Tag Archives: International Airlines Group

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 EBITDA3,4 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.

4 The 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 to acquire Niki, will be put under Vueling

Transferred to Airberlin on January 12, 2017

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

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

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 orders 31 Airbus wide body and narrow body airliners

International Airlines Group (IAG) (British Airways, Iberia and Vueling Airlines) (London) has signed a firm order for 31 Airbus aircraft, which includes 11 wide-body aircraft (eight A350-900s, three A330-200s) and 20 A320neos.

IAG logo

 

The A350s and A330s are slated for Iberia’s fleet modernization and to open new long-haul routes, and the A320neos will be allocated to the group’s airlines for fleet replacement.

Iberia (2013) logo

With this latest order for 31 aircraft IAG and its airlines have ordered a total of nearly 450 aircraft from Airbus. IAG’s airlines British Airways, Iberia and Vueling, between them operate nearly every aircraft in Airbus’ product range from the smallest single aisle A318 to the world’s largest wide-body A380.

Copyright Photo: Brian McDonough/AirlinersGallery.com. The new Airbus A330-200s for Iberia will replace the aging Airbus A340-300s and compliment the pictured Airbus A330-300s. Iberia is due to take delivery of its first Airbus A330-200 in December 2015. Iberia’s Airbus A330-302 EC-MAA (msn 1515) approaches the runway at Miami International Airport.

Iberia aircraft slide show: AG Airline Slide Show

AG Prints-6 Sizes

 

IAG reports an operating profit of €530 million ($582 million) in the second quarter

International Airlines Group-IAG (British Airways, Iberia and Vueling Airlines) (London) presented the Group’s consolidated results for the six months to June 30, 2015:

IAG logo

IAG period highlights on results:

  • Second quarter operating profit €530 million ($582 million) (2014: operating profit of €380 million)
  • Revenue for the quarter up 11.2 percent to €5,656 million
  • Passenger unit revenue for the quarter up 5.0 per cent and down 6.6 per cent at constant currency
  • Fuel unit costs for the quarter up 3.0 per cent, down 12.0 per cent at constant currency
  • Non-fuel unit costs for the quarter up 3.2 per cent, down 6.9 per cent at constant currency
  • Operating profit for the half year €555 million (2014: operating profit €230 million), up 141 per cent
  • Cash of €6,421 million at June 30, 2015 was up €1,477 million on 2014 year end
  • Adjusted gearing down 8 points to 43 per cent and adjusted net debt to EBITDAR improved 0.4 to 1.5 times

Willie Walsh, IAG Chief Executive Officer, said:

“We made an operating profit of €530 million in the quarter, up from a €380 million operating profit last year.

“At constant currency, revenue was down 1.2 per cent with passenger unit revenue down 6.6 per cent. Non-fuel unit costs were down 6.9 per cent while fuel unit costs were down 12 per cent.

“We said previously that profit improvement would be slower in the second quarter and we are on track to reach our full year targets.

“We continue to take cost out of the business, with both employee and supplier unit costs down at constant currency, and improvements in productivity levels.

“In the half year, we made an operating profit of €555 million which is up from a €230 million operating profit last year”.

Quarter 2 operating profit overview:

IAG’s operating profit for the quarter to June 30, 2015 was €530 million, an improvement of €150 million from the same quarter in the prior year. British Airways made a profit of €453 million (2014: operating profit €332 million); Iberia made a profit of €51 million (2014: operating profit €16 million) and Vueling’s profit was €24 million (2014: operating profit €30 million) on top of a 13.9 per cent capacity increase.

Half year financial review:

Strategic development

Aer Lingus clover logo

On May 26, 2015 IAG and the independent directors of Aer Lingus Group plc (‘Aer Lingus’) reached agreement on the terms of a recommended cash offer for the entire issued ordinary share capital of Aer Lingus to be made by AERL Holding Limited, a wholly incorporated subsidiary of IAG. The offer is for €2.55 per Aer Lingus share, comprising a cash payment of €2.50 per Aer Lingus share and the payment of a cash dividend of €0.05 per Aer Lingus share (paid by Aer Lingus on May 29, 2015 to Aer Lingus shareholders on the register of members on May 1, 2015). The transaction values Aer Lingus’ entire issued ordinary share capital at approximately €1.4 billion. The offer, extended to August 18, 2015, is subject to the terms and conditions that have not already been satisfied which are set out in Appendix I of the Offer document (www.iairgroup.com), in particular acceptance of the Offer having been received in respect of the Aer Lingus shares held by the Ryanair Group.

