --------------- --------------- --------------- ---------------- ---------------
Three months to September 30
----------------------------------------------------------------------------------------------------
Before Before
Exceptional exceptional Statutory Exceptional exceptional
EUR million Statutory 2023 items items 2023 2022(1) items items 2022
---------------- -------------- --------------- --------------- --------------- ---------------- ---------------
Passenger
revenue 7,733 - 7,733 6,416 - 6,416
Cargo revenue 263 - 263 373 - 373
Other revenue 650 - 650 540 - 540
---------------- -------------- --------------- --------------- --------------- ---------------- ---------------
Total revenue 8,646 - 8,646 7,329 - 7,329
---------------- -------------- --------------- --------------- --------------- ---------------- ---------------
Employee costs 1,375 - 1,375 1,250 - 1,250
Fuel, oil costs
and emissions
charges 2,029 - 2,029 1,834 - 1,834
Handling,
catering and
other operating
costs 1,095 - 1,095 821 - 821
Landing fees and
en-route
charges 658 - 658 544 - 544
Engineering and
other aircraft
costs 654 - 654 579 - 579
Property, IT and
other costs 273 - 273 235 - 235
Selling costs 273 - 273 229 - 229
Depreciation,
amortisation
and
impairment(3) 525 - 525 516 (2) 518
Net loss/(gain)
on sale of
property, plant
and equipment 2 - 2 (10) - (10)
Currency
differences 17 - 17 113 - 113
---------------- -------------- --------------- --------------- --------------- ---------------- ---------------
Total
expenditure on
operations 6,901 - 6,901 6,111 (2) 6,113
---------------- -------------- --------------- --------------- --------------- ---------------- ---------------
Operating profit 1,745 - 1,745 1,218 2 1,216
Finance costs (302) - (302) (243) - (243)
Finance income 118 - 118 8 - 8
Net change in
fair value of
financial
instruments 13 - 13 2 - 2
Net financing
credit relating
to pensions 26 - 26 6 - 6
Net currency
retranslation
charges (85) - (85) (108) - (108)
Other
non-operating
credits 63 - 63 126 - 126
---------------- -------------- --------------- --------------- --------------- ---------------- ---------------
Total net
non-operating
costs (167) - (167) (209) - (209)
---------------- -------------- --------------- --------------- --------------- ---------------- ---------------
Profit before
tax 1,578 - 1,578 1,009 2 1,007
Tax (348) - (348) (156) (2) (154)
Profit after tax
for the period 1,230 - 1,230 853 - 853
---------------- -------------- --------------- --------------- --------------- ---------------- ---------------
(1) The 2022 results include a reclassification to confirm with
the current period presentation for the Net gain on sale of
property, plant and equipment. Accordingly, for the nine month and
three month periods to September 30, 2022, the Group has
reclassified EUR31 million and EUR10 million, respectively, of
gains from Other non-operating credits to Net (gain)/loss on sale
of property, plant and equipment within Operating expenses. There
is no impact on the Profit after tax.
The rationale for each exceptional item is given below.
(2) Partial reversal of historical fine
The exceptional credit of EUR23 million for the nine months to
September 30, 2022, related to the partial reversal of the fine,
plus accrued interest, initially issued by the European Commission,
in 2010, to British Airways regarding its involvement in cartel
activity in the air cargo sector and that had been recognised as an
exceptional charge. The exceptional credit was recorded within
Property, IT and other costs in the Income statement with no
resultant tax charge arising. The cash inflow associated with the
partial reversal of the fine was recognised during 2022.
(3) Impairment reversal of fleet and associated assets
The exceptional impairment reversal of EUR8 million for the nine
months to September 30, 2022, related to six Airbus A320s in
Vueling, previously stood down in the fourth quarter of 2020 and
subsequently stood up during 2022. The exceptional impairment
reversal was recorded within Right of use assets on the Balance
sheet and within Depreciation, amortisation and impairment in the
Income statement.
b Adjusted earnings per share (KPI)
Adjusted earnings are based on results before exceptional items
after tax and adjusted for earnings attributable to equity holders
and interest on convertible bonds, divided by the weighted average
number of ordinary shares, adjusted for the dilutive impact of the
assumed conversion of the bonds and employee share schemes
outstanding .
