REG - Intl Con Airline Grp - IAG FY 2022 Results
24/02/2023 07:01
For best results when printing this announcement, please click on link below:
http://newsfile.refinitiv.com/getnewsfile/v1/story?guid=urn:newsml:reuters.com:20230224:nRSX9698Qa&default-theme=true
RNS Number : 9698Q International Cons Airlines Group 24 February 2023
IAG full year results 2022
Strong recovery in profits in 2022
• In 2022 we saw a strong recovery in our core markets as COVID-19
restrictions were lifted, which drove revenue momentum and a return to profit
with significantly positive operating cash flow
• Further recovery in profits expected in 2023, with full year operating
profit before exceptional items expected to be in the range of €1.8 to
€2.3 billion, based on current foreign exchange rates and jet fuel forward
prices. However, we are mindful of uncertainty in the macro environment and
fuel and non-fuel cost inflation
• Committed to generating long-term shareholder value and confident in
returning to pre-COVID-19 levels of operating profit within the next few years
Luis Gallego, IAG Chief Executive Officer, said:
"2022 was a year of strong recovery, driven by sustained leisure demand and
markets reopening. At this point of the year we continue to see robust
forward-bookings, while also remaining conscious of global macro-economic
uncertainties. We are transforming our businesses, with the intention of
returning IAG to pre-COVID levels of profit within the next few years, through
major initiatives to improve customer experience and operational performance.
Our unique group structure allows us to maximise revenue and cost synergies,
and invest capital to achieve strong returns, whilst continuing progress
towards net zero by 2050.
"With the acquisition of Air Europa now agreed but subject to regulatory and
other approvals which could take around 18 months, we are intending to welcome
another leading airline to the Group. This acquisition will enable us to grow
Madrid as a hub, offering a gateway to Latin America and beyond, with benefits
for customers, employees and shareholders.
"I would like to thank the teams across IAG for their exceptionally hard work
in addressing the challenges of ramping up the operation throughout the year."
Financial summary:
Year to December 31 Three months to December 31
Statutory results (€ million) 2022 2021 2022 2021
Total revenue 23,066 8,455 6,386 3,534
Operating profit/(loss) 1,256 (2,765) 486 (278)
Profit/(loss) after tax 431 (2,933) 232 (311)
Basic earnings/(loss) per share (€ cents) 8.7 (59.1)
Cash, cash equivalents and interest-bearing deposits 9,599 7,943
Borrowings 19,984 19,610
Alternative performance measures (€ million) 2022 2021 2022 2021
Total revenue before exceptional items 23,066 8,450 6,386 3,534
Operating profit/(loss) before exceptional items 1,225 (2,970) 486 (305)
Profit/(loss) after tax before exceptional items 402 (3,038) 232 (263)
Adjusted earnings/(loss) per share (€ cents) 5.6 (61.2)
Net debt 10,385 11,667
Total liquidity(1) 13,999 11,986
1 Total liquidity includes Cash, cash equivalents and interest-bearing
deposits, plus committed and undrawn general and aircraft-specific financing
facilities
• Significant improvement to our financial performance with operating
profit before exceptional items of €1,225 million, an increase of €4,195
million compared to full year 2021
• Restored 87 per cent of 2019 capacity, measured in available seat
kilometres (ASKs), by quarter 4 and 78 per cent in the full year
• Passenger unit revenue was 11.0% higher than in 2019, with the increase
seen particularly in the second half of 2022, with strong leisure traffic
recovery and business traffic steadily improving. The premium leisure segment
performed very well.
• Higher non-fuel unit costs, up 24.1% versus 2019, driven by supplier
cost inflation net of transformation initiatives, capacity levels still below
2019 and foreign exchange
• Fuel unit cost was up 30.2% versus 2019, negatively impacted by
significant rise in commodity prices for jet fuel, following the Russian
invasion of Ukraine in February 2022, partially offset by the benefit of our
hedging policy
• Invested €3.9 billion to make important improvements in fleet,
customer offerings, IT infrastructure and sustainability
• Reduction in net debt to €10.4 billion, driven by operating profit and
significant working capital inflows
• Liquidity continued to strengthen to €14.0 billion at December 31,
2022, from €12.0 billion at the end of 2021
Good progress against strategic objectives in 2022
• Investing for our customers:
• Quickly recovered operations in our main hubs in Madrid, Dublin and
Barcelona
• Iberia recognised as the most punctual European airline in 2022.
Iberia Express and Vueling also ranked as the third and fourth most punctual
airlines in Europe(1).
• Significant focus on rebuilding operational stability at London
Heathrow, with British Airways' operational performance improving through the
summer, with 7,400 new colleagues recruited in 2022
• 27 deliveries of modern, fuel-efficient aircraft and 59 longhaul
aircraft embodied with next generation products for British Airways and Iberia
at the end of 2022
• Ordered 109 new shorthaul aircraft, bringing fuel efficiency benefits
of up to 20 per cent versus the aircraft they will replace
• Carbon intensity, measured as grammes of CO(2) per passenger kilometre,
7 per cent lower than in 2019
• Agreement with Globalia to acquire the remaining 80 per cent equity of
Air Europa, following the acquisition of a 20 per cent equity stake in August
2022. The transaction is subject to regulatory and other approvals which could
take around 18 months
• Funding level of British Airways' main pension scheme (NAPS) improved
such that the scheme was in surplus on its triennial funding basis and no
deficit recovery payments were made during 2022 or required in the foreseeable
future
Trading outlook
Full year 2023 capacity (ASKs) of approximately 98 per cent of the 2019 level,
with quarter 1, 2023 approximately 96 per cent of the quarter 1, 2019 level.
Full year 2023 operating profit before exceptional items expected to be in the
range of €1.8 to €2.3 billion, with most of the improvement over 2022 in
the first half of the year. Quarter 1, 2023 operating loss of approximately
€200 million. This assumes no further setbacks related to COVID-19 or
material impacts from geopolitical developments.
Capital expenditure for 2023 of approximately €4.0 billion, subject to the
timing of aircraft deliveries. Net debt broadly maintained at the December 31,
2022 level of €10.4 billion by the end of 2023.
This guidance is based on forward jet fuel prices and spot foreign exchange
rates at February 23, 2023.
IAG plans to update the market with further strategic and financial
information at a Capital Markets event later in 2023.
Notes
1 Cirium report 'The On-time Performance Review 2022 Airlines &
Airports', January 2023
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 2021 Annual Report and
Accounts; 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 of any further disruption to the global airline industry as well
as the current economic and geopolitical environment.
IAG Investor Relations
Waterside (HAA2),
PO Box 365,
Harmondsworth,
Middlesex,
UB7 0GB
Investor.relations@iairgroup.com (mailto:Investor.relations@iairgroup.com)
CONSOLIDATED INCOME STATEMENT
Year to December 31 Three months to December 31
€ million 2022 2021 Higher/ 2022 2021 Higher/
(lower)
(lower)
Passenger revenue 19,458 5,835 nm 5,438 2,695 nm
Cargo revenue 1,615 1,673 (3.5)% 399 499 (20.0)%
Other revenue 1,993 947 nm 549 340 61.5 %
Total revenue 23,066 8,455 nm 6,386 3,534 80.7 %
Employee costs 4,647 3,013 54.2 % 1,230 914 34.6 %
Fuel, oil costs and emissions charges 6,120 1,781 nm 1,720 732 nm
Handling, catering and other operating costs 2,971 1,308 nm 828 520 59.2 %
Landing fees and en-route charges 1,890 923 nm 499 325 53.5 %
Engineering and other aircraft costs 2,101 1,085 93.6 % 594 383 55.1 %
Property, IT and other costs 950 758 25.3 % 280 218 28.4 %
Selling costs 920 434 nm 249 154 61.7 %
Depreciation, amortisation and impairment 2,070 1,932 7.1 % 539 548 (1.6)%
Currency differences 141 (14) nm (39) 18 nm
Total expenditure on operations 21,810 11,220 94.4 % 5,900 3,812 54.8 %
Operating profit/(loss) 1,256 (2,765) nm 486 (278) nm
Finance costs (1,017) (830) 22.5 % (294) (218) 34.9 %
Finance income 52 13 nm 41 8 nm
Net change in fair value of financial instruments 81 89 (9.0)% (51) 85 nm
Net financing credit/(charge) relating to pensions 26 (2) nm 7 (4) nm
Net currency retranslation (charges)/credits (115) (82) 40.2 % 190 (19) nm
Other non-operating credits/(charges) 132 70 88.6 % (130) (31) nm
Total net non-operating costs (841) (742) 13.3 % (237) (179) 32.4 %
Profit/(loss) before tax 415 (3,507) nm 249 (457) nm
Tax 16 574 (97.2)% (17) 146 nm
Profit/(loss) after tax 431 (2,933) nm 232 (311) nm
ALTERNATIVE PERFORMANCE MEASURES
All figures in the tables below are before exceptional items. Refer to
Alternative performance measures section for more detail.
Year to December 31 Three months to December 31
Before exceptional items Before exceptional items
€ million 2022 2021 Higher/ 2022 2021 Higher/
(lower)
(lower)
Passenger revenue 19,458 5,830 nm 5,438 2,695 nm
Cargo revenue 1,615 1,673 (3.5)% 399 499 (20.0)%
Other revenue 1,993 947 nm 549 340 61.5 %
Total revenue 23,066 8,450 nm 6,386 3,534 80.7 %
Employee costs 4,647 3,031 53.3 % 1,230 932 32.0 %
Fuel, oil costs and emissions charges 6,120 1,935 nm 1,720 733 nm
Handling, catering and other operating costs 2,971 1,308 nm 828 520 59.2 %
Landing fees and en-route charges 1,890 923 nm 499 325 53.5 %
Engineering and other aircraft costs 2,101 1,092 92.4 % 594 383 55.1 %
Property, IT and other costs 973 758 28.4 % 280 218 28.4 %
Selling costs 920 434 nm 249 154 61.7 %
Depreciation, amortisation and impairment 2,078 1,953 6.4 % 539 556 (3.1)%
Currency differences 141 (14) nm (39) 18 nm
Total expenditure on operations 21,841 11,420 91.3 % 5,900 3,839 53.7 %
Operating profit/(loss) 1,225 (2,970) nm 486 (305) nm
Finance costs (1,017) (830) 22.5 % (294) (218) 34.9 %
Finance income 52 13 nm 41 8 nm
Net change in fair value of financial instruments 81 89 (9.0)% (51) 85 nm
Net financing credit/(charge) relating to pensions 26 (2) nm 7 (4) nm
Net currency retranslation (charges)/credits (115) (82) 40.2 % 190 (19) nm
Other non-operating credits/(charges) 132 145 (9.0)% (130) 44 nm
Total net non-operating costs (841) (667) 26.1 % (237) (104) nm
Profit/(loss) before tax 384 (3,637) nm 249 (409) nm
Tax 18 599 (97.0)% (17) 146 nm
Profit/(loss) after tax 402 (3,038) nm 232 (263) nm
Operating figures 2022 2021 Higher/ 2022 2021 Higher/
(lower)
(lower)
Available seat kilometres (ASK million) 263,592 121,965 nm 71,048 47,842 48.5 %
Revenue passenger kilometres (RPK million) 215,749 78,689 nm 59,125 34,225 72.8 %
Seat factor (per cent) 81.8 64.5 17.3 pts 83.2 71.5 11.7 pts
Passenger numbers (thousands) 94,726 38,864 nm 25,222 15,309 64.8 %
Cargo tonne kilometres (CTK million) 3,980 3,970 0.3 % 1,090 1,129 (3.5)%
Sold cargo tonnes (thousands) 561 539 4.1 % 153 157 (2.5)%
Sectors 619,122 307,519 nm 162,285 114,686 41.5 %
Block hours (hours) 1,781,829 892,455 99.7 % 473,511 328,739 44.0 %
Average manpower equivalent(1) 59,505 50,222 18.5 % 63,790 49,114 29.9 %
Aircraft in service 558 531 5.1 % n/a n/a n/a
Passenger revenue per RPK (€ cents) 9.02 7.41 21.7 % 9.20 7.87 16.8 %
Passenger revenue per ASK (€ cents) 7.38 4.78 54.4 % 7.65 5.63 35.9 %
Cargo revenue per CTK (€ cents) 40.58 42.14 (3.7)% 36.61 44.20 (17.2)%
Fuel cost per ASK (€ cents) 2.32 1.59 46.3 % 2.42 1.53 58.0 %
Non-fuel costs per ASK (€ cents) 5.96 7.78 (23.3)% 5.88 6.49 (9.4)%
Total cost per ASK (€ cents) 8.29 9.36 (11.5)% 8.30 8.02 3.5 %
1 Included in the average manpower equivalent are staff on furlough, wage
support and equivalent schemes, including the Temporary Redundancy Plan
arrangements in Spain.
FINANCIAL REVIEW
IAG capacity
The year 2022 was a year of rebuilding capacity, with COVID-19 related travel
restrictions eased or removed in most of the Group's markets, allowing the
airline industry to substantially restore capacity towards levels seen in
2019, in line with strong pent-up demand for travel. For the year, IAG
capacity, measured in available seat kilometres (ASKs), reached 78.0 per cent
of 2019. Each airline had a different recovery path, reflecting its respective
network, markets served and constraints at hub and other airports. Group
capacity increased steadily over the quarters, starting at 65.1 per cent of
2019 in quarter 1 and reaching 86.6 per cent of 2019 in quarter 4.
Proportion of 2019 passenger capacity operated by quarter
Year to December 31, 2022 (per cent) Q1 Q2 Q3 Q4 Total
Aer Lingus 69.0 85.6 89.9 98.5 86.8
British Airways 57.4 69.1 74.2 79.8 70.3
Iberia 84.7 87.0 84.2 92.8 87.1
Level 30.3 60.7 55.5 51.3 50.5
Vueling 72.9 100.2 102.9 111.3 98.2
Group 65.1 78.0 81.1 86.6 78.0
Capacity operated as a percentage of 2019 by quarter by region
Year to December 31, 2022 (per cent) Q1 Q2 Q3 Q4 Total
Domestic 90.1 105.1 101.5 104.0 100.6
Europe 63.3 84.7 88.2 96.0 84.0
North America 62.6 83.8 92.0 94.0 83.9
Latin America and Caribbean 90.2 81.0 75.0 85.5 82.8
Africa, Middle East and South Asia 64.3 73.9 79.0 88.8 76.4
Asia Pacific 5.9 9.5 10.4 19.2 11.3
Total network 65.1 78.0 81.1 86.6 78.0
The impact of COVID-19 and related travel restrictions was significantly less
than in 2021, when many countries were still in lockdown or had severe travel
restrictions in place. The strong recovery in demand and traffic was reflected
in the Group's passenger load factor, which reached 81.8 per cent for the
year, down just 2.8 points from 2019. The recovery increased across the year,
with the passenger load factor in quarter 1 at 72.2 per cent and quarter 4
rising to 83.2 per cent.
Capacity operated out of London Heathrow airport was lower than originally
planned at the start of the year. British Airways' capacity was capped by
Heathrow Airport and along with limited access to South Asia, capacity reached
70.3 per cent of 2019 levels. In addition, there was an impact from the
Omicron variant of COVID-19 in January and February. As global travel
restrictions eased, British Airways restarted routes such as Sydney, San Jose
in California, Tokyo and Hong Kong. In March 2022 British Airways also
launched its new shorthaul Gatwick subsidiary, BA Euroflyer, operating to 35
new destinations in the summer, flying under the British Airways brand.
Iberia's capacity saw increasing recovery over the course of the year, after
quarter 1 was negatively impacted by Omicron. Performance improved steadily,
especially in the Latin America and Caribbean (LACAR) region, North America
and Europe. For the year, Iberia significantly grew its capacity in LACAR
versus 2021 by increasing frequencies to destinations such as Mexico and
Colombia. Load factor was at 84.6 per cent in this region, only 0.8 points
lower than 2019. The increase in capacity versus 2019 was lower in quarter 3
than quarter 2, as in 2019 the seasonal increase in Iberia's schedule to LACAR
for the peak summer months was greater than in 2022.
Vueling adopted a new strategy to reduce its seasonality and increase aircraft
utilisation during the winter travel months. The airline started seeing the
results of this strategy in quarter 4, when Vueling had capacity growth above
2019 levels by 11.3 per cent, despite fewer aircraft in service, with new
routes and growth into existing markets such as the Canary Islands.
Aer Lingus was able to restore the majority of its transatlantic services and
in addition operated three transatlantic services from its new Manchester
Airport base in the UK, all of which started in late 2021. These services
represented 13 per cent of Aer Lingus' transatlantic capacity and 8 per cent
of its total network in 2022. The Manchester base supported Aer Lingus in
restoring longhaul passenger capacity to similar levels to 2019 by the end of
the year.
IAG regional capacity
Year to December 31, 2022 ASKs ASKs Passenger load Higher/(lower) Higher/(lower)
factor
higher/(lower) higher/(lower)
v2019 v2021
(per cent)
v2019 v2021
Domestic 0.6% 36.9% 85.5 (1.7)pts 10.6pts
Europe (16.0%) 138.2% 81.5 (2.1)pts 12.4pts
North America (16.1%) 192.9% 79.3 (4.8)pts 29.9pts
Latin America and Caribbean (17.2%) 73.5% 85.1 (1.3)pts 15.3pts
Africa, Middle East and South Asia (23.6%) 130.0% 81.1 (1.9)pts 13.7pts
Asia Pacific (88.7%) (7.1%) 84.0 (1.8)pts 44.6pts
Total network (22.0%) 116.1% 81.8 (2.8)pts 17.3pts
Domestic and Europe
Capacity in IAG's Domestic markets recovered to a greater extent than other
regions, with capacity slightly higher than 2019 by 0.6 per cent and higher
than 2021 by 36.9 per cent. Iberia and Vueling benefited from strong leisure
demand to the Canary and Balearic Islands, with capacity increases above 2019.
Passenger load factor for the region remained the highest for the Group at
85.5 per cent, down 1.7 points versus 2019 and up 10.6 points versus 2021.
The Group's capacity in Europe was 16.0 per cent lower than 2019; however, it
recovered to 138.2 per cent above 2021 as demand for travel increased. Outside
of Russia and the countries neighbouring Ukraine, the impact of the conflict
has been relatively limited in this region. Vueling expanded its operations
from Paris Orly in November 2021, with an additional 18 slots that allowed
Vueling to base an additional four aircraft at the airport, taking its total
to nine at an airport which is highly slot-constrained. British Airways
launched a new route to Nuremberg in Germany and BA Cityflyer launched a
number of new routes from London City, including to Barcelona, San Sebastian
and Thessaloniki. Iberia reopened its route to Bergen in Norway. Passenger
load factor for the region was down 2.1 points versus 2019 to 81.5 per cent
and was up 12.4 points versus 2021.
North America
IAG's North American capacity was 16.1 per cent lower than 2019 and was up
significantly versus 2021, by 192.9 per cent. The United States Government
eased its COVID-19 travel restrictions in November 2021 for vaccinated
passengers and removed the need for a COVID-19 test prior to arrival in June
2022. British Airways was able to substantially restore its network to North
America by the end of the year by reopening seven routes and adding a new
service to Portland, Oregon. During the year, Iberia reopened flights to San
Francisco and launched new routes to Washington and Dallas. Aer Lingus
reopened six routes to North America during the year. Passenger load factor
for the region was down 4.8 points versus 2019 to 79.3 per cent and was up
29.9 points versus 2021.
Latin America and Caribbean (LACAR)
IAG's capacity in LACAR was down 17.2 per cent on 2019 but increased 73.5 per
cent on 2021. Demand in this region was strong, with the Group benefiting from
pent-up demand as COVID-19 travel restrictions to LACAR were lifted earlier
than in other regions. Iberia significantly increased its capacity to LACAR
during the year, with Mexico up to three flights daily and increased
frequencies for Bogotá, Colombia from 10 to 14 flights per week in February
2022. Passenger load factor was down 1.3 points versus 2019 at 85.1 per cent
and was up 15.3 points versus 2021.
Africa, Middle East and South Asia (AMESA)
Capacity to this region was down 23.6 per cent versus 2019 and up
significantly versus 2021. British Airways had restored almost 90 per cent of
its 2019 capacity to AMESA by quarter 4 and during the year reopened routes to
Morocco, Doha and Cape Town. Iberia had strong results in Israel as Tel Aviv
recovered faster than expected, and North Africa also performed well with good
recovery to Morocco. Vueling launched new routes to Cairo, Alexandria and
Amman. Passenger load factor for the region was down 1.9 points versus 2019 at
81.1 per cent and was up 13.7 points versus 2021.
Asia Pacific
During 2022, the Asia Pacific region remained the most capacity-constrained
region, as strict travel restrictions continued to severely impact demand.
Australia opened its borders to international travel in February 2022, while
other countries such as Singapore, Japan and Hong Kong lifted travel
restrictions later, while China did not lift restrictions until January 2023.
During the year, British Airways restarted routes to Sydney, Hong Kong and
Tokyo. Passenger load factor for the region was down 1.8 points versus 2019 at
84.0 per cent and was up 44.6 points versus 2021.
Basis of Preparation
At December 31, 2022, the Group had total liquidity of €13,999 million,
comprising cash, cash equivalents and interest-bearing deposits of €9,599
million, €3,284 million of committed and undrawn general facilities, and a
further €1,116 million of committed and undrawn aircraft-specific
facilities. The Group has been successful in raising financing since the
outbreak of COVID-19, having financed all aircraft deliveries in 2020, 2021
and 2022. The Group continues to secure aircraft financing on long-term
arrangements.
In its assessment of going concern over the period to June 30, 2024 (the
'going concern period'), the Group has prepared extensive modelling, including
considering a plausible but severe downside scenario and further sensitivities
to the downside scenario. Having reviewed these scenarios and sensitivities,
the Directors have a reasonable expectation that the Group has sufficient
liquidity to continue in operational existence over the going concern period,
and hence continue to adopt the going concern basis in preparing the
consolidated financial statements.
In adopting the going concern basis of accounting, the consolidated financial
statements have been prepared without the inclusion of a material uncertainty,
which has been removed since the 2021 Annual Report and Accounts. The removal
of the material uncertainty arises from the reduction in uncertainty over the
going concern period due to both the continued recovery subsequent to the
COVID-19 pandemic and the strength of the Group's liquidity at December 31,
2022.
Summary
The Group was able to substantially restore its capacity by the end of the
year, having operated a significantly reduced schedule in 2020 and 2021 due to
the impact of the COVID-19 pandemic. As capacity was increasingly restored
through the year the operating result improved, with the third quarter, which
includes the airlines' summer peak seasons, approaching levels of
profitability seen in 2019. Fuel prices were significantly higher than both
the previous year and 2019 and the airline sector also experienced high
supplier price inflation. Due to the strong demand, passenger unit revenues
also rose above those in 2019, thus allowing the airlines to recover a
substantial portion of the fuel price increase and other cost inflation.
The net result was an operating profit for the year of €1,256 million,
versus an operating loss of €2,765 million in 2021. The profit after tax for
the year was €431 million, versus a loss of €2,933 million in 2021.
Profit/(loss) for the year
Statutory results 2022 2021 Higher/
€ million
(lower) vly
Operating profit/(loss) 1,256 (2,765) 4,021
Profit/(loss) before tax 415 (3,507) 3,922
Profit/(loss) after tax 431 (2,933) 3,364
The biggest driver of the year-on-year changes in revenues and costs was the
significant restoration of the airlines' flying programmes, linked to the
opening of markets and recovery from the substantial impacts of COVID-19 in
2020 and 2021. Passenger capacity, measured in ASKs, was more than double the
level of the previous year, up 116 per cent on 2021. Such an increase has made
percentage increases not meaningful and hence they are excluded from the
tables below.
Summary of exceptional items
The Group uses Alternative Performance Measures (APMs) to analyse the
underlying results of the business excluding exceptional items, which 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.
In 2020 and 2021, the Group recorded a number of exceptional items arising as
a direct result of COVID-19, which during 2021 principally related to the fair
value movements on derivatives de-designated from hedge accounting and the
reversal of the impairment of certain aircraft stood back up in 2021. In 2021
all items were associated with the impact of COVID-19, except for the
termination payment to Globalia.
During the course of 2022 the Group recorded exceptional credits relating to
the partial reversal of a fine issued to British Airways in 2010 and the
reversal of the impairment of certain aircraft returned to service in 2022.
A summary of the exceptional items relating to 2022 and 2021 is given below,
with more detail in the Alternative Performance Measures section, including a
breakdown of the exceptional items by operating company.
Income statement line Exceptional item description Credit/(charge) to the
Income statement
€ million
2022 2021
Passenger revenue Discontinuation of hedge accounting for foreign currency derivatives for - 5
revenue
Employee costs Restructuring costs - 18
Fuel, oil and emissions costs Discontinuation of hedge accounting for fuel and associated foreign exchange - 154
derivatives
Engineering and other aircraft costs Inventory write down and charge in relation to contractual lease provisions - 7
Property, IT and other costs Reversal of fine 23 -
Depreciation, amortisation and impairment Impairment reversal of fleet and associated assets 8 21
Non-operating costs Termination payment to Globalia - (75)
Tax Tax on exceptional items (2) (25)
Excluding the impact of the exceptional items shown above, the operating
profit for 2022 was €1,225 million, €4,195 million better than the
operating loss of €2,970 million for 2021, reflecting the continued recovery
in capacity. The profit after tax and before exceptional items was €402
million, €3,440 million higher than the 2021 loss of €3,038 million.
Alternative Performance Measures (before exceptional items) 2022 2021 Higher/
(lower) vly
€ million
Operating profit/(loss) 1,225 (2,970) 4,195
Profit/(loss) before tax 384 (3,637) 4,021
Profit/(loss) after tax 402 (3,038) 3,440
Revenue
€ million 2022 2021 Higher/
(lower) vly
Passenger revenue(1) 19,458 5,835 13,623
Cargo revenue 1,615 1,673 (58)
Other revenue 1,993 947 1,046
Total revenue 23,066 8,455 14,611
1 For 2021 includes an exceptional credit of €5 million related to
discontinued hedge accounting of revenue foreign currency derivatives. Further
information is given in the Alternative Performance Measures section.
Total revenue increased €14,611 million versus 2021, of which €782 million
was due to favourable exchange rate movements.