Operating and market environment

The half year has seen decreasing fuel prices although partially offset by adverse exchange. The improvement in the pound sterling against the euro has generated translation benefits for the Group which again have been partially offset by the US dollar strength.

Revenues in our domestic, LATAM and Asia Pacific markets were up 3 to 4 per cent at constant currency (‘ccy’) on capacity growth of about 8 per cent. The LATAM market has been impacted by weakness in Brazil and Venezuela. Revenues in our European markets rose 8 per cent at ccy while capacity for the Group was increased by 13 per cent partially through seat densification but also reflecting additional capacity in our low cost carriers, Iberia Express and Vueling. Capacity in the Africa, Middle East and South Asia region was reduced 4 per cent but revenues fell further impacted by weakening of oil routes. North Atlantic passenger unit revenues were broadly flat for the six months, down 1 per cent.

Capacity

IAG increased capacity (ASKs) by 5.3 per cent in the first six months of the year and traffic volumes rose 5.8 per cent, increasing seat factor to 79.3 per cent. The rise in capacity reflects growth at Vueling, restoration of routes at Iberia and seat densification in British Airways’ shorthaul.

Revenue

Passenger revenue increased 11.5 per cent compared to the prior year six months with approximately 10.4 points of beneficial currency impact. Passenger unit revenue (passenger revenue per ASK) was down 3.8 per cent at constant currency (‘ccy’) from lower yields. Yields have been impacted at Vueling and Iberia by growth. British Airways yields are down related to weakening oil routes and increased competitor capacity on transatlantic routes in addition to the impacts of currency dislocation. Overall the Group has maintained its volumes in the first half of 2015 with seat factor rising 0.4 points.

British Airways logo

Cargo revenue for the period decreased by 8.0 per cent at ccy reflecting the reduction in the Cargo freighter programme. The performance of the Cargo business was up with load factors flat, positive mix partially offsetting market price pressure, and benefits from strong cost management.

Other revenue was up 6.3 per cent at ccy. The increase includes a €50 million benefit from the timing of the recognition of Avios revenue. The underlying revenue rose through higher customer engagement at BA Holidays and in the Avios loyalty scheme, partially offset by lower third party maintenance activity in the period.

Costs

Employee unit costs improved 3.5 per cent at ccy. The average number of employees reduced by 0.3 per cent and productivity rose by 5.6 per cent with improvements at each airline.

Fuel costs decreased 6.8 per cent at ccy, driven by lower average fuel prices net of hedging. At constant currency and on a unit basis the improvement was 11.7 per cent, with benefits from more efficient aircraft and improved operational procedures.

Handling, catering and other operating costs decreased 1.8 percent at ccy benefiting from an improvement in operations reducing costs related to disruption, including compensation fees and baggage costs. The improvements have been partially offset by higher costs due to additional passengers carried, inflationary price increases and BA Holiday activity.

Landing fees and en-route charges rose 6.4 per cent excluding adverse currency impacts. The performance reflects increased airport charges and additional volume, with ASKs up 5.3 per cent and sectors flown up 6.1 per cent.

Engineering and other aircraft costs were broadly flat at ccy. Increases are driven by volume and price, offset by the reduced freighter flying of IAG Cargo and less third party maintenance activity.

Property, IT and other costs decreased, half of which is due to cost improvements including IT initiatives and the remaining reduction from one-time benefits.

Selling costs decreased 3.9 per cent excluding adverse currency impacts due to the timing of promotions and from improvements in supplier contract terms. The reduction in selling costs was partially offset by volume increases related to additional passengers carried during the period.

Ownership costs increased 1.6 per cent at ccy. At June 30, 2015 the Group had 472 aircraft, an increase of 13 from June 30, 2014. The increase in aircraft primarily related to 22 additional Airbus A320s, while the Boeing 737-400s are being retired.

At constant currency non-fuel unit costs decreased by 4.9 per cent with benefits from exiting the Cargo freighter program and the seat densification at British Airways. Non-fuel unit costs improved at British Airways and Iberia, while Vueling was broadly flat.

