Category Archives: IAG

IAG returns to profitable for the first six months of 2022

International Consolidated Airlines Group (IAG) presented its Group consolidated results for the six months to June 30, 2022.

IAG returns to profit in the second quarter following strong recovery in demand across all airlines

IAG financial results highlights for the period:

Operating profit for the second quarter €293 million (2021: operating loss €967 million), and operating profit before exceptional items €287 million (2021: operating loss before exceptional items €1,045 million)
Operating loss for the half year €438 million (2021: operating loss €2,035 million), and operating loss before exceptional items €467 million (2021: operating loss before exceptional items €2,180 million)
Profit after tax and exceptional items for the second quarter €133 million (2021: loss €981 million) and profit after tax before exceptional items €127 million (2021: loss €1,045 million)
Loss after tax and exceptional items for the half year €654 million (2021: loss €2,048 million) and loss after tax before exceptional items €683 million (2021: loss €2,169 million)
Strong liquidity at June 30, 2022:
- Total liquidity increased to €13,489 million (December 31, 2021: €11,986 million)
- Cash1 of €9,190 million, up €1,247 million on December 31, 2021, with significantly positive working capital, driven
  principally by bookings for travel in the second half of the year
- Committed and undrawn general and aircraft financing facilities of €4,299 million (December 31, 2021: €4,043
  million), including an additional €200 million loan facility for Aer Lingus from the Ireland Strategic Investment Fund
Net debt at June 30, 2022 was down €688 million since December 31, 2021 to €10,979 million, reflecting the seasonal
benefit on cash of bookings for travel in the second half of the year

Customer demand continues to recover strongly

Passenger capacity in quarter 2 was 78% of 2019 (Q1 guidance: c80%), up from 65% in quarter 1, driven primarily by IAG’s key regions of European shorthaul (capacity 89% of 2019), North America (84%) and Latin America & Caribbean (81%)
Passenger unit revenue in quarter 2 increased by 6.4% compared to 2019, helping to offset lower capacity and higher fuel costs, driven by passenger revenue yield 10.6% higher than in 2019
Load factor of 81.8% (3.2 points lower than in 2019, but higher than 72.2% in quarter 1)
By the end of quarter 2, premium leisure revenue had almost fully recovered to 2019’s level, despite capacity being
significantly lower. Business channel revenue had recovered to c.60% of 2019’s level
In response to the challenging operational environment at Heathrow, British Airways’ capacity was limited to 69.1% in quarter 2 (compared to 57.4% in quarter 1) and plans to increase to c.75% in quarter 3
IAG’s overall passenger capacity plans for the remainder of 2022 are c.80% in quarter 3 and c.85% in quarter 4, a reduction
of 5% for the second half of the year compared to previous guidance, mainly due to the challenges at Heathrow; full-year capacity is expected to be c.78% of 2019 (compared to c.80% previously), with North America close to 2019 capacity by the end of the year
SAF (Sustainable Aviation Fuel) purchase commitments increased to $865 million (from $400 million previously) for the next 20 years, including a quarter of IAG’s SAF target for 2030 (10% of total fuel needs)

Luis Gallego, IAG Chief Executive Officer, said:

“In the second quarter we returned to profit for the first time since the start of the pandemic following a strong recovery in demand across all our airlines. This result supports our outlook for a full year operating profit.

“Our performance reflected a significant increase in capacity, load factor and yield compared to the first quarter. “Premium leisure remains strong while business travel continues a steady recovery in all airlines.

“Iberia and Vueling were the best performing carriers within the Group. The Spanish domestic market and routes to Latin America continued to lead the recovery with demand exceeding 2019 levels last month.

“Forward bookings show sustained strength and North Atlantic demand continues to grow following the lifting of the US COVID testing requirements in June.

“Although bookings into the fourth quarter are seasonally low at this time of year, we are seeing no signs of any weakness in demand.

“Our industry continues to face historic challenges due to the unprecedented scaling up in operations, especially in the UK where the operational challenges of Heathrow airport have been acute. Our airline teams remain focused on enhancing operational resilience and improving customer experience. I would like to thank those customers affected for their loyalty and patience and our colleagues for their hard work and commitment. We will continue working with the industry to address these issues as aviation emerges from its biggest crisis ever.

“In line with our net zero commitment by 2050, we have announced the addition of 50 new Boeing 737s and 59 Airbus A320 Neo family aircraft subject to shareholder approval. These modern, fuel-efficient planes will see us over 60 per cent through our shorthaul fleet replacement by 2028.

“As we build back operational resilience, our strong portfolio of brands, ability to deliver efficiencies through our Group scale, strong capital discipline and our leadership position in sustainability will generate long term shareholder value.”