Passenger revenue
The increase in passenger revenue of €13,623 million was significantly ahead
of the increase in passenger capacity, driven by higher yields and higher load
factors than in 2021, linked to the reopening of markets, strong pent-up
customer demand and increases in ticket prices to reflect a higher cost
environment, with higher fuel prices and supplier price inflation,
particularly following the outbreak of the war in Ukraine in February 2022.
The passenger load factor for the year of 81.8 per cent was 17.3 points higher
than in 2021 and only 2.8 points lower than in 2019, with recovery
increasingly seen as the year progressed and the final quarter of the year
just 1.1 points lower than in 2019. Passenger yields, measured as passenger
revenue per revenue passenger kilometre (RPK) were 21.7 per cent higher than
in 2021 and up 14.7 per cent on 2019. The resulting passenger unit revenue
(passenger revenue per ASK) for the year was 54.4 per cent higher than in 2021
and 11.0 per cent higher than in 2019. Passenger unit revenue also steadily
rose as capacity was restored, being 11.7 per cent lower than 2019 in the
first quarter, achieving 21.9 per cent higher than in 2019 in the summer peak
of quarter 3 and still 16.4 per cent higher than 2019 in the fourth quarter.
Cargo revenue
Cargo revenue, at €1,615 million, was only 3.5 per cent lower than in 2021,
which was a record year for cargo revenue and was linked to the number of
additional cargo flights that were operated due to the severely restricted
passenger flying programmes. In 2022, as passenger flying schedules were
restored, there were significantly fewer cargo-only flights operating, with
502 during the year, compared with 3,788 in 2021. The early part of 2022
experienced global supply chain disruption, which eased across the year as
shipping capacity returned, with cargo volumes, measured in cargo tonne
kilometres (CTKs), 15.9 per cent higher than the previous year in quarter 1,
but lower than in the previous year by 3.5 per cent by quarter 4; total cargo
carried for the year was almost the same as in 2021, up 0.3 per cent. Cargo
yields, measured as cargo revenue per cargo tonne kilometre, were 3.7 per cent
below those of 2021, although double those of 2019. As global supply chain
issues eased, cargo yields also declined across the year, with quarter 1 up
6.5 per cent on the previous year but quarter 4 being 17.2 per cent lower than
in quarter 4 2021. The yield environment is expected to moderate, along with
global air cargo volumes, in 2023.
Other revenue
The largest Other revenue streams for the Group are BA Holidays, Iberia's
Maintenance, Repair and Overhaul (MRO) and Handling businesses and IAG
Loyalty. Other revenue from activities linked to the volume of passenger
flying rose significantly with larger flying programmes, resulting in Other
revenue more than double the level in 2021 and 3.7 per cent higher than that
of 2019. BA Holidays bookings benefited from an increase in British Airways'
flying schedule and the strong demand for leisure travel. Iberia's third party
MRO and handling businesses improved, reflecting higher activity. IAG Loyalty
improved (on both 2019 and 2021), with a significant growth in the number of
Avios issued linked to its partnerships, including with American Express,
resulting in an increase in customers collecting Avios and with higher average
numbers of Avios collected per customer. IAG Loyalty also launched a new
partnership with Barclays in 2022.
Operating costs
Total expenditure on operations rose from €11,220 million in 2021 to
€21,810 million in 2022, linked to the higher volume of flights and
passenger numbers, together with adverse foreign currency movements of
€1,104 million, which were mainly due to the strengthening of the US dollar
against the euro and pound sterling.
Employee costs
€ million 2022 2021 Higher/
(lower) vly
Employee costs(1) 4,647 3,013 1,634
1 For 2021 includes an exceptional credit of €18 million related to the
release of restructuring provisions. Further information is given in the
Alternative Performance Measures section.
The rise in Employee costs to €4,647 million versus €3,013 million in 2021
reflected an increase in employee numbers as the Group restored capacity and
the end of the various government schemes to support employees and businesses
during the most intense periods of the COVID-19 pandemic. The use of
government wage support and related schemes in 2022 was limited to a small
residual amount of €14 million, all in the first quarter, versus €555
million for the year in 2021. The Group agreed pay deals with the substantial
majority of its bargaining groups and employees during 2022.
Fuel, oil and emissions costs
€ million 2022 2021 Higher/
(lower) vly
Fuel, oil costs and emissions charges(1) 6,120 1,781 4,339
1 For 2021 includes an exceptional credit of €154 million related to the
discontinuation of hedge accounting for fuel derivatives and fuel foreign
currency derivatives as a result of the impact of COVID-19. Further
information is given in the Alternative Performance Measures section.
Fuel, oil and emissions charges were up significantly on 2021, up €4,339
million, reflecting increased flying volumes and the significant rise in
commodity prices for jet fuel, most notably following the Russian invasion of
Ukraine early in the year. Foreign exchange movements accounted for €505
million of the increase, principally due to the average US dollar exchange
rates being stronger versus the euro and pound sterling in 2022 compared with
2021. Average spot prices in 2022 were 80 per cent higher than the previous
year, with prices at the end of 2022 39 per cent higher than at the start of
the year.
Jet fuel price trend ($ per metric tonne)
Fuel hedging
The Group seeks to reduce the impact of volatile commodity prices by hedging
prices in advance. The Group's fuel hedging policy was approved by the Board
in May 2021 and is designed to provide flexibility to respond to both
significant unexpected reductions in travel demand or capacity and/or material
or sudden changes in jet fuel prices. The policy allows for differentiation
within the Group, to match the nature of each operating company, and the use
of call options for a proportion of the hedging undertaken. The policy
operates on a two-year rolling basis, with hedging of up to 60 per cent of
anticipated requirements in the first 12 months and up to 30 per cent in the
following 12 months, and with flexibility for low-cost airlines within the
Group to adopt hedging up to 75 per cent in the first 12 months. For all Group
airlines, hedging between 25 and 36 months ahead is only undertaken in
exceptional circumstances.
Fuel consumption
The Group continued to benefit from reduced fuel consumption, associated with
the investment in new fleet, together with the early retirement of older
aircraft, including the retirement of 15 Airbus A340-600 and 32 Boeing 747-400
aircraft in quarter 2 of 2020. Increasing passenger load factors versus 2021
also contributed to reduced carbon intensity.
Supplier costs
€ million 2022 2021 Higher/
(lower) vly
Handling, catering and other operating costs 2,971 1,308 1,663
Landing fees and en-route charges 1,890 923 967
Engineering and other aircraft costs(1) 2,101 1,085 1,016
Property, IT and other costs(2) 950 758 192
Selling costs 920 434 486
Currency differences 141 (14) 155
Total Supplier costs 8,973 4,494 4,479
1 For 2021 includes an exceptional credit of €7 million related to the
reversal, due to adjusted fleet plans, of a 2020 inventory write-down and a
charge relating to contractual lease provisions. Further information is given
in the Alternative Performance Measures section.
2 Includes an exceptional credit of €23 million related to the partial
reversal of the historical fine, plus accrued interest, initially issued by
the European Commission to British Airways for involvement in cartel activity
and recognised as an exceptional charge in 2010. Further information is given
in the Alternative Performance Measures section.
Total Supplier costs rose by €4,479 million to €8,973, double the level of
2021, reflecting the higher capacity operated. Supplier costs were impacted by
higher levels of inflation, although the impact was partially mitigated by the
Group's procurement initiatives.
Property, IT and other costs include an exceptional credit of €23 million,
due to the partial reversal of a fine originally issued to British Airways in
2010.
Supplier costs include a €141 million currency differences charge in 2022
versus a €14 million currency differences credit in 2021; currency
differences mainly reflect the retranslation of current financial assets and
liabilities at the closing foreign exchange rate for the period, which in 2022
reflects the strengthening of the US dollar against both the euro and the
pound sterling over the course of 2022. Total foreign currency impacts on
Supplier costs, including currency differences, were €526 million adverse
versus 2021.
Ownership costs
Ownership costs include depreciation, amortisation and impairment of tangible
and intangible assets, including right of use assets.
€ million 2022 2021 Higher/
(lower) vly
Ownership costs(1) 2,070 1,932 138
1 Includes an exceptional credit of €8 million (2021: exceptional credit
of €21 million) related to the partial reversal of an impairment relating to
fleet assets that were previously stood down in 2020. Further information is
given in the Alternative Performance Measures section.
The increase in ownership costs versus 2022 is mainly driven by the increase
in the Group's fleet of aircraft, linked to the restoration of capacity and 27
deliveries of new aircraft in the year. An exceptional credit of €8 million
was recorded in the year, reflecting the partial reversal of an impairment
related to six aircraft previously stood down by Vueling in 2020 on the
assumption these aircraft were no longer required and would not return to
service; in 2022 it was determined the aircraft are required for Vueling's
flying programme and they were stood up and re-entered service.
Aircraft fleet
In 2022, the in-service fleet increased by 27 aircraft, with 25 of the new
aircraft delivered in 2022 in service by the end of the year; the remaining
two entered service early in 2023. During the year 12 aircraft were removed
from service, pending lease return or disposal, and 14 aircraft re-entered
service, having previously been stood down from active service.
Number of fleet
Number of fleet in-service 2022 2021 Higher/
(lower) vly
Shorthaul 381 363 5.0%
Longhaul 177 168 5.4%
558 531 5.1%
In addition to the in-service fleet, there were a further 18 aircraft not in
service, made up of 16 aircraft held by the Group pending disposal or lease
return and two aircraft delivered late in 2022 and not in service by December
31, 2022.
Exchange rate impact
Exchange rate impacts are calculated by retranslating current year results at
prior year exchange rates. The reported revenues and expenditures are impacted
by the translation of currencies other than euro to the Group's reporting
currency of euro, primarily British Airways and IAG Loyalty. From a
transaction perspective, the Group performance is impacted by the fluctuation
of exchange rates, primarily exposure to the pound sterling, euro and US
dollar. The Group typically generates a surplus in most currencies in which it
does business, except the US dollar, for which capital expenditure, debt
repayments and fuel purchases typically create a deficit which is managed and
partially hedged. The Group hedges its economic exposure from transacting in
foreign currencies but does not hedge the translation impact of reporting in
euro.
Overall, in 2022 the Group operating profit before exceptional items was
reduced by €322 million due to adverse exchange rate impacts.
Exchange rate impact before exceptional items
€ million 2022
Favourable/(adverse)
Translation impact Transaction impact Total exchange impact
Total exchange impact on revenue 97 685 782
Total exchange impact on operating expenditures (129) (975) (1,104)
Total exchange impact on operating profit (32) (290) (322)
€ million 2021
Favourable/(adverse)
Translation impact Transaction impact Total exchange impact
Total exchange impact on revenue 220 (163) 57
Total exchange impact on operating expenditures (251) 292 41
Total exchange impact on operating loss (31) 129 98
The exchange rates of the Group were as follows:
2022 2021 Higher/ (lower) vly
Translation - Balance sheet
£ to € 1.14 1.18 (2.8)%
Translation - Income statement (weighted average)
£ to € 1.17 1.15 1.9%
Transaction (weighted average)
£ to € 1.17 1.15 1.9%
€ to $ 1.05 1.20 (12.6)%
£ to $ 1.23 1.38 (10.8)%
Total net non-operating costs
Total net non-operating costs for the year were €841 million, versus €742
million in 2021. The main driver of the increase was Finance costs, which were
up €187 million, reflecting a full year of interest on the debt raised in
2021 and the impact of higher interest rates on the Group's floating rate
debt.
The net change in the fair value of financial instruments of €81 million
reflects fair value adjustments at December 31, 2022 of IAG's convertible bond
maturing in 2028, partially offset by the fair value movements on the
convertible loan issued to Globalia during quarter 2 and converted into a 20
per cent equity stake in Air Europa Holdings in quarter 3. In 2021
non-operating costs included a €89 million non-cash credit relating to
movements in the fair value of the €825 million IAG convertible bond.
Other non-operating credits of €132 million (2021: €70 million) represent
net gains on derivative contracts for which hedge accounting is not applied;
in 2021 the credit of €70 million is net of an exceptional non-operating
charge of €75 million, relating to a settlement agreement reached with
Globalia to terminate the previous agreements signed in 2019 and 2021 for
Iberia to acquire the issued share capital of Air Europa Holdings.
Tax
The tax credit on the profit for the year was €16 million (2021: tax credit
of €574 million), and the effective tax rate was negative 3.9 per cent
(2021: 16.4 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 had statutory
corporation tax rates of 19 per cent, 25 per cent and 12.5 per cent
respectively for 2022. The expected effective 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 24.6 per cent for the year to December 31, 2022.
The difference between the actual effective tax rate of negative 3.9 per cent
and the expected tax rate of 24.6 per cent is primarily due to the recognition
of previously unrecognised tax losses in the Group's Spanish companies.
The profit after tax for the year was €431 million (2021: loss of €2,933
million).
On March 3, 2021 the UK Chancellor of the Exchequer announced that legislation
would be introduced in the Finance Bill 2021 to set the main rate of
corporation tax at 25 per cent from April 2023. On May 24, 2021 the Finance
Bill was substantively enacted, which has led to the remeasurement of deferred
tax balances and will increase the Group's future current tax charge
accordingly. As a result of the remeasurement of deferred tax balances in UK
entities, a credit of €17 million (2021: €78 million credit) is recorded
in the Income statement and a charge of €10 million (2021: €61 million
credit) is recorded in Other comprehensive income.
On October 8, 2021 the Irish Government announced that it would increase the
rate of corporation tax for certain multinational businesses to 15 per cent
with effect from 2023. This expected tax rate change has not been reflected in
these results because it has not yet been substantively enacted.
The Group is monitoring the OECD's proposed two-pillar solution to address the
tax challenges arising from the digitalisation of the economy. This proposed
reform to the international tax system addresses the geographical allocation
of profits for the purposes of taxation, and is designed to ensure that
multinational enterprises will be subject to a minimum 15 per cent effective
tax rate. On December 15, 2022, the Council of the European Union formally
adopted the EU Pillar Two Directive. Member States are expected to transpose
the Directive into national law by the end of 2023. The Group is continuing to
assess the implications of the reform and these will be determined when the
relevant legislation is finalised.
Operating profit and loss performance of operating companies
British Airways Aer Lingus Iberia Vueling
€ million
€ million
€ million
£ million
Statutory 2022 Higher/ 2022 Higher/ 2022 Higher/ 2022 Higher/
(lower) vly
(lower) vly
(lower) vly
(lower) vly
Passenger revenue 9,215 6,894 1,679 1,372 4,042 2,318 2,584 1,573
Cargo revenue 1,060 (37) 80 15 347 (47) - -
Other revenue 755 474 10 6 1,122 456 14 9
Total revenue 11,030 7,331 1,769 1,393 5,511 2,727 2,598 1,582
Fuel, oil costs and emissions charges 2,929 2,099 539 450 1,313 794 739 541
Employee costs 2,100 629 393 213 1,161 438 370 170
Supplier costs 4,595 2,407 646 341 2,284 872 1,088 464
Ownership costs(1) 1,084 105 146 6 371 21 206 (21)
Operating profit 322 2,091 45 383 382 602 195 428
Operating margin 2.9% 50.7 pts 2.6% 92.6 pts 6.9% 14.8 pts 7.5% 30.5 pts
Alternative Performance Measures(2)
Passenger revenue 9,215 6,899 1,679 1,371 4,042 2,318 2,584 1,573
Cargo revenue 1,060 (37) 80 15 347 (47) - -
Other revenue 755 474 10 6 1,122 456 14 9
Total revenue before exceptional items 11,030 7,336 1,769 1,392 5,511 2,727 2,598 1,582
Fuel, oil costs and emissions charges 2,929 1,990 539 440 1,313 785 739 532
Employee costs 2,100 618 393 213 1,161 433 370 170
Supplier costs 4,614 2,426 646 341 2,284 872 1,088 457
Ownership costs(1) 1,084 99 146 6 371 21 214 (26)
Operating profit before exceptional items 303 2,203 45 392 382 616 187 449
Operating margin before exceptional items 2.7% 54.1 pts 2.6% 94.7 pts 6.9% 15.3 pts 7.2% 33.0 pts
1 Ownership costs reflects Depreciation, amortisation and impairment.
2 Further detail is provided in the Alternative Performance Measures
section.
Review by operating company
All four of the airline operating companies saw a return to profitability in
2022, following the significant negative impacts of COVID-19 in 2020 and 2021.
The shape of each airline's recovery was linked to the pace of the easing of
government travel restrictions and re-opening of travel in their key markets,
together with operating constraints at their hubs and other airports.
British Airways operated the lowest passenger capacity relative to 2019, with
ASKs at 70.3 per cent of 2019, partly linked to constraints at London Heathrow
Airport. Aer Lingus operated at 86.8 per cent of 2019, including the impact of
a new base at Manchester Airport in the UK, with Iberia at 87.1 per cent and
Vueling at 98.2 per cent, including its expanded operation at Paris Orly.
Operating profit/(loss) before exceptional items
2022 2021 2019
British Airways (£ million) 303 (1,900) 1,890
Aer Lingus (€ million) 45 (347) 276
Iberia (€ million) 382 (234) 497
Vueling (€ million) 187 (262) 240
Iberia and Vueling saw the greatest return to profit versus 2019, linked to
strong demand in the Domestic, Europe and LACAR regions. Aer Lingus saw an
increasing recovery through the year and a strong quarter 3, in which there
was strong pent-up demand for summer travel. British Airways also experienced
rising profitability through the year, strong pent-up demand and significantly
increased unit revenues versus 2019 in the second half of the year, as load
factors improved and average yields rose.
All of the airlines experienced significantly higher fuel prices than in 2019
or 2021, although the impact was partly mitigated by the Group's hedging
policy. Supplier costs were impacted by the high levels of price inflation and
costs to restart the business following COVID-19 restrictions, with the impact
lessened by procurement and transformation initiatives.
IAG Loyalty showed significant growth in its non-airline partner revenue
streams, together with benefiting from the recovery in the Group's airlines,
leading to operating profit before exceptional items of £240 million (€282
million), up from £113 million (€131 million) in 2021.
Capital expenditure
In 2022 the Group increased investment in its aircraft fleets, customer
products and services, IT infrastructure and sustainability, as the business
recovered, with capital expenditure of €3,875 million, compared with €744
million in 2021.
During 2022 the Group took delivery of aircraft delayed from 2020 and 2021 due
to the impact of COVID-19, together with making pre-delivery payments for
future aircraft deliveries, which had also been deferred. In 2022 the Group
took delivery of 27 aircraft: 10 for British Airways, 15 for Iberia and two
for Aer Lingus. Of these deliveries, 25 were aircraft acquired from Airbus and
Boeing and two were leased directly from aircraft lessors. This contrasts with
2021, in which only five A320neo family aircraft were acquired from Airbus,
with the remainder of the 11 deliveries in the year on direct lease
arrangements from aircraft lessors.
Aircraft deliveries 2022 2021
Airbus A320 family 12 8
Airbus A330 - 1
Airbus A350 12 -
Boeing 787-10 3 -
Embraer E190 - 2
Total 27 11
Aircraft orders
The Group exercised options for 22 Airbus A320neo family aircraft in the first
half of 2022, for delivery in 2024 and 2025. The Group entered into direct
leasing contracts for and took delivery of two Airbus A320neo aircraft in the
year. In October 2022 an Extraordinary Shareholders' Meeting approved the
acquisition of a further 37 Airbus A320neo family aircraft and 50 Boeing 737
aircraft. The aircraft will replace Airbus A320ceo family aircraft and are up
to 20 per cent more fuel-efficient than the aircraft they replace. These
aircraft are expected to be delivered between 2024 and 2028.
Aircraft future deliveries at December 31 2022 2021
Airbus A320/A321 91 42
Airbus A321 XLR 14 14
Airbus A350 12 26
Boeing 737 50 -
Boeing 777-9 18 18
Boeing 787-10 7 10
Total 192 110
Following the orders placed in 2022, at December 31, 2022 the Group held
options to acquire a further 246 aircraft from Airbus and Boeing.
Capital commitments
Capital expenditure authorised and contracted for at December 31, 2022
amounted to €13,749 million (2021: €10,911 million), with the increase
attributable to the net of the aircraft deliveries and orders described above.
Most of these commitments are denominated in US dollars.
The Group has certain rights to cancel commitments in the event of significant
delays to aircraft deliveries caused by the aircraft manufacturers. No such
rights had been exercised as at December 31, 2022.
Working capital
The Group saw strong booking inflows for travel in 2023 during the second half
of 2022, reflecting expanded flying programmes as the recovery from COVID-19
continued, with capacity in 2023 expected to approach that of 2019 and with
higher average yields. At December 31, 2022, Deferred revenue on ticket sales,
which includes loyalty points (Avios), had risen €1,092 million on the
previous year to close at €7,644 million. Of this balance, €7,318 million
is included in current liabilities and €326 million within non-current
liabilities, associated with the renewal of IAG Loyalty's multi-year contract
with American Express in 2020.
Sales in advance of carriage, related to passenger ticket sales, were up
€1,282 million versus 2021, at €5,014 million. Vouchers issued for future
travel in lieu of a cash refund represented 13 per cent of sales in advance of
carriage.
The value of loyalty points (Avios) issued and yet to be recognised in revenue
was down €190 million versus 2021 at €2,630 million, reflecting the net
impact of the unwind of the remainder of a pre-payment from American Express
made in 2020 and the balance of Avios issued versus redeemed in 2022.
Trade receivables rose by €595 million to €1,330 million, related to the
increased flying programmes and higher yields.
Trade and other payables rose by €1,497 million to €5,209 million, again
due to the significantly increased flying schedule and cost inflation. In
quarter 4, 2022, the period to which the Trade and other payables mainly
relates, the Group operated 86.6 per cent of 2019 passenger capacity, versus
58.3 per cent operated in quarter 4 of 2021.
Funding and debt
IAG's long-term objectives when managing capital are: to safeguard the Group's
ability to continue as a going concern and its long-term viability; to
maintain an optimal capital structure in order to reduce the cost of capital;
and to provide sustainable returns to shareholders. In November 2018, S&P
and Moody's assigned IAG with a long-term investment-grade credit rating with
a stable outlook; IAG's credit ratings remained investment-grade up until the
outbreak of COVID-19. The impact of COVID-19 on the Group and wider airline
industry led to ratings falling by three notches for S&P and two notches
for Moody's. The Group's current ratings (at February 23, 2023) are: S&P:
BB, Moody's: Ba2.
Debt and capital
The Group monitors leverage using net debt to EBITDA before exceptional items,
in addition to closely following measures used by the credit ratings agencies,
including those based on total borrowings (gross debt).
The Group had previously set a target of net debt to EBITDA before exceptional
items below 1.8 times.
In 2022, net debt to EBITDA before exceptional items was 3.1 times, compared
with 1.4 times in 2019, reflecting a partial recovery in operating
profitability in 2022 following the significant impact of COVID-19 in 2020 and
2021, together with the impact of debt raised during the pandemic to boost
liquidity and resilience. In 2021, EBITDA was negative, rendering the net debt
to EBITDA before exceptional items ratio not meaningful; the calculation for
2021 resulted in net debt to EBITDA before exceptional items of minus 11.5
times.
Net debt
€ million 2022 2021 Higher / (lower)
Debt 19,610 15,679 3,931
Cash, cash equivalents and interest-bearing deposits (7,943) (5,917) (2,026)
Net debt at January 1 11,667 9,762 1,905
Increase in cash net of exchange (1,656) (2,026) 370
Movements in total borrowings
Net cash outflow from repayments of borrowings and lease liabilities (2,505) (2,265) (240)
Net cash inflow from new borrowings 1,436 4,817 (3,381)
Non-cash impact of new leases 1,017 518 499
(Decrease)/increase in net debt from regular financing (52) 3,070 (3,122)
Exchange and other non-cash movements 426 861 (435)
Net debt at December 31 10,385 11,667 (1,282)
Net debt reduced by €1,282 million, principally due to the recovery in
profitability and positive working capital from bookings into 2023, partially
offset by the capital expenditure of €3,875 million. Gross debt increased by
€374 million during the year to €19,984 million. Repayments exceeded new
borrowings by €1,069 million, reflecting scheduled repayments of aircraft
debt, new aircraft debt raised during the year and the repayments of
non-aircraft financing as detailed below. Gross debt is subject to foreign
exchange translation movements, as the majority of the Group's aircraft debt
is denominated in US dollars. Over the course of 2022 the euro and pound
sterling weakened against the US dollar which increased gross debt by €518
million.
Cash
Cash, cash equivalents and interest-bearing deposits
€ million 2022 2021 Higher/ (lower)
British Airways 2,877 1,986 891
Iberia 2,389 761 1,628
Vueling 766 441 325
Aer Lingus 375 228 147
IAG Loyalty 993 954 39
IAG and other Group companies 2,199 3,573 (1,374)
Cash, cash equivalents and interest-bearing deposits 9,599 7,943 1,656
British Airways, Iberia, Vueling and Aer Lingus all experienced significant
positive operating cash flow in the year. The reduction in the balance of
cash, cash equivalents and interest-bearing deposits in IAG and other Group
companies reflects the repayment of unsecured debt in IAG and intragroup loan
payments to Iberia and Aer Lingus.
Debt
Long-term aircraft financing was successfully secured during 2022 for all 27
of IAG's aircraft delivered in the year; financing for five of these aircraft
for British Airways will be drawn in 2023. Committed aircraft financing
facilities at December 31, 2022 includes an amount of €571 million for these
five aircraft, together with one further Airbus A320neo, which will be
delivered in 2023. Seven aircraft were financed via operating leases, reported
as Lease liabilities, with five Iberia A350-900s financed through sale and
leaseback transactions subsequent to the delivery of the aircraft and two Aer
Lingus A320neos leased directly from aircraft lessors. All of British Airways'
10 deliveries and the remaining 10 Iberia aircraft were financed through
finance leases, reported as Asset financed liabilities.
During 2022 IAG repaid its €500 million convertible bond originally issued
in 2015 and Aer Lingus repaid €100 million of its loan from the Ireland
Strategic Investment Fund (ISIF), thereby increasing the amount of its ISIF
facility that is undrawn and available to draw in the future, if needed, to
€300 million.