Operating profit overview

IAG’s operating profit for the six months to June 30, 2015 was €555 million, an improvement of €325 million from the prior year. British Airways made a profit of €570 million (2014: €327 million); Iberia made a loss of €4 million (2014: €95 million) and Vueling’s loss was €5 million (2014: €0 million).

Exceptional items

There have been no exceptional items in the six months to June 30, 2015 or 2014.

Non-operating items

The net non-operating cost was €143 million for the six months compared to €75 million for the same period last year. The increase related to ‘Net currency retranslation charges’ from the weakening of the euro against the US dollar and additional finance costs primarily from adverse translation currency with the weakening of the euro against the pound sterling.

Taxation

The tax charge for the six months to June 30, 2015 is €80 million (2014: €59 million charge) with an effective tax rate of 19 per cent.

Profit after tax

The profit after tax for the six month period to June 30, 2015 was €332 million (2014: €96 million).

Exchange rates

For the six months to June 30, 2015, the reported results are impacted by translation currency from converting British Airways’ results from sterling to the Group’s reporting currency of euro. The net impact on the operating profit was €73 million favourable, with an increase in revenue of €814 million and an increase in cost of €741 million, reflecting a 10.3 per cent weakening of the euro versus the pound sterling.

The transactional exchange rate impact across the Group was €167 million favourable on revenues and €194 million adverse on costs with a net adverse impact of €27 million.

The net benefit on operating profit from currency was €46 million for the six months to June 30, 2015.

Cash

The Group’s cash position was €6,421 million up €1,477 million from December 31, 2014. British Airways’ cash position was €3,730 million, Iberia €1,118 million, Vueling €829 million and the parent and other Group companies €744 million.

Compared to December 31, 2014, the Group’s adjusted net debt decreased by €618 million to €5,463 million and adjusted net debt to EBITDAR improved 0.4 points. Adjusted gearing improved by eight points.

Principal risks and uncertainties

During the period we have continued to maintain and operate our structure and processes to identify, assess and manage risks. The principal risks and uncertainties affecting us, detailed on pages 87 to 93 of the December 31, 2014 Annual Report and Accounts, remain relevant for the remaining six months of the year.

Other strategic developments

Iberia (2013) logoOn January 26, 2015, Iberia announced plans to begin flights to Cali and Medellin in Colombia in early July. Iberia highlighted that this has been possible due to its restructuring which has allowed it to achieve a competitive cost base.

Iberia Express (2013) logo-1

Iberia and its subsidiary Iberia Express were the world’s most punctual airlines in January according to the latest ranking published by FlightStats. Iberia led network carriers with 92.72 per cent of flights on time while Iberia Express achieved 96.34 per cent punctuality the highest score among low cost carriers. The airline’s improvement in operational performance has been a key aspect of its restructuring.

British Airways is changing its ‘On Business’ loyalty scheme for small and medium sized businesses to incorporate American Airlines and Iberia. The new partnership will allow On Business members to benefit from collecting and spending across all three airlines under one program.

Vueling logo

Vueling Airlines has become the first airline to offer a self-service baggage check-in at its hub in Barcelona, also as part of a marketing agreement, Vueling has begun to install power outlets in the priority seats of its fleet.

On March 4, 2015, Iberia announced that it had reached an agreement with Airbus to take early delivery of eight Airbus A330-200s that IAG ordered for the airline last year to replace Airbus A340-300s. The new aircraft will join Iberia’s longhaul fleet up to 14 months earlier than initially planned, between November 2015 and December 2016.

On March 19, 2015, Vueling signed an agreement with American Airlines to feed its longhaul flights from the US at Barcelona-El Prat and Rome-Fiumicino airports.

On March 29, 2015, British Airways began its Airbus A380 services to San Francisco from London Heathrow adding 6,000 more seats a month between the two cities.

In April 2015, IAG took delivery of its first five Airbus A320s standardized aircraft which have joined Vueling’s fleet. The aircraft are part of IAG’s harmonization plan which aims at reducing costs by standardizing its Airbus A320 fleet across the Group.

On May 13, 2015, Iberia announced that it won 17 out of 21 tendered licenses to provide handling services at Spanish airports. The airline remains the main handling operator in Spain and highlighted that this outcome has been achieved due to the cost and productivity agreements reached with its employees.

