Category Archives: IAG

IAG to acquire Air Europa for €1 billion, Air Europa to be run by Iberia

International Consolidated Airlines Group (IAG) and Globalia are pleased to announce that definitive transaction agreements have been signed under which IAG’s wholly owned subsidiary, IB OPCO Holding S.L. (Iberia), has agreed to acquire the entire issued share capital of Air Europa for €1 billion to be satisfied in cash at Completion and subject to a closing accounts adjustment.

Highlights

Transforms IAG’s Madrid hub into a true rival to Europe’s four largest hubs: Amsterdam, Frankfurt, London Heathrow and Paris Charles De Gaulle.
Re-establishes IAG as a leader in the highly attractive Europe to Latin America and Caribbean market.
Offers significant synergy potential in terms of cost and revenue.
EPS accretive in the first full year and accretive to IAG’s return on invested capital by the fourth year after Completion.
Completion is expected to take place in H2 2020 following receipt of relevant approvals.

Commenting on today’s announcement, Willie Walsh, Chief Executive of IAG, said:

“Acquiring Air Europa would add a new competitive, cost effective airline to IAG, consolidating Madrid as a leading European hub and resulting in IAG achieving South Atlantic leadership, therefore generating additional financial value for our shareholders.

IAG has a strong track record of successful acquisitions, most recently with the acquisition of Aer Lingus in 2015 and we are convinced Air Europa presents a strong strategic fit for the group.”

Javier Hidalgo, Chief Executive of Globalia, said:

“For Globalia, the incorporation of Air Europa to IAG implies the strengthening of the company’s present and future that will maintain the path followed by Air Europa in the last years. We are convinced that the incorporation of Air Europa to a group such as IAG, who over all these years has demonstrated its support to the development of airlines within the group and the Madrid hub, will be a success”.

Luis Gallego, Chief Executive of Iberia, said:

“This is of strategic importance for the Madrid hub, which in recent years has lagged behind other European hubs. Following this agreement, Madrid will be able to compete with other European hubs on equal terms with a better position on Europe to Latin America routes and the possibility to become a gateway between Asia and Latin America.”

Strategic rationale

Air Europa is one of the leading private airlines in Spain, operating scheduled domestic and international flights to 69 destinations, including European and long-haul routes to Latin America, the United States of America, the Caribbean and North Africa. In 2018, Air Europa generated revenue of €2.1 billion and an operating profit of €100 million. It carried 11.8 million passengers in 2018 and ended the year with a fleet of 66 aircraft.

The Board of IAG believes that the transaction would:

Increase the importance of IAG’s Madrid hub, transforming it into a true rival to Europe’s big four hubs: Amsterdam, Frankfurt, London Heathrow and Paris Charles De Gaulle;
Unlock further network growth opportunities and re-establish IAG’s South Atlantic leadership; and
Result in significant customer benefits through providing increased

The Air Europa brand will initially be retained and the company will remain as a standalone profit center within Iberia run by Iberia CEO Luis Gallego. The managements of IAG and Iberia anticipate opportunities to unlock value through the Acquisition across three key areas:

Integrating Air Europa into the existing Iberia hub structure at Madrid;
Creating commercial links between Air Europa and other IAG operating companies, in addition to inclusion into IAG’s joint businesses;
Integrating Air Europa onto the IAG platform of common services.

Synergies and financial impact

The Acquisition is expected to generate cost synergies across selling, general and administrative expenses, procurement, handling and distribution costs with full run-rate synergies to be achieved by 2025. IAG expects implementation costs to be phased over the same period.

In addition, the Acquisition is expected to generate significant revenue synergies by 2025, including:

Adding reciprocal intra-group codeshares across all connecting gateways;
Adjusting timings to maximise connectivity through the Madrid hub;
Aligning commercial policies and integrating sales forces in home markets;
Integrating Air Europa into existing IAG joint businesses; and
Integrating Air Europa into the Avios currency for loyalty.

The Acquisition is expected to be earnings accretive in the first full year following Completion and accretive to IAG’s return on invested capital within four years after Completion.

Financing and expected timetable

The Acquisition will be funded by external debt. After Completion, IAG’s net debt to EBITDA is expected to be 0.3 times higher as a result of the Acquisition compared to 1.2 times last reported at the end of Q3 2019.

Assuming satisfaction of all conditions to the Acquisition, Completion is expected to take place in 2H 2020.

IAG has agreed to pay Air Europa a break fee of €40 million in the event that the transaction fails to receive the necessary regulatory approvals and either party elects to terminate the transaction agreement.