The maturity profile of the Group's Bank and other loans includes, in 2023,
the maturity of a €500 million unsecured bond issued in 2019, along with the
first amortisation of the syndicated loans to Iberia and Vueling drawn in
2020, which were partly backed by Spain's Instituto de Crédito Oficial (ICO).
In 2026, the main maturity is a €2.3 billion (£2.0 billion) syndicated loan
to British Airways drawn in 2021, which was partly backed by UK Export Finance
(UKEF).
Maturity profile of Bank and other loans
€ million 2023 2024 2025 2026 After
2026(1)
Payment of debt principal 715 287 875 2,738 2,096
1 Includes the €825 million IAG 2028 convertible bond.
Equity
No equity was raised or repaid during the year, nor in 2021.
Liquidity facilities
During the year, the Group extended its facility with Ireland's ISIF for Aer
Lingus by €200 million, bringing the total facility to €350 million. At
December 31, 2022 €50 million had been drawn and €300 million was undrawn.
The Group also exercised a one-year extension to the availability of its
$1,755 million (€1,654 million) Revolving Credit Facility (RCF), which now
has committed availability until March 2025. The facility was originally
agreed and executed with a syndicate of banks in 2021, with availability for
three years, plus two consecutive one-year extension periods, at the
discretion of the lenders. The facility is available to Aer Lingus, British
Airways and Iberia, each of whom has a separate borrower limit within the
overall facility. Any drawings under the facility would be secured against
eligible unencumbered aircraft assets and/or take-off and landing rights at
London Heathrow or London Gatwick airports. This facility was undrawn at
December 31, 2022.
The other major general facility for the Group is a £1,000 million (€1,143
million) committed credit facility for British Airways, partially guaranteed
by UKEF, which was agreed and executed in 2021 and matures in 2026. This
facility was also undrawn at December 31, 2022.
The Group also has certain other committed and undrawn general facilities,
bringing total committed and undrawn general facilities at December 31, 2022
to €3,284 million (2021: €2,917 million).
The Group also holds €1,116 million of committed and undrawn aircraft
financing facilities (2021: €1,126 million), including €620 million
remaining undrawn from committed and undrawn sustainability-linked aircraft
financing for British Airways agreed and committed in 2022 and to be drawn in
2023. The Group also has certain backstop financing arrangements, which can be
used against certain future aircraft deliveries.
In total, the Group had €4,400 million of committed and undrawn general and
aircraft facilities as at December 31, 2022 (2021: €4,043 million).
The facilities values above do not include the balance of certain shorter-term
working capital facilities available to the Group's operating companies.
Dividends
No dividends were proposed or paid in 2022 (2021: nil).
Liquidity and cash flow
Total liquidity, measured as cash, cash equivalents and interest-bearing
deposits of €9,599 million and committed and undrawn general and aircraft
facilities of €4,400 million, was €13,999 million at December 31, 2022.
This represented an increase of €2,013 million versus total liquidity of
€11,986 million at the end of 2021.
Cash flow
The Group saw strong cash flow generation in 2022, mainly linked to a return
to profitability and positive working capital movements, including an increase
in bookings for future travel as the airlines' schedules increased and yields
rose in the light of higher fuel prices and inflation. The resulting net cash
flows from operating activities of €4,835 million was significantly higher
than the net cash outflows from investing and financing activities, leading to
an increase in Cash, cash equivalents and interest-bearing deposits of
€1,656 million to
€9,599 million.
Condensed cash flow summary
€ million 2022 2021 Movement
Net cash flows from operating activities 4,835 (141) 4,976
Net cash flows from investing activities (3,463) (181) (3,282)
Net cash flows from financing activities (56) 2,235 (2,291)
Net increase in cash and cash equivalents 1,316 1,913 (597)
Net foreign exchange differences (12) 205 (217)
Cash and cash equivalents at January 1 7,892 5,774 2,118
Cash and cash equivalents at year end 9,196 7,892 1,304
Interest-bearing deposits maturing after more than three months 403 51 352
Cash, cash equivalents and interest-bearing deposits 9,599 7,943 1,656
Many of the significant cash flow items are already explained above, including
in the sections covering operating costs, non-operating costs, capital
expenditure, working capital and other initiatives and funding. Further detail
of other movements is provided below.
Cash flows from operating activities
€ million 2022 2021 Movement
Operating profit/(loss) 1,256 (2,765) 4,021
Depreciation, amortisation and impairment 2,070 1,932 138
Movement in working capital 1,884 1,634 250
Payments related to restructuring (81) (161) 80
Pension contributions net of service costs (5) (15) 10
Provision and other non-cash movements 627 305 322
Settlement of derivatives where hedge accounting has been discontinued - (497) 497
Interest paid (824) (640) (184)
Interest received 42 3 39
Tax (paid)/received (134) 63 (197)
Net cash flows from operating activities 4,835 (141) 4,976
Restructuring payments principally include payments in Spain relating to
redundancy programmes in Iberia agreed prior to 2020.
In December 2022, British Airways agreed the valuation of its main defined
benefit pension scheme, the New Airways Pension Scheme (NAPS), with the
scheme's Trustee, which resulted in a deficit as at the valuation date of
March 31, 2021 of £1,650 million (€1,887 million). As at December 31, 2022,
the scheme was over 100 per cent funded on the 2021 valuation basis and an
overfunding protection mechanism agreed with the NAPS Trustee meant that no
contributions were due. Deficit contributions could resume should the funding
level fall in the future. Previously British Airways had agreed deferrals of
deficit contributions with the NAPS Trustee from October 2020 to September
2021. From October 2021 to December 2022, an overfunding mechanism agreed as
part of the previous triennial valuation led to no deficit contributions being
required. The pension cash flows shown above represent payments to various
smaller schemes within the Group.
Provision and other non-cash movements mainly relate to restoration and
handback provisions for leased aircraft and ETS allowances.
The cash outflow for the Settlement of derivatives where hedge accounting has
been discontinued of €497 million in 2021 represented cash payments relating
to overhedging of fuel and foreign exchange in 2020, linked to the significant
fall in airline capacity in 2020, due to the impact of COVID-19.
The increase in interest expense in 2022 reflects the full year impact of
additional debt raised in 2021 and higher interest rates. Approximately one
quarter of the Group's total debt is on floating rate arrangements.
Cash flows from investing activities
€ million 2022 2021 Movement
Acquisition of PPE and intangible assets (3,875) (744) (3,131)
Sale of PPE, intangible assets and investments 837 544 293
(Increase)/decrease in other current interest-bearing deposits (351) 91 (442)
Payment to Globalia for convertible loan (100) - (100)
Other investing movements 26 (72) 98
Net cash flows from investing activities (3,463) (181) (3,282)
The €837 million of cash inflow from Sale of property, plant and equipment
and intangible assets and investments is mainly due to the aircraft sale and
leaseback transactions discussed in the Funding and debt section above,
together with the disposal of surplus assets, principally aircraft being
retired from service. The increase from 2021 is due to the value of aircraft
financed through sale and leaseback transactions being higher, as in 2022 it
includes five wide-bodied A350-900 aircraft.
In March of 2022 IAG entered into a convertible loan with Globalia for €100
million, convertible into an equity stake in Air Europa Holdings of 20 per
cent. The conversion option was exercised in August 2022.
Cash flows from financing activities
€ million 2022 2021 Movement
Proceeds from borrowings 1,436 4,817 (3,381)
Repayment of borrowings (1,050) (784) (266)
Repayment of lease liabilities (1,455) (1,481) 26
Settlement of derivative financial instruments 1,036 (268) 1,304
Acquisition of treasury shares and other financing movements (23) (49) 26
Net cash flows from financing activities (56) 2,235 (2,291)
Proceeds from borrowings reflect the cash inflows from aircraft financing as
described in the Funding and debt section above. There was no non-aircraft
financing raised in 2022, whereas in 2021 British Airways raised £2.0 billion
(€2.3 billion) through a loan guaranteed by the UKEF, Aer Lingus drew a
further €75 million from ISIF and the Group raised €1.2 billion through
unsecured bonds and issued a €825 million convertible bond.
Repayments of borrowings and lease liabilities includes the repayment of IAG's
2015 €500 million convertible bond, €100 million to the Ireland's ISIF and
the principal element of ongoing lease payments.
Settlement of derivative financial instruments relates to settlements of
foreign exchange instruments taken out to hedge long-term debt payments,
including US dollar lease payments. The significant inflow in 2022 relates to
the strengthening of the US dollar versus the euro and pound sterling.
STRATEGIC FRAMEWORK
IAG's purpose in the world is to connect people, businesses and countries, and
we hold innovation, commitment, care for people, responsibility, pragmatism,
execution, ambition and resilience as key values that enable us to fulfil our
purpose.
We create value through a unique model that enables our airlines to perform in
the long-term interests of our customers, people, shareholders and society -
knowing that success in each reinforces the others.
IAG, as the parent company, actively engages and works collaboratively with
its portfolio of operating companies, sharing best practices and talent,
overseeing intra-Group coordination and managing central functions that drive
synergies and value to the Group. Its independence from the operating
companies enables IAG to implement a long-term strategy for the Group that is
aligned with our purpose and values, as well as set performance targets for
the operating companies, track their progress and efficiently allocate capital
within the Group.
IAG's strategic priorities are:
• Strengthening a portfolio of world-class brands and operations;
• Growing global leadership positions; and
• Enhancing IAG's central platform.
These strategic priorities are achieved through:
• An unrivalled customer proposition;
• Value-accretive and sustainable growth; and
• Efficiency and innovation
Our commitment to sustainability underpins our strategy - it is an important
part of how we do business. As a Group, we have clear processes in place to
drive our sustainability strategy forward, and remain committed to using 10
per cent SAF by 2030 and to reach the goal of net zero CO(2) emissions for our
Group and its supply chain by 2050. We also continue to prioritise other key
sustainability issues, including waste management, stakeholder engagement and
welfare.
PRINCIPAL RISKS AND UNCERTAINTIES
The Group has continued to maintain its framework and processes to
identify, assess and manage risks. It continually reviews how its principal
risks are evolving and how the severity or likelihood of occurrence of risks
change, given the Group's exposure to the external risk environment,
particularly weaknesses in the resilience of the aviation sector's supply
chain and inflation impacts, combined with an ambitious transformation and
change agenda.
Throughout 2022, the Group has reviewed the macroeconomic and geopolitical
landscape to identify emerging risks and the implications of market
uncertainty and impacts on inflation, interest and exchange rates have been
reflected in the principal risk assessments. By continuing to develop the
Group's assessment of the interdependencies of risks; scenario planning to
quantify risk impact under different combinations and assumptions; and
considering the risks within the Group's risk environment that have increased
either as a result of the external factors or as a result of decisions made by
the Group, the Board and management are better informed and can react more
quickly. Where further action has been required the Board has considered
potential mitigations and, where appropriate or feasible, the Group has
implemented or confirmed plans that would address those risks or retain them
within the Board's determined Group risk appetite.
The principal risks and uncertainties affecting the Group, detailed on pages
100 to 121 of the 2021 Annual Report and Accounts, remain relevant at the date
of this report. In assessing its principal risks, the Group has considered
operational resilience, competition and market risk changes, the status of the
financial markets and access to finance, people and culture across the Group
and customer satisfaction and trust. Management remains focused on mitigating
these risks at all levels in the business and investing to increase resilience
whilst recognising that such risk events may not be so easily planned for and
that mitigations are more responsive in nature. The Board reviews and
challenges management on the risk landscape in the light of changes that
influence the Group and the aviation industry.
No new principal risks were identified through the risk management assessment
discussions across the business in the year. One risk has been reconsidered
as part of the reviews in the year and has been reframed as 'Operational
resilience' from 'Event causing significant network disruption' to recognise
that the risk to the operational resilience of the business may be challenged
by multiple combining events with significant network and customer impact and
these may be more significant to the Group where they persist over a longer
time frame compared to one-off events.
From the risks identified in the 2021 Annual Report and Accounts, the main
risks that continue to be a key area of focus, due to their potential
implications for the Group, are outlined below. Business responses implemented
by management and that effectively mitigate or reduce the risk are reflected
in the Group's latest business plan and related downside scenarios.
• Brand and customer trust. Operational resilience and customer
satisfaction build brand value and customer trust. Reliability, including
on-time performance, is a key element of the brands and of each customer's
experience. The Group is pro-actively addressing its customer service
processes and systems to deliver excellent customer service and support
customers through disruption, which will help ensure that our customers choose
to fly with the Group's airlines.
• Critical third parties in the supply chain. The aviation sector has been
affected by global supply chain disruption which has impacted aircraft
deliveries, component availability, resource availability and/or threat of
employee industrial action in critical third parties and airport services.
Operational staffing shortages at hubs and airports have required capacity
adjustments. The Group has pro-actively assessed its schedules to ensure that
our customers have sufficient notice of any changes to their flight plans
wherever possible and within our control. The Group continues to work with all
critical suppliers to understand any potential disruption within their supply
chains from either a shortage of available resource or production delays which
could delay the availability of new fleet, engines or critical goods or
services. It remains reliant on the resilience within the operations of air
traffic control airspace services to deliver its flight schedules as planned.
• Cyber attack and data security. The threat of ransomware attacks on
critical infrastructure and services has increased as a result of the war in
Ukraine and the potential for state sponsored cyber attacks. The Group
continues to focus its efforts on appropriate monitoring to mitigate the risk.
• Debt funding. Access to the unsecured debt markets is currently
restricted for sub investment grade organisations which may reduce the
external funding options available to the Group where it chooses to re-finance
upcoming maturities. Rising interest rates also increase the cost for the
Group for existing floating rate debt, which represented approximately 25 per
cent of the Group's debt at December 31, 2022, as well as for new financing.
The Group continues to successfully secure aircraft financing, having secured
financing for all its deliveries in 2020, 2021 and 2022.
• Economic, political and regulatory environment. The economic impact of
energy shortages and increases in commodity and wage costs has driven
significant inflation and uncertainty over the economic outlook. The Group is
closely reviewing the impacts of wage and supplier inflation on margins and
customer demand. The Group will continue to adjust its future capacity plans
accordingly, retaining flexibility to adapt as required and where possible.
• Financial and treasury related risk. Fuel cost increases have been
partly mitigated by the Group's fuel hedging policy. Access to fuel hedging
instruments or the ability to pass increased fuel costs on to consumers could
impact the Group's profits. The Group continues to assess the strength of the
US dollar against the euro and pound sterling and the potential impacts on the
Group's operating results. All airlines hedge in line with the Group hedging
policy.
• IT systems and IT infrastructure. The Group is reliant upon the
resilience of its systems for key customer and business processes and is
exposed to risks that relate to poor performance, obsolescence or failure of
these systems. The Group is currently engaged in a number of major programmes
to modernise and upgrade its IT systems, digital capability, customer
propositions and core IT infrastructure and network where required. Mitigating
actions that prioritise operational stability and resilience have been built
into all cutover plans.
• Operational resilience. The pandemic resulted in an unprecedented level
of disruption to the aviation sector and changed the Group's perspective on
how resilient it needed to be. Ongoing labour shortages, threat of strike
action in the aviation sector and staff sickness have impacted the operational
environment of the Group's airlines as well as the operations of the
businesses on which the Group relies. Many of these events can occur within a
close timeframe and challenge operational resilience. In addition, the Group
has significant IT infrastructure changes to complete which could impact
operations. The Group is focussed on minimising any unplanned outages or
disruption to customers with additional resilience built into the airlines'
networks.
• People, culture and employee relations. The resilience and engagement
of our people and leaders are critical to achieving our transformation plans.
Our people are a critical enabler of the Group's future success and the Group
has identified the skills and capabilities that are required to manage its
transformation, which include delivering on the Group's diversity and
inclusion plan. Our leadership recognises the efforts of our staff and their
resilience and commitment supporting the ramp up of operations. Resource
shortages and the timelines to secure resource, particularly in UK and
Ireland, can impact operational readiness and resilience. The Group is focused
on measures to attract and secure flight and ground staff into its airlines to
enable them to fulfil their schedules and maintain competitiveness. Across the
Group, collective bargaining is in place with various unions. The Group is
exposed to the risk of industrial relations action and the operating companies
continue to engage in discussions with unions to address and resolve disputes
arising within the negotiations.
• Transformation and change. The Group recognises the need to transform to
compete. The impact on our people of the wide-ranging change agenda if poorly
managed or uncoordinated could lead to logistical and engagement challenges
with the potential to negatively impact the delivery of customer and revenue
benefits and cost efficiencies. The Chief Transformation Officer has clear
oversight of all programmes to assess performance against plan. The Group
transformation agenda is subject to Board approval and progress is regularly
monitored by the Board.
The Board and its sub committees have been apprised of regulatory, competitor
and governmental responses on an ongoing basis.
INTERNATIONAL CONSOLIDATED AIRLINES GROUP S.A.
Full year Unaudited Consolidated Financial Statements
January 1, 2022 - December 31, 2022
CONSOLIDATED INCOME STATEMENT
Year to December 31
€ million Note 2022 2021
Passenger revenue 19,458 5,835
Cargo revenue 1,615 1,673
Other revenue 1,993 947
Total revenue 5 23,066 8,455
Employee costs 8 4,647 3,013
Fuel, oil costs and emissions charges 6,120 1,781
Handling, catering and other operating costs 2,971 1,308
Landing fees and en-route charges 1,890 923
Engineering and other aircraft costs 2,101 1,085
Property, IT and other costs 950 758
Selling costs 920 434
Depreciation, amortisation and impairment 6 2,070 1,932
Currency differences 141 (14)
Total expenditure on operations 21,810 11,220
Operating profit/(loss) 1,256 (2,765)
Finance costs 9 (1,017) (830)
Finance income 9 52 13
Net change in fair value of financial instruments 9 81 89
Net financing credit/(charge) relating to pensions 9 26 (2)
Net currency retranslation charges (115) (82)
Other non-operating credits 9 132 70
Total net non-operating costs (841) (742)
Profit/(loss) before tax 415 (3,507)
Tax 10 16 574
Profit/(loss) after tax for the year 431 (2,933)
Attributable to:
Equity holders of the parent 431 (2,933)
Non-controlling interest - -
431 (2,933)
Basic earnings/(loss) per share (€ cents) 11 8.7 (59.1)
Diluted earnings/(loss) per share (€ cents) 11 6.1 (59.1)
CONSOLIDATED STATEMENT OF OTHER COMPREHENSIVE INCOME
Year to December 31
€ million Note 2022 2021
Items that may be reclassified subsequently to net profit
Cash flow hedges:
Fair value movements in equity 1,299 794
Reclassified and reported in net profit (1,233) (81)
Fair value movements on cost of hedging (106) 10
Cost of hedging reclassified and reported in net profit 38 (12)
Currency translation differences 31 (53) (12)
Items that will not be reclassified to net profit
Fair value movements on other equity investments 19 2 -
Fair value movements on cash flow hedges 173 54
Fair value movements on cost of hedging (9) -
Fair value movements on liabilities attributable to credit risk changes (6) (15)
Remeasurements of post-employment benefit obligations 662 1,400
Remeasurements of long-term employee-related provisions 52 25
Total other comprehensive profit for the year, net of tax 819 2,163
Profit/(loss) after tax for the year 431 (2,933)
Total comprehensive profit/(loss) for the year 1,250 (770)
Total comprehensive profit/(loss) is attributable to:
Equity holders of the parent 1,250 (770)
Non-controlling interest 31 - -
1,250 (770)
Items in the consolidated Statement of other comprehensive income above are
disclosed net of tax.
CONSOLIDATED BALANCE SHEET
€ million Note December 31, December 31,
2022 2021
Non-current assets
Property, plant and equipment 13 18,346 17,161
Intangible assets 17 3,556 3,239
Investments accounted for using the equity method 18 43 40
Other equity investments 19 55 31
Employee benefit assets 32 2,334 1,775
Derivative financial instruments 28 81 77
Deferred tax assets 10 1,282 1,282
Other non-current assets 20 362 250
26,059 23,855
Current assets
Non-current assets held for sale 16 19 20
Inventories 353 334
Trade receivables 20 1,330 735
Other current assets 20 1,226 960
Current tax receivable 10 72 16
Derivative financial instruments 28 645 543
Current interest-bearing deposits 21 403 51
Cash and cash equivalents 21 9,196 7,892
13,244 10,551
Total assets 39,303 34,406
Shareholders' equity
Issued share capital 29 497 497
Share premium 29 7,770 7,770
Treasury shares (28) (24)
Other reserves (6,223) (7,403)
Total shareholders' equity 2,016 840
Non-controlling interest 31 6 6
Total equity 2,022 846
Non-current liabilities
Borrowings 25 17,141 17,084
Employee benefit obligations 32 217 285
Deferred tax liability 10 - -
Provisions 26 2,652 2,267
Deferred revenue on ticket sales 23 326 391
Derivative financial instruments 28 84 47
Other long-term liabilities 24 200 208
20,620 20,282
Current liabilities
Borrowings 25 2,843 2,526
Trade and other payables 22 5,209 3,712
Deferred revenue on ticket sales 23 7,318 6,161
Derivative financial instruments 28 387 126
Current tax payable 10 8 21
Provisions 26 896 732
16,661 13,278
Total liabilities 37,281 33,560
Total equity and liabilities 39,303 34,406
CONSOLIDATED CASH FLOW STATEMENT
Year to December 31
€ million Note 2022 2021
Cash flows from operating activities
Operating profit/(loss) 1,256 (2,765)
Depreciation, amortisation and impairment 6 2,070 1,932
Movement in working capital 1,884 1,634
Increase in trade receivables, inventories and other current assets (914) (351)
Increase in trade and other payables and deferred revenue on ticket sales 2,798 1,985
Payments related to restructuring 26 (81) (161)
Employer contributions to pension schemes (22) (41)
Pension scheme service costs 32 17 26
Provisions and other non-cash movements 627 305
Settlement of derivatives where hedge accounting has been discontinued - (497)
Interest paid (824) (640)
Interest received 42 3
Tax (paid)/received (134) 63
Net cash flows from operating activities 4,835 (141)
Cash flows from investing activities
Acquisition of property, plant and equipment and intangible assets (3,875) (744)
Sale of property, plant and equipment and intangible assets and investments 837 544
(Increase)/decrease in other current interest-bearing deposits (351) 91
Payment to Globalia for convertible loan (100) -
Other investing movements 26 (72)
Net cash flows from investing activities (3,463) (181)
Cash flows from financing activities
Proceeds from borrowings 1,436 4,817
Repayment of borrowings (1,050) (784)
Repayment of lease liabilities (1,455) (1,481)
Settlement of derivative financial instruments 25c 1,036 (268)
Acquisition of treasury shares (23) (24)
Other financing movements - (25)
Net cash flows from financing activities (56) 2,235
Net increase in cash and cash equivalents 1,316 1,913
Net foreign exchange differences (12) 205
Cash and cash equivalents at 1 January 7,892 5,774
Cash and cash equivalents at year end 21 9,196 7,892
Interest-bearing deposits maturing after more than three months 21 403 51
Cash, cash equivalents and interest-bearing deposits 21 9,599 7,943
For details on restricted cash balances refer to note 21 Cash, cash
equivalents and current interest-bearing deposits.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the year to December 31, 2022
€ million Issued share Share premium (note 29) Treasury shares Other reserves (note 31) Retained earnings Total shareholders' equity Non-controlling interest Total equity
capital (note 29) (note 31)
(note 29)
January 1, 2022 497 7,770 (24) (1,673) (5,730) 840 6 846
Profit for the year - - - - 431 431 - 431
Other comprehensive profit for the year
Cash flow hedges reclassified and reported in net profit:
Fuel and oil costs - - - (1,115) - (1,115) - (1,115)
Currency differences - - - (90) - (90) - (90)
Finance costs - - - 10 - 10 - 10
Discontinuance of hedge accounting - - - (22) - (22) - (22)
Ineffectiveness recognised in other non-operating costs - - - (16) - (16) - (16)
Net change in fair value of cash flow hedges - - - 1,472 - 1,472 - 1,472
Net change in fair value of equity investments - - - 2 - 2 - 2
Net change in fair value of cost of hedging - - - (115) - (115) - (115)
Cost of hedging reclassified and reported in net profit - - - 38 - 38 - 38
Fair value movements on liabilities attributable to credit risk changes - - - (6) - (6) - (6)
Currency translation differences - - - (53) - (53) - (53)
Remeasurements of post-employment benefit obligations - - - - 662 662 - 662
Remeasurements of long-term employee-related provisions - - - - 52 52 - 52
Total comprehensive profit for the year - - - 105 1,145 1,250 - 1,250
Hedges reclassified and reported in property, plant and equipment - - - (65) - (65) - (65)
Hedges reclassified and reported in sales in advance of carriage - - - 36 - 36 - 36
Hedges reclassified and reported in inventory - - - (58) - (58) - (58)
Cost of share-based payments - - - - 39 39 - 39
Vesting of share-based payment schemes - - 19 - (22) (3) - (3)
Acquisition of treasury shares - - (23) - - (23) - (23)
Redemption of convertible bond - - - (62) 62 - - -
December 31, 2022 497 7,770 (28) (1,717) (4,506) 2,016 6 2,022
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the year to December 31, 2021
€ million Issued share Share premium (note 29) Treasury shares Other reserves (note 31) Retained earnings Total shareholders' equity Non-controlling interest Total equity
capital (note 29) (note 31)
(note 29)
January 1, 2021 497 7,770 (40) (2,420) (4,203) 1,604 6 1,610
Loss for the year - - - - (2,933) (2,933) - (2,933)
Other comprehensive loss for the year
Cash flow hedges reclassified and reported in net profit:
Passenger revenue - - - 18 - 18 - 18
Fuel and oil costs - - - (45) - (45) - (45)
Currency differences - - - (15) - (15) - (15)
Finance costs - - - 23 - 23 - 23
Discontinuance of hedge accounting - - - (62) - (62) - (62)
Net change in fair value of cash flow hedges - - - 848 - 848 - 848
Net change in fair value of cost of hedging - - - 10 - 10 - 10
Cost of hedging reclassified and reported in net profit - - - (12) - (12) - (12)
Fair value movements on liabilities attributable to credit risk changes - - - (15) - (15) - (15)
Currency translation differences - - - (12) - (12) - (12)
Remeasurements of post-employment benefit obligations - - - - 1,400 1,400 - 1,400
Remeasurements of long-term employee-related provisions - - - - 25 25 - 25
Total comprehensive loss for the year - - - 738 (1,508) (770) - (770)
Hedges reclassified and reported in property, plant and equipment - - - 9 - 9 - 9
Cost of share-based payments - - - - 23 23 - 23
Vesting of share-based payment schemes - - 40 - (42) (2) - (2)
Acquisition of treasury shares - - (24) - - (24) - (24)
December 31, 2021 497 7,770 (24) (1,673) (5,730) 840 6 846
NOTES TO THE ACCOUNTS
For the year to December 31, 2022
1 Background and general information
International Consolidated Airlines Group S.A. (hereinafter 'International
Airlines Group', 'IAG' or the 'Group') is a leading European airline group,
formed to hold the interests of airline and ancillary operations. IAG
(hereinafter the 'Company') is a Spanish company registered in Madrid and was
incorporated on December 17, 2009. The registered address of IAG is El
Caserío, Zona industrial 2, Camino de La Muñoza s/n, 28042, Madrid, Spain.