On May 27, 2015, British Airways started daily flights to Kuala Lumpur on a four class Boeing 777-200 ER aircraft. The airline also announced two new routes from Heathrow for the winter season. From October 25, 2015, it will start flights to Keflavik (Reykjavik) while services to Salzburg will commence on December 5, 2015.

On June 1, 2015, Iberia resumed its flights to Havana. The five per week service between Madrid and the Cuban capital is operated on Airbus A330 aircraft with new longhaul cabins. These new flights aim to strengthen further Iberia’s leadership between Europe and Latin America.

On June 9, 2015, Vueling announced that it had become a member of IATA (International Air Transport Association). The airline will benefit from lower costs on transactions with IATA members.

On June 17, 2015, the chief executives of IAG, Air France-KLM, EasyJet, Lufthansa Group and Ryanair announced that they will work together to develop an EU aviation strategy which will support growth and jobs across Europe, strengthen the sector and provide more choice and competitive fares to European passengers. This is in response to a consultation by the EU Transport Commissioner Violeta Bulc.

Objectives

Our mission is to be the leading international airline group. This means we will:

• win the customer through service and value across our global network;
• deliver higher returns to our shareholders through leveraging cost and revenue opportunities across the Group; • attract and develop the best people in the industry;
• provide a platform for quality international airlines, leaders in their markets, to participate in consolidation;
• retain the distinct cultures and brands of individual airlines.

By accomplishing our mission, IAG will help to shape the future of the industry, set new standards of excellence and provide sustainability, security and growth.

Aircraft Fleet:

IAG Fleet

Read the full report: CLICK HERE

Copyright Photo: SPA/AirlinersGallery.com. Iberia will retiring its Airbus A340-300s by December 2016. On March 4, 2015, Iberia announced that it had reached an agreement with Airbus to take early delivery of eight Airbus A330-200s that IAG ordered for the airline last year to replace Airbus A340-300s. The new aircraft will join Iberia’s long-haul fleet up to 14 months earlier than initially planned, between November 2015 and December 2016. Airbus A340-313 EC-GLE (msn 146) departs from London (Heathrow).

British Airways aircraft slide show: AG Airline Slide Show

Iberia aircraft slide show: AG Airline Slide Show

Vueling Airlines aircraft slide show: AG Airline Slide Show

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Aer Lingus reports a first half loss after a second quarter profit as it moves towards acceptance of the IAG takeover

Aer Lingus (Dublin) reported a first half loss of €13.9 million ($15.2 million), an increase from a loss of €9.9 million ($10.8) in the same period a year ago.

However the flag carrier produced a profit of €34.5 million ($37.8 million) for the second quarter of this year as the takeover by Willie Walsh’s IAG nears.

The airline issued this financial report for the first half in which it discussed the upcoming IAG takeover:

Aer Lingus Group plc announces its results for the three and six month periods ended June 30, 2015:

Second Quarter 2015 highlights:

  • Operating profit (before net exceptional items) of €34.5 million; estimated adverse currency movement of €21 million
  • Strong revenue growth of 7.1% with increases in passenger, retail and cargo revenues
  • Long haul revenue increase of 24.4% with capacity up 9.7% and revenue per seat up 14.4%
  • Successful Washington route launch, frequency additions and new business cabin introduction
  • Short haul load factor improvement delivered by a volume active strategy
  • Solid short haul forward booking profile achieved, facilitating 5.8% retail growth in Q2 and increased H2 short haul capacity expansion
  • Network growth, positive forward booking profile and lower unit fuel costs will support H2 2015 performance

    Stephen Kavanagh Aer Lingus’ CEO commented:

    “I am pleased to report a profitable second quarter with Aer Lingus well positioned to deliver an improved operating performance in the key Q3 trading period and for the full year. I would like to thank my colleagues for their contribution to the delivery of this performance and for their on-going endeavours.

    Passenger, retail and cargo revenues all grew strongly in the quarter. The continued investment in our transatlantic business was rewarded with strong growth in unit revenues. The volume active strategy employed in our short haul business delivered stable unit revenue performance in an intensely competitive marketplace.

