TIDMIAG
RNS Number : 5562Y
International Cons Airlines Group
05 May 2023
IAG first quarter results 2023
First quarter profit for the first time since quarter 1, 2019,
demonstrating strong performance across our diversified Group
Highlights
-- Operating profit before exceptional items of EUR9 million, up
EUR750 million versus quarter 1, 2022 and a positive outcome for
quarter 1 for the first time since quarter 1, 2019, representing
ongoing strong customer demand across all our airlines
-- Better than expected(1) due to strong yield performance
across the Group and the benefit of a lower fuel price
-- We continue to focus our capacity deployment on our core
Latin America and North Atlantic markets, which are now back at
pre-pandemic levels of capacity, as well as growing Vueling's
year-round leisure network
-- Encouraging outlook for the summer with around 80% of
expected quarter 2 revenue now booked
-- We currently expect our full year 2023 operating profit
before exceptional items to be higher than the top end of our
previous guidance of EUR1.8 billion to EUR2.3 billion
Luis Gallego, IAG Chief Executive Officer, said:
"IAG has delivered a strong first quarter financial performance,
as Group airlines recovered capacity to close to pre-pandemic
levels. Iberia contributed a record first quarter profit and all
our airlines performed above expectations, benefiting from robust
demand and a lower fuel price in the quarter. We are seeing healthy
forward bookings with leisure demand particularly strong while
business travel continues to recover more slowly.
"As we return to more normal operations, we continue to invest
in sustainability, including more fuel-efficient aircraft, and in
customer experience, updating the business cabins for British
Airways and Iberia. Over the past year we have recruited thousands
of new employees across the Group and strengthened our operations
so that we are ready to deliver for our customers during the summer
peak.
"We have the right model to succeed with synergies and
efficiencies across the Group and I want to thank all our employees
for the role they have played in our continued recovery."
Financial summary:
Three months to March 31
------------------------------
Higher /
Reported results (EUR million) 2023 2022(1) (lower)
Total revenue 5,889 3,435 71.4 %
Operating profit/(loss) 9 (718) nm
Loss after tax (87) (787) (88.9)%
Basic loss per share (EUR cents) (1.8) (15.9) (88.7)%
------------------------------------------------------------------------ -------- -------- ----------
Cash, cash equivalents and interest-bearing deposits (2) 11,369 9,599 18.4 %
Borrowings (2) 19,767 19,984 (1.1)%
------------------------------------------------------------------------ -------- -------- ----------
Higher /
Alternative performance measures (EUR million) 2023 2022(1) (lower)
Total revenue before exceptional items 5,889 3,435 71.4 %
Operating profit/(loss) before exceptional items 9 (741) nm
Loss after tax before exceptional items (87) (810) (89.3)%
Adjusted loss per share (EUR cents) (1.8) (16.3) (89.0)%
------------------------------------------------------------------------ -------- -------- ----------
Net debt(2) 8,398 10,385 (19.1)%
Net debt to EBITDA before exceptional items (times)(2) 2.1 3.1 (1.0)x
Total liquidity(2,3) 15,081 13,999 7.7 %
------------------------------------------------------------------------ -------- -------- ----------
For definitions of Alternative performance measures, refer to the IAG Annual report and accounts
2022.
(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 Loss
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
-- Stronger performance than expected at every airline,
supported by more good progress at IAG Loyalty.
-- Outperformance mainly driven by leisure demand in both longhaul and shorthaul:
o Aer Lingus is more seasonally exposed than the other airlines,
but is seeing good demand to European leisure destinations as well
as to the USA and the Caribbean. Shorthaul business seeing some
softness, as are technology industry-related routes.
o British Airways returned to profit in quarter 1 for the first
time since quarter 1, 2019. We are seeing strong demand from
leisure travel to most parts of the network. Corporate travel is
recovering slowly. The change in the non-premium mix of seats in
the longhaul fleet also has a negative impact on unit revenue.
o Particularly strong demand in Spain and Latin America, as well
as on routes to the USA, has delivered Iberia's best-ever quarter 1
performance and made it one of the world's most profitable airlines
in quarter 1, 2023. Business demand is recovering slightly faster
than in other airlines.
o Vueling's strategy to build winter season capacity to leisure
destinations has driven high unit revenue and load factors, which
also supports improving, sustainable ancillary revenue.