The Acquisition constitutes a Class 2 transaction for the purposes of the UK Financial Conduct Authority’s Listing Rules and, as such, does not require IAG’s shareholders’ approval. The gross assets of Air Europa at 31 December 2018 were €901 million. The pre-tax profits attributable to Air Europa for the year ended 31 December 2018 were €67 million.

Steve Gunning

Chief Financial Officer

November 4, 2019

Air Europa aircraft photo gallery:

IAG backs the Airbus A321XLR with an order for 14 aircraft

International Airlines Group (IAG) has selected the Airbus A321XLR to expand its fleet of highly efficient single aisles with a firm order for 14 aircraft. Of these, eight are destined for Iberia and six for Aer Lingus.

IAG, the parent company of leading airlines also including British Airways, Level and Vueling, is one of Airbus’s largest customers and this agreement will take the overall order from the group to 530 aircraft. IAG airlines combined operate one of the world’s largest Airbus fleets with over 400 aircraft.

The aircraft will enable Aer Lingus to launch new routes beyond the US East Coast and Canada. For Iberia, this is a new aircraft type that will enable it to operate new transatlantic destinations and increase frequencies in key markets.

Images: Airbus.

Boeing, International Airlines Group build on 777X order with services agreements

Boeing and International Airlines Group (IAG), one of the world’s largest airline groups, signed two agreements at the Paris Air Show today that will provide key services for IAG’s British Airways, including parts for the airline’s Airbus A320 family and its Boeing 777 fleet.

With the first agreement, Boeing will furnish British Airways with its Component Services Program where Boeing and its partners will own, manage, and maintain a global exchange inventory of parts for the airline’s A320 and A320neo aircraft. This agreement – the first of its kind for Boeing – will open convenient access to parts for British Airways, which operates an extensive route network.

British Airways has also signed an agreement for three Landing Gear Exchanges for its 777 fleet. Through the program, operators receive an overhauled and certified landing gear from an exchange pool maintained by Boeing, with stocked components and supporting parts shipping within 24 hours.

Following the signing of these new services agreements, Boeing and IAG held a deferred ceremonial signing to celebrate its order for 18 777X airplanes. Earlier this year, IAG placed firm orders for 18 777-9 aircraft and 24 options for British Airways. The airline selected the 777X, the world’s largest, most efficient twin aisle jet, as part of its long-haul fleet modernization program, joining a group of leading global carriers that have selected the new 777X.

The firm order by IAG puts the 777X at 364 orders and commitments from more than eight customers. Production of the 777X began in 2017, with first flight expected later this year and first delivery expected in 2020.

International Airlines Group (IAG) operates 582 aircraft and serves 268 destinations, carrying 113 million passengers in 2018. It is the parent company of Aer Lingus, British Airways, Iberia, LEVEL and Vueling.

IAG reports its first quarter results

International Consolidated Airlines Group (IAG) today (May 10, 2019) presented Group consolidated results for the three months to March 31, 2019.

IAG period highlights on results:

First quarter operating profit €135 million before exceptional items (2018 pro forma¹: €340 million)
Passenger unit revenue for the quarter down 0.8 per cent, down 1.4 per cent at constant currency
Non-fuel unit costs before exceptional items for the quarter up 0.8 per cent, down 0.6 per cent at constant currency on a pro forma¹ basis
Fuel unit costs for the quarter up 15.8 percent, up 11.1 per cent at constant currency
Net foreign exchange operating profit impact for the quarter adverse €61 million
Cash of €7,481 million at March 31, 2019 was up €1,207 million on December 31, 2018 and net debt to EBITDA improved by 0.2 to 1.0 times
Profit after tax before exceptional items €70 million down 62.6 per cent, and adjusted earnings per share down 57.5 per cent on a pro forma¹ basis

Performance summary:

	Three months to March 31
	Statutory	Pro forma		Statutory
Highlights € million	2019	2018¹	Higher / (lower)	2019	2018²
Passenger revenue	4,646	4,415	5.2 %	4,646	4,415
Total revenue	5,318	5,022	5.9 %	5,318	5,022
Operating profit before exceptional items	135	340	(60.3)%	135	280
Exceptional items	–	639	(100.0)%	–	639
Operating profit after exceptional items	135	979	(86.2)%	135	919

Available seat kilometres (ASK million)	75,423	71,093	6.1 %
Passenger revenue per ASK (€ cents)	6.16	6.21	(0.8)%
Non-fuel costs per ASK (€ cents)	5.06	5.02	0.8 %


Alternative performance measures	2019	2018¹	Higher / (lower)
Profit after tax before exceptional items (€ million)	70	187	(62.6)%
Adjusted earnings per share (€ cents)	3.7	8.7	(57.5)%
Net debt (€ million)^3,4	5,225	6,430	(18.7)%
Net debt to EBITDA^3,4	1.0	1.2	(0.2x)


Statutory results € million	2019	2018	Higher / (lower)
Profit after tax and exceptional items	70	794	(91.2)%
Basic earnings per share (€ cents)	3.7	38.5	(90.4)%
Cash and interest-bearing deposits	7,481	7,442	0.5 %
Interest-bearing long-term borrowings	12,706	6,953	82.7 %
For definitions refer to the IAG Annual report and accounts 2018.