    The adverse effects of unfavourable FX movements on performance which were evident in this quarter will moderate in the second half of the year as a result of a higher proportion of US$ denominated revenues. Both short and long haul capacity are set to expand into the peak season and we are very satisfied with forward yield and load factor profiles at this time.

    Finally, I would like to reiterate the view of the independent directors of Aer Lingus that the combination with IAG will strengthen Aer Lingus and will grow our airline and contribute to growth in the tourism sector and wider Irish economy.”

Full year 2015 outlook

Aer Lingus is currently in an offer period as defined by the Irish Takeover Rules. The Group is therefore not issuing specific guidance with regard to 2015 operating profit performance while it remains in this offer period.

Update on Offer from International Consolidated Airline Group S.A (“IAG”)

On June 19, 2015 IAG issued the Offer Document containing the full terms and conditions of the recommended cash offer (the “Offer”) by AERL Holding Limited (“AERL Holding”), a wholly-owned subsidiary of IAG, for the entire issued and to be issued ordinary share capital of Aer Lingus. The Offer values each Aer Lingus share at €2.55, of which €0.05 was paid as a dividend on May 29, 2015 (“the Offer”). The Offer conditions include, amongst other things, approval from the European Commission (“EC”) under the EU Merger Regulation, acceptance of the Offer by Ryanair Limited and the Minister for Finance of Ireland, shareholders approving the connectivity resolutions and a 90% acceptance condition. Full details of the Offer conditions are set out in Appendix I of the Offer Document posted to Aer Lingus shareholders. The following conditions have been fulfilled to date:

  1. On July 14, 2015 the proposed merger received competition approval from the EC under the EU Merger Regulation, following the EC’s initial Phase I review period. IAG offered the following remedies to the EC as part of the regulatory process:
  • Five daily slot pairs to be made available to other airlines at London Gatwick for flights between the airport and Dublin or Belfast.
  • Specifically, two of the five daily frequencies must be operated between Gatwick and Dublin.
  • One daily frequency must be operated between Gatwick and Belfast.
  • The other two frequencies can be operated between Gatwick and either Dublin or Belfast.
  • Other airlines can apply for seats on Aer Lingus’ short haul network for their transfer passengers, on normal commercial terms July 2015 Aer Lingus held an Extraordinary General Meeting (“EGM”) and successfully passed the resolutions in relation to the

2. On July 16, 2015 Aer Lingus held an extraordinary general meeting (EGM) and successfully passed the resolutions in relation to the connectivity commitments and received Rule 16 approval from the independent shareholders.

3. On this date IAG also confirmed the extension of the Offer until 1 pm (Irish time) on July 30, 2015.

4. On July 17, 2015 IAG confirmed the receipt of the valid acceptance of its Offer by the Minister for Finance of Ireland. The Minister for Finance’s acceptance was a condition of the Offer. At this date, IAG also announced that on July 16, 2015, AERL Holding had received valid acceptances of the Offer for 269,902,009 Aer Lingus shares, representing 50.53 per cent of the existing issued share capital of Aer Lingus, which AERL Holding may count towards the satisfaction of the acceptance condition to the Offer.

Read the full report: CLICK HERE

Copyright Photo: SM Fitzwilliams Collection/AirlinersGallery.com. Aer Lingus, under an IAG takeover, is confident it can compete against an aggressive Ryanair. Airbus A320-214 EI-EDS (msn 3755) departs from the Dublin hub.

Aer Lingus aircraft slide show: AG Airline Slide Show

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European Commission approves with concerns IAG’s proposed acquisition of Aer Lingus

The European Commission (Brussels) has issued this statement concerning the proposed acquisition of Aer Lingus (Dublin) by the International Airlines Group (IAG) (London):

European Commission logo

The European Commission has cleared under the EU Merger Regulation the proposed acquisition of Irish airline Aer Lingus by International Consolidated Airlines Group (IAG).

IAG is the holding company of British Airways, Iberia and Vueling. The clearance is conditional upon commitments offered by the parties to address the Commission’s concerns regarding the transaction as notified.

The Commission had concerns that the merged entity would have faced insufficient competition on several routes.

The Commission also found that the merged entity would have prevented Aer Lingus from continuing to provide traffic to the long-haul flights of competing airlines on several routes.