-- IAG Loyalty added 1.2 million newly enrolled customers during
the quarter, which is 50% more than in quarter 1, 2019. IAG Loyalty
drove good cash flow and operating profit during the quarter of
EUR81 million. During the quarter IAG Loyalty launched new products
designed to increase engagement, such as Avios-Only Flights.
-- The IAG Cargo business continues to focus on maximising its
contribution to the Group. As shipping capacity normalises we are
seeing pressure on yields, although they remain above 2019
levels.
Other developments
-- Three narrow-bodied aircraft (one Airbus A320neo and two
A321neo) were delivered in the quarter, with 29 aircraft still
expected in total in 2023. These modern, more fuel-efficient
aircraft are a key part of our cost and sustainability initiatives.
We continue to manage our fleet deliveries and do not expect
supplier challenges to have a material impact on our plans.
Trading outlook
Customer demand currently remains strong in all IAG's airlines
and in all regions, particularly for leisure customers.
We expect capacity to be around 97 per cent of 2019 levels for
the full year, as we focus on our core markets.
We are mindful of a number of uncertainties that currently face
the sector:
-- ongoing volatility in the geopolitical and macroeconomic
environment can have a significant impact on the price of fuel, our
biggest cost, and consumer confidence;
-- this early in the year, we have limited visibility of
customer bookings for the second half of the year; and
-- our business is directly impacted by issues in the external
operating environment, such as the strikes currently ongoing at
French ATC and Heathrow Airport.
Taking the above into account, together with the quarter 1
performance, we currently expect our full year 2023 operating
profit before exceptional items to be higher than the top end of
our previous guidance of EUR1.8 billion to EUR2.3 billion. We also
expect our net debt at December 31, 2023 to be better than previous
guidance of materially flat year on year, and to be down in line
with our profit outperformance.
Further update
Effective July, Fernando Candela Perez is appointed Chairman and
Chief Executive Officer of Iberia until the end of the year. This
follows the decision of Javier Sánchez-Prieto to leave the Group to
pursue a new professional project outside of aviation. Fernando has
more than 30 years' experience in the aviation industry and has
been with IAG for 10 years, including his roles as Chief
Transformation Officer, Chief Executive Officer of LEVEL and Chief
Executive Officer of Iberia Express.
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 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
Three months to March 31
-------------------------------
Higher/
EUR million 2023 2022(1) (lower)
Passenger revenue 5,041 2,655 89.9 %
Cargo revenue 323 432 (25.2)%
Other revenue 525 348 50.9 %
--------------------------------------------------------------------- ------- --------- -----------
Total revenue 5,889 3,435 71.4 %
--------------------------------------------------------------------- ------- --------- -----------
Employee costs 1,257 1,045 20.3 %
Fuel, oil costs and emissions charges 1,758 918 91.5 %
Handling, catering and other operating costs 776 542 43.2 %
Landing fees and en-route charges 484 358 35.2 %
Engineering and other aircraft costs 587 375 56.5 %
Property, IT and other costs 249 204 22.1 %
Selling costs 280 201 39.3 %
Depreciation, amortisation and impairment 486 531 (8.5)%
Net gain on sale of property, plant and equipment (10) (13) (23.1)%
Currency differences 13 (8) nm
--------------------------------------------------------------------- ------- --------- -----------
Total expenditure on operations 5,880 4,153 41.6 %
--------------------------------------------------------------------- ------- --------- -----------
Operating profit/(loss) 9 (718) nm
Finance costs (274) (233) 17.6 %
Finance income 68 1 nm
Net change in fair value of financial instruments (1) 60 nm
Net financing credit relating to pensions 25 7 nm
Net currency retranslation credits/(charges) 60 (61) nm
Other non-operating (charges)/credits (8) 28 nm
--------------------------------------------------------------------- ------- --------- -----------
Total net non-operating costs (130) (198) (34.3)%
--------------------------------------------------------------------- ------- --------- -----------
Loss before tax (121) (916) (86.8)%
Tax 34 129 (73.6)%
--------------------------------------------------------------------- ------- --------- -----------
Loss after tax for the period (87) (787) (88.9)%
--------------------------------------------------------------------- ------- --------- -----------
(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/(loss).