¹ Pro forma financial information is based on the Group’s statutory results with an adjustment for IFRS 16 ‘Leases’ from January 1, 2018. A reconciliation of the pro forma financial information to the Group’s statutory results is available on the Company’s website.

² March 31, 2018 comparatives are the Group’s statutory results as reported.

³ Net debt is long-term borrowings less cash and cash equivalents and other interest-bearing deposits. EBITDA is operating profit before exceptional items and depreciation, amortisation and impairment.

⁴The prior year comparative is pro forma December 31, 2018. The December 31, 2018 as reported was adjusted net debt of €8,355 million, and adjusted net debt to EBITDAR of 1.6 times.

Willie Walsh, IAG Chief Executive Officer, said:

“In a quarter when European airlines were significantly affected by fuel and foreign exchange headwinds, market capacity impacting yield and the timing of Easter, we remained profitable and are reporting an operating profit of €135 million.

“At constant currency, non-fuel unit costs were down 0.6 per cent while passenger unit revenue decreased by 1.4 per cent.”

Trading outlook

At current fuel prices and exchange rates, IAG expects its 2019 operating profit before exceptional items to be in line with 2018 pro forma. Passenger unit revenue is expected to be flat at constant currency and non-fuel unit cost is expected to improve at constant currency. We expect passenger unit revenue at constant currency to improve for the remainder of the year.

IAG reports strong financial results, livery change coming at Aer Lingus

International Consolidated Airlines Group (IAG) on October 26, 2018 presented Group consolidated results for the nine months to September 30, 2018.

The IAG is the holding company of Aer Lingus, British Airways, Iberia, Level and Vueling.

IAG period highlights on results:

Third quarter operating profit €1,460 million before exceptional items (2017 restated⁽¹⁾: €1,450 million)
Net foreign exchange operating profit impact for the quarter adverse €111 million
Passenger unit revenue for the quarter up 1.3 per cent, up 2.4 per cent at constant currency
Non-fuel unit costs before exceptional items for the quarter up 0.5 per cent, down 0.7 per cent at constant currency
Fuel unit costs for the quarter up 14.3 per cent, up 15.0 per cent at constant currency
Operating profit before exceptional items for the nine months period €2,575 million (2017 restated⁽¹⁾: €2,400 million), up 7.3 per cent
Completion of second €500m share buyback programme on October 24
Interim dividend of 14.5 euro cents per share

Performance summary:

	Nine months to September 30
Highlights € million	2018	2017 (restated)⁽¹⁾	Higher / (lower)

Passenger revenue	16,326	15,507	5.3 %
Total revenue	18,346	17,450	5.1 %
Operating profit before exceptional items	2,575	2,400	7.3 %
Exceptional items	584	(271)	nm
Operating profit after exceptional items	3,159	2,129	48.4%

Available seat kilometres (ASK million)	244,343	231,417	5.6 %
Passenger revenue per ASK (€ cents)	6.68	6.70	(0.3)%
Non-fuel costs per ASK (€ cents)	4.84	5.01	(3.2)%

Alternative performance measures	2018	2017 (restated)⁽¹⁾	Higher / (lower)

Profit after tax before exceptional items (€ million)	1,970	1,805	9.1 %
Adjusted earnings per share (€ cents)	91.9	81.7	12.5 %
Adjusted net debt (€ million)	7,475	7,183	4.1 %
Adjusted net debt to EBITDAR	1.4	1.4	(0.0x)

Statutory results € million	2018	2017 (restated)⁽¹⁾	Higher / (lower)

Profit after tax and exceptional items	2,514	1,597	57.4 %
Basic earnings per share (€ cents)	121.9	75.3	61.8 %
Cash and interest-bearing deposits	6,923	7,523	(8.0) %
Interest-bearing long-term borrowings	7,342	7,578	(3.1) %

For definitions refer to the IAG Annual report and accounts 2017.
⁽¹⁾Restated for new accounting standards IFRS 15 ‘Revenue from contracts with customers’ and IFRS 9 ‘Financial instruments’.

