International Airlines Group is one of the world's largest airline groups, with a fleet of 573 aircraft, operating 256 destinations and carries around 95 million passengers. The following airline brands are part of IAG: Aer Lingus; British Airways; Iberia; Level and Vueling. It is a Spanish registered company with shares traded on the London and Madrid Stock Exchanges and is part of the FTSE 100 Index.
We were delighted to welcome Stuart Morgan, Head of Investor Relations, to the latest Yellowstone Advisory webinar to provide an update on performance and prospects following the recent Q3 results and Capital Markets Day.
The group strategy is broadly the same as it was pre covid and has three pillars: To grow their global leadership position in the strong hubs of Dublin, London, Madrid and Barcelona; to strengthen their portfolio of World Class Brands & Operations and ensure the customer propositions are increasingly strong; and, to grow IAG loyalty, a high growth, capital light business. In the medium term the ambition is to create a sustainably profitable business with 12-15% operating margins and 13-16% ROIC. In addition the company targets 4-5% growth in Available Seat Kilometres (ASK) and to maintain leverage below 1.8x (ND/EBITDA) through the cycle. If they can hit these targets the company should be able to deliver strong shareholder returns via a combination of EPS growth, ordinary dividends, share buybacks and special dividends. An interim dividend was announced in August 2024 and a share buy back followed the recent Q3 results.
The financial performance in the third quarter delivered revenue growth of 7.9%, operating profit growth of 15.4% to €2,013m, a record for the group and an increase in the operating margin to 21.6%. Apart from Ryanair, the company believes they are the most profitable airline business in the World. Combined the company generated significant free cash flow and enabled them to announce a €350m share buyback, which should take up to results in 2025 to complete. At that point the company will update the market on the capital allocation policy going forward. Demand remains strong in all core markets and the company expects their strong financial performance to continue for the rest of the year.
The improvement in Q3 profitability mainly came from growth in passenger revenues but there were also positive contributions from cargo and loyalty. There was a negative contribution from the increase in nonfuel costs. In…