Accordingly, for the three months to March 31, 2022, the Group has reclassified EUR13 million
of gains from Other non-operating (charges)/credits to Expenditure on operations. There is
no impact on the Loss after tax.
ALTERNATIVE PERFORMANCE MEASURES
All figures in the tables below are before exceptional items.
Refer to Alternative performance measures section for more
detail.
Three months to March 31
---------------------------------
Before exceptional items
---------------------------------
Higher/
EUR million 2023 2022(1) (lower)
Passenger revenue 5,041 2,655 89.9 %
Cargo revenue 323 432 (25.2)%
Other revenue 525 348 50.9 %
------------------------------------------------------------------- ---------- --------- ----------
Total revenue 5,889 3,435 71.4 %
------------------------------------------------------------------- ---------- --------- ----------
Employee costs 1,257 1,045 20.3 %
Fuel, oil costs and emissions charges 1,758 918 91.5 %
Handling, catering and other operating costs 776 542 43.2 %
Landing fees and en-route charges 484 358 35.2 %
Engineering and other aircraft costs 587 375 56.5 %
Property, IT and other costs 249 227 9.7 %
Selling costs 280 201 39.3 %
Depreciation, amortisation and impairment 486 531 (8.5)%
Net gain on sale of property, plant and equipment (10) (13) (23.1)%
Currency differences 13 (8) nm
------------------------------------------------------------------- ---------- --------- ----------
Total expenditure on operations 5,880 4,176 40.8 %
------------------------------------------------------------------- ---------- --------- ----------
Operating profit/(loss) 9 (741) nm
Finance costs (274) (233) 17.6 %
Finance income 68 1 nm
Net change in fair value of financial instruments (1) 60 nm
Net financing credit relating to pensions 25 7 nm
Net currency retranslation credits/(charges) 60 (61) nm
Other non-operating (charges)/credits (8) 28 nm
------------------------------------------------------------------- ---------- --------- ----------
Total net non-operating costs (130) (198) (34.3)%
------------------------------------------------------------------- ---------- --------- ----------
Loss before tax (121) (939) (87.1)%
Tax 34 129 (73.6)%
------------------------------------------------------------------- ---------- --------- ----------
Loss after tax for the period (87) (810) (89.3)%
------------------------------------------------------------------- ---------- --------- ----------
Higher/
Operating figures 2023 2022 (lower)
Available seat kilometres (ASK million) 71,663 49,080 46.0 %
Revenue passenger kilometres (RPK million) 58,423 35,432 64.9 %
Seat factor (per cent) 81.5 72.2 9.3 pts
Passenger numbers (thousands) 24,279 14,377 68.9 %
Cargo tonne kilometres (CTK million) 1,125 990 13.6 %
Sold cargo tonnes (thousands) 151 139 8.6 %
Sectors 157,500 107,700 46.2 %
Block hours (hours) 468,625 322,084 45.5 %
------------------------------------------------------------------- ---------- --------- ----------
Aircraft in service 561 536 4.7 %
------------------------------------------------------------------- ---------- --------- ----------
Passenger revenue per RPK (EUR cents) 8.63 7.49 15.2 %
Passenger revenue per ASK (EUR cents) 7.03 5.41 30.0 %
Cargo revenue per CTK (EUR cents) 28.71 43.64 (34.2)%
Fuel cost per ASK (EUR cents) 2.45 1.87 31.2 %
Non-fuel costs per ASK (EUR cents) 5.75 6.64 (13.4)%
Total cost per ASK (EUR cents) 8.21 8.51 (3.6)%
------------------------------------------------------------------- ---------- --------- ----------
(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/(loss).