European Commissioner in charge of competition policy Margrethe Vestager said: “By obtaining significant concessions from the airlines the Commission has ensured that air passengers will continue to have a choice of airlines at competitive prices after IAG’s takeover of Aer Lingus.

The five million passengers travelling each year from Dublin and Belfast to London will be able to choose among several strong carriers.

And we are also protecting passengers travelling on connecting flights between Ireland and the rest of the world.”

The clearance decision is conditional upon the following commitments, which address the Commission’s concerns:

The release of five daily slot pairs at London-Gatwick airport to facilitate the entry of competing airlines on routes from London to both Dublin and Belfast ; and Aer Lingus continuing to carry connecting passengers to use the long-haul flights of competing airlines out of London- Heathrow, London-Gatwick, Manchester, Amsterdam, Shannon and Dublin .

The Commission’s investigation

The Commission’s investigation found that the transaction, as initially notified, would have led to high market shares on the Dublin-London, Belfast-London and Dublin-Chicago routes. The merged entity would have faced insufficient competitive constraints from the remaining players which could ultimately lead to higher prices.

The Commission also analysed whether there was a risk that IAG would prevent passengers flying on Aer Lingus’ short-haul flights, from Dublin, Cork, Shannon, Knock and Belfast, from

connecting with long-haul flights operated by competing airlines out of other European airports, including Heathrow, Gatwick, Manchester, Dublin and Amsterdam.

IAG submitted commitments to release five daily slot pairs at London Gatwick which can be used on the specific routes of concern, namely Dublin-London and Belfast-London.

The availability of these slots, and other incentives such as the acquisition of grandfathering rights after a certain period of time, facilitate the entry of competing airlines.

Furthermore, IAG made a commitment to enter into agreements with competing airlines which operate long-haul flights out of London Heathrow, London Gatwick, Manchester, Amsterdam, Shannon and Dublin so that Aer Lingus will continue to provide these airlines with connecting passengers.

Passengers will therefore continue to have a choice to use other airlines than IAG when connecting at these airports, for instance on Heathrow-New York, Gatwick-Las Vegas, Manchester-Orlando, Amsterdam-Singapore, Shannon-Chicago, and Dublin-Chicago.

These commitments adequately address all competition concerns identified by the Commission.

The Commission therefore concluded that the proposed transaction would not significantly impede effective competition in the European Economic Area (EEA) or a substantial part of it. The transaction was notified to the Commission on 27 May, 2015.

Companies and products International Consolidated Airlines Group (“IAG” ) of the United Kingdom, is the holding company of British Airways, Iberia Líneas Aéreas de España S.A. and Vueling Airlines S.A.

Aer Lingus of Ireland is currently mainly owned by the Republic of Ireland and Ryanair, a competing carrier. Other significant shareholders include Etihad Airways.

Both IAG and Aer Lingus provide air transport for passengers, air transport for cargo, airport ground handling services and landside cargo handling services.

Merger control rules and procedures

The Commission has the duty to assess mergers and acquisitions involving companies with a turnover above certain thresholds (see Article 1 of the Merger Regulation) and to prevent concentrations that would significantly impede effective competition in the EEA or any substantial part of it.

The vast majority of mergers do not pose competition problems and are cleared after a routine review.

From the moment a transaction is notified, the Commission generally has a total of 25 working days to decide whether to grant approval (Phase I) or to start an in-depth investigation (Phase II).

The commitments offered by the Parties will be made available as of 16 July under the case number

The International Airlines Group (IAG) issued this statement:

IAG logo

International Consolidated Airlines Group (IAG) welcomes the decision by the European Commission to approve its Offer for Aer Lingus.

IAG has offered the following remedies to the EC as part of the regulatory process:

  • Five daily slot pairs will be made available to other airlines at London Gatwick for flights between the airport and Dublin or Belfast.
  • Specifically, two of the five daily frequencies must be operated between Gatwick and Dublin.
  • One daily frequency must be operated between Gatwick and Belfast.
  • The other two frequencies can be operated between Gatwick and either Dublin or Belfast.
  • Other airlines can apply for seats on Aer Lingus’ shorthaul network for their transfer passengers, on normal commercial terms.

Copyright Photo: SPA/AirlinersGallery.com. London’s Gatwick Airport was the main competitive concern for the EC. Aer Lingus’s Airbus A320-214 EI-DEE (msn 2250) arrives at LGW.