On January 21, 2011 British Airways Plc and Iberia Líneas Aéreas de España
S.A. Operadora (hereinafter 'British Airways' and 'Iberia' respectively)
completed a merger transaction becoming the first two airlines of the Group.
Vueling Airlines S.A. ('Vueling') was acquired on April 26, 2013, and Aer
Lingus Group Plc ('Aer Lingus') on August 18, 2015. A list of the subsidiaries
of the Group is included in the Group investments section.
IAG shares are traded on the London Stock Exchange's main market for listed
securities and also on the stock exchanges of Madrid, Barcelona, Bilbao and
Valencia (the 'Spanish Stock Exchanges'), through the Spanish Stock Exchanges
Interconnection System (Mercado Continuo Español).
2 Significant accounting policies
Basis of preparation
The consolidated financial statements of the Group have been prepared in
accordance with the International Financial Reporting Standards as endorsed by
the European Union (IFRSs as endorsed by the EU). The consolidated financial
statements herein are not the Group's statutory accounts and are unaudited.
The consolidated financial statements are rounded to the nearest million
unless otherwise stated. These financial statements have been prepared on a
historical cost convention except for certain financial assets and
liabilities, including the €825 million convertible bond due 2028,
derivative financial instruments and other equity investments that are
measured at fair value. The notes to the financial statements for the prior
year include reclassifications that were made to conform to the current year
presentation.
The Group's financial statements for the year to December 31, 2022 were
authorised for issue, and approved by the Board of Directors on February 23,
2023.
Going concern
At December 31, 2022, the Group had total liquidity of €13,999 million
(December 31, 2021: total liquidity of €11,986 million), comprising cash,
cash equivalents and interest-bearing deposits of €9,599 million, €3,284
million of committed and undrawn general facilities and a further €1,116
million of committed and undrawn aircraft specific facilities. At December 31,
2022, the Group has no financial covenants associated with its loans and
borrowings.
In its assessment of going concern, the Group has modelled two scenarios
referred to below as the Base Case and the Downside Case over the period to
June 30, 2024 (the 'going concern period'). The tenor of the going concern
period encapsulates the seasonality of the Group's operations. The Group's
three-year business plan, used in the creation of the Base Case, was prepared
for and approved by the Board in December 2022. The business plan takes into
account the Board's and management's views on the anticipated continued
recovery from the COVID-19 pandemic and the wider economic and geopolitical
environments on the Group's businesses across the going concern period. The
key inputs and assumptions underlying the Base Case include:
• capacity recovery modelled by geographical region (and in certain
regions, by key destinations) with capacity gradually increasing from 97 per
cent in quarter 1 2023 (compared to the equivalent period in 2019) to
pre-pandemic levels by the end of the going concern period;
• passenger unit revenue per ASK is forecast to continue to remain above
the levels obtained in 2019 throughout the going concern period, which is
based on, amongst other assumptions, higher ticket prices to reflect both
higher fuel prices and cost inflation;
• the Group has assumed that the committed and undrawn general facilities
of €3.3 billion will not be drawn over the going concern period. The
availability of certain of these facilities reduces over time, with €3.2
billion being available to the Group at the end of the going concern period;
• the Group has assumed that €1.0 billion of the committed and undrawn
aircraft specific facilities of €1.1 billion would be available to be drawn
over the going concern period if required, of which €0.6 billion, relating
to the EETC financing structures and other specific asset securitised
financing are expected to be utilised;
• the Group has assumed that the €500 million bond that matures in July
2023 will not be refinanced;
• of the capital commitments detailed in note 15, €4.4 billion is due to
be paid over the going concern period;
• in addition to the €0.6 billion of committed aircraft financing, the
Group has forecast securing approximately 100 per cent, or €4.9 billion, of
the aircraft financing required that is currently uncommitted, to align with
the timing and payments for these aircraft deliveries. This loan to value
assumption is consistent with the level of financing the Group has been able
to achieve recently, including over the course of the COVID-19 pandemic to
date; and
• the acquisition of the remaining shares in Air Europa Holdings, that the
Group does not currently own, shall receive the relevant approvals and
complete during the going concern period.
The Downside Case applies stress to the Base Case to model adverse commercial
and operational impacts as the Group's capacity recovers over the going
concern period, represented by: reduced levels of capacity operated in each
month, including reductions of at least 25 per cent for three months during
2023 to reflect the risk of more severe operational disruption; reduced
passenger unit revenue per ASK reflective of general pricing pressure due to
the current economic backdrop; and increased operational costs reflective of
inflationary pressures. In the Downside Case, over the going concern period
capacity would be ten per cent down when compared to the Base Case. The
Downside Case assumes that €350 million of the €3,284 million of available
general credit facilities are required to be drawn. The Directors consider the
Downside Case to be a severe but plausible scenario.
While not incorporated in the Downside Case, the Group has modelled the impact
of further deteriorations in capacity operated and yield, as well as increases
in the price of jet fuel by 20 per cent and a reduction in the forecast loan
to value to 80 per cent of the uncommitted financing, but has also considered
further mitigating actions, such as reducing operating and capital expenditure
and deferring currently forecast early repayments of loans and borrowings. The
Group expects to be able to continue to secure financing for future aircraft
deliveries and in addition has further potential mitigating actions, including
asset disposals, it would pursue in the event of adverse liquidity experience.
Having reviewed the Base Case, the Downside Case and additional sensitivities,
the Directors have a reasonable expectation that the Group has sufficient
liquidity to continue in operational existence over the going concern period
and hence continue to adopt the going concern basis in preparing the
consolidated financial statements for year to December 31, 2022. In adopting
the going concern basis of accounting, the consolidated financial statements
have been prepared without the inclusion of a material uncertainty, which has
been removed since the Annual report and accounts 2021. The removal of the
material uncertainty arises from the reduction in uncertainty over the going
concern period due to both the continued recovery subsequent to the COVID-19
pandemic and the strength of the Group's liquidity at December 31, 2022.
Consolidation
The Group financial statements include the financial statements of the Company
and its subsidiaries, each made up to December 31, together with the
attributable share of results and reserves of associates and joint ventures,
adjusted where appropriate to conform to the Group's accounting policies.
Subsidiaries are consolidated from the date of their acquisition, which is the
date on which the Group obtains control and continue to be consolidated until
the date that such control ceases. Control exists when the Group is exposed
to, or has rights to, variable returns from its involvement with the entity
and has the ability to affect those returns through its power over the entity.
The Group applies the acquisition method to account for business combinations.
The consideration paid is the fair value of the assets transferred, the
liabilities incurred and the equity interests issued by the Group.
Identifiable assets acquired and liabilities assumed in a business combination
are measured initially at their fair values at the acquisition date.
Non-controlling interests represent the portion of profit or loss and net
assets in subsidiaries that are not held by the Group and are presented
separately within equity in the Consolidated balance sheet.
Acquisition-related costs are expensed as incurred.
If the business combination is achieved in stages, as at the acquisition date
the acquirer's previously held equity interest in the acquiree is remeasured
to fair value at the acquisition date through the Income statement.
Goodwill is initially measured as the excess of the aggregate of the
consideration transferred and the fair value of non-controlling interest over
the net identifiable assets acquired and liabilities assumed.
All intragroup account balances, including intragroup profits, are eliminated
in preparing the consolidated financial statements.
Unconsolidated structured entities
The Group regularly uses sale and leaseback transactions to finance the
acquisition of aircraft. In certain instances the Group will undertake several
such sale and leaseback transactions at once through Enhanced Equipment Trust
Certificates (EETCs). Under each of these financing structures, a company or
companies (the EETC Issuer) are established to facilitate such financing on
behalf of a number of unrelated investors. In certain of these financing
structures, additional special purpose vehicles (the Lessor SPV) are
established to provide additional financing from a number of further unrelated
investors to the EETC Issuer. The proceeds from the issuance of the EETCs by
the EETC Issuer, and where relevant the proceeds obtained from the Lessor SPV,
are then used to purchase aircraft solely from the Group. The Group will then
enter into fixed rate lease arrangements (which meet the recognition criteria
of Asset financed liabilities) with the EETC Issuer, or where relevant the
Lessor SPV, with payments made by the Group to the EETC Issuer, or the Lessor
SPV, distributed, through a trust, to the aforementioned unrelated investors.
The main purpose of the trust structure is to enhance the credit-worthiness of
the Group's debt obligations through certain bankruptcy protection provisions
and liquidity facilities, and also to lower the Group's total borrowing cost.
The EETC Issuer and the Lessor SPV are established solely with the purpose of
providing the asset-backed financing and upon maturity of such financing are
expected to have no further activity. The relevant activities of the EETC
Issuer and the Lessor SPV are restricted to pre-established financing
agreements and the retention of the title of the associated financed aircraft.
Accordingly, the Group has determined that each EETC Issuer and the Lessor
SPVs are structured entities. Under the contractual terms of the financing
structures, the Group has no exposure to losses in these entities, does not
own any of the share capital of the EETC Issuer or the Lessor SPV, does not
have any representation on the respective boards and has no ability to
influence decision making.
In addition to the above, such financial transactions expose the Group to no
further significant financial or economic risks, such as no variability over
time in interest rates.
In considering the aforementioned facts, management has concluded that the
Group does not have access to variable returns from the EETC Issuers and
Lessor SPVs because its involvement is limited to the payment of principal and
interest under the arrangement and, therefore, it does not control the EETC
Issuers or the Lessor SPVs and as such does not consolidate them.
Further information as to the financial impact of these financial transactions
is given in note 25.
Segmental reporting
Operating segments are reported in a manner consistent with how resource
allocation decisions are made by the chief operating decision-maker. The chief
operating decision-maker, who is responsible for resource allocation and
assessing performance of the operating segments, has been identified as the
IAG Management Committee.
Foreign currency translation
a Functional and presentation currency
Items included in the financial statements of each of the Group's entities are
measured using the functional currency, being the currency of the primary
economic environment in which the entity operates. In particular, British
Airways and IAG Loyalty have a functional currency of pound sterling. The
Group's consolidated financial statements are presented in euros, which is the
Group's presentation currency.
b Transactions and balances
Transactions in foreign currencies are initially recorded in the functional
currency using the rate of exchange prevailing on the date of the transaction.
Monetary foreign currency balances are translated into the functional currency
at the rates ruling at the balance sheet date. Foreign exchange gains and
losses resulting from the settlement of such transactions and from the
translation at balance sheet exchange rates of monetary assets and liabilities
denominated in foreign currencies are recognised in the Income statement,
except where hedge accounting is applied. Foreign exchange gains and losses
arising on the retranslation of monetary assets and liabilities classified as
non-current on the Balance sheet are recognised within Net currency
retranslation (charges)/credits in the Income statement. All other gains and
losses arising on the retranslation of monetary assets and liabilities are
recognised in operating profit.
c Group companies
The net assets of foreign operations are translated into euros at the rate of
exchange ruling at the balance sheet date. Profits and losses of such
operations are translated into euros at average rates of exchange during the
year. The resulting exchange differences are taken directly to a separate
component of equity (Currency translation reserve) until all or part of the
interest is sold, when the relevant portion of the cumulative exchange
difference is recognised in the Income statement.
Property, plant and equipment
Property, plant and equipment are held at cost. The Group has a policy of not
revaluing property, plant and equipment. Depreciation is calculated to write
off the cost less the estimated residual value on a straight-line basis, over
the economic life of the asset. Residual values, where applicable, are
reviewed annually against prevailing market values for equivalently aged
assets and depreciation rates adjusted accordingly on a prospective basis.
a Fleet
All aircraft are stated at the fair value of the consideration given after
taking account of manufacturers' credits. Fleet assets owned or right of use
('ROU') assets are disaggregated into separate components and depreciated at
rates calculated to write down the cost of each component to the estimated
residual value at the end of their planned operational lives (which is the
shorter of their useful life or lease term) on a straight-line basis.
Depreciation rates are specific to aircraft type, based on the Group's fleet
plans, within overall parameters of 23 years and up to 5 per cent residual
value for shorthaul aircraft and between 23 and 29 years (depending on
aircraft) and up to 5 per cent residual value for longhaul aircraft.
Right of use assets are depreciated over the shorter of the lease term and the
aforementioned depreciation rates. Where the lease includes a purchase option,
at the discretion of the Group, where it is expected that the purchase option
will be exercised, the associated right of use asset is depreciated using the
aforementioned depreciation rates to reflect the reasonably certain life of
the aircraft, irrespective of the lease term.
Cabin interior modifications, including those required for brand changes and
relaunches, are depreciated over the lower of 12 years and the remaining
economic life of the aircraft, whether owned or leased.
Aircraft and engine spares acquired on the introduction or expansion of a
fleet, as well as rotable spares purchased separately, are carried as
property, plant and equipment and generally depreciated in line with the fleet
to which they relate.
Major overhaul expenditure, including replacement spares and labour costs, is
capitalised and amortised over the average expected life between major
overhaul. All other replacement spares and other costs relating to maintenance
of fleet assets (including maintenance provided under 'pay-as-you-go'
contracts) are charged to the Income statement on consumption or as incurred
respectively.
b Other property, plant and equipment
Provision is made for the depreciation of all property, plant and equipment.
Property, with the exception of freehold land, is depreciated over its
expected useful life over periods not exceeding 50 years, or in the case of
leasehold properties, over the duration of the lease if shorter, on a
straight-line basis. Equipment is depreciated over periods ranging from four
to 20 years.
c Capitalisation of interest on progress payments
Interest costs attributed to progress payments made on account of aircraft and
other qualifying assets under construction are capitalised and added to the
cost of the asset concerned. All other borrowing costs are recognised in the
Income statement in the year in which they are incurred.
d Liquidated damages
Liquidated damages are recognised in the Income statement only to the extent
that they relate to compensation for loss of income and/or incremental
operating costs, when a contractual entitlement exists, the amounts can be
reliably measured and the receipt is virtually certain. When liquidated
damages do not relate to compensation for loss of income and/or incremental
operating costs, the amounts are recorded as a reduction in the cost of the
associated aircraft in the Balance sheet and depreciated over the life of the
aircraft.
e Leases
The Group leases various aircraft, properties, equipment and other assets. The
lease terms of these assets are consistent with the determined useful economic
life of similar assets within property, plant and equipment.
At inception of a contract, the Group assesses whether a contract is, or
contains, a lease. A contract is, or contains, a lease if the contract conveys
the right to control the use of an identified tangible asset for a period in
exchange for consideration. The Group has elected not to apply such
consideration where the contract relates to an intangible asset, such as for
landing rights or IT software, in which case payments associated with the
contract are expensed as incurred.
Leases are recognised as a ROU asset and a corresponding lease liability at
the date at which the leased asset is available for use by the Group.
Right of use assets
At the lease commencement date a ROU asset is measured at cost comprising the
following: the amount of the initial measurement of the lease liability; any
lease payments made at or before the commencement date less any lease
incentives received; and any initial direct costs. In addition, at the lease
commencement date a ROU asset will incorporate unavoidable restoration costs,
such as the removal of airline-specific branding and configuration, to return
the asset to its original condition, for which a corresponding amount is
recognised within Provisions. The ROU asset is depreciated over the shorter of
the asset's useful life and the lease term on a straight-line basis. If
ownership of the ROU asset transfers to the Group at the end of the lease term
or the cost reflects the exercise of a purchase option, depreciation is
calculated using the estimated useful life of the asset.
Lease liabilities
Lease liabilities are initially measured at their present value, which
includes the following lease payments: fixed payments (including in-substance
fixed payments), less any lease incentives receivable; variable lease payments
that are based on an index or a rate; amounts expected to be payable by the
Group under residual value guarantees; the exercise price of a purchase option
if the Group is reasonably certain to exercise that option; payments of
penalties for terminating the lease, if the lease term reflects the Group
exercising that option; and payments to be made under reasonably certain
extension options.
Aircraft lease payments are discounted using the interest rate implicit in the
lease. The interest rate implicit in the lease is the discount rate that, at
the inception of the lease, causes the aggregate present value of the minimum
lease payments and the unguaranteed residual value to be equal to the fair
value of the leased asset and any initial indirect costs of the lessor. For
aircraft leases these inputs are either observable in the contract or readily
available from external market data. The initial direct costs of the lessor
are considered to be immaterial. If the interest rate implicit in the lease
cannot be determined, the Group entity's incremental borrowing rate is used.
Each lease payment is allocated between the principal and finance cost. The
finance cost is charged to the Income statement over the lease period so as to
produce a constant periodic rate of interest on the remaining balance of the
lease liability for each period. After the commencement date, the amount of
lease liabilities is increased to reflect the accretion of interest and
reduced for the lease payments made.
The carrying amount of lease liabilities is remeasured if there is a
modification of the lease contract, a re-assessment of the lease term
(specifically in regard to assumptions regarding extension and termination
options) and changes in variable lease payments that are based on an index or
a rate.
Amounts excluded from recognition as lease liabilities
The Group has elected not to recognise ROU assets and lease liabilities for
short-term leases that have a lease term of 12 months or less and those leases
of low-value assets. Payments associated with short-term leases and leases of
low-value assets are recognised on a straight line basis as an expense in the
Income statement. Short-term leases are leases with a lease term of 12 months
or less, that do not contain a purchase option. Low-value assets comprise IT
equipment and small items of office furniture.
The Group is exposed to potential future increases in variable lease payments
based on an index or rate, which are not included in the lease liability until
they take effect. When adjustments to lease payments based on an index or rate
take effect, the lease liability is re-assessed and adjusted against the ROU
asset. Extension options are included in a number of aircraft, property and
equipment leases across the Group and are reflected in the lease payments
where the Group is reasonably certain that it will exercise the option. The
Group is also exposed to variable lease payments based on usage or revenue
generated over a defined period. Such variable lease payments are expensed to
the Income statement as incurred.
Sale and leaseback transactions
The Group regularly uses sale and lease transactions to finance the
acquisition of aircraft. Each transaction is assessed as to whether it meets
the criteria within IFRS 15 'Revenue from contracts with customers' for a sale
to have occurred. The principal criterion for assessing whether a sale has
occurred or not, is whether the contract contains the option, at the
discretion of the Group, to repurchase the aircraft over the lease term; with
the existence of such a repurchase option resulting in a sale having been
deemed not to have occurred; and if no such repurchase option exists, then a
sale is deemed to have occurred. The following defines the accounting for such
transactions:
• if a sale is determined to have occurred, then the associated asset is
de-recognised and a ROU asset and lease liability are recognised. The ROU
asset recognised is based on the proportion of the previous carrying amount of
the asset that is retained. Any gain or loss is restricted to the amount that
relates to the rights that have been transferred to the counter-party to the
transaction; and
• where a sale is determined to have not occurred, the asset is retained
on the balance sheet within Property, plant and equipment and an Asset
financed liability recognised equal to the financing proceeds.
Cash flow presentation - lease liabilities
Lease payments are presented as follows in the Consolidated cash flow
statement:
• where the proceeds received from sale and leaseback transactions
represent the fair value of the asset being transferred, the total proceeds
are presented within cash flows from investing activities. Where the proceeds
received from sale and leaseback transactions exceed the fair value of the
asset being transferred, the element of the proceeds equivalent to the fair
value of the asset being transferred is presented within investing activities
and the amount of proceeds in excess of the fair value is presented within
financing activities;
• the repayments of the principal element of lease liabilities are
presented within cash flows from financing activities;
• the payments of the interest element of lease liabilities are included
within cash flows from operating activities; and
• the payments arising from variable elements of a lease, short-term
leases and low-value assets are presented within cash flows from operating
activities.
Cash flow presentation - asset financed liabilities
Payments associated with asset financed liabilities are presented as follows
in the Consolidated cash flow statement:
• the proceeds received asset financed liabilities are presented within
cash flows from financing activities;
• the repayments of the principal element of asset financed liabilities
are presented within cash flows from financing activities; and
• the payments of the interest element of asset financed liabilities are
included within cash flows from operating activities.
COVID-19 related rent concessions
On May 28, 2020, the IASB issued 'COVID-19 Related Rent Concessions -
amendments to IFRS 16 Leases'. The EU subsequently adopted the amendment on
October 9, 2020. The amendment provides a practical expedient for lessees, up
to June 30, 2021, not to assess whether a COVID-19 related rent concession is
a lease modification. On March 31, 2021, the IASB extended the period for the
application of these concessions through to June 30, 2022. The EU subsequently
adopted the amendment on August 31, 2021. The extended amendment is effective
for annual reporting periods commencing on or after April 1, 2021 and the
Group has elected to adopt this amendment for the year to December 31, 2022.
Lessor accounting
From time to time the Group will lease, to third parties, specific assets,
including certain property, plant and equipment. On inception of the lease,
the Group determines whether each lease is a finance lease or an operating
lease.
In order to make this determination, the Group assesses whether the lease
transfers substantially all of the risks and rewards of ownership to the
lessee. Factors in making this assessment include, but are not limited to,
whether the lease term is for the major part of the economic life of the
underlying asset and whether the underlying asset transfers to the lessee or
the lessee has the option to purchase the underlying asset at the end of the
lease. Where substantially all of the risks and rewards of ownership have been
transferred, then the lease is recorded as a finance lease, otherwise it is
recorded as an operating lease.
Intangible assets
a Goodwill
Goodwill arises on the acquisition of subsidiaries, associates and joint
ventures and represents the excess of the consideration paid over the net fair
value of the identifiable assets and liabilities of the acquiree. Where the
net fair value of the identifiable assets and liabilities of the acquiree is
in excess of the consideration paid, a gain on bargain purchase is recognised
immediately in the Income statement.
For the purpose of assessing impairment, goodwill is grouped at the lowest
levels for which there are separately identifiable cash flows (cash generating
units). Goodwill is tested for impairment annually and whenever indicators
exist that the carrying value may not be recoverable.
b Brands
Brands arising on the acquisition of subsidiaries are initially recognised at
fair value at the acquisition date. Long established brands that are expected
to be used indefinitely are not amortised but assessed annually for
impairment.
c Customer loyalty programmes
Customer loyalty programmes arising on the acquisition of subsidiaries are
initially recognised at fair value at the acquisition date. A customer loyalty
programme with an expected useful life is amortised over the expected
remaining useful life. Established customer loyalty programmes that are
expected to be used indefinitely are not amortised but assessed annually for
impairment.
d Landing rights
Landing rights acquired in a business combination are recognised at fair value
at the acquisition date. Landing rights acquired from other airlines are
capitalised at cost.
Capitalised landing rights based outside of the UK and the EU are amortised on
a straight-line basis over a period not exceeding 20 years. Capitalised
landing rights based within the UK and the EU are not amortised, as
regulations provide that these landing rights are perpetual.
e Contract-based intangibles
Contract based intangibles acquired in a business combination are recognised
initially at fair value at the acquisition date and amortised over the
remaining life of the contract.
f Software
The cost to purchase or develop computer software that is separable from an
item of related hardware is capitalised separately and amortised on a
straight-line basis generally over a period not exceeding five years, with
certain specific software developments amortised over a period of up to ten
years.
g Emissions allowances
Where an operating company purchases emissions allowances these amounts are
recognised at cost and recorded within Intangible assets. As an operating
company emits CO(2) equivalent and builds up an obligation to the relevant
authorities, a provision is recognised.
Emissions allowances recorded within Intangible assets are not revalued or
amortised but are tested for impairment whenever indicators exist that the
carrying value may not be recoverable. For those obligations arising for which
the operating company has purchased emission allowances to offset the
emissions, the provision is recognised at the weighted average cost of the
intangible asset. For those obligations arising for which the operating
company has not yet purchased emission allowances to offset the emissions, the
provision is recognised at the market price of the allowances required at the
reporting date. As the provision is recognised, a corresponding amount is
recorded in the Income statement within Fuel, oil costs and emission charges.
The Group's emissions obligation, recognised as a separate liability, is
extinguished when the associated emission certificates are surrendered, which
is typically within 12 months of the reporting date.
From time to time the Group enters into sale and repurchase transactions for
specified emission allowances. Such transactions do not meet the recognition
criteria of a sale under IFRS 15 and accordingly the asset is retained on the
balance sheet within Intangible assets and an Other financing liability
recognised equal to the proceeds received.
Impairment of non-financial assets
Assets that have an indefinite useful life are not subject to amortisation and
are tested annually for impairment. Assets that are subject to amortisation
are reviewed for impairment whenever events or changes in circumstances
indicate that the carrying amount may not be recoverable. An impairment loss
is recognised for the value by which the asset's carrying value exceeds its
recoverable amount. The recoverable amount is the higher of an asset's fair
value less cost to sell and value-in-use. Non-financial assets other than
goodwill that were subject to an impairment are reviewed for possible reversal
of the impairment at each reporting date.
a Property, plant and equipment, including Right of use assets
The carrying value is reviewed for impairment when events or changes in
circumstances indicate the carrying value may not be recoverable and the
cumulative impairment losses are shown as a reduction in the carrying value of
property, plant and equipment.
b Intangible assets
Intangible assets are held at cost and are either amortised on a straight-line
basis over their economic life, or they are deemed to have an indefinite
economic life and are not amortised. Indefinite life intangible assets are
tested annually for impairment or more frequently if events or changes in
circumstances indicate the carrying value may not be recoverable.
Investments in associates and joint ventures
An associate is an undertaking in which the Group has a long-term equity
interest and over which it has the power to exercise significant influence.
Where the Group cannot exercise control over an entity in which it has a
shareholding greater than 51 per cent, the equity interest is treated as an
associated undertaking.