Accordingly, for the three months to March 31, 2022, the Group has reclassified EUR13 million
of gains from Other non-operating (charges)/credits to Expenditure on operations. There is
no impact on the Loss after tax.
Developments since the last report (February 24, 2023)
There have been no significant developments for the purposes of
this financial review since the Group reported its full year 2022
results.
Basis of preparation
At March 31, 2023, the Group had total liquidity of EUR15,081
million, comprising cash and interest-bearing deposits of EUR11,369
million, EUR3,302 million of committed and undrawn general and
overdraft facilities and a further EUR410 million of committed and
undrawn aircraft specific facilities.
Based on the extensive modelling the Group has undertaken,
including considering a plausible but severe downside scenario and
further sensitivities to the downside scenario, the Directors have
a reasonable expectation that the Group has sufficient liquidity to
continue in operational existence over the going concern assessment
period to June 30, 2024, and hence continue to adopt the going
concern basis in preparing the condensed consolidated interim
financial statements for the three months to March 31, 2023.
Principal risks and uncertainties
The Group has continued to maintain its framework and processes
to identify, assess and manage risk and prioritise investment to
address the risks it faces. The principal risks and uncertainties
affecting the Group are detailed in the Risk management and
principal risk factors section of the 2022 Annual report and
accounts and these remain relevant. The Board has continued to
monitor and assess risks in the light of changes that influence the
Group and the aviation industry. The combination of weaknesses in
the resilience of the aviation sector's supply chain, operational
disruption and customer impacts from the threat of/or employee
industrial action in critical third parties and airport services,
further market uncertainty driven by increased global tensions,
volatility in the banking sector, the inflationary environment and
pressure on interest rates, are receiving significant management
focus. Mitigating actions have been identified where possible to
enable the Group to continue to respond to its exposure to the
external risk environment whilst continuing to deliver its
ambitious transformation and change agenda.
Operating and market environment
Commodity fuel prices have continued to be volatile in 2023,
with no signs of the volatility easing in the near-term. The
average jet fuel spot price in quarter 1, 2023 was $910 per metric
tonne, approximately five per cent lower than the average spot
price in quarter 1, 2022 of $955 per metric tonne. The shape of
price movements within the first quarter was markedly different in
2023 than in 2022. In 2022, there was a significant rise in fuel
prices from late February, following the outbreak of the war in
Ukraine, with the commodity price of jet fuel at the end of quarter
1, 2022 rising to $1,135 per metric tonne. By contrast, in 2023 the
fuel price fell towards the end of the quarter, from a peak of
$1,140 per metric tonne in late January to $805 per metric tonne at
the end of March. Jet fuel supply contracts are typically based on
pricing up to one month in arrears, which results in the average
price paid for jet fuel supply being higher in quarter 1, 2023 than
in the same period in 2022.
The average foreign exchange rates for the first three months of
2023 resulted in the US dollar strengthening 5 per cent against the
euro and 10 per cent stronger against the pound sterling, compared
with the average of the first three months of 2022. The closing
exchange rates, applied for balance sheet translations, represented
a weakening of the US dollar of 1 per cent against both the euro
and pound sterling since December 31, 2022.
The net impact of transaction and translation exchange for the
Group for the first quarter was EUR54 million adverse versus
quarter 1, 2022.
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 adverse by EUR48 million for the quarter,
increasing revenues by EUR148 million and costs by EUR196
million.
