REG - Intl Con Airline Grp - IAG 1st Quarter Results
05/05/2023 07:00
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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 €9 million, up
€750 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
€1.8 billion to €2.3 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
Reported results (€ million) 2023 2022(1) Higher /
(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 (€ 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)%
( )
Alternative performance measures (€ million) 2023 2022(1) Higher /
(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 (€ 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 €81 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 €1.8 billion to
€2.3 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
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.
IAG Investor Relations
Waterside (HAA2),
PO Box 365,
Harmondsworth,
Middlesex,
UB7 0GB
Investor.relations@iairgroup.com
CONSOLIDATED INCOME STATEMENT
Three months to March 31
€ million 2023 2022(1) Higher/
(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 €13 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
€ million 2023 2022(1) Higher/
(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)%
( )Operating figures 2023 2022 Higher/
(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 (€ cents) 8.63 7.49 15.2 %
Passenger revenue per ASK (€ cents) 7.03 5.41 30.0 %
Cargo revenue per CTK (€ cents) 28.71 43.64 (34.2)%
Fuel cost per ASK (€ cents) 2.45 1.87 31.2 %
Non-fuel costs per ASK (€ cents) 5.75 6.64 (13.4)%
Total cost per ASK (€ 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 €13 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 €15,081 million,
comprising cash and interest-bearing deposits of €11,369 million, €3,302
million of committed and undrawn general and overdraft facilities and a
further €410 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 €54 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 €48 million for the quarter, increasing
revenues by €148 million and costs by €196 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 €6 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 €13 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
Three months to March 31, 2023 ASKs ASKs Passenger load factor Higher/(lower) Higher/(lower)
higher/(lower) higher/(lower) (%) 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 €2,386 million from quarter 1, 2022 to €5,041
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 €109 million versus the previous year to €323
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 €48 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 €177 million to €525 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 €212 million versus quarter 1, 2022 to €1,257
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 €840 million to €1,758 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 €694 million to €2,389 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 €486
million and the Net gain from the sale of property, plant and equipment was
€10 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 €9 million, an improvement
of €727 million versus the operating loss of €718 million for quarter 1,
2022. Excluding exceptional items the operating result improved €750 million
versus the previous year.
Exceptional items
There were no exceptional items in the quarter. In 2022, quarter 1 included an
exceptional credit of €23 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 €130 million in
2023, compared with €198 million in 2022, mainly reflecting €60 million of
Net currency retranslation credits in 2023, versus charges of €61 million in
2022.
The tax credit on the loss for the period was €34 million (2022: tax credit
of €129 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 €87 million (2022: €787 million).
Cash, debt and liquidity
The Group's cash balance (defined as cash, cash equivalents and current
interest-bearing deposits) of €11,369 million at March 31, 2023 was up
€1,770 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 €19,767 million, down
€217 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 €500 million IAG bond in July.
Net debt (total borrowings less cash, cash equivalents and current
interest-bearing deposits) was €8,398 million at March 31, 2023, a reduction
of €1,987 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 €4,030 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 €15,081 million, up €1,082 million
from €13,999 million at December 31, 2022. Committed and undrawn general and
overdraft facilities were €3,302 million (December 31, 2022: €3,284
million) and committed and undrawn aircraft facilities were €410 million
(December 31, 2022: €1,116 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
€ million Reported 2023 Exceptional items Before exceptional items Reported 2022 Exceptional items Before exceptional items
2023 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 €13 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 €23 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.
€ 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, - (23)
amortisation and impairment)
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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