A joint venture is a type of joint arrangement whereby the parties that have
joint control of the arrangement have rights to the net assets of the joint
venture. Joint control is the contractually agreed sharing of control of an
arrangement, which exists only when decisions about the relevant activities
require unanimous consent of the parties sharing control. The considerations
made in determining significant influence or joint control are similar to
those necessary to determine control over subsidiaries.
Investments in associates and joint ventures are accounted for using the
equity method, and initially recognised at cost. The Group's interest in the
net assets of associates and joint ventures is included in Investments
accounted for using the equity method in the Balance sheet and its interest in
their results is included in the Income statement, below operating result. The
attributable results of those companies acquired or disposed of during the
year are included for the periods of ownership.
Financial instruments
a Financial assets and liabilities
Financial assets and financial liabilities are classified, upon initial
recognition, as measured at amortised cost, at fair value through other
comprehensive income (OCI), or fair value through profit or loss. Financial
assets and financial liabilities are not reclassified subsequent to their
initial recognition unless the Group changes its business model for managing
financial assets and financial liabilities.
The classification of financial assets and financial liabilities at initial
recognition depends on the financial assets' and financial liabilities'
contractual cash flow characteristics and the Group's business model for
managing them. In order for a financial asset and financial liability to be
classified and measured at amortised cost or fair value through OCI, it needs
to give rise to cash flows that are 'solely payments of principal and
interest' (SPPI) on the principal amount outstanding. A financial asset or
financial liability that is not SPPI is classified and measured at fair value
through profit or loss. This assessment is performed on an instrument by
instrument basis.
The Group's business model for managing financial assets and financial
liabilities establishes how it manages its financial assets and financial
liabilities in order to generate cash flows. The business model determines
whether cash flows will result from collecting contractual cash flows, selling
the financial assets, or both. Financial assets and financial liabilities
classified and measured at amortised cost are held within a business model
with the objective to hold financial assets in order to collect contractual
cash flows while financial assets and financial liabilities classified and
measured at fair value through OCI are held within a business model with the
objective of both holding to collect contractual cash flows and selling.
Long term borrowings
Long-term borrowings are recorded at amortised cost, including lease
liabilities which contain interest rate swaps that are closely related to the
underlying financing and as such are not accounted for as an embedded
derivative.
Convertible debt
Convertible bonds are classified as either compound financial instruments or
hybrid financial instruments depending on the settlement alternatives upon
redemption. Where the bondholders exercise their equity conversion options and
the Group has no alternative other than to settle the convertible bonds into a
fixed number of ordinary shares of the Company, then the bonds are classified
as a compound financial instrument. Where the Group has an alternative
settlement mechanism to the convertible bonds that permits settlement in cash,
then the convertible instrument is classified as a hybrid financial
instrument.
Convertible bonds that are classified as compound financial instruments
consist of a liability and an equity component. At the date of issue, the fair
value of the liability component is estimated using the prevailing market
interest rate for similar non-convertible debt, and is subsequently recorded
on an amortised cost basis using the effective interest method until
extinguished on conversion or maturity of the bonds, and is recognised within
Long-term borrowings. The difference between the proceeds of issue of the
convertible bond and the fair value assigned to the liability component,
representing the embedded option to convert the liability into equity of the
Group, is included in the equity portion of the convertible bond in Other
reserves and is not subsequently remeasured. The interest expense on the
liability component is calculated by applying the effective interest rate for
similar non-convertible debt to the liability component of the instrument. The
difference between this value and the interest paid is added to the carrying
amount of the liability.
Convertible bonds that are classified as hybrid financial instruments consist
only of a liability component recognised within Long-term borrowings. At the
date of issue, the entirety of the convertible bonds is accounted for at fair
value with subsequent fair value gains or losses recorded within Long-term
borrowings. The fair value of such financial instruments is obtained from
their respective quoted prices in active markets, with the portion of the
change in fair value attributable to changes in the credit risk of the
convertible bonds recognised in Other comprehensive income and the portion of
the change in fair value attributable to market conditions recognised in the
Income statement within Finance costs.
Issue costs associated with compound financial instruments are apportioned
between the liability and equity components of the convertible bonds where
appropriate based on their relative carrying values at the date of issue. The
portion relating to the equity component is charged directly against equity.
Issue costs associated with hybrid financial instruments are expensed
immediately to the Income statement.
Other equity investments
Other equity investments are non-derivative financial assets including listed
and unlisted investments, excluding interests in associates and joint
ventures. On initial recognition, these equity investments are irrevocably
designated as measured at fair value through Other comprehensive income. They
are subsequently measured at fair value, with changes in fair value recognised
in Other comprehensive income with no recycling of these gains and losses to
the Income statement when the investment is sold or a change in the structure
of transaction changes its classification as an Other equity instrument.
Dividends received on other equity investments are recognised in the Income
statement.
The fair value of quoted investments is determined by reference to bid prices
at the close of business on the balance sheet date.
Where there is no active market, fair value is determined using valuation
techniques.
Interest-bearing deposits
Interest-bearing deposits, principally comprising funds held with banks and
other financial institutions with contractual cash flows that are SPPI, and
held in order to collect contractual cash flows, are carried at amortised cost
using the effective interest method.
Impairment of financial assets
At each balance sheet date, the Group recognises provisions for expected
credit losses on financial assets measured at amortised cost, based on either
12-month or lifetime losses depending on whether there has been a significant
increase in credit risk since initial recognition. The simplified approach,
based on the calculation and recognition of lifetime expected credit losses,
is applied to contracts that have a maturity of one year or less, including
trade receivables.
When determining whether there has been a significant increase in credit risk
since initial recognition and when estimating the expected credit loss, the
Group considers reasonable and supportable information that is relevant and
available. This includes both quantitative and qualitative information and
analysis, based on the Group's historical experience and informed credit
assessment, including forward-looking information. Such forward-looking
information takes into consideration the forecast economic conditions expected
to impact the outstanding balances at the balance sheet date. A financial
asset is written off when there is no reasonable expectation of recovery, such
as the customer having filed for liquidation.
b Cash and cash equivalents
Cash and cash equivalents include cash in hand and deposits with any
qualifying financial institution repayable on demand or maturing within three
months of the date of acquisition and which are subject to an insignificant
risk of change in value.
c Derivative and non-derivative financial instruments and hedging
activities
Derivative financial instruments, comprising interest rate swap derivatives,
foreign exchange derivatives and fuel hedging derivatives (including options,
swaps and forward contracts) are initially recognised at fair value on the
date a derivative contract is entered into and are subsequently remeasured at
their fair value. They are classified as financial instruments through the
Income statement. The method of recognising the resulting gain or loss arising
from remeasurement depends on whether the derivative is designated as a
hedging instrument, and if so, the nature of the item being hedged (as
detailed below under cash flow hedges). The time value of options is excluded
from the designated hedging instrument and accounted for as a cost of hedging.
Movements in the time value of options are recognised in Other comprehensive
income until the underlying transaction affects the Income statement.
When forward contracts are used to hedge forecast transactions, the Group
generally designates only the spot component of the forward contract as the
hedging instrument within a hedge relationship. Gains or losses arising on the
change in fair value of the spot component are recognised within Other
comprehensive income in the Cash flow hedge reserve within equity. The forward
component of a forward contract is not designated within a hedge relationship,
with the associated gains and losses on the forward component recorded within
Other comprehensive income in the Cost of hedging reserve within equity until
the underlying transaction affects the Income statement.
To manage foreign exchange movements on foreign currency customer cash inflows
(denominated in US dollars, euros and Japanese yen), certain non-derivative
repayment instalments on foreign currency-denominated interest-bearing
liabilities are designated as hedging instruments within a hedge relationship.
Gains or losses arising from movements in foreign exchange rates are
recognised within Other comprehensive income in the Cash flow hedge reserve
within equity. Accumulated gains or losses within the cash flow hedge reserve
are transferred to Sales in advance of carriage in the same period as the
forecast transaction occurs or when hedge accounting is discontinued when the
forecast transaction is no longer expected to occur, at which point amounts
are immediately reclassified to Passenger revenue.
When a derivative is designated as a hedging instrument and that instrument
expires, is sold or is restructured, if the initial forecast transaction is
still expected to occur, any cumulative gain or loss remains in the cash flow
hedge reserve until such time as the hedge item impacts the Income statement.
Where there is a change in the risk management objective, then hedge
accounting is discontinued and the associated cumulative gain or loss arising
prior to the change in risk management objective remains in the cash flow
hedge reserve until such time as the underlying hedged item impacts the Income
statement had the risk management objective continued to have been met. Where
a forecast transaction which was previously determined to be highly probable
and for which hedge accounting applied, is no longer expected to occur, hedge
accounting is discontinued and the cumulative gain or loss in the cash flow
hedge reserve is immediately reclassified to the Income statement.
Each operating company enters into foreign currency derivative contracts, that
are not designated in a hedge relationship, in order to mitigate foreign
exchange movements on financial liabilities designated in currencies other
than the presentational currency of each operating company, including but not
limited to, lease liabilities. Movements in the fair value of such derivatives
are recognised in the Income statement in the period in which they occur and
are presented within Net currency retranslation charges.
Exchange gains and losses on monetary investments are taken to the Income
statement unless the item has been designated and is assessed as an effective
hedging instrument. Exchange gains and losses on non-monetary investments are
reflected in equity.
d Cash flow hedges
Changes in the fair value of derivative financial instruments designated as in
a hedge relationship of a highly probable expected future transaction are
assessed for effectiveness and accordingly recorded in the Cash flow hedge
reserve within equity.
Hedge effectiveness
Hedge effectiveness is determined at the inception of the hedge relationship,
and through periodic prospective effectiveness assessments, to ensure that an
economic relationship exists between the hedged item and hedging instrument. A
hedging relationship qualifies for hedge accounting if it meets all of the
following effectiveness requirements: (i) there is 'an economic relationship'
between the hedged item and the hedging instrument; (ii) the effect of credit
risk does not dominate the value changes that result from that economic
relationship; and (iii) the hedge ratio is aligned with the requirements of
the Group's risk management strategy and in all instances is maintained at a
ratio of 1:1.
Sources of ineffectiveness include the following:
• in hedges of fuel purchases, ineffectiveness may arise if the timing of
the forecast transaction changes from what was originally estimated, or if
there are changes in the credit risk of the Group or the derivative
counterparty;
• in hedges of foreign currency purchases, ineffectiveness may arise if
the timing of the forecast transaction changes from what was originally
estimated, or if there are changes in the credit risk of the Group or the
derivative counterparty; and
• in hedges of interest rate payments, ineffectiveness may arise if there
are differences in the critical terms between the interest rate derivative
instrument and the underlying hedged item, or if there are changes in the
credit risk of the Group or the derivative counterparty.
Ineffectiveness is recorded within the Income statement as Realised/unrealised
(losses)/gains on derivatives not qualifying for hedge accounting and
presented within Other non-operating charges.
Reclassification adjustments
Gains and losses accumulated in the Cash flow hedge reserve within equity are
reclassified from the Cash flow hedge reserve when the hedged item affects the
Income statement as follows:
• where the forecast hedged item results in the recognition of expenses
within the Income statement (such as the purchase of jet fuel for which both
fuel and the associated foreign currency derivatives are designated as the
hedging instrument), the accumulated gains and losses recorded in both the
cash flow hedge reserve and the cost of hedging reserve are reclassified and
included in the Income statement within the same caption as the hedged item is
presented. Such reclassification occurs in the same period as the hedged item
is recognised in the Income statement;
• where the forecast hedged item results in the recognition of a
non-financial asset (such as the purchase of aircraft for which foreign
currency derivatives are designated as the hedging instrument or where the
purchase of jet fuel gives rise to the recognition of fuel inventory in
storage facilities), or a non-financial liability (such as the sales in
advance of carriage for which both foreign currency derivatives and
non-financial derivative instruments are designated as the hedging
instrument), the accumulated gains and losses recorded within both the cash
flow hedge reserve and the cost of hedging reserve are included in the initial
cost of the asset and liability, respectively. These gains or losses are
recorded in the Income statement as the non-financial asset and the
non-financial liability affects the Income statement (which for aircraft is
through Depreciation over the expected life of the aircraft, for fuel
inventory through Fuel, oil costs and emission charges and for sales in
advance of carriage through Passenger revenue when the flight is flown); and
• where the forecast hedged items results in the recognition of a
financial asset or liability (such as variable rate debt for which interest
rate swaps are designated as the hedging instrument), the accumulated gains
and losses recorded within the cash flow hedge reserve are reclassified to
Interest expense within the Income statement at the same time as the interest
expense arises on the hedged item.
Further information on the risk management activities of the Group is given in
note 28d.
e Interest rate benchmark reform
In 2020 the Group adopted the amendments to IFRS 9 and IFRS 7 relating to the
interest rate benchmark reform Phase 1, ('Phase 1') and in 2021 the Group
adopted the amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16 relating
to the interest rate benchmark reform Phase 2 ('Phase 2').
The Phase 1 amendments provide temporary relief from applying certain hedge
accounting requirements to hedging relationships directly affected by
Interbank Offered Rates ('IBOR') reform. The reliefs have the effect that IBOR
reform does not cause hedge accounting to terminate prior to contracts being
amended. Where transition to an alternative benchmark rate has taken place,
the Group ceases to apply the Phase 1 amendments and instead applies the Phase
2 amendments.
Hedge accounting
Where the Group continues to apply the Phase 1 amendments, the following
reliefs are applied:
• when considering the highly probable requirement, the Group has assumed
that those benchmark rates that need to be transitioned to an alternative
benchmark rate, on which the Group's hedged long-term borrowings are based, do
not change as a result of IBOR reform;
• in assessing whether the hedge is expected to be highly effective on a
forward-looking basis the Group has assumed that those benchmark rates that
need to be transitioned to an alternative benchmark rate, on which the cash
flows of the hedged long-term borrowings and the interest rate swaps that
hedge them are based, are not altered by IBOR reform; and
• the Group has not recycled the cash flow hedge reserve relating to the
period after the IBOR reform is expected to take effect.
When the Group ceases to apply the Phase 1 amendments, the Group amends its
hedge designation to reflect changes which are required by IBOR reform, but
only to make one or more of the following changes:
• designating an alternative benchmark rate (contractually or
non-contractually specified) as the hedged risk;
• amending the description of the hedged item, including the description
of the designated portion of the cash flows being hedged; or
• amending the description of the hedging instrument.
The associated hedge documentation is updated to reflect these changes in
designation by the end of the reporting period in which the changes are made.
Such amendments do not give rise to the hedge relationship being discontinued.
When the Group transitions to an alternative benchmark rate, the accumulated
amounts within the cash flow hedge reserve are determined to be based on the
alternative benchmark rate and no reclassification adjustments are made from
the cash flow hedge reserve to the Income statement.
Long-term borrowings and lease liabilities
Phase 2 of the amendments requires that, for financial instruments measured
using amortised cost measurement, changes to the basis for determining the
contractual cash flows required by interest rate benchmark reform are
reflected by adjusting their effective interest rate prospectively. No gain or
loss is recognised upon transition to the new benchmark. The expedient is only
applicable to direct changes that are required by interest rate benchmark
reform.
For lease liabilities where there is a change to the basis for determining the
contractual cash flows, as a practical expedient the lease liability is
remeasured by discounting the revised lease payments using a discount rate
that reflects the change in the interest rate where the change is required by
IBOR reform.
Further information on the management of and uncertainty arising from interest
rate reform is given in note 27i. No amounts have been recorded in the current
or prior periods as a result of these amendments.
Employee benefit plans
a Pension obligations
The Group has both defined benefit and defined contribution plans. A defined
contribution plan is a pension plan under which the Group pays fixed
contributions into a separate entity. The Group has no legal or constructive
obligations to pay further contributions if the fund does not hold sufficient
assets to pay all employees the benefits relating to employee service in the
current and prior years.
Typically defined benefit plans define an amount of pension benefit that an
employee will receive on retirement, usually dependent on one or more factors
such as age, years of service and compensation.
The Group's net obligation in respect of defined benefit pension plans is
calculated separately for each plan by estimating the amount of future benefit
that employees have earned in return for their service in the current and
prior years. The benefit is discounted to determine its present value, and the
fair value of any plan assets are deducted. The discount rate is the yield at
the balance sheet date on AA-rated corporate bonds of the appropriate currency
that have durations approximating those of the Group's obligations. The
calculation is performed by a qualified actuary using the projected unit
credit method. When the net obligation calculation results in an asset for the
Group, the recognition of an asset is limited to the present value of any
future refunds, net of the relevant taxes, from the plan or reductions in
future contributions to the plan ('the asset ceiling'). The fair value of the
plan assets is based on market price information and, in the case of quoted
securities, is the published bid price. The fair value of insurance policies
which exactly match the amount and timing of some or all benefits payable
under the scheme are deemed to be the present value of the related
obligations. Longevity swaps are measured at their fair value.
Current service costs are recognised within employee costs in the year in
which they arise. Past service costs are recognised in the event of a plan
amendment or curtailment, or when the Group recognises related restructuring
costs or severance obligations. The net interest is calculated by applying the
discount rate used to measure the defined benefit obligation at the beginning
of the period to the net defined benefit liability or asset, taking into
account any changes in the net defined benefit liability or asset during the
period as a result of contributions and benefit payments. Net interest and
other expenses related to the defined benefit plans are recognised in the
Income statement. Remeasurements, comprising IAS 19 gains and losses, the
effect of the asset ceiling (excluding interest) and the return on plan assets
(excluding interest), are recognised immediately in Other comprehensive
income. Remeasurements are not reclassified to the Income statement in
subsequent periods.
b Severance obligations
Severance obligations are recognised when employment is terminated by the
Group before the normal retirement date, or whenever an employee accepts
voluntary redundancy in exchange for these benefits. The Group recognises a
provision for severance payments when it is demonstrably committed to either
terminating the employment of current employees according to a detailed formal
plan without realistic possibility of withdrawal, or providing severance
payments as a result of an offer made to encourage voluntary redundancy.
Other employee benefits are recognised when there is deemed to be a present
obligation.
Taxation
Current income tax assets and liabilities are measured at the amount expected
to be recovered from or paid to the taxation authorities, based on tax rates
and laws that are enacted or substantively enacted at the balance sheet date.
Deferred income tax is recognised on all temporary differences arising between
the tax bases of assets and liabilities and their carrying amounts in the
financial statements, with the following exceptions:
• where the temporary difference arises from the initial recognition of
goodwill or of an asset or liability in a transaction that is not a business
combination that at the time of the transaction affects neither accounting nor
taxable profit or loss;
• in respect of taxable temporary differences associated with investments
in subsidiaries or associates, where the timing of the reversal of the
temporary differences can be controlled and it is probable that the temporary
differences will not reverse in the foreseeable future; and
• deferred income tax assets are recognised only to the extent that it is
probable that taxable profit will be available against which the deductible
temporary differences, carried forward tax credits or tax losses can be
utilised.
Deferred income tax assets and liabilities are measured on an undiscounted
basis at the tax rates that are expected to apply when the related asset is
realised or liability is settled, based on tax rates and laws enacted or
substantively enacted at the balance sheet date.
Income tax is charged or credited directly to equity if it relates to items
that are credited or charged to equity. Otherwise income tax is recognised in
the Income statement.
Inventories
Inventories are valued at the lower of cost and net realisable value. Such
cost is determined by the weighted average cost method. Inventories include
mainly aircraft spare parts, repairable aircraft engine parts and fuel held in
storage facilities.
Share-based payments
The Group operates a number of equity-settled, share-based payment plans,
under which the Group awards equity instruments of the Group for services
rendered by employees. The fair value of the share-based payment plans is
measured at the date of grant using a valuation model provided by external
specialists. The resulting cost, as adjusted for the expected and actual level
of vesting of the plan, is charged to the Income statement over the period in
which the options vest. At each balance sheet date before vesting, the
cumulative expense is calculated, representing the extent to which the vesting
period has expired and management's best estimate of the achievement or
otherwise of non-market conditions, and accordingly the number of equity
instruments that will ultimately vest. The movement in the cumulative expense
since the previous balance sheet date is recognised in the Income statement
with a corresponding entry in equity.
Provisions
Provisions are made when an obligation exists for a present liability in
respect of a past event and where the amount of the obligation can be reliably
estimated and where it is considered probable that an outflow of economic
resources will be required to settle the obligation. Where it is not
considered probable that there will be an outflow of economic resources
required to settle the obligation, the Group does not recognise a provision,
but discloses the matter as a contingent liability. The Group assesses whether
each matter is probable of there being an outflow of economic resources to
settle the obligation at each reporting date.
Employee leaving indemnities and other employee provisions are recorded for
flight crew who, meeting certain conditions, have the option of being placed
on reserve or of taking early retirement. The Group is obligated to remunerate
these employees until they reach the statutory retirement age. The calculation
is performed by independent actuaries using the projected unit credit method.
Other employee related provisions are recognised for direct expenditures of
business reorganisation such as severance payments (restructuring provisions)
where plans are sufficiently detailed and well advanced, and where appropriate
communication to those affected has been undertaken at the balance sheet date.
Restoration and handback provisions arising on inception of a lease are
recognised as a provision with a corresponding amount recognised as part of
the ROU asset. Any subsequent change in estimation relating to such costs are
reflected in the ROU asset. Maintenance and handback provisions that occur
through usage or through the passage of time are recognised as such activity
occurs, with a corresponding expense recorded in the Income statement. Any
subsequent change in estimation are recognised in the Income statement.
The method for determining legal claims provisions is determined on a claim by
claim basis. Where a claim includes a significant population of items, the
weighted average provision is estimated by determining all potential outcomes
and the probability of their occurrence. Where a claim relates to a single
item, then the Group determines the associated provision by applying the most
likely outcome giving consideration to alternative outcomes. Where an
individual claim is significant, the disclosure of quantitative information is
restricted to the extent that it does not prejudice the outcome of the claim.
If the effect is material, expected future cash flows are discounted using a
rate that reflects, where appropriate, the risks specific to the provision.
Where discounting is used, the effect of unwinding the discount rate is
recognised as a finance cost in the Income statement.
Revenue recognition
Passenger revenue
The Group's revenue primarily derives from transportation services for both
passengers and cargo. Revenue is recognised when the transportation service
has been provided.
Passenger tickets are generally paid for in advance of transportation and are
recognised, net of discounts, as Deferred revenue on ticket sales in current
liabilities until either the customer has flown or, for flexible tickets, when
unused ticket revenue is recognised or the ticket expires unused.
At the time of expected travel, revenue is recognised in relation to flexible
tickets where a customer can reschedule the date of intended travel, that are
not expected to be used, a term referred to as 'unused flexible tickets'. This
revenue is recognised based on the terms and conditions of the ticket and
analysis of historical experience. For these unused flexible tickets, revenue
is recognised only when the risk of a significant reversal of revenue is
remote based on the terms and conditions of the ticket and analysis of
historical experience. The estimation regarding historical experience is
updated at each reporting date.
Where a flight is cancelled, the passenger is entitled to either compensation,
a refund, changing to an alternative flight or the receipt of a voucher. Where
compensation is issued to the customer, such payments are presented net within
Passenger revenue against the original ticket purchased. Where the Group
provides a refund to a customer, Deferred revenue on ticket sales is reduced
and no amount is recorded within revenue. Where a voucher is issued it is
retained within Deferred revenue on ticket sales until such time as it is
redeemed for a flight or it expires, at which time it is recorded within
Passenger revenue. The Group also recognises revenue by estimating the amount
of vouchers that are not expected to be redeemed prior to expiry using
analysis of historical experience. The estimation regarding historical
experience is updated at each reporting date. The amount of such revenue
recognised is constrained, where necessary, such that the risk of a
significant reversal of revenue in the future is remote.
Payments received in relation to certain ancillary services regarding
passenger transportation, such as change fees, are not considered to be
distinct from the performance obligation to provide the passenger flight.
Payments relating to these ancillary services are recognised in Deferred
revenue on ticket sales in current liabilities until the customer has flown.
The Group considers whether it is an agent or a principal in relation to
passenger transportation services by considering whether it has a performance
obligation to provide services to the customer or whether the obligation is to
arrange for the services to be provided by a third party. The Group acts as an
agent where (i) it collects various taxes, duties and fees assessed on the
sale of tickets to passengers and remits these to the relevant taxing
authorities; and (ii) where it provides interline services to airline partners
outside of the Group. Commissions earned in relation to agency services are
recognised as revenue when the underlying goods or services have been
transferred to the customer. In all other instances, the Group considers it
acts as the principal in relation to passenger transportation services.
Cargo revenue
The Group has identified a single performance obligation in relation to cargo
services and the associated revenue is measured at its standalone selling
price and recognised on satisfaction of the performance obligation, which
occurs on the fulfilment of the transportation service.
Other revenue
The Group has identified several performance obligations in relation to
services that give rise to revenue being recognised within Other revenue.
These services, their performance obligations and associated revenue
recognition include:
• the provision of maintenance services and overhaul services for engines
and airframes, where the Group is engaged to enhance an asset while the
customer retains control of the asset. Accordingly, the performance
obligations are satisfied, and revenue recognised, over time. The Group
estimates the proportion of the contract completed at the reporting date and
recognises revenue based on the percentage of completion of the contract;
• the provision of ground handling services, where the performance
obligations are fulfilled when the services are provided;
• the provision of holiday and hotel services, where the performance
obligations are satisfied over time as the customer receives the benefit of
the service; and
• brand and marketing activities, where the performance obligations are
satisfied as the associated activities occur.
Customer loyalty programmes
The Group operates four loyalty programmes: the British Airways Executive
Club, Iberia Plus, Vueling Club and the Aer Lingus Aer Club. The customer
loyalty programmes award travellers Avios to redeem for various rewards,
primarily redemption travel, including flights, hotels and car hire. Avios are
also sold to commercial partners to use in loyalty activity.
Avios issuance
When issued, the standalone selling price of an Avios is recorded within
Deferred revenue on ticket sales in current liabilities until the customer
redeems the Avios. The standalone selling price of Avios is based on the value
of the awards for which the points could be redeemed. The Group also
recognises revenue associated with the proportion of Avios which are not
expected to be redeemed, referred to as 'breakage', based on the results of
modelling using historical experiences and expected future trends in customer
behaviour, up until the reporting date. The amount of such revenue recognised
is limited, where necessary, such that the risk of a significant reversal of
revenue in the future is remote.