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 first quarter, the net impact of translation was EUR6 million
adverse versus quarter 1, 2022.
Unless stated otherwise, all variances quoted below compare the
first three months of 2023 with the first three 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/(loss), with EUR13 million of gains in 2022
reclassified from Other non-operating (charges)/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 pre-pandemic levels. In the first three months of
2023, IAG capacity, measured in available seat kilometres (ASKs),
was 46.0 per cent higher than in quarter 1, 2022, which was
impacted by the Omicron variant of COVID-19. Passenger capacity was
only 5.0 per cent lower than in quarter 1, 2019. Passenger load
factor for the quarter was 81.5 per cent, up 9.3 points on the
previous year and 0.8 points higher than in 2019.
Summary of passenger capacity and load factor by region
ASKs ASKs
Three months to March 31, higher/(lower) higher/(lower) Passenger load factor Higher/(lower) Higher/(lower)
2023 v2022 v2019 (%) v2022 v2019
----------------------------- --------------- --------------- --------------------- -------------- --------------
Domestic 28.4% 15.6% 85.2 7.8 pts 1.3 pts
Europe 53.7% (2.8%) 82.6 12.2 pts 3.2 pts
North America 62.9% 1.9% 74.8 10.4 pts (2.4) pts
Latin America and Caribbean 12.1% 1.0% 86.9 8.6 pts 2.1 pts
Africa, Middle East and South
Asia 56.2% 0.5% 82.9 6.7 pts 1.4 pts
Asia Pacific 406.1% (70.1%) 88.8 32.5 pts 6.1 pts
----------------------------- --------------- --------------- --------------------- -------------- --------------
Total network 46.0% (5.0%) 81.5 9.3 pts 0.8 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. British Airways' schedule to the
region is planned to increase during 2023, with services resuming
to Shanghai and Beijing from the summer travel season and increased
frequencies to Hong Kong and Tokyo Haneda.
Revenue
Passenger revenue rose EUR2,386 million from quarter 1, 2022 to
EUR5,041 million, reflecting the 46.0 per cent increase in capacity
operated, together with the positive impact of the 9.3 percentage
point increase in the passenger load factor and passenger yields
per revenue passenger kilometre (RPK) up 15.2 per cent. The
resulting passenger unit revenue (passenger revenue per ASK) was
30.0 per cent higher than the previous year and 14.8 per cent
higher than quarter 1, 2019. Leisure traffic performed particularly
strongly, with corporate traffic recovering more slowly.
Cargo revenue was down EUR109 million versus the previous year
to EUR323 million. Cargo carried, measured in cargo tonne
kilometres (CTKs), rose by 13.6 per cent. Yields were 34.2 per cent
lower than in the previous year, reflecting the increase in global
passenger airline capacity across the industry and the
normalisation of the global supply chain disruption seen in quarter
1, 2022. Cargo revenue was up EUR48 million, or 17.5 per cent,
versus the same period in 2019, with cargo yields up 45.4 per cent
versus 2019.
Other revenue increased by EUR177 million to EUR525 million,
reflecting the recovery in the Group's non-airline businesses,
including Iberia's third party maintenance business, BA Holidays,
and the growth of IAG Loyalty. Other revenue was 32 per cent higher
than in quarter 1, 2019.
Costs
Costs were impacted by the increase in capacity versus 2022,
with Total expenditure on operations 40.8 per cent higher than the
previous year and Non-fuel costs per ASK down 13.4 per cent.
Employee costs increased by EUR212 million versus quarter 1,
2022 to EUR1,257 million, reflecting the increase in airline
operations since quarter 1, 2022 and the related increase in
employee numbers, together with pay increases.