Aer Lingus aircraft slide show: AG Airline Slide Show

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Ryanair agrees to sell its 29.8% stake in Aer Lingus to IAG

Ryanair (Dublin) has agreed to sell its 29.8 percent share in Aer Lingus (Dublin) to the International Airlines Group-IAG (British Airways, Iberia and Vueling Airlines) (London). The airline issued this statement:

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The Board of Ryanair Holdings PLC today (July 10) confirmed that it has voted unanimously to accept the IAG offer for Ryanair’s 29.8% shareholding in Aer Lingus Group plc. Ryanair’s stake in Aer Lingus has been available for sale since May 2012 and the Board believes that the current IAG offer maximizes Ryanair shareholder value.

In line with this decision, Ryanair will now vote in favor of the motion at the Aer Lingus EGM on July 16 (to give the Irish Government a golden share over Aer Lingus’s Heathrow slots) and Ryanair will also vote its 29.8% shareholding in favor of acceptance of the IAG offer, subject to this offer receiving regulatory approval from the European competition authorities.

Ryanair’s Michael O’Leary said:

“We believe the IAG offer for Aer Lingus is a reasonable one in the current market and we plan to accept it, in the best interests of Ryanair shareholders. The price means that Ryanair will make a small profit on its investment in Aer Lingus over the past 9 years.

This sale of our stake is timely given that our original strategy for Aer Lingus (to use it as a mid-priced brand to offer competition to flag carriers at primary airports) has been overtaken by the successful rollout – since September 2013 – of Ryanair’s “Always Getting Better” strategy, which has seen the Ryanair brand successfully enter many of Europe’s primary airports, being rewarded with strong growth in our network, traffic, load factor and profitability, while keeping our fares low and our punctuality high.

We wish IAG well with their takeover of Aer Lingus. When Ryanair first bid for Aer Lingus in late 2006, Ryanair (36 million passengers) carried 4 times Aer Lingus traffic (9 million). Today Ryanair (over 100 million) carries more than 10 times Aer Lingus traffic (10 million), and we will continue to deliver the vast majority of Ireland’s traffic and tourism growth in the coming months and years.”

Ken Odeluga, a senior market analyst at www.cityindex.com.sg comments on this latest news:

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It has taken the better part of seven months for IAG to put the final pieces of the Aer Lingus puzzle in place.

Ryanair has, after much delay, which it insisted was not down to intransigence, agreed to sell its 30% to IAG, which had already struck a deal with Ireland’s government to purchase the country’s 25%.

Reports that the EU will swiftly grant conditional approval appear credible.

Concessions by IAG were accepted by the antitrust authorities this morning. IAG offered to relinquish some slots and to give its competitors special terms, like allowing them to provide connecting at favourable terms.

All these agreements will tend to focus investors’ minds back on the details of the €1.3 billion bid, for which a strong part of the rationale rests on highly prized routes from Heathrow and lucrative routes between the UK and North America.

Aer Lingus had 300 slots at Heathrow as of December, with industry figures suggesting each is worth at least £5 million  per annum.

Also, Aer Lingus is not the unprofitable airline it was say about 15 years ago or more. It’s stronger in margin terms than Lufthansa, for instance, and had at least €550 million in free cash at last tally.

The additional 3.5%-4% of Heathrow market share will consolidate IAG’s dominance at the hub, ahead of the extension of capacity.

But now comes the hard part.

Despite its recent forecast upgrades, IAG remains the least profitable airline operator based in the UK or Ireland.

EasyJet and Ryanair are tightly matched and each seems to swap marginal dominance over the other every few years or so.

Either way, the pair has largely locked out all other large competitors in Europe, including IAG, for the last decade.

Plus, having already written down the value of its Aer Lingus stake, Ryanair’s £400 million proceeds from the sale will go straight to its bottom line.

The only way for a rival catch and match with the two above in terms of profits, is to grow, probably inorganically, and probably not in Europe, in the medium term.

With the soon-to-be-cemented deal, IAG has given itself the best chance among any large European carrier to close the profit gap, and the scale to absorb strategic hits to margins in Europe.

Top Copyright Photo: Paul Bannwarth/AirlinersGallery.com. Ryanair Boeing 737-8AS EI-DPM (msn 33640) lands in Tenerife Sur.