Trading outlook

IAG expects pre-exceptional operating profit to be significantly improved for quarter 3 2022 compared to quarter 2 and to be positive for full year 2022. Net cash flow from operating activities is expected to be significantly positive for the year. This assumes no further setbacks related to COVID-19 and government-imposed restrictions or material impacts from geopolitical developments. Net debt is expected to increase by year end compared with the end of 2021.

Aircraft:

IAG orders 50 Boeing 737-8-200s and 737-10s, plus 100 options

Boeing and International Airlines Group (IAG) have announced an order for a combined total of 50 737-8-200s and 737-10s, plus 100 options.

The 737-8-200 will enable IAG to configure the airplane with up to 200 seats, increasing revenue potential and reducing fuel consumption.

(Boeing photo)

The largest model in the family, the 737-10 seats up to 230 passengers in a single-class configuration and can fly up to 3,300 miles. The fuel-efficient jet can cover 99% of single-aisle routes, including routes served by 757s.

The 737 incorporates the latest-technology CFM International LEAP-1B engines, Advanced Technology winglets and other improvements to deliver the highest efficiency, reliability and passenger comfort in the single-aisle market. The 737 family of airplanes is on average 14% more fuel-efficient than today’s most efficient Next-Generation 737s and 20% more efficient than the original Next-Generation 737s when they entered service.

This announcement finalizes a commitment made by IAG for the 737 at the 2019 Paris Air Show and is subject to approval by IAG shareholders.

Note: IAG did not specify which airlines will operate the aircraft.

IAG to provide a loan to Air Europa’s owner in return for a possible 20% share

International Airlines Group (IAG)’s quest to acquire Air Europa is not lost. IAG is still in the game. IAG is providing a lifeline to Globalia, the owner of Air Europa.

IAG will offer a 100 million euros seven-year unsecured loan to Globalia.

In return, IAG will have the option to trade the loan into a possible 20 percent share of Air Europa.

The deal is conditional on the approval from syndicated banks.

British Airways owner ‘exposed to French and German demands for a break-up’

Not everything is resolved with Brexit.

From The Telegraph:

“The owner of British Airways is at risk of a challenge from France and Germany under legacy Brussel rules that would force it to break up, analysts have warned.

IAG, the FTSE 100 group whose airlines also include Aer Lingus and Spain’s Iberia, could be forced to spin off BA because of European Union ownership rules, according to HSBC.

These regulations require airlines which operate flights between countries in the bloc to be “owned and controlled” from member states.”

Read the full article:

https://finance.yahoo.com/news/british-airways-owner-exposed-french-135639665.html

The CMA is investigating the anticipated acquisition of Air Europa Líneas Aéreas by IAG

IAG / Air Europa merger inquiry

The Competition and Markets Authority (CMA) (UK) issued this short statement:

The CMA is investigating the anticipated acquisition of Air Europa Líneas Aéreas, S.A.U., Aeronova S.L.U., León Activos Aeronáuticos, S.L.U. and Globalia Lease Finance Seven Limited (together, Air Europa) by International Consolidated Airlines Group, S.A.

The CMA is considering whether it is or may be the case that this transaction, if carried into effect, will result in the creation of a relevant merger situation under the merger provisions of the Enterprise Act 2002 and, if so, whether the creation of that situation may be expected to result in a substantial lessening of competition within any market or markets in the United Kingdom for goods or services.

IAG reports “there’s a significant recovery underway”, with longhaul doing better

IAG issued this financial report for the past nine months:

Click to access iag-q3-2021-financial-results-en.pdf

IAG reports six months of financial results

IAG released this financial report for the first half of 2021:

IAG reports a first quarter operating loss of €1,068 million

IAG to power 10% of its flights with sustainable fuel by 2030

International Airlines Group (IAG) has become the first European airline group to commit to powering 10 percent of its flights with sustainable aviation fuel by 2030.

The Group will purchase one million tons of sustainable jet fuel per year enabling it to cut its annual emissions by two million tonnes by 2030. This equates to removing one million cars from Europe’s roads each year.

In addition, IAG will become the first airline group worldwide to extend its net zero commitment to its supply chain. The Group will be working with its suppliers to enable them to commit to achieving net zero emissions by 2050 for the products and services they provide to IAG.

With the right policy in place in the next ten years up to 14 plants could be built across the UK, creating 6,500 jobs and saving 3.6 million tonnes of CO2 per annum. Sustainable jet fuel produces at least 70 percent less carbon emissions than fossil fuel.

IAG is investing US$400 million in the development of sustainable aviation fuel in the next 20 years. The Group is partnering with sustainable aviation fuel developers, LanzaJet and Velocys. This includes Europe’s first household waste-to-jet fuel plant in the UK which will start operations in 2025. British Airways will also purchase sustainable jet fuel from LanzaJet’s US plant to power some of its flights from late 2022.