Fuel costs increased by EUR840 million to EUR1,758 million,
principally reflecting the impact of the higher capacity operated,
the increase in the average price of physical fuel purchased in the
quarter, lower hedging gains and the impact of a stronger US
dollar. Fuel costs are hedged up to two years in advance and hence
the impact of the significant price rises in quarter 1, 2022 was
mitigated by hedging gains, whereas in quarter 1, 2023 the hedging
gains were significantly lower. Fuel costs continue to benefit from
the Group's investment in new, more fuel-efficient aircraft.
Supplier costs increased by EUR694 million to EUR2,389 million,
mainly linked to the increase in capacity operated, together with
inflationary increases, partly offset by the Group's procurement
initiatives.
Depreciation, amortisation and impairment costs in the quarter
were EUR486 million and the Net gain from the sale of property,
plant and equipment was EUR10 million, representing the disposal of
assets, mainly connected with the disposal of aircraft and related
parts.
Operating result
The Group's operating profit for the period was EUR9 million, an
improvement of EUR727 million versus the operating loss of EUR718
million for quarter 1, 2022. Excluding exceptional items the
operating result improved EUR750 million versus the previous
year.
Exceptional items
There were no exceptional items in the quarter. In 2022, quarter
1 included 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. See Reconciliation of
Alternative performance measures for further information.
Net non-operating costs, taxation and loss after tax
The Group's net non-operating costs for the quarter were EUR130
million in 2023, compared with EUR198 million in 2022, mainly
reflecting EUR60 million of Net currency retranslation credits in
2023, versus charges of EUR61 million in 2022.
The tax credit on the loss for the period was EUR34 million
(2022: tax credit of EUR129 million), and the effective tax rate
was 28.1 per cent (2022: 14.1 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 14 per cent for the three
months to March 31, 2023. The difference between the actual
effective tax rate of 28.1 per cent and the expected tax rate of 14
per cent is due to the Group having recorded an adjustment to
deferred tax in respect of prior periods resulting from changes
made to the tax base of certain property, plant and equipment.
The loss after tax for the quarter was EUR87 million (2022:
EUR787 million).
Cash, debt and liquidity
The Group's cash balance (defined as cash, cash equivalents and
current interest-bearing deposits) of EUR11,369 million at March
31, 2023 was up EUR1,770 million on December 31, 2022, in line with
the normal seasonal pattern of working capital movements. The
Group's airlines typically experience a rise in deferred revenue in
the first half of the year, linked to bookings for future travel,
particularly leisure bookings for summer travel; deferred revenue
then usually falls in the second half of the year. Cash was also
increased by the drawing of debt during the quarter for five
aircraft that were delivered in 2022; this financing had been
agreed at December 31, 2022 and was reported in undrawn aircraft
facilities.
During the quarter, the Group took delivery of three shorthaul
aircraft: one Airbus A320neo for Iberia and two Airbus A321neos for
Vueling; financing for these aircraft will be drawn later in
2023.
The Group's total borrowings at March 31, 2023 were EUR19,767
million, down EUR217 million from December 31, 2022, principally
due to foreign exchange movements, with the net impact of new debt
drawn in the quarter and repayments of existing debt broadly
neutral. Debt maturities in 2023, aside from regular lease
payments, include the repayment of a EUR500 million IAG bond in
July.
Net debt (total borrowings less cash, cash equivalents and
current interest-bearing deposits) was EUR8,398 million at March
31, 2023, a reduction of EUR1,987 million since December 31, 2022,
mainly due to the increase in cash outlined above.
The Group's EBITDA before exceptional items for the rolling four
quarters to March 31, 2023 was EUR4,030 million. Net debt to EBITDA
before exceptional items was 2.1 times at March 31, 2023. See
Reconciliation of Alternative performance measures and Alternative
performance measures section of IAG's 2022 Annual report and
accounts for further information.
Total liquidity at March 31, 2023 was EUR15,081 million, up
EUR1,082 million from EUR13,999 million at December 31, 2022.