Nine months to September 30
-----------------------------
EUR million 2023 2022
--------------------------------------------------------------------------------------- -------------- -------------
Profit after tax attributable to equity holders of the parent 2,151 199
Exceptional items - 29
--------------------------------------------------------------------------------------- -------------- -------------
Profit after tax attributable to equity holders of the parent before exceptional items 2,151 170
Income statement impact of convertible bonds 3 (147)
--------------------------------------------------------------------------------------- -------------- -------------
Adjusted profit 2,154 23
--------------------------------------------------------------------------------------- -------------- -------------
Weighted average number of shares used for basic earnings per share 4,938 4,960
Weighted average number of shares used for diluted earnings per share 5,289 5,338
Basic earnings per share (EUR cents) 43.6 4.0
Basic earnings per share before exceptional items (EUR cents) 43.6 3.4
Adjusted earnings per share (EUR cents) 40.7 0.4
--------------------------------------------------------------------------------------- -------------- -------------
c Net debt to EBITDA before exceptional items (KPI)
To supplement total borrowings as presented in accordance with
IFRS, the Group reviews net debt to EBITDA before exceptional items
to assess its level of net debt in comparison to the underlying
earnings generated by the Group in order to evaluate the underlying
business performance of the Group. This measure is used to monitor
the Group's leverage and to assess financial headroom against
internal and external security analyst and investor benchmarks.
Net debt is defined as long-term borrowings (both current and
non-current), less cash, cash equivalents and current
interest-bearing deposits. Net debt excludes supply chain financing
arrangements which are classified within trade payables.
EBITDA before exceptional items is defined as the rolling four
quarters operating result before exceptional items, interest,
taxation, depreciation, amortisation and impairment.
The Group believes that this additional measure, which is used
internally to assess the Group's financial capacity, is useful to
the users of the financial statements in helping them to see how
the Group's financial capacity has changed over the year. It is a
measure of the profitability of the Group and of the core operating
cash flows generated by the business model.
EUR million Nine months to September 30, 2023 December 31, 2022(1)
------------------------------------------------------------- --------------------------------- --------------------
Interest-bearing long-term borrowings 17,227 19,984
Less: Cash and cash equivalents (7,801) (9,196)
Less: Other current interest-bearing deposits (1,417) (403)
------------------------------------------------------------- --------------------------------- --------------------
Net debt 8,009 10,385
------------------------------------------------------------- --------------------------------- --------------------
Operating profit 3,482 1,278
Add: Depreciation, amortisation and impairment 2,047 2,070
------------------------------------------------------------- --------------------------------- --------------------
EBITDA 5,529 3,348
------------------------------------------------------------- --------------------------------- --------------------
Add: Exceptional items (excluding those reported within
Depreciation, amortisation and impairment) - (23)
------------------------------------------------------------- --------------------------------- --------------------
EBITDA before exceptional items 5,529 3,325
------------------------------------------------------------- --------------------------------- --------------------
Net debt to EBITDA before exceptional items 1.4 3.1
------------------------------------------------------------- --------------------------------- --------------------
(1) The 2022 results include a reclassification to conform with the current period presentation
for the Net gain on sale of property, plant and equipment.
d Liquidity
The Board and the Management Committee monitor liquidity in
order to assess the resilience of the Group to adverse events and
uncertainty and develop funding initiatives to maintain this
resilience.
Liquidity is used by analysts, investors and other users of the
financial statements as a measure to the financial health and
resilience of the Group.
Liquidity is defined as Cash and cash equivalents plus Current
interest-bearing deposits, plus Committed general undrawn
facilities and Committed aircraft undrawn facilities.
September December
EUR million 30, 2023 31, 2022
-------------------------------------- --------- --------
Cash and cash equivalents 7,801 9,196
Current interest-bearing deposits 1,417 403
Committed general undrawn facilities 4,426 3,231
Committed aircraft undrawn facilities - 1,116
Overdrafts and other facilities 53 53
-------------------------------------- --------- --------
Total liquidity 13,697 13,999
-------------------------------------- --------- --------
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