Willie Walsh, IAG Chief Executive Officer, said:

“We’re reporting a good quarter 3 performance with an operating profit of €1,460 million before exceptional items, up from €1,450 million last year.

“These were strong results despite significant fuel cost and foreign exchange headwinds. At constant currency, our passenger unit revenue increased by 2.4 per cent while non-fuel unit costs went down 0.7 per cent.

“We’re pleased to announce an interim dividend of 14.5 euro cents per share and this week we completed our second €500 million share buy-back programme”.

Trading outlook

At current fuel prices and exchange rates, IAG expects its operating profit before exceptional items for 2018 to show an increase of around €200m from a base of €2,950m in 2017. Both passenger unit revenue and non-fuel unit costs are expected to improve at constant currency for the full year.

It’s back! College Football is returning to Dublin for the Aer Lingus College Football Series. Five epic games from 2020-2024. First up: Notre Dame Football v Navy Football.

Top Copyright Photo: Aer Lingus Airbus A330-302 EI-ELA (msn 1106) JFK (Stephen Tornblom). Image: 910752. The desire to create larger profits are driving an upcoming livery change at Aer Lingus. Look now, the amount of green is expected to be significantly reduced with the upcoming new livery. The first Aer Lingus aircraft in the new colors is expected at the end of January, 2019. The pictured Airbus A330-302, registered as EI-ELA, will probably be the first aircraft to be repainted (always subject to change). The new livery is expected to be something like Iberia Express with green engine cowlings and a dark green shamrock on the tail with two cheat lines down the fuselage. The size and style of the titles are still under discussion pending a final livery decision.

In other news, Aer Lingus is expecting their first Avro (BAe) RJ85 (EI-RJN) on Sunday with Aer Lingus titles and a shamrock in green decals.

Below Copyright Photo: Aer Lingus Airbus A330-302 EI-ELA (msn 1106) DUB (SM Fitzwilliams Collection). Image: 925195.

Aer Lingus aircraft slide show:

IAG, Ryanair, easyJet and Wizz Air submit French ATC strikes complaint to European Commission

International Airlines Group (IAG), Ryanair, easyJet and Wizz Air have submitted complaints to the European Commission against France as its air traffic controllers’ strikes restrict the fundamental principle of freedom of movement within the EU.

The airlines are not questioning the right to strike but believe France is breaking EU law by not enabling flights over the country during strikes. Passengers on overflights are being denied their fundamental freedom to travel between member states not affected by strike action.

So far this year, French ATC strikes have increased by 300 per cent versus 2017. Last month, the French Senate confirmed that France alone is responsible for 33 per cent of flight delays in Europe. The Senate states also that the right to strike has to be balanced against the obligation to provide public service. (*).

Willie Walsh, IAG’s chief executive, said: “The right to strike needs to be balanced against freedom of movement. It’s not only customers flying in and out of France who are affected during French ATC strikes. Passengers on routes that overfly France, especially the large airspace that covers Marseille and the Mediterranean, are also subject to delays and massive disruptions. This affects all airlines but has a significant negative impact on Spain’s tourism and economy.”

The complaints state that there is a legal precedent to this case. In 1997, the Spanish complained to the European Commission after they suffered for many years when French farmers prevented their fruit and vegetable exports into the EU. The European Court ruled against France as the French authorities didn’t address the farmers’ actions and failed to ensure the free movement of goods (**).

Michael O’Leary, Ryanair’s chief executive, said: “Europe’s ATC providers are reaching the point of meltdown with hundreds of flights being cancelled and delayed daily either because of ATC strikes or because Europe’s ATC don’t have enough staff. When Greece and Italy have ATC strikes, overflights continue as normal. Why won’t France do the same? ATC providers (especially in Germany and the UK) are hiding behind adverse weather and euphemisms such as “capacity restrictions” when the truth is they are not rostering enough air traffic controllers to cater for the number of flights that are scheduled to operate. These disruptions are unacceptable, and we call on Europe’s Governments and the EU Commission to take urgent and decisive action to ensure that ATC providers are fully staffed and that overflights are not affected when national strikes take place, as they repeatedly do in France.”

Johan Lundgren, easyJet’s chief executive, said: “We fully respect the right to strike and have been in constructive dialogue with the EU and the French government to address the issue of ATC strikes. Unfortunately, our passengers have felt little progress so far, which is why we felt it is necessary to take this next step – particularly given the sustained industrial action this year which has totalled 29 days to date.”