Committed and undrawn general and overdraft facilities were
EUR3,302 million (December 31, 2022: EUR3,284 million) and
committed and undrawn aircraft facilities were EUR410 million
(December 31, 2022: EUR1,116 million).
RECONCILIATION OF ALTERNATIVE PERFORMANCE MEASURES
a Loss after tax before exceptional items
Exceptional items are those that in management's view need to be
separately disclosed by virtue of their size or incidence in
understanding the entity's financial performance.
The table below reconciles the reported income statement to the
alternative performance measures statement:
Three months to March 31
----------------------------------------------------------------------------------------------------
Before Before
exceptional exceptional
Exceptional items Exceptional items
EUR million Reported 2023 items 2023 Reported 2022 items 2022 (1)
---------------- ------------- ---------------- ---------------- ------------- ---------------- ----------------
Passenger
revenue 5,041 - 5,041 2,655 - 2,655
Cargo revenue 323 - 323 432 - 432
Other revenue 525 - 525 348 - 348
---------------- ------------- ---------------- ---------------- ------------- ---------------- ----------------
Total revenue 5,889 - 5,889 3,435 - 3,435
---------------- ------------- ---------------- ---------------- ------------- ---------------- ----------------
Fuel, oil costs
and emissions
charges 1,758 - 1,758 918 - 918
Property, IT and
other costs(2) 249 - 249 204 23 227
Other operating
charges 3,873 - 3,873 3,031 - 3,031
---------------- ------------- ---------------- ---------------- ------------- ---------------- ----------------
Total
expenditure on
operations 5,880 - 5,880 4,153 23 4,176
---------------- ------------- ---------------- ---------------- ------------- ---------------- ----------------
Operating
profit/(loss) 9 - 9 (718) (23) (741)
Total net
non-operating
costs (130) - (130) (198) - (198)
---------------- ------------- ---------------- ---------------- ------------- ---------------- ----------------
Loss before tax (121) - (121) (916) (23) (939)
Tax 34 - 34 129 - 129
---------------- ------------- ---------------- ---------------- ------------- ---------------- ----------------
Loss after tax
for the period (87) - (87) (787) (23) (810)
---------------- ------------- ---------------- ---------------- ------------- ---------------- ----------------
(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/(loss).
Accordingly, for the three months to March 31, 2022, the Group has reclassified EUR13 million
of gains from Other non-operating (charges)/credits to Expenditure on operations. There is
no impact on the loss after tax.
(2) The exceptional credit of EUR23 million recorded in the three months to March 31, 2022,
relates 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 has been recorded within Property, IT and other costs in the Income statement with
no resultant tax charge arising.
b Net debt to EBITDA before exceptional items
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. Net debt is
defined as long-term borrowings (both current and non-current),
less cash, cash equivalents and other current interest-bearing
deposits. EBITDA before exceptional items is calculated as the
rolling four quarter operating result before exceptional items,
interest, taxation, depreciation, amortisation and impairment.
EUR million March 31, 2023 December 31, 2022(1)
-------------------------------------------------------------------------------- -------------- --------------------
Interest-bearing long-term borrowings 19,767 19,984
Less: Cash and cash equivalents (10,374) (9,196)
Less: Other current interest-bearing deposits (995) (403)
-------------------------------------------------------------------------------- -------------- --------------------
Net debt 8,398 10,385
-------------------------------------------------------------------------------- -------------- --------------------
Operating profit 2,005 1,278
Add: Depreciation, amortisation and impairment 2,025 2,070
-------------------------------------------------------------------------------- -------------- --------------------
EBITDA 4,030 3,348
-------------------------------------------------------------------------------- -------------- --------------------
Add: Exceptional items (excluding those reported within Depreciation,
amortisation and impairment) - (23)
-------------------------------------------------------------------------------- -------------- --------------------
EBITDA before exceptional items 4,030 3,325
-------------------------------------------------------------------------------- -------------- --------------------
Net debt to EBITDA before exceptional items 2.1 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.
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END
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