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Bottom Copyright Photo: AirlinersGallery.com. Aer Lingus Airbus A319-111 EI-EPU (msn 3102) taxies to the gate at London’s Heathrow Airport.

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IAG moves one step closer to acquiring a 25% share of Aer Lingus

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British Airways (London) and Iberia (Madrid) parent company International Airlines Group (IAG) (London) has confirmed that it has reached agreement with Aer Lingus (Dublin) to make a €1.4 billion ($1.5 billion) (£1 billion) cash offer for Ireland’s national carrier.

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The deal, which comes after months of negotiations, values Aer Lingus at €2.55 a share ($2.80 a share).

The board of the Irish carrier is recommending the offer, which was made after confirmation from the Irish government that it is willing to sell its 25 percent stake in Aer Lingus.

The decision of the sale was made at a meeting of the Irish cabinet late on Tuesday, which itself followed indications earlier in the day from Brussels that European competition authorities would not stand in IAG’s path.

Yesterday (May 28) IAG updated the Aer Lingus offer with this formal statement: CLICK HERE

Read more from The Irish Times: CLICK HERE

Assistant Editor Oliver Wilcock reporting from Manchester.

Copyright Photo: AirlinersGallery.com. Aer Lingus Airbus A320-214 EI-DEO (msn 2486) in the special Green Spirit – Official Airline of the Irish Rugby Team livery taxies at the home of IAG and British Airways – London (Heathrow).

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International Airlines Group reports higher earnings in 2014 due to Iberia turnaround

International Airlines Group (IAG) (British Airways, Iberia and Vueling Airlines) (London and Madrid) presented Group consolidated results for the year to December 31, 2014:

IAG period highlights on results:

Fourth quarter operating profit €260 million (2013: operating profit of €113 million) before exceptional items

Revenue for the quarter up 9.9 per cent to €5,015 million, up 5.8 per cent at constant currency

Non-fuel unit costs for the quarter down 0.8 per cent at constant currency

Operating profit for the year to December 31, 2014 of €1,390 million (2013: operating profit of €770 million) before exceptional items

Revenue for the year up 8.0 per cent to €20,170 million and passenger unit revenue for the year down 0.4 per cent at constant currency

Fuel unit costs for the year down 7.8 per cent also down 7.8 per cent at constant currency.

Non-fuel unit costs before exceptional items for the year down 1.9 per cent, down 3.9 per cent at constant currency

Cash of €4,944 million at December 31, 2014 was up €1,311 million on 2013 year end

Adjusted gearing up 1 point to 51 per cent and adjusted net debt to EBITDAR improved 0.6 to 1.9 times

Willie Walsh, IAG Chief Executive Officer, said:

“We’re reporting strong full year results with an operating profit before exceptional items of €1,390 million which is up 80.5 per cent. Total revenue was up 8.0 per cent with non-fuel costs up 7.0 per cent and fuel costs up 0.6 per cent on capacity growth of 9.3 per cent.

“Iberia made an operating profit of €50 million compared to an operating loss of €166 million last year. The airline’s turnaround has been remarkable, both financially and operationally, and we’re very proud of its achievement especially its strong cost discipline. In 2013 we said our intention was for Iberia to breakeven in 2014 and it has fulfilled that promise.

“British Airways’ operating profit increased to €1,215 million up from €762 million last year which shows significant progress towards its long term targets. Vueling made an operating profit of €141 million, compared to an operating profit of €139 million in 2013, with the airline focusing on flexible growth.

“We achieved a strong unit cost performance, down 4.1 per cent, through increased productivity, supplier cost savings and lower fuel unit costs. The latter was boosted by the introduction of more efficient aircraft into our fleet and lower fuel prices in the last quarter of the year. However, the positive effect of the oil price reduction has been partly offset by hedging and significant currency impact.

“In the quarter, we made an operating profit before exceptional items of €260 million which is up from €113 million last year. Revenue for the quarter was up 9.9 per cent. Non-fuel costs were up 10.5 per cent and fuel costs decreased by 0.4 per cent on capacity growth of 5.8 per cent.”

Copyright Photo: Iberia Airbus A321-211 EC-JQZ (msn 2736) taxies at London’s Heathrow Airport.

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