Where the issuance of Avios arises from travel on the Group's airlines, the
consideration received from the customer may differ to the aggregation of the
relative standalone selling prices. In such instances the allocation of the
consideration to each performance obligation is undertaken on a proportional
basis using the relative standalone selling prices.
The Group has contractual arrangements with non-Group airlines and non-air
partners for the issuance and redemption of Avios, for which it has identified
the following performance obligations:
Companion vouchers
Certain non-air partners issue their card holders with companion vouchers,
which forms part of the variable consideration of the overall contract,
depending on the level of expenditure by the card holders, for redemption on
the airlines of the Group for the same flight and class of cabin as the
underlying fare being purchased. The Group estimates the standalone selling
price of the companion voucher performance obligation, using valuation
techniques, by reference to the amount that a third party would be prepared to
pay in an arm's length transaction.
Brand and marketing activities
For both air and non-air partners, the Group licenses the Avios and the
airline brands for certain activities, such as the creation of co-branded
credit cards. In addition, the Group has certain contractual arrangements
whereby it commits to provide marketing services to the members of the loyalty
schemes on behalf of those partners. For the provision of both brand and
marketing services, the partner receives benefits incremental to the issuance
of Avios. The Group estimates the standalone selling price of the brand and
marketing performance obligations, using valuation techniques, by reference to
the amount that a third party would be prepared to pay in an arm's length
transaction for access to comparable brands for the period over which they use
the brand. For brand services, as the Group considers that the partner has the
right to use the brand, revenue is recognised as the brand service is provided
and not over time. For marketing performance obligations, revenue is
recognised as the marketing activities occur based on when the partner
receives the benefit of those services.
Upfront payments
Where a partner makes an upfront payment to the Group which does not relate to
any specific performance obligation, then the Group considers such payments as
advance payments for future goods and services and the associated revenue is
recognised as those goods and services are provided, as detailed above. In
such instances the payment is allocated across all of the performance
obligations over the contract term. The Group estimates the expected level of
Avios to be issued over the contract term using experience, historical and
expected future trends, and allocates the payments to the relevant performance
obligations accordingly. At each reporting date, the Group updates its
estimate of the number of Avios expected to be issued over the total contract
term and recognises a cumulative catch-up adjustment where necessary.
When a partner makes an upfront payment to the Group, the Group assesses
whether such a payment is representative of a significant financing event.
Where a significant financing component is identified, the Group estimates a
market rate of interest that an arm's length financial liability of similar
size and tenor would yield. The Group recognises the imputed interest as a
Finance expense in the Income statement.
Other considerations
The Group considers whether it is an agent or a principal in relation to the
loyalty services by considering whether it has a performance obligation to
provide services to the customer or whether the obligation is to arrange for
the services to be provided by a third party. In particular, the Group acts as
an agent where customers redeem their Avios on interline partner flights
outside of the Group, where the fees payable to the interline partner are
presented net against the associated release of the Deferred revenue from
ticket sales.
Exceptional items
Exceptional items are those that in management's view need to be separately
disclosed by virtue of their size or nature and where such presentation is
relevant to an understanding of the Group's financial performance. While
management has defined a list of items and a quantitative threshold that would
merit categorisation as exceptional that has been established through
historical experience, the Group retains the flexibility to add additional
items should their size or nature merit such presentation. The accounting
policy in respect of exceptional items and classification of an item as
exceptional is approved by the Board, through the Audit and Compliance
Committee.
The financial performance of the Group is monitored by the Management
Committee and the Board on a pre-exceptional basis to enable comparison to
prior reporting periods as well as to other selected companies, and also for
making strategic, financial and operational decisions.
The exceptional items recorded in the Income statement include, but are not
limited to, items such as significant settlement agreements with the Group's
pension schemes; significant restructuring; the impact of business combination
transactions that do not contribute to the ongoing results of the Group;
significant discontinuance of hedge accounting; legal settlements;
individually significant tax transactions; and the impact of the sale,
disposal or impairment of an asset or investment in a business. Where
exceptional items are separately disclosed, the resultant tax impact is
additionally separately disclosed. Certain exceptional items may cover more
than a single reporting period, such as significant restructuring events, but
not more than two reporting periods.
Further information is given in the Alternative performance measures section.
Government grants
Government grants are recognised where there is reasonable assurance that the
grant will be received. Loans provided and/or guaranteed by governments that
represent market rates of interest are recorded at the amount of the proceeds
received and recognised within Borrowings. Those loans provided and/or
guaranteed by governments that represent below market rates of interest are
measured at inception at their fair value and recognised within Borrowings,
with the differential to the proceeds received recorded within Deferred income
and released to the relevant financial statement caption in the Income
statement on a systematic basis. Grants that compensate the Group for expenses
incurred are recognised in the Income statement in the relevant financial
statement caption on a systematic basis in the periods in which the expenses
are recognised.
Critical accounting estimates, assumptions and judgements
The preparation of financial statements requires management to make
judgements, estimates and assumptions that affect the application of policies
and reported amounts of assets and liabilities, income and expenses. These
judgements, estimates and associated assumptions are based on historical
experience and various other factors believed to be reasonable under the
circumstances. Actual results in the future may differ from judgements and
estimates upon which financial information has been prepared. These
underlying assumptions are reviewed on an ongoing basis. Revisions to
accounting estimates are recognised prospectively.
Estimates
The estimates and assumptions that have a significant risk of causing a
material adjustment to the carrying amounts of assets and liabilities within
the next financial year are as follows:
a Employee benefit obligations, employee leaving indemnities, other
employee related restructuring
At December 31, 2022 the Group recognised €2,334 million in respect of
employee benefit assets (2021: €1,775 million) and €217 million in respect
of employee benefit obligations (2021: €285 million). Further information on
employee benefit obligations is disclosed in note 32.
The cost of employee benefit obligations, employee leaving indemnities and
other employee-related provisions is determined using the valuation
requirements of IAS 19. These valuations involve making assumptions about
discount rates, future salary increases, mortality rates and future pension
increases. Due to the long-term nature of these schemes, such assumptions are
subject to significant uncertainty. The assumptions relating to these schemes
are disclosed in note 32. The Group determines the assumptions to be adopted
in discussion with qualified actuaries. Any difference between these
assumptions and the actual outcome will impact future net assets and total
comprehensive income. The sensitivity to changes in pension assumptions is
disclosed in note 32.
Under the Group's Airways Pension Scheme (APS) and New Airways Pension Scheme
(NAPS) defined benefit schemes, increases to pensions are based on the annual
Government Pension Increase (Review) Orders, which since 2011 have been based
on the Consumer Prices Index (CPI). Additionally, in APS there is provision
for the Trustee to pay increases up to the level of the Retail Prices Index
(RPI), subject to certain affordability tests. Historically market
expectations for RPI could be derived by comparing the prices of UK Government
fixed-interest and index-linked gilts, with CPI assessed by considering the
Bank of England's inflation target and comparison of the construction of the
two inflation indices.
In November 2020, the UK Government and UK Statistics Authority (UKSA)
confirmed alignment of RPI with CPIH (a variant of CPI) from February 2030. In
assessing RPI and CPI inflation from investment market data, allowance has
been made for alignment of RPI with CPIH from 2030 and, therefore, effectively
no gap between RPI and CPI inflation from that date. CPI inflation before 2030
is assumed to be 1 per cent per annum below RPI inflation.
b Revenue recognition
At December 31, 2022 the Group recognised €7,644 million (2021: €6,552
million) in respect of deferred revenue on ticket sales of which €2,630
million (2021: €2,820 million) related to customer loyalty programmes.
Further information on deferred revenue from ticket sales is included in note
23.
Passenger revenue
Passenger revenue is recognised when the transportation service is provided.
At the time of transportation, revenue is also recognised in respect of unused
tickets and is estimated based on the terms and conditions of the tickets and
historical experience. The Group considers that there is no reasonably
possible change to unused ticket assumptions that would have a material impact
on Passenger revenue recorded in the year.
Historically, where a voucher has been issued to a customer in the event of a
flight cancellation, the Group estimated, based on historical experience, the
level of such vouchers not expected to be used prior to expiry and recognised
revenue accordingly. During 2020 and 2021, due to the significant level of
flight cancellations arising from COVID-19, the Group issued a greater volume
of vouchers than it would have otherwise done so. In addition, given the
uncertainty as to the timing of customers redeeming these vouchers, the Group
was unable to estimate with a high degree of probability that there would not
be a significant reversal of revenue in the future had it applied the
historical expiry trends over the period of the pandemic. Accordingly, for the
years ended December 31, 2020, and December 31, 2021, the Group did not
recognise revenue arising from those vouchers issued due to COVID-19 related
cancellations until either the voucher was redeemed or it expired.
During 2022, while the recovery from COVID-19 has seen much lower levels of
voucher issuance and high levels of voucher redemption, the Group's operating
companies' voucher programmes have had limited voucher expiry in 2022, with
the majority not expected until 2023 at the earliest. Accordingly, the Group
has had insufficient historical expiry experience relating to vouchers issued
during the pandemic and therefore has not applied any breakage to existing
voucher liabilities as it cannot confirm that there would not be a subsequent
significant reversal of revenue if it were to do so.
Customer loyalty schemes
Revenue associated with the issuance of Avios under customer loyalty
programmes is based on the relative standalone selling prices of the related
performance obligations (brand, marketing and Avios), determined using
estimation techniques. The transaction price of brand and marketing services
is determined using specific brand valuation methodologies. The transaction
price of an Avios is determined as the price of the rewards against which they
can be redeemed and is reduced to take account of the proportion of Avios that
are not expected to be redeemed by customers.
During 2020 and 2021, due to the significant restrictions imposed on the
ability of customers to redeem Avios coupled with the disruption in the
patterns of redemption caused by COVID-19, the Group considered that the
trends experienced since the start of the COVID-19 pandemic were not
reflective of the long-term expected patterns of redemption and accordingly,
the Group was unable to determine with a high degree of probability that there
would not be a significant reversal of revenue in the future had it applied
the redemption trends over the period of the pandemic. Accordingly, for the
years to December 31, 2020 and December 31, 2021, the Group continued to
estimate the level of redemption activity based on pre-COVID-19 customer
behaviour. While 2022 has seen all operating companies recover from the
COVID-19 pandemic, there remains uncertainty as to whether recent redemption
data is representative of long-term behavioural trends and accordingly the
Group cannot confirm that there would not be a subsequent significant reversal
of revenue if the level of redemption estimates were to be updated to reflect
behaviours during the COVID-19 period. Accordingly, the Group continues to
estimate the level of redemption activity based on pre-COVID-19 customer
behaviour.
The Group estimates the number of Avios not expected to be redeemed using
statistical modelling based on historical experience and expected future
trends in customer behaviour. A five percentage point increase in the
assumption of Avios outstanding and not expected to be redeemed would result
in an adjustment to Deferred revenue from ticket sales of €95 million, with
an offsetting adjustment to increase revenue and operating profit recognised
in the year.
c Income taxes
At December 31, 2022 the Group recognised €1,282 million in respect of
deferred tax assets (2021: €1,282 million). Further information on current
and deferred tax is disclosed in note 10.
The Group is subject to income taxes in numerous jurisdictions. Estimates are
required in determining the worldwide provision for income taxes. There are
many transactions and calculations for which the ultimate tax determination is
uncertain because it may be unclear how tax law applies to a particular
transaction or circumstance. Where the Group determines that it is more likely
than not that the tax authorities would accept the position taken in the tax
return, amounts are recognised in the financial statements on that basis.
Where the amount of tax payable or recoverable is uncertain, the Group
recognises a liability based on either: the Group's judgement of the most
likely outcome; or, when there is a wide range of possible outcomes, a
probability-weighted average approach.
The Group recognises deferred tax assets only to the extent that it is
probable that the taxable profit will be available against which the
deductible temporary differences, carried forward tax credits or tax losses
can be utilised. Management uses judgement, including the consideration of
past and current operating performance and the future projections of
performance laid out in the approved business plan in order to assess the
probability of recoverability.
In exercising this judgement, while there are no time restrictions on the
utilisation of historic tax losses in the principal jurisdictions in which the
Group operates, future cash flow projections are forecast for a period of up
to ten years from the balance sheet date, which represents the period over
which it is probable that future taxable profits will be available.
At December 31, 2022, the Group had unrecognised deferred tax assets of
€2,084 million relating to tax losses the Group does not reasonably expect
to utilise. In applying the aforementioned judgement, had the Group extended
the period of future cash flow projections indefinitely, then the amount of
unrecognised deferred tax assets would have reduced by €1,608 million.
Conversely, if the forecast profit before tax for each operating company was
reduced by two percentage points over the forecast period, the amount of the
unrecognised deferred tax asset relating to tax losses would increase by €11
million.
d Impairment of non-financial assets
At December 31, 2022 the Group recognised €2,423 million (2021: €2,439
million) in respect of intangible assets with an indefinite life, including
goodwill. Further information on these assets is included in note 17.
Goodwill and intangible assets with indefinite economic lives are tested, as
part of the cash-generating units to which they relate, for impairment
annually and at other times when such indicators exist. The recoverable
amounts of cash-generating units have been determined based on value-in-use
calculations, which use a weighted average multi-scenario discounted cash flow
model, which are then compared to the carrying amount of the associated
cash-generating unit.
In determining the carrying value of each cash generating unit, the Group
allocates all associated operating tangible and intangible assets, including
ROU assets. In addition the Group has allocated certain liabilities to the
carrying value of each CGU where those liabilities are critical to the
underlying operations of the cash-generating unit and in the event of a
disposal of the cash-generating unit would be required to be transferred to
the purchaser. Such liabilities include lease liabilities.
The Group has applied judgement in the weighting of each scenario in the
discounted cash flow model and these calculations require the use of estimates
in the determination of key assumptions and sensitivities as disclosed in
notes 4 and 17.
The Group assesses whether there are any indicators of impairment for all
non-financial assets at each reporting date. When such indicators are
identified, then non-financial assets are tested for impairment.
e Engineering and other aircraft costs
At December 31, 2022, the Group recognised €2,400 million in respect of
maintenance, restoration and handback provisions (2021: €1,832 million).
Information on movements on the provision is disclosed in note 26.
The Group has a number of contracts with service providers to replace or
repair engine parts and for other maintenance checks. These agreements are
complex and generally cover a number of years. Provisions for maintenance,
restoration and handback are made based on the best estimate of the likely
committed cash outflow. In determining this best estimate, the Group applies
significant judgement as to the level of forecast costs expected to be
incurred when the aircraft is returned to the lessor. The assumptions of this
significant judgement include aircraft utilisation, expected maintenance
intervals, future maintenance costs and the aircraft's condition. The
associated forecast costs are discounted to their present value. In 2021, the
Group considered that there was no reasonably possible change to a single
assumption that would have had a material impact on the provisions, however a
combination of changes in multiple assumptions may have. In 2022, with the
status of the macro-economic environment, the Group considers that a
reasonable possible change in the inflation rate and discount rate assumptions
of a 100 basis points increase would give rise to an increase of €51 million
and a decrease of €68 million, respectively, when applied in isolation to
one another.
Judgements
a Determining the lease term of contracts with renewal and
termination options
The Group determines the lease term as the non-cancellable term of the lease,
together with any periods covered by an option to extend the lease if it is
reasonably certain to be exercised, or any periods covered by an option to
terminate the lease, if it is reasonably certain not to be exercised. The
Group applies judgement in evaluating whether it is reasonably certain whether
or not to exercise the option to renew or terminate the lease. Such judgement
includes consideration of fleet plans which underpin approved business plans
and historical experience regarding the extension of leases. After the
commencement date, the Group re-assesses the lease term if there is a
significant event or change in circumstances that affects the Group's ability
to exercise or not to exercise the option to renew or to terminate. Further
information is given in note 14.
b Determining whether the Group has significant influence over Air
Europa Holdings
The Group applies judgement in the determination as to whether it has the
power with which to participate in the decision making of, and as a result
significant influence over, Air Europa Holdings, S.L. (Air Europa Holdings).
Such judgement includes the consideration as to the ability of the Group to:
have representation on the board of Air Europa Holdings; participate in the
policy-making processes, including participation in decisions regarding
dividends and other distributions; the existence of material transactions
between Air Europa Holdings and the Group; enable the interchange of
management personnel and provide essential technical information.
In forming its judgement, the Group notes that: it does not have the ability
to have representation on the board of Air Europa Holdings; it does not have
the ability to participate in the policy-making processes; has not entered
into material transactions outside of the normal course of business; it does
not have the ability to enable the interchange of management personnel and it
does not have the ability to provide essential technical information. The
Group has therefore concluded that it does not have significant influence over
Air Europa Holdings.
Accordingly, the Group accounts for its shareholding in Air Europa Holdings as
an Other equity investment and measures it at fair value through Other
comprehensive income. Had the Group concluded that it does have significant
influence over Air Europa Holdings, then the shareholding would have been
classified as an associate, measured at fair value on inception and
subsequently measured using the equity method. At December 31, 2022, the fair
value of its shareholding in Air Europa Holdings was €24 million. Further
information is given in
note 19.
New standards, amendments and interpretations
The following amendments and interpretations apply for the first time in 2022,
but do not have a material impact on the consolidated financial statements of
the Group:
• property, plant and equipment: proceeds before intended use - amendments
to IAS 16 effective for periods beginning on or after
January 1, 2022;
• reference to the Conceptual Framework - amendments to IFRS 3 effective
for periods beginning on or after January 1, 2022;
• onerous contracts - cost of fulfilling a contract - amendments to IAS 37
effective for periods beginning on or after January 1, 2022; and
• annual improvements to IFRS standards 2018-2020 - effective for periods
beginning on or after January 1, 2022.
The IASB and IFRIC have issued the following standards, amendments and
interpretations with an effective date after the year end of these financial
statements which management believe could impact the Group in future periods.
The Group has assessed the impact of these standards, amendments and
interpretations and it is not expected that these will have a material effect
on the reported income or net assets of the Group. Unless otherwise stated,
the Group plans to adopt the following standards, interpretations and
amendments on the date they become mandatory:
• IFRS 17 Insurance contracts - effective for periods beginning on or
after January 1, 2023;
• definition of accounting estimate - amendments to IAS 8 effective for
periods beginning on or after January 1, 2023;
• disclosure of accounting policies - amendments to IAS 1 and IFRS
Practice statement 2 effective for periods beginning on or after January 1,
2023; and
• deferred tax related to assets and liabilities arising from a single
transaction - amendments to IAS 12 effective for periods beginning on or after
January 1, 2023.
On October 31, 2022, the IASB issued the amendments to IAS 1 - classification
of liabilities as current or non-current (the 'Amendments'), effective for
periods beginning on or after January 1, 2024. The Amendments will require the
€825 million convertible bond that matures in 2028, which as at December 31,
2022, had a carrying value of €605 million, to be reclassified from a
non-current liability to a current liability with the comparative presentation
as at December 31, 2023 also reclassified. The Amendments require that where
the conversion feature of a convertible instrument does not meet the
recognition criteria for separate presentation within equity and where the
associated bond holders have the irrevocable right to exercise the conversion
feature within twelve months of the balance sheet date, that such convertible
instruments be presented as current. Other than this reclassification, the
Amendments will not have a material effect on the reported results or net
assets of the Group.
3 Significant changes and transactions in the current reporting period
The financial performance and position of the Group was affected by the
following significant events and transactions in the year to December 31, 2022
as detailed below:
• on March 4, 2022 Aer Lingus entered into a financing arrangement with
the Ireland Strategic Investment Fund (ISIF), which subsequently increased the
existing €150 million of facilities to €350 million and extended the
maturity to March 2025. On December 13, 2022, Aer Lingus repaid €100 million
of the €150 million it had previously drawn against this facility. At
December 31, 2022, €300 million of undrawn facilities remains available for
draw down;
• on April 12, 2022, the Group entered into an asset-financing structure,
under which five aircraft were financed. These transactions mature between
2032 and 2036. This arrangement was transacted through an unconsolidated
structured entity, which in turn issued the Iberia Pass Through Certificates,
Series 2022-1, commonly referred to as EETCs. In doing so, the asset financing
structure provides committed aircraft financing of €680 million;
• on May 19, 2022, the Group entered into an agreement with Boeing to
purchase 25 737-8200 and 25 737-10 aircraft, plus 100 options. The aircraft
will be delivered between 2023 and 2027 and will be used for shorthaul fleet
renewal. The fleet order was subsequently approved by shareholders on October
26, 2022;
• on June 15, 2022, following approval from Sociedad Estatal de
Participaciones Industriales (SEPI) (the Spanish state holding company that
has a direct participation in Air Europa Holdings) and the Instituto de
Crédito Oficial (ICO) in Spain, the Group entered into a financing
arrangement with Globalia Corporación Empresarial, S,A, ('Globalia'),
whereby, the Group provided a €100 million seven-year unsecured loan. The
loan was convertible for a period of two years from inception into a fixed
number of the shares of Air Europa Holdings;
• in the first half of 2022, the Group converted 22 Airbus A320neos
options into firm orders for 17 Airbus A320neos and five Airbus A321neos;
• on July 28, 2022, IAG announced a further order for more fuel-efficient
Airbus A320neo family aircraft, as part of its plan to meet climate
commitments. The Group converted 12 Airbus A320neo/A321neo options into firm
orders and ordered a further 25 Airbus A320neo/A321neo aircraft, with the
option to purchase 50 additional aircraft. The firm orders will replace
existing Airbus A320ceo family aircraft and are for delivery between 2025 and
2028; the split between A320neos and A321neos will be determined nearer to
delivery. The fleet order was subsequently approved by shareholders on October
26, 2022;
• on August 16, 2022, the Group exercised its exchange option and
converted the €100 million loan it had made to Globalia into 20 per cent of
the share capital of Air Europa Holdings, which has been recognised within
Other equity instruments. The fair value of the loan immediately prior to
conversion was €65 million, representing a reduction of €35 million from
inception, which has been recorded within the Income statement. Upon
converting the loan into share capital of Air Europa Holdings, the fair value
of the investment was determined to be €22 million, with the difference
between the fair value of the loan immediately prior to conversion and the
fair value of the equity investment immediately after conversion, representing
€43 million, being recorded as a loss within the Income statement. Further
details regarding the investment in Air Europa Holdings are given in note 19;
• on August 23, 2022, the Group extended its $1.755 billion secured
Revolving Credit Facility accessible by British Airways, Iberia and Aer
Lingus, previously due to mature on March 23, 2024, by a further 12 months to
March 23, 2025;
• on October 21, 2022, the Group entered into an asset-financing
structure, under which four aircraft were financed. These transactions mature
between 2032 and 2036. This arrangement was transacted through an
unconsolidated structured entity, which in turn issued the British Airways
Pass Through Certificates, Series 2022-1, commonly referred to as EETCs. In
doing so, the asset financing structure provides committed aircraft financing
of €416 million; and
• on November 17, 2022, the Group redeemed the convertible bond issued in
November 2015 for its nominal value of €500 million.
4 Impact of climate change on financial reporting
Significant transactions and critical accounting estimates, assumptions and
judgements in the determination of the impact of climate change
As a result of climate change the Group has designed and approved its
Flightpath Net Zero climate strategy, which commits the Group to net zero
emissions by 2050. While approved business plans currently have a duration of
three years, the Flightpath Net Zero climate strategy impacts both the short,
medium and long-term operations of the Group.
The details regarding the inputs and assumptions used in the determination of
the Flightpath Net Zero climate strategy include, but are not limited to, the
following that are within the control of the Group:
• the additional cost of the Group's commitment to increasing the level of
Sustainable Aviation Fuels (SAF) to ten per cent by 2030 and to seventy per
cent by 2050;
• the cost of incurring an increase in the level of carbon offsetting and
carbon capture schemes; and
• the impact of introducing more fuel-efficient aircraft and being able to
operate these more efficiently.
In addition to these inputs and measures within the control of management,
Flightpath Net Zero includes assumptions pertaining to consumers, governments
and regulators regarding the following:
• the impact on passenger demand for air travel as a result of both
passenger trends regarding climate change and government policies;
• investment and policy regarding the development of SAF production
facilities;
• investment and improvements in air traffic management; and
• the price of carbon through the EU, Swiss and UK Emissions Trading
Schemes (ETS) and the UN Carbon Offsetting and Reduction Scheme for
International Aviation (CORSIA).
The level of uncertainty regarding the impact of these factors increases over
time. Accordingly, the Group has applied critical estimation and judgement in
the evaluation of the impact of climate change regarding the recognition and
measurement of assets and liabilities within the financial statements.
Critical accounting estimates, assumptions and judgements - cash flow forecast
estimation
With the Flightpath Net Zero climate strategy assessing the impact over a
long-term horizon to 2050, the level of estimation uncertainty in the
determination of cash flow forecasts increases over time. For those assets and
liabilities, where their recoverability is dependent on long-term cash flows,
the following critical accounting estimates, assumptions and judgements, to
the extent they can be reliably measured, have been applied:
a Long-term fleet plans and useful economic lives
The Group's Flightpath Net Zero climate strategy has been developed in
conjunction with the long-term fleet plans of each operating company. This
includes the annual assessment of useful lives and the residual values of each
aircraft type.
During the course of 2020 as a result of the impact of COVID-19, the Group
permanently stood down 82 aircraft (of which ten were subsequently stood back
up), their associated engines and rotable inventories. These permanently stood
down aircraft were older generation aircraft, that were less fuel efficient,
more carbon intensive and more expensive to operate than more modern models.
With the permanent standing down of these aircraft, coupled with the future
committed delivery of 192 fuel efficient aircraft as detailed in note 15, the
Group considers the existing fleet assets align with the long-term fleet plans
to achieve its Flightpath Net Zero climate strategy. All aircraft in the
fleet, and those due to be delivered in the future, have the capability to
utilise SAF in their operations without impediment. Accordingly, no impairment
has arisen in the current or prior year, nor have the useful lives and
residual values of aircraft been amended, as a result of the Group's
decarbonisation plans.
b Impairment testing of the Group's cash generating units
The Group applies discounted cash flow models, for each cash generating unit,
derived from the cash flow forecasts from the approved three-year business
plans. The Group's Flightpath Net Zero climate strategy is long-term in nature
and includes commitments that will occur at differing points over this time
horizon. To the extent that certain of those commitments occur over the
short-term, then they have been incorporated into the three-year business
plans.