IAG was the first airline group worldwide to commit to net zero carbon emissions by 2050 and is one of the 10 global companies recognized by the UN for their ambitious carbon targets.

The Group is investing in tech innovator ZeroAvia to speed up the development of hydrogen-electric powered aircraft. This type of technology has the potential to enable IAG airlines to reach zero emissions on short-haul routes by 2050.

IAG reports a 2020 loss of €6,923 million

International Consolidated Airlines Group (IAG) on February 26, 2021 presented Group consolidated results for the year to December 31, 2020.

COVID-19 situation and management actions:

• Passenger capacity in quarter 4 was 26.6 per cent of 2019 and for the full year was 33.5 per cent of 2019 and continues to be adversely affected by the COVID-19 pandemic, together with government restrictions and quarantine requirements

• Current passenger capacity plans for quarter 1, 2021 are for around 20 per cent of 2019 capacity, but remain uncertain and subject to review

• 969 cargo-only flights operated in quarter 4 • Additional funding of €3.4 billion secured in quarter 4, including £2.0 billion commitment from UK Export Finance finalized in February 2021 and $1.0 billion EETC for British Airways, $0.2 billion sales and leaseback transactions for Iberia and €150 million for Aer Lingus backed by the Ireland Strategic Investment Fund (ISIF), with €0.8 billion bridge financing facilities repaid

• 2020 capex reduced by €2.3 billion, from plans at the start of the year, to €1.9 billion, with €0.5 billion due to seven aircraft deliveries delayed from Q4-20 into 2021; 2021 capex expected to be lower than 2020

• British Airways reached agreement to defer €495 million of pension contributions due between September 2020 and October 2021

• British Airways reached agreement in principle over restructuring plans for cargo employees, following agreement with the other main British Airways employee groups earlier in 2020 • Group continues to focus on cost reduction, increasing the variability of its cost-base and liquidity initiatives

IAG period highlights on results:

• Fourth quarter operating loss €1,471 million (2019: operating profit €93 million), and operating loss before exceptional items €1,165 million (2019: operating profit before exceptional items €765 million)

• Operating loss for the year to December 31, 2020 €7,426 million (2019: operating profit €2,613 million), and operating loss before exceptional items €4,365 million (2019: operating profit before exceptional items €3,285 million)

• Exceptional charge before tax in the year to December 31, 2020 of €3,061 million on discontinuance of fuel and foreign exchange hedge accounting, impairment of fleet and restructuring costs; exceptional charge before tax for quarter 4 €306 million

• Loss after tax and exceptional items for the year to December 31, 2020 €6,923 million (2019: profit €1,715 million) and loss after tax before exceptional items: €4,325 million (2019: profit before exceptional items €2,387 million)

• Cash of €5,917 million at December 31, 2020 down €766 million on December 31, 2019. Committed and undrawn general and aircraft facilities were €2.14 billion, bringing total liquidity to €8.1 billion. Including €2.2 billion proceeds from the UK Export Finance (UKEF) gives total pro-forma liquidity of €10.3 billion.

Luis Gallego, IAG’s Chief Executive Officer, said: “In 2020, we’re reporting an operating loss of €4,365 million before exceptional items compared to an operating profit of €3,285 million in 2019. Total operating losses including exceptional items relating to fuel and currency hedges, early fleet retirement plus restructuring costs came to €7,426 million.

“Our results reflect the serious impact that COVID-19 has had on our business. We have taken effective action to preserve cash, boost liquidity and reduce our cost base. Despite this crisis, our liquidity remains strong. At 31 December, the Group’s liquidity was €10.3 billion including a successful €2.7 billion capital increase and £2 billion loan commitment from UKEF. This is higher than at the start of the pandemic.

“In 2020, our capacity decreased by 66.5 per cent while our non-fuel costs went down 37.1 per cent thanks to the extraordinary effort across our business. The Group continues to reduce its cost base and increase the proportion of variable costs to better match market demand. We’re transforming our business to ensure we emerge in a stronger competitive position.

“IAG Cargo’s turnover increased by almost €200 million to €1.3 billion. Cargo helped to make longhaul passenger flights viable. In addition, we operated 4,003 cargo-only flights in the year.

“I would like to thank our employees across the Group for their remarkable commitment, resilience and flexibility through this crisis. They have adapted quickly to new ways of working and made big sacrifices in terms of salary and working time. Our people have played a central role in all we have achieved during these challenging times.

“The aviation industry stands with governments in putting public health at the top of the agenda. Getting people traveling again will require a clear roadmap for unwinding current restrictions when the time is right.

“We know there is pent-up demand for travel and people want to fly. Vaccinations are progressing well and global infections are going in the right direction. We’re calling for international common testing standards and the introduction of digital health passes to reopen our skies safely.”