József Váradi, Wizz Air’s chief executive, said: “The failure of French air traffic control authorities to ensure a continued and adequate service has already caused massive disruption to the travel plans of thousands of passengers across Europe, with airlines left to pick up the pieces. Addressing this issue must be a priority for the European authorities to ensure European citizens and businesses are no longer held hostage to national industrial relations issues.”

According to Eurocontrol, more than 16,000 flights had been delayed by June this year due to ATC strikes, affecting more than two million passengers.

Last summer, the European Commission said that since 2005 there have been around 357 ATC strikes in Europe. That’s the equivalent of roughly one month per year when the EU skies are disrupted.

Top Copyright Photo (all other photos by respective airlines):

British Airways aircraft slide show: British Airways Airbus A320-251N WL G-TTNB (msn 8139) LIS (Stefan Sjogren). Image: 942707.

British Airways slide show (Airbus):

IAG’s statement on Norwegian

Response to Press Speculation on Norwegian Air Shuttle ASA

International Airlines Group (IAG) notes the recent press speculation that it is considering making an offer for Norwegian Air Shuttle ASA (Norwegian).

IAG considers Norwegian to be an attractive investment and has acquired a 4.61 per cent ownership position in Norwegian (minority investment).

The minority investment is intended to establish a position from which to initiate discussions with Norwegian, including the possibility of a full offer for Norwegian.

IAG confirms that no such discussions have taken place to date, that it has taken no decision to make an offer at this time and that there is no certainty that any such decision will be made.

A further announcement will be made if appropriate.

Enrique Dupuy de Lôme

Chief Financial Officer

IAG to acquire Niki, will be put under Vueling

International Airlines Group – IAG (London) has announced it will acquire insolvent Niki (Vienna) for €36.5 million ($43.8 Million). IAG became the lone bidder after the Lufthansa Group pulled out of the bidding. The IAG also out bid Niki Lauda who was bidding to take back his former airline. The IAG will pay €20 million ($24 million) for Niki’s assets and provide liquidity of up to €16.5 million to Niki.

The new Niki will become a subsidiary of Vueling and the IAG will employ most of the former Niki employees (around 740). Vueling will now be able to grow its presence in Austria, Germany and Switzerland.

Niki is now likely to adopt the Vueling brand.

Copyright Photo: Niki Luftfahrt (flyNiki.com) (Airberlin) Airbus A320-214 D-ABHF (OE-LEE) (msn 2749) PMI (Javier Rodriguez). Image: 937271.

Niki:

IAG is the last remaining bidder for Niki

The International Airlines Group-IAG is the last remaining bidder for insolvent airline Niki (Vienna) according to Reuters. Niki was part of the Airberlin Group.

Copyright Photo: Niki-The Spirit of Niki (flyniki.com) Airbus A320-214 OE-LEU (msn 2902) (Airberlin colors) ZRH (Rolf Wallner). Image: 929150.

Niki aircraft slide show:

IAG to launch LEVEL, a new low-cost, long-haul carrier

International Airlines Group (IAG) is launching LEVEL – a new low cost longhaul airline brand that will take to the skies in June 2017 with flights from Barcelona to Los Angeles, San Francisco (Oakland), Buenos Aires and Punta Cana.

LEVEL will fly two new Airbus A330 aircraft branded in its own livery and fitted with 293 economy and 21 premium economy seats. Initially it will be operated by Iberia’s flight and cabin crew and will create up to 250 jobs based in Barcelona.

Barcelona has been chosen as the first European city for the launch of IAG’s new operation but LEVEL will look to expand its flights from other European cities.

Fares start from €99/US$149 one way.

Checked luggage (in addition to a free cabin bag), meals, seat selection and the latest movie releases will be complimentary for customers flying in premium economy. Those travelling in economy can chose what they want to buy based on a menu of choices. All customers will have access to next generation inflight technology with a wide range of onboard entertainment options. High speed internet connectivity will be available with prices starting at €8.99.

LEVEL’s customers will be able to earn and redeem Avios – the loyalty currency for IAG’s airlines. This will give them the opportunity to fly to 380 destinations across the Group’s network.

Willie Walsh, IAG chief executive, said: “LEVEL is an exciting new IAG airline brand which will bring a stylish and modern approach to flying at prices that are even more affordable. It will benefit from having the strength of one of the world’s largest airline groups behind it.

“LEVEL will become IAG’s fifth main airline brand alongside Aer Lingus, British Airways, Iberia and Vueling. It will complement our existing airline portfolio and further diversify our current customer base.

Image: IAG.