The Group adjusts the final year (being the third year) of these probability
weighted cash flows to incorporate the impacts of climate change from the
Group's Flightpath Net Zero climate strategy that are expected to occur over
the medium term. These adjustments are limited to those that: (i) the Group
can reliably estimate at the reporting date; (ii) only relate to the Group's
existing asset base in its current condition; and (iii) incorporate
legislation and regulation that is expected to be required to achieve the
Group's Flightpath Net Zero climate strategy, and which is sufficiently
progressed at the reporting date.
As a result, the Group's impairment modelling incorporates the following
aspects of the Group's Flightpath Net Zero climate strategy through to 2030,
after which time the level of uncertainty regarding timing and costing becomes
insufficiently reliable to estimate: (i) an increase in the level of SAF
consumption of 10 per cent of the overall fuel mix; (ii) forecast cost of
carbon, including SAF, ETS allowances and CORSIA allowances (all derived from
externally sourced or derived information); (iii) the removal of existing free
ETS allowances issued by the EU member states, Switzerland and the UK; (iv)
forecast kerosene taxes applied to jet fuel for all intra EU flight activity;
and (v) assumptions regarding the ability of the Group to recover these
incremental costs through increased ticket pricing.
In preparing the impairment models, the Group cash flow projections are
prepared on the basis of using the current fleet in its current condition. The
Group excludes the estimated cash flows expected to arise from future
restructuring unless already committed and assets not currently in use by the
Group. In addition, for the avoidance of doubt, the Group's impairment
modelling excludes the following aspects of the Group's Flightpath Net Zero
climate strategy: (i) the expected transition to electric and hydrogen
aircraft, as well as future technological developments to jet engines and
airframes; (ii) any savings from the transition to more fuel efficient
aircraft other than those either in the Group's fleet or those committed
orders due to be delivered over the business plan period; (iii) the benefit of
the development of carbon capture technologies and enhanced carbon offsetting
mechanisms; (iv) the required beneficial reforms to air traffic management
regulation and legislation; and (v) the required government incentives and/or
support across the supply chain.
As detailed in note 17, the Group applies a long-term growth rate to these
adjusted probability weighted cash flows, per CGU, and each of the long-term
growth rates include a specific adjustment to reduce the rate to reflect the
Group's assumptions regarding the reduced demand and elasticity impact arising
from climate change. These impacts are derived with reference to external
market data, industry publications and internal analysis.
Given the inherent uncertainty associated with the impact of climate change,
the Group has applied additional sensitivities in note 17 to reflect a more
adverse impact of climate change than currently expected. This has been
captured through both the downward sensitivities of the long-term growth
rates, ASKs, operating margins and the increased fuel price sensitivity.
c Valuation of employee benefit scheme assets
The Group's employee benefit schemes are principally represented by the
British Airways APS and NAPS schemes in the UK. The schemes are structured to
make post-employment payments to members over the long term, with the Trustee
having established both return seeking assets and liability matching assets
that mature over the long-term to align with the forecast benefit payments.
The assets of these schemes are invested predominantly in a diversified range
of equities, bonds and property. The valuation of these assets ranges from
those with quoted prices in active markets, where prices are readily and
regularly available, through to those where the valuations are not based on
observable market data, often requiring complex valuation models. The trustees
of the schemes have integrated climate change considerations into their
long-term decision making and reporting processes across all classes of
assets, actively engaging with all fund and portfolio managers to ensure that
where unobservable inputs are required into valuation models, that such
valuation models incorporate long-term expectations regarding the impact of
climate change.
d Recoverability of deferred tax assets
In determining the recoverable amounts of the Group's deferred tax assets, the
Group applies the future cash flow projections for a period of up to ten years
derived from the approved three-year business plans. The Group applies a
medium-term growth rate subsequent to the three-year business plans, specific
to each operating company. In considering the impact of the Group's Flightpath
Net Zero climate strategy, management adjusts this medium-term growth rate,
where applicable, to incorporate the assumed impacts on both revenue and costs
to the Group.
e The price of carbon through the EU, Swiss and UK Emissions Trading
Schemes
The EU, Swiss and the UK's ETS were established to reduce greenhouse gas
emissions cost effectively. Under these schemes, companies, including the
Group, are required to buy emission allowances, or are issued them under
existing quotas. The Group is required to surrender these allowances to the
relevant authorities annually dependent on the level of CO(2) equivalent
emitted within a 12-month period. Over time the level of available emission
allowances decreases in order to reduce total emissions, which has the effect
of increasing the price of such allowances. The Group expects that the future
price of such allowances will continue to increase and that the free
allocation of emission allowances will cease. Given the relative illiquid
nature of the emission allowance market there is uncertainty as to the future
pricing of such allowances.
As detailed in note 2, the Group accounts for the purchase of allowances as an
addition to Intangible assets, which are measured at amortised cost. In
addition, as the Group emits CO(2) equivalent as part of its flight
operations, a provision is recorded to settle the obligation. For emissions
for which the Group has already purchased allowances, the provision is valued
at the weighted cost of those allowances. Where the level of emissions exceeds
the amounts of allowances held, this deficit is measured at the market price
of such allowances at the reporting date.
At December 31, 2022, the Group has recorded ETS allowances within Intangibles
assets of €407 million, representing sufficient allowances, by operating
company, to settle its forecast obligations through to at least December 31,
2023. At December 31, 2022, the Group has recorded a provision for settling
its 2022 emissions obligation of €132 million.
5 Segment information
a Business segments
The chief operating decision-maker is responsible for allocating resources and
assessing performance of the operating segments, and has been identified as
the IAG Management Committee (IAG MC).
The Group has a number of entities which are managed as individual operating
companies including airline and platform functions. Each airline operates its
network operations as a single business unit and the IAG MC assesses
performance based on measures including operating profit, and makes resource
allocation decisions for the airlines based on network profitability,
primarily by reference to the passenger markets in which the companies
operate. The objective in making resource allocation decisions is to optimise
consolidated financial results.
The Group has determined its operating segments based on the way that it
treats its businesses and the manner in which resource allocation decisions
are made. British Airways, Iberia, Vueling, Aer Lingus and IAG Loyalty have
been identified for financial reporting purposes as reportable operating
segments. LEVEL is also an operating segment but does not exceed the
quantitative thresholds to be reportable and management has concluded that
there are currently no other reasons why LEVEL should be separately disclosed.
The platform functions of the business primarily support the airline
operations. These activities are not considered to be reportable operating
segments as they either earn revenues incidental to the activities of the
Group and resource allocation decisions are made based on the passenger
business or are not reviewed regularly by the IAG MC and are included within
Other Group companies.
For the year to December 31, 2022
2022
€ million British Airways Iberia Vueling Aer IAG Loyalty Other Group companies(1) Total
Lingus
Revenue
Passenger revenue 10,523 4,002 2,584 1,665 451 233 19,458
Cargo revenue 1,239 284 - 80 - 12 1,615
Other revenue 848 799 14 10 322 - 1,993
External revenue 12,610 5,085 2,598 1,755 773 245 23,066
Inter-segment revenue 311 426 - 14 228 378 1,357
Segment revenue 12,921 5,511 2,598 1,769 1,001 623 24,423
Depreciation and amortisation charge (1,272) (371) (222) (146) (8) (59) (2,078)
Impairment reversal - - 8 - - - 8
Operating profit/(loss) 362 382 195 45 282 (10) 1,256
Exceptional items(2) 23 - 8 - - - 31
Operating profit/(loss) before exceptional items 339 382 187 45 282 (10) 1,225
Net non-operating costs (841)
Profit before tax 415
Total assets 23,788 9,200 3,177 1,946 3,303 (2,111) 39,303
Total liabilities (20,975) (9,005) (3,774) (1,942) (2,914) 1,329 (37,281)
1 Includes eliminations on total assets of €16,159 million and total
liabilities of €5,755 million.
2 For details on exceptional items refer to the Alternative performance
measures section.
For the year to December 31, 2021
2021
€ million British Airways Iberia Vueling Aer Lingus IAG Loyalty(1) Other Group companies(1,2) Total
Revenue
Passenger revenue 2,607 1,707 1,011 302 180 28 5,835
Cargo revenue 1,268 333 - 65 - 7 1,673
Other revenue 314 443 5 4 181 - 947
External revenue 4,189 2,483 1,016 371 361 35 8,455
Inter-segment revenue 129 301 - 5 77 293 805
Segment revenue 4,318 2,784 1,016 376 438 328 9,260
Depreciation and amortisation charge (1,104) (350) (240) (140) (7) (74) (1,915)
Impairment (charge)/reversal (30) - 13 - - - (17)
Operating (loss)/profit (2,041) (220) (233) (338) 131 (64) (2,765)
Exceptional items(3) 151 14 29 9 - 2 205
Operating (loss)/profit before exceptional items (2,192) (234) (262) (347) 131 (66) (2,970)
Net non-operating costs(4) (742)
Loss before tax (3,507)
Total assets 20,891 6,919 2,671 1,820 3,184 (1,079) 34,406
Total liabilities (18,795) (7,062) (3,364) (1,806) (3,009) 476 (33,560)
1 In 2022, based on size thresholds the Group determined that IAG Loyalty
was a reportable segment and accordingly presented the financial information
of the segment separately. The prior year segment note has been re-presented
to align with the current year presentation.
2 Includes eliminations on total assets of €16,023 million and total
liabilities of €5,833 million.
3 For details on exceptional items refer to the Alternative performance
measures section.
4 Includes €75 million of exceptional items relating to the Air Europa
Holdings termination settlement payment.
b Geographical analysis
Revenue by area of original sale
Year to December 31
€ million 2022 2021
UK 7,923 2,435
Spain 4,313 2,189
USA 3,735 931
Rest of world 7,095 2,900
23,066 8,455
Assets by area
December 31, 2022
€ million Property, plant and equipment Intangible
assets
UK 12,026 1,490
Spain 5,082 1,462
USA 47 9
Rest of world 1,191 595
18,346 3,556
December 31, 2021
€ million Property, plant and equipment Intangible
assets
UK 11,544 1,317
Spain 4,404 1,333
USA 76 13
Rest of world 1,137 576
17,161 3,239
6 Expenses by nature
Operating result is arrived at after charging
Depreciation, amortisation and impairment of non-current assets:
€ million 2022 2021
Depreciation charge on right of use assets 1,092 1,058
Depreciation charge on owned assets 748 638
Gain arising on de-designation of foreign exchange hedges recorded in (29) -
Depreciation(1)
Impairment reversal on owned property, plant and equipment - (4)
Amortisation and impairment of intangible assets 218 178
Impairment (reversal)/charge on right of use assets (8) 20
Depreciation charge on other leasehold assets 49 42
2,070 1,932
1 Included in the Depreciation charge, not included within note 13 is a
credit of €29 million relating to the de-designation of hedge accounting
that had been applied to mitigate the foreign currency exposure on aircraft
purchases.
Cost of inventories:
€ million 2022 2021
Cost of inventories recognised as an expense 749 1,038
749 1,038
7 Auditor's remuneration
The fees for the year to December 31, 2022, for audit and non-audit services
provided by the auditor of the Group's consolidated financial statements and
of certain individual financial statements of the consolidated companies, KPMG
Auditores S.L., and by companies belonging to KPMG's network, were as follows:
€'000 2022 2021
Fees payable for the audit of the Group and individual accounts 6,378 4,860
Fees payable for other services:
Audit of the Group's subsidiaries pursuant to legislation 985 532
Other services pursuant to legislation 195 431
Other audit and assurance services 1,644 569
Services relating to working capital review 1,022 776
10,224 7,168
Fees payable to the Group's auditor for the audit of the Group's pension
scheme during the year total €236 thousand (2021: €182 thousand).
8 Employee costs and numbers
€ million 2022 2021
Wages and salaries 3,207 2,135
Social security costs 519 307
Costs related to pension scheme benefits 272 232
Share-based payment charge 39 23
Other employee costs(1) 610 316
Total employee costs 4,647 3,013
1 Other employee costs include allowances and accommodation for crew.
The number of employees during the year and at December 31 was as follows:
2022 2021
December 31, 2022 December 31, 2021
Average number of employees(1) Number of employees Percentage Average number of employees(1) Number of employees Percentage
of women of women
In the air:
Cabin crew 19,801 22,278 70% 9,304 17,865 70%
Pilots 7,340 7,864 7% 3,879 7,607 6%
On the ground:
Airports 13,798 15,087 38% 6,728 12,842 37%
Corporate 11,741 13,819 49% 8,612 10,709 52%
Maintenance 6,908 6,775 8% 6,345 7,448 8%
Senior executives 212 221 34% 167 187 33%
59,800 66,044 44% 35,035 56,658 42%
1 The average number of employees excludes those employees who were on
furlough, wage support and equivalent schemes, including the Temporary
Redundancy Plan arrangements in Spain. For further details see note 34. The
total average number of employees including these schemes is 61,192.
The number of employees is based on actual headcount at December 31. The
average manpower equivalent for 2022 was 59,505 (2021: 50,222), which includes
employees on furlough, wage support and equivalent schemes, including
Temporary Redundancy Plan arrangements in Spain.
9 Finance costs, income and other non-operating charges
a Finance costs
€ million 2022 2021
Interest expense on:
Bank borrowings (191) (133)
Asset financed liabilities (107) (65)
Lease liabilities (464) (408)
Bonds(1) (83) (63)
Provisions unwinding of discount (43) (12)
Other borrowings(1) (102) (90)
Capitalised interest on progress payments 11 3
Other finance costs (38) (62)
(1,017) (830)
1 The 2021 total finance costs include a reclassification of results to
conform with the current basis of presentation. A charge of €63 million has
been reclassified from Other borrowings to Bonds. There is no change to total
finance costs.
b Finance income
€ million 2022 2021
Interest on other interest-bearing deposits 51 5
Other finance income 1 8
52 13
c Net change in fair value of financial instruments
€ million 2022 2021
Net change in the fair value of convertible bond 159 89
Net fair value losses on financial assets at fair value through profit or loss (35) -
Net fair value losses on de-recognition of financial assets and recognition of (43) -
other equity investment
81 89
d Net financing credit/(charge) relating to pensions
€ million 2022 2021
Net financing credit/(charge) relating to pensions 26 (2)
e Other non-operating charges
€ million 2022 2021
Gains on sale of property, plant and equipment and investments(1) 22 59
Charge related to equity investments (note 19) (3) -
Share of profits in investments accounted for using the equity method (note 5 2
18)
Realised gains on derivatives not qualifying for hedge accounting 190 37
Unrealised (losses)/gains on derivatives not qualifying for hedge accounting (82) 47
Air Europa Holdings termination settlement payment - (75)
132 70
1 2021 includes a gain of €24 million arising from the disposal of
Compañía Auxiliar al Cargo Exprés, S.A. and Auxiliar Logística
Aeroportuaria, S.A. The Group previously owned 75 per cent of the share
capital of these companies and disposed of them during the fourth quarter of
2021. The disposal led to the de-recognition of €12 million of net assets
from the consolidated financial statements of the Group.
10 Tax
a Tax credits/(charges)
Tax credits/(charges) recognised in the Income statement, Other comprehensive
income and directly in equity:
2022 2021
€ million Income statement Other comprehensive income Recognised directly in equity Total Income statement Other comprehensive income Recognised directly in equity Total
Current tax
Movement in respect of prior years (6) - - (6) 10 - (1) 9
Movement in respect of current year (64) 3 - (61) (9) 5 - (4)
Total current tax (70) 3 - (67) 1 5 (1) 5
Deferred tax
Movement in respect of prior years (36) (2) - (38) (23) - - (23)
Movement in respect of current year 105 (60) 5 50 518 (420) - 98
Rate change/rate differences 17 (10) - 7 78 61 - 139
Total deferred tax 86 (72) 5 19 573 (359) - 214
Total tax 16 (69) 5 (48) 574 (354) (1) 219
The current tax credit in Other comprehensive income relates to the fair value
movements on the convertible bond of €2 million (2021: €5 million) and
movements relating to employee benefit plans of €1 million (2021: €nil).
Tax recognised directly in equity relates to cash flow hedges of €5 million
(2021: €nil) and share-based payment schemes of €nil (2021: €1 million).
Within tax in Other comprehensive income is a tax credit of €8 million
(2021: tax charge of €123 million) that may be reclassified to the Income
statement and a tax charge of €77 million (2021: tax charge of €231
million) that will not.
b Current tax asset/(liability)
€ million 2022 2021
Balance at January 1 (5) 53
Income statement (70) 1
Other comprehensive income 3 5
Recognised directly in equity - (1)
Cash 134 (63)
Exchange movements and other 2 -
Balance at December 31 64 (5)
Current tax asset 72 16
Current tax liability (8) (21)
Balance at December 31 64 (5)
c Deferred tax asset/(liability)
€ million Fixed assets Right of use assets Lease liabilities Employee leaving indemnities and others Employee benefit plans Fair value gains/ losses(1) Share-based payment schemes Tax loss carried forward and tax credits Other temporary differences Total
Balance at January 1, 2022 (477) (220) 19 196 62 57 11 1,573 61 1,282
Income statement (194) 169 (9) 19 1 - 6 87 7 86
Other comprehensive income(2) - - - (17) (12) (46) - 3 - (72)
Recognised directly in equity - - - - - 5 - - - 5
Exchange movements and other (9) 7 (1) (1) 3 (19) - (27) 28 (19)
Balance at December 31, 2022 (680) (44) 9 197 54 (3) 17 1,636 96 1,282
Balance at January 1, 2021 (589) (248) 21 194 298 195 10 1,090 64 1,035
Income statement 106 67 (3) 9 (11) (14) 1 408 10 573
Other comprehensive income - - - (9) (237) (133) - 20 - (359)
Recognised directly in equity - - - - - - - - - -
Exchange movements and other 6 (39) 1 2 12 9 - 55 (13) 33
Balance at December 31, 2021 (477) (220) 19 196 62 57 11 1,573 61 1,282
1 Fair value gains/losses include both the Cash flow hedge reserve and the
Cost of hedging reserve, of which the movement in relation to Other
comprehensive income recognised in the Cash flow hedge reserve for 2022 was
€68 million (refer to note 28d).
2 Movements in Other comprehensive income relating to post-employment
benefit obligations increase the Group's tax losses by €3 million (tax
value) at December 31, 2022 (2021: €20 million) and have therefore been
disclosed as tax loss carried forward and tax credits in the above table.
€ million 2022 2021
Deferred tax asset 1,282 1,282
Deferred tax liability - -
Balance at December 31 1,282 1,282
The deferred tax assets mainly arise in Spain and the UK and are expected to
reverse in full beyond one year. Recognition of the deferred tax assets is
supported by the expected reversal of deferred tax liabilities in
corresponding periods, and projections of operating performance laid out in
the management approved business plans.
d Reconciliation of the total tax charge in the Income statement
The tax (charge)/credit is calculated at the domestic rates applicable to
profits/(losses) in the country in which the profits/(losses) arise. The
differences between the expected tax charge (2021: credit) and the actual tax
credit (2021: credit) on the profit for the year to December 31, 2022 (2021:
loss) are explained below:
€ million 2022 2021
Accounting profit/(loss) before tax 415 (3,507)
Weighted average tax (charge)/credit of the Group(1) (102) 683
Unrecognised losses and deductible temporary differences arising in the year (2) (193)
Disposal and write down of investments - 8
Effect of tax rate changes 17 78
Prior year tax assets recognised 153 44
Effect of lower tax rate in the Canary Islands 5 (23)
Movement in respect of prior years (42) (13)
Non-deductible expenses (22) (15)
Other items 9 5
Tax credit in the Income statement 16 574
1 The expected tax credit is calculated by aggregating the expected tax
(charges)/credits arising in each company in the Group and changes each year
as tax rates and profit mix change. The 2022 corporate tax rates for the
Group's main countries of operation are Spain 25% (2021: 25%), the UK 19%
(2021: 19%) and Ireland 12.5% (2021: 12.5%).
e Payroll-related taxes and UK Air Passenger Duty
The Group was also subject to other taxes paid during the year which are as
follows:
€ million 2022 2021
Payroll related taxes 522 310
UK Air Passenger Duty 722 204
1,244 514
f Factors that may affect future tax charges
Unrecognised deductible temporary differences and losses
€ million 2022 2021
Income tax losses
Spanish corporate income tax losses 1,596 1,993
Openskies SASU trading losses 405 390
UK trading losses 72 72
Other trading losses 11 3
2,084 2,458
Other losses and temporary differences
Spanish deductible temporary differences 481 648
UK capital losses 343 361
Irish capital losses 17 17
841 1,026
None of the unrecognised temporary differences have an expiry date. Further
information with regard to the sensitivity of the recoverability of deferred
tax assets is given in note 2.
Unrecognised temporary differences - investment in subsidiaries and associates
No deferred tax liability has been recognised in respect of €823 million
(2021: €617 million) of temporary differences relating to subsidiaries and
associates. The Group either controls the reversal of these temporary
differences and it is probable that they will not reverse in the foreseeable
future or no tax consequences would arise from their reversal to a material
extent.
Tax rate changes
On March 3, 2021 the UK Chancellor of the Exchequer announced that legislation
would be introduced in the Finance Bill 2021 to set the main rate of
corporation tax at 25 per cent from April 2023. On May 24, 2021 the Finance
Bill was substantively enacted, which has led to the remeasurement of deferred
tax balances and will increase the Group's future current tax charge
accordingly. As a result of the remeasurement of deferred tax balances in UK
entities, a credit of €17 million (2021: €78 million credit) is recorded
in the Income statement and a charge of €10 million (2021: €61 million
credit) is recorded in Other comprehensive income.
On October 8, 2021 Ireland announced that it would increase the rate of
corporation tax for certain multinational businesses to 15 per cent with
effect from 2023. This expected tax rate change has not been reflected in
these results because it has not yet been substantively enacted. The effect of
the proposed rate change is not expected to be material over the period of the
management approved business plan.
Tax policy developments
The Group is monitoring the OECD's proposed two-pillar solution to address the
tax challenges arising from the digitalisation of the economy. This proposed
reform to the international tax system addresses the geographical allocation
of profits for the purposes of taxation and is designed to ensure that
multinational enterprises will be subject to a minimum 15 per cent effective
tax rate. On December 15, 2022, the Council of the European Union formally
adopted the EU Pillar Two Directive. Member States are expected to transpose
the Directive into national law by the end of 2023 and effective from 2024.
The Group is continuing to assess the implications of the reform and these
will be determined when the relevant legislation is finalised.
g Tax-related contingent liabilities
The Group has certain contingent liabilities that could be reliably estimated,
across all taxes, at December 31, 2022 amounting to €110 million (December
31, 2021: €106 million). No material losses are likely to arise from such
contingent liabilities. As such the Group does not consider it appropriate to
make a provision for these amounts. Included in the tax related contingent
liabilities are the following:
Merger gain
Following tax audits covering the period 2011 to 2014, the Spanish Tax
Authorities issued a corporate income tax assessment to the Company regarding
the merger in 2011 between British Airways and Iberia. The maximum exposure in
this case is €98 million (December 31, 2021: €95 million), being the
amount in the tax assessment with an estimate of the interest accrued on that
assessment through to December 31, 2022.
The Company appealed the assessment to the Tribunal Económico-Administrativo
Central or 'TEAC' (Central Administrative Tax Tribunal). On October 23, 2019,
the TEAC ruled in favour of the Spanish Tax Authorities. The Company
subsequently appealed this ruling to the Audiencia Nacional (National High
Court) on December 20, 2019, and on July 24, 2020 filed submissions in support
of its case. The Company does not expect a hearing at the National High Court
until late 2023 at the earliest.
The Company disputes the technical merits of the assessment and ruling of the
TEAC, both in terms of whether a gain arose and in terms of the quantum of any
gain. The Company believes that it has strong arguments to support its
appeals. The Company does not consider it appropriate to make a provision for
these amounts and accordingly has classified this matter as a contingent
liability.
IAG Loyalty VAT
In the year ended December 31, 2022 and through to the date of this report,
His Majesty's Revenue and Customs (HMRC) has issued notices of VAT assessments
for the 13 months ended March 2019 to Avios Group (AGL) Limited, a controlled
undertaking of the Group trading as IAG Loyalty. At December 31, 2022 and
through to the date of these financial statements HMRC's enquiries into IAG
Loyalty's VAT position remain at an early stage. The Group has reviewed the
position with its advisors and considers it has strong arguments to support
its VAT accounting, including having received rulings previously from HMRC on
the matter, and therefore does not consider it probable that an adverse ruling
will eventuate. Given the above the Group does not consider it appropriate to
record any provision. It is further not possible to estimate reliably any
exposure that may arise from this matter until HMRC's enquiries are further
progressed. The Group expects further developments of these matters during the
remainder of 2023.
11 Earnings per share
€ million 2022 2021
Earnings/(losses) attributable to equity holders of the parent for basic 431 (2,933)
earnings/(losses) per share
Income statement impact of convertible bonds (104) -
Diluted earnings/(losses) attributable to equity holders of the parent and 327 (2,933)
diluted earnings/(losses) per share
2022 2021
Number Number
'000 '000
Weighted average number of ordinary shares in issue 4,958,420 4,963,945
Weighted average number of ordinary shares in issue for diluted 5,344,152 4,963,945
earnings/(losses) per share
€ cents 2022 2021
Basic earnings/(losses) per share 8.7 (59.1)
Diluted earnings/(losses) per share 6.1 (59.1)
The effect of the assumed conversion of the €825 million convertible bond
2028 and outstanding employee share schemes have a dilutive impact on the
earnings per share for the year to December 31, 2022 due to the reported
profit after tax for the year, but are antidilutive for the year to December
31, 2021 due to the reported loss after tax for the year, and therefore have
not been included in the diluted loss per share calculation for 2021.
For information relating to Adjusted earnings/(losses) per share refer to the
Alternative performance measures section.
12 Dividends
The Directors propose that no dividend be paid for the year to December 31,
2022 (2021: €nil).
The future dividend capacity of the Group is dependent on the liquidity
requirements and the distributable reserves of the Group's main operating
companies and their capacity to pay dividends to the Company, together with
the Company's distributable reserves and liquidity.
Certain debt obligations place restrictions or conditions on the payment of
dividends from the Group's main operating companies to the Company, including
a loan to British Airways partially guaranteed by UKEF and loans to Iberia and
Vueling partially guaranteed by the Instituto de Crédito Oficial (ICO) in
Spain; these loans can be repaid early without penalty at the election of each
company. In Spain, Iberia and Vueling are not permitted to make dividend
payments in the reporting period in which they are in receipt of Expedientes
de Regulación Temporal de Empleo or 'ERTE' (Temporary Employment Regulation
Records). British Airways agreed with the Trustee of its main UK defined
benefit pension scheme (NAPS) as part of the triennial valuation as at March
31, 2021 that, subject to the over-funding protection mechanism, no dividends
will be paid to IAG before December 31, 2023 and that any dividends paid to
IAG from January 1, 2024 through to September 30, 2025, will trigger a pension
contribution of 50 per cent of the amount of the dividend. Further details on
the British Airways dividend restrictions agreed with NAPS are given in note
32a.
13 Property, plant and equipment
€ million Fleet Property Equipment Total
Cost
Balance at January 1, 2021 26,936 2,982 1,501 31,419
Additions 709 38 37 784
Modification of leases 236 (2) (26) 208
Disposals (3,035) (74) (135) (3,244)
Reclassifications (4) - (1) (5)
Transfers to Non-current assets held for sale (note 16) (111) - - (111)
Exchange movements 1,265 181 74 1,520
Balance at December 31, 2021 25,996 3,125 1,450 30,571
Additions 3,765 61 101 3,927
Modification of leases 241 129 - 370
Disposals (1,700) (406) (120) (2,226)
Reclassifications (4) - - (4)
Transfers to Non-current assets held for sale (note 16) (44) - - (44)
Exchange movements (552) (73) (31) (656)
December 31, 2022 27,702 2,836 1,400 31,938
Depreciation and impairment
Balance at January 1, 2021 11,571 1,282 1,035 13,888
Depreciation charge for the year 1,500 154 84 1,738
Impairment (reversal)/charge for the year(1) (3) 19 - 16
Disposals (2,699) (63) (105) (2,867)
Modification of leases - - (14) (14)
Transfers to Non-current assets held for sale (note 16) (91) - - (91)
Exchange movements 602 81 57 740
Balance at December 31, 2021 10,880 1,473 1,057 13,410
Depreciation charge for the year 1,642 168 79 1,889
Impairment reversal for the year(1) (8) - - (8)
Disposals (857) (403) (107) (1,367)
Transfers to Non-current assets held for sale (note 16) (25) - - (25)
Exchange movements (247) (32) (28) (307)
December 31, 2022 11,385 1,206 1,001 13,592
1 For details regarding the impairment reversal on fleet assets refer to
the Alternative performance measures section. For details regarding the
operating segment in which the impairment (reversal)/charge arose, refer to
note 5.
Net book values
December 31, 2022 16,317 1,630 399 18,346
December 31, 2021 15,116 1,652 393 17,161
Analysis at December 31, 2022
Owned 7,242 833 338 8,413
Right of use assets (note 14) 7,993 684 20 8,697
Progress payments 1,071 113 40 1,224
Assets not in current use 11 - 1 12
Property, plant and equipment 16,317 1,630 399 18,346
Analysis at December 31, 2021
Owned 5,736 916 330 6,982
Right of use assets (note 14) 8,626 640 37 9,303
Progress payments 748 96 26 870
Assets not in current use 6 - - 6
Property, plant and equipment 15,116 1,652 393 17,161
The net book value of property comprises:
€ million 2022 2021
Freehold 469 495
Right of use assets (note 14) 684 640
Long leasehold improvements with a contractual life in excess of 50 years 301 311
Short leasehold improvements with a contractual life of less than 50 years 176 206
Property 1,630 1,652
At December 31, 2022, bank and other loans of the Group are secured on owned
fleet assets with a net book value of €3,931 million
(2021: €3,081 million).
14 Leases
a Amounts recognised in the Consolidated balance sheet
Property, plant and equipment includes the following amounts relating to right
of use assets:
€ million Fleet Property Equipment Total
Cost
Balance at January 1, 2021 14,008 893 99 15,000
Additions 240 15 - 255
Modifications of leases 236 (2) (26) 208
Disposals (72) (12) (1) (85)
Reclassifications(1) (759) - - (759)
Exchange movements 565 55 2 622
December 31, 2021 14,218 949 74 15,241
Additions 586 28 1 615
Modification of leases 241 129 - 370
Disposals (214) (171) (2) (387)
Reclassifications(1) (849) - (24) (873)
Exchange movements (232) (24) - (256)
December 31, 2022 13,750 911 49 14,710
Depreciation and impairment
Balance at January 1, 2021 4,884 198 43 5,125
Depreciation charge for the year 963 87 8 1,058
Impairment charge for the year(2) 4 16 - 20
Disposals (71) (4) (1) (76)
Modification of leases - - (14) (14)
Reclassifications(1) (394) - - (394)
Exchange movements 206 12 1 219
December 31, 2021 5,592 309 37 5,938
Depreciation charge for the year 991 93 8 1,092
Impairment reversal for the year(2) (8) - - (8)
Disposals (191) (170) (1) (362)
Reclassifications(1) (528) - (14) (542)
Exchange movements (99) (5) (1) (105)
December 31, 2022 5,757 227 29 6,013
Net book value
December 31, 2022 7,993 684 20 8,697
December 31, 2021 8,626 640 37 9,303
1 Amounts with a net book value of €331 million (2021: €365 million)
were reclassified from ROU assets to Owned Property, plant and equipment at
the cessation of the respective leases. The assets reclassified relate to
leases with purchase options that were grandfathered as ROU assets upon
transition to IFRS 16, for which the Group had been depreciating over the
expected useful life of the aircraft, incorporating the purchase option.
2 For details regarding the impairment (reversal)/charge on fleet assets
refer to the Alternative performance measures section.
Interest-bearing long-term borrowings includes the following amount relating
to lease liabilities:
€ million 2022 2021
January 1 9,637 10,024
Additions 639 310
Modifications of leases 378 208
Repayments (1,886) (1,855)
Interest expense 464 400
Disposals (28) (8)
Exchange movements 415 558
December 31 9,619 9,637
Current 1,766 1,521
Non-current 7,853 8,116
b Amounts recognised in the Consolidated income statement
€ million 2022 2021
Amounts not included in the measurement of lease liabilities
Variable lease payments 2 1
Expenses relating to short-term leases 39 26
Amounts expensed as a result of the recognition of ROU assets and lease
liabilities
Interest expense on lease liabilities 464 400
Gains/(losses) arising from sale and leaseback transactions 1 (6)
Depreciation charge for the year 1,092 1,058
Impairment (reversal)/charge for the year (8) 20
During 2020 the IASB issued 'COVID-19 related rent concessions - amendment to
IFRS 16 Leases' to provide a practical expedient to lessees from applying IFRS
16 guidance on lease modification accounting for rent concessions for those
lease modifications arising as a direct result of COVID-19. During 2021, the
IASB extended the period for the application of the practical expedient.
The Group has applied this practical expedient to all such modifications in
the preparation of the consolidated financial statements. The net impact on
the Income statement for 2022 was €nil (2021: credit of €8 million)
reflecting the changes to lease payments that arose from such concessions.
c Amounts recognised in the Consolidated cash flow statement
€ million 2022 2021(1)
Cash flows arising from transactions giving rise to lease liabilities
Total cash outflows arising from lease liabilities - aircraft 1,699 1,711
Total cash outflows arising from lease liabilities - other 178 137
Total cash inflows arising from sale and leaseback transactions - aircraft 718 213
Cash flows arising from transactions that do not give rise to the recognition
of lease liabilities
Total cash outflows arising from short-term leases, low-value assets and 41 27
variable lease payments
Total cash outflows arising from asset financed liabilities 292 209
1 During 2022, the Group has re-presented cash flow amounts to disclose
amounts arising from all contractual leases as opposed to only those that give
rise to right of use assets and lease liabilities.
The Group is not exposed to future cash outflows as at December 31, 2022 and
December 31, 2021, for which no amount has been recognised in relation to
leases not yet commenced to which the Group is committed.
d Maturity profile of the lease liabilities
The maturity profile of the lease liabilities is disclosed in note 27f.
e Extension options
The Group has certain leases which contain extension options exercisable by
the Group prior to the non-cancellable contract period. Where practicable, the
Group seeks to include extension options in new leases to provide operational
flexibility. The Group assesses at lease commencement whether it is reasonably
certain to exercise the extension options.
The Group is exposed to future cash outflows (on an undiscounted basis) at
December 31, 2022, for which no amount has been recognised, for potential
extension options of €945 million (2021: €795 million) due to it not being
reasonably certain that these leases will be extended.
f Lessor accounting
The Group leases out certain of its property, plant and equipment. The Group
has classified those leases that transfer substantially all of the risks and
rewards of ownership to the lessee as finance leases and those leases that do
not transfer substantially all of the risks and rewards of ownership to the
lessee as operating leases.
Finance leases
Rental income from finance leases recognised by the Group in 2022 was €4
million (2021: €nil). Rental income is recorded within Property, IT and
other within the Income statement.
The following table sets out a maturity analysis of finance lease receipts,
showing the undiscounted lease receipts to be received after the reporting
date:
€ million 2022 2021
Within one year 2 4
One to two years 6 5
Two to five years - 2
More than five years - -
Total 8 11
15 Capital expenditure commitments
Capital expenditure authorised and contracted but not provided for in the
accounts, including outstanding aircraft commitments, at December 31, 2022
amounted to €13,749 million (December 31, 2021: €10,911 million). The
outstanding aircraft commitments including the expected delivery timeframes,
totalling €13,484 million (2021: €10,813 million), are as follows:
Aircraft future deliveries at December 31 2022(1) 2021(1)
Airbus A320 (from 2023 to 2028) 45 22
Airbus A321 (from 2023 to 2028) 46 20
Airbus A321 XLR (from 2024 to 2026) 14 14
Airbus A350-900 (from 2023 to 2030) 7 16
Airbus A350-1000 (from 2023 to 2024) 5 10
Boeing 777-9 (from 2026 to 2028) 18 18
Boeing 787-10 (from 2023 to 2024) 7 10
Boeing 737-8200 (from 2024 to 2025) 25 -
Boeing 737-10 (from 2026 to 2027) 25 -
Total 192 110
1 Capital commitments exclude options to purchase additional aircraft.
In May 2022, the Group agreed to purchase 25 Boeing 737-8200 and 25 737-10
aircraft, with 100 options to purchase further such aircraft. In addition, in
July 2022, the Group agreed to exercise its option over 12 Airbus
A320neos/A321neos and to purchase 25 Airbus A320neos/A321neos with 50 options
to purchase further such aircraft. The determination of the split between
A320neos and A321neos will be made closer to delivery. Both of these
agreements were subject to shareholder approval and were subsequently approved
at the Extraordinary General Meeting of the Company on October 26, 2022.
The majority of these commitments are denominated in US dollars translated at
the closing exchange rate at the reporting date and include escalation clauses
dependent on the timing of aircraft deliveries. Under the terms of the
committed purchase agreements, the Group is required to make periodic advance
payments towards the purchase price, with the commitments above stated net of
advance payments that have been made at the reporting date.
The Group has certain rights to defer aircraft deliveries and to cancel
commitments in the event of significant delays to aircraft deliveries caused
by the aircraft manufacturers. No such rights had been exercised as at
December 31, 2022.
16 Non-current assets held for sale
As at December 31, 2022, the non-current assets held for sale of €19 million
represented two Airbus A321 aircraft. No gain or loss was recognised on
classification as non-current assets held for sale. These aircraft were
presented within the British Airways segment and are expected to exit the
business during 2023.
As at December 31, 2021, the non-current assets held for sale of €20 million
represented three Airbus A321 aircraft. No gain or loss was recognised on
classification as non-current assets held for sale. These aircraft are
presented within the Aer Lingus segment and exited the business during 2022.
17 Intangible assets and impairment review
a Intangible assets
€ million Goodwill Brand Customer loyalty programmes Landing rights(1) Software ETS Other(2) Total
assets(2)
Cost
Balance at January 1, 2021 593 451 253 1,555 1,474 76 85 4,487
Additions - - - - 149 33 1 183
Disposals - - - (6) (19) (49) - (74)
Exchange movements 3 - - 56 70 2 1 132
Balance at December 31, 2021 596 451 253 1,605 1,674 62 87 4,728
Additions - - - 14 218 360 1 593
Disposals - - - (6) (52) (9) - (67)
Exchange movements (1) - - (25) (34) (6) - (66)
December 31, 2022 595 451 253 1,588 1,806 407 88 5,188
Amortisation and impairment
Balance at January 1, 2021 249 - - 132 836 - 62 1,279
Amortisation charge for the year - - - 6 167 - 5 178
Disposals - - - - (13) - - (13)
Exchange movements - - - 4 42 - (1) 45
Balance at December 31, 2021 249 - - 142 1,032 - 66 1,489
Amortisation charge for the year - - - 6 210 - 2 218
Disposals - - - - (50) - - (50)
Exchange movements - - - (2) (23) - - (25)
December 31, 2022 249 - - 146 1,169 - 68 1,632
Net book values
December 31, 2022 346 451 253 1,442 637 407 20 3,556
December 31, 2021 347 451 253 1,463 642 62 21 3,239
1 The net book value includes non-UK and non-EU based landing rights of
€69 million (2021: €75 million) that have a definite life. The remaining
average life of these landing rights is 13 years.
2 During 2022 the Group separated the ETS assets from Other intangible
assets. This change resulted in an amount of €76 million and €62 million
recorded within ETS assets at January 1, 2021 and January 1, 2022,
respectively. There was no net change in total intangible assets.
b Impairment review
The carrying amounts of intangible assets with indefinite life and goodwill
allocated to cash generating units (CGUs) of the Group are:
€ million Goodwill Landing rights Brand Customer loyalty programmes Total
2022
Iberia
January 1 and December 31, 2022 - 423 306 - 729
British Airways
January 1, 2022 47 809 - - 856
Additions - 14 - - 14
Disposals - (6) - - (6)
Exchange movements (1) (23) - - (24)
December 31, 2022 46 794 - - 840
Vueling
January 1 and December 31, 2022 28 94 35 - 157
Aer Lingus
January 1 and December 31, 2022 272 62 110 - 444
IAG Loyalty
January 1 and December 31, 2022 - - - 253 253
December 31, 2022 346 1,373 451 253 2,423
€ million Goodwill Landing rights Brand Customer loyalty programmes Total
2021
Iberia
January 1 and December 31, 2021 - 423 306 - 729
British Airways
January 1, 2021 44 763 - - 807
Disposals - (6) - - (6)
Exchange movements 3 52 - - 55
December 31, 2021 47 809 - - 856
Vueling
January 1 and December 31, 2021 28 94 35 - 157
Aer Lingus
January 1 and December 31, 2021 272 62 110 - 444
IAG Loyalty
January 1 and December 31, 2021 - - - 253 253
December 31, 2021 347 1,388 451 253 2,439
Basis for calculating recoverable amount
The recoverable amounts of the Group's CGUs have been measured based on their
value-in-use, which utilises a weighted average multi-scenario discounted cash
flow model. The details of these scenarios are given in the going concern
section of note 2, with a weighting of 70 per cent to the Base Case and 30 per
cent to the Downside Case. Cash flow projections are based on the business
plans approved by the relevant operating companies covering a three-year
period. Cash flows extrapolated beyond the three-year period are projected to
increase based on long-term growth rates. Cash flow projections are discounted
using each CGU's pre-tax discount rate.
Annually the relevant operating companies prepare and approve three-year
business plans, and the Board approved the Group three-year business plan in
the fourth quarter of the year. Adjustments have been made to the final year
of the business plan cash flows to incorporate the impacts of climate change
that the Group can reliably estimate at the reporting date. However, given the
long-term nature of the Group's sustainability commitments, there are other
aspects of these commitments that cannot be reliably estimated and accordingly
have been excluded from the value-in-use calculations (refer to note 4). The
business plan cash flows used in the value-in-use calculations also reflect
all restructuring of the business where relevant that has been approved by the
Board and which can be executed by management under existing labour
agreements.
Key assumptions
The value-in-use calculations for each CGU reflect the ongoing uncertainty of
the future implications of COVID-19 and the wider economic and geopolitical
environments, including updated projected cash flows for activity from 2023
through to the end of 2025. For each of the Group's CGUs the key assumptions
used in the value-in-use calculations are as follows:
2022
Per cent British Airways Iberia Vueling Aer Lingus IAG Loyalty
Operating margin(1) 5-13 5-10 0-10 4-12 23-25
ASKs as a proportion of 2019(1,2) 90-105 92-107 113-123 102-127 n/a
Long-term growth rate 1.7 1.5 1.4 1.6 1.7
Pre-tax discount rate 10.4 11.2 12.8 10.1 13.4
2021
Per cent British Airways Iberia Vueling Aer Lingus IAG Loyalty
Operating margin(1) 3-13 2-12 2-11 0-14 22-24
ASKs as a proportion of 2019(1,2) 75-103 77-100 97-119 84-115 n/a
Long-term growth rate 1.9 1.7 1.6 1.7 1.6
Pre-tax discount rate 11.8 11.4 11.1 10.1 12.0
1 ASKs as a proportion of 2019 and operating margin are both stated as the
weighted average derived from the multi-scenario discounted cash flow model.
2 In prior periods the Group applied the average ASK growth per annum as a
key assumption. Given the impact of COVID-19, the Group has presented ASKs as
a proportion of the level of ASKs achieved in 2019, prior to the application
of the terminal value calculation.
Jet fuel price ($ per MT) Within 12 months 1-2 years 2-3 years 3 years and thereafter
2022 867 809 780 780
2021 690 673 659 659
Forecast ASKs reflect the range of ASKs as a percentage of the 2019 actual
ASKs over the forecast period, based on planned network growth and taking into
account management's expectation of the market.
The long-term growth rate is calculated for each CGU, considering a number of
data points: (i) industry publications; (ii) forecast weighted average
exposure in each primary market using gross domestic product (GDP); and (iii)
internal analysis regarding the long-term changes in consumer preferences and
the effects on demand from the increased costs to the Group of climate change.
The calculation of the long-term growth rate utilises a Base Case and a
Downside Case growth rate, which is then weighted on the same basis as the
cash flows detailed above of 70 per cent to the Base Case and 30 per cent to
the Downside Case. The terminal value cash flows and long-term growth rate
incorporate the impacts of climate change insofar as they can be determined
(note 4). The airlines' network plans are reviewed annually as part of the
three-year business plan preparation and reflect management's plans in
response to specific market risk or opportunity.
Pre-tax discount rates represent the current market assessment of the risks
specific to each CGU, taking into consideration the time value of money and
underlying risks of its primary market. The discount rate calculation is based
on the circumstances of the airline industry, the Group and the CGU. It is
derived from the weighted average cost of capital (WACC). The WACC takes into
consideration both debt and equity available to airlines. The cost of equity
is derived from the expected return on investment by airline investors and the
cost of debt is derived from both market data and industry gearing levels
derived from comparable companies. CGU-specific risk is incorporated by
applying individual beta factors which are evaluated annually based on
available market data. The pre-tax discount rate reflects the timing of future
tax flows.
Jet fuel price assumptions are derived from forward price curves in the fourth
quarter of each year and sourced externally. The cash flow forecasts reflect
these price increases after taking into consideration the level of fuel
derivatives and their associated prices that the Group has in place.
As detailed above, the Group adjusts the final year of the three-year business
plans to incorporate the medium-term impacts of climate change from the
Group's Flightpath Net Zero climate strategy. These adjustments include the
following key assumptions: (i) a 10 per cent level of SAF consumption out of
the overall fuel mix with an assumed price of €2,275 per metric tonne; (ii)
a kerosene tax of €325 per metric tonne on all intra-EU flights; (iii) for
costs of carbon, prices of €130, €130, €175 and €25 for EU ETS
allowances, Swiss ETS allowances, UK ETS allowances and CORSIA allowances,
respectively, per tonne of CO(2) equivalents emitted; and (iv) the removal of
all free ETS and CORSIA allowances.
Summary of results
At December 31, 2022 management reviewed the recoverable amount of each of the
CGUs and concluded the recoverable amounts exceeded the carrying values.
Reasonable possible changes in key assumptions, both individually and in
combination, have been considered for each CGU, where applicable, which
include reducing the operating margin by 2 percentage points in each year,
ASKs by 5 percentage points in each year, long-term growth rates in the
terminal value calculation to zero, increasing pre-tax discount rates by 2.5
percentage points, changing the weighting of the Base Case and the Downside
Case to be 100 per cent weighted towards the Downside Case and increasing the
fuel price (both jet fuel and SAF) by 45 per cent with no assumed cost
recovery. Given the inherent uncertainty associated with the impact of climate
change, these sensitivities represent a reasonably possible greater impact of
climate change on the CGUs than that included in the impairment models.
For the British Airways, Iberia, Vueling and Aer Lingus CGUs, while the
recoverable amounts are estimated to exceed the carrying amounts by €15,432
million, €3,213 million, €1,606 million and €1,407 million,
respectively, the recoverable amounts would be below the carrying amounts when
applying reasonable possible changes, over the forecast period, in assumptions
in each of the following scenarios:
• British Airways: (i) if ASKs had been five per cent lower combined with
a fuel price increase without cost recovery of 22 per cent; and (ii) if the
fuel price had been 27 per cent higher without cost recovery;
• Iberia: (i) if ASKs had been five per cent lower combined with a fuel
price increase without cost recovery of 20 per cent; and (ii) if the fuel
price had been 27 per cent higher without cost recovery;
• Vueling: (i) if ASKs had been five per cent lower combined with a fuel
price increase without cost recovery of 15 per cent; and (ii) if the fuel
price had been 20 per cent higher without cost recovery; and
• Aer Lingus: (i) if ASKs had been five per cent lower combined with a
fuel price increase without cost recovery of 7 per cent; and (ii) if the fuel
price had been 14 per cent higher without cost recovery.
For the remainder of the reasonably possible changes in key assumptions
applied to the British Airways, Iberia, Vueling and Aer Lingus CGUs and for
all the reasonably possible changes in key assumptions applied to the IAG
Loyalty CGU, no impairment arises.
18 Investments
a Investments in subsidiaries
The Group's subsidiaries at December 31, 2022 are listed in the Group
investments section.
All subsidiary undertakings are included in the consolidation. The proportion
of the voting rights in the subsidiary undertakings held directly do not
differ from the proportion of ordinary shares held. There have been no
significant changes in ownership interests of subsidiaries during the year.
The total non-controlling interest at December 31, 2022 is €6 million (2021:
€6 million).
b Investments in associates and joint ventures
The share of assets, liabilities, revenue and profit of the Group's associates
and joint ventures, which are included in the Group's financial statements,
are as follows:
€ million 2022 2021
Total assets 148 115
Total liabilities (104) (85)
Revenue 89 64
Profit for the year 5 2
The detail of the movement in Investment in associates and joint ventures is
shown as follows:
€ million 2022 2021
At beginning of year 40 29
Additions - 9
Share of retained profits 5 2
Dividends received (2) (1)
Exchange movements - 1
43 40
At December 31, 2022 there are no restrictions on the ability of associates or
joint ventures to transfer funds to the parent and there are no related
contingent liabilities.
At both December 31, 2022 and December 31, 2021 the investment in Sociedad
Conjunta para la Emisión y Gestión de Medios de Pago EFC, S.A. exceeded 50
per cent ownership by the Group (50.5 per cent). The entity is treated as a
joint venture as decisions regarding its strategy and operations require the
unanimous consent of the parties who share control, including IAG.
19 Other equity investments
Other equity investments include the following:
€ million 2022 2021
Unlisted securities 55 31
55 31
The charge relating to Other equity investments was €3 million (2021:
€nil).
Investment in Air Europa Holdings
On June 15, 2022, the Group entered into a financing arrangement with Globalia
Corporación Empresarial, S,A, ('Globalia'), whereby, the Group provided a
€100 million seven-year unsecured loan, which was convertible for a period
of two years from inception into a fixed number of the shares of Air Europa
Holdings, S.L. ('Air Europa Holdings'). The loan was accounted for at fair
value through the Income statement and recorded as an Other non-current
financial asset.
In determining the fair value of the financing arrangement, the Group utilised
the income approach, whereby, the financing arrangement was valued using
observable market data by which to determine an interest rate that a market
participant would require to provide a loan with the same tenor and amount.
This interest rate was then used to discount back the existing contractual
cash flows to derive the fair value.
On August 16, 2022, the Group exercised its exchange option with Globalia and
converted the Other non-current financial asset into an Other equity
investment.
Immediately prior to exercising the exchange option, the fair value of the
Other non-current financial asset was €65 million, representing a decrease
from inception of €35 million, which has been recorded within Net change in
fair value of financial instruments in the Income statement (see note 9c).
The Group determined the fair value of the investment in Air Europa Holdings
using both the market approach and the income approach, whereby the Group used
both observable market data and unobservable inputs. The fair value was
determined on the stand-alone basis of Air Europa Holdings without
consideration of potential synergies that could be obtained if the Group were
able to obtain control over the operations of Air Europa Holdings. The results
of these valuation approaches resulted in a fair value of €22 million,
representing a difference of €43 million from the fair value of the Other
non-current financial asset prior to exercising the option. This loss, which
derives from the de-recognition of the loan to Globalia prior to the
recognition of the investment in Air Europa Holdings, was recorded within Net
change in fair value of financial instruments in the Income statement (see
note 9c).
At December 31, 2022, the fair value of the investment in Air Europa Holdings
was €24 million, representing an increase of €2 million since August 16,
2022, which has been recorded within Other comprehensive income.
20 Trade and other receivables
€ million 2022 2021
Amounts falling due within one year
Trade receivables 1,444 850
Provision for expected credit loss (114) (115)
Net trade receivables 1,330 735
Prepayments and accrued income 870 764
Other non-trade receivables 356 196
Other current receivables 1,226 960
Amounts falling due after one year
Prepayments and accrued income 337 248
Other non-trade receivables 25 2
Other receivables due after one year 362 250
Movements in the provision for expected credit loss were as follows:
€ million 2022 2021
At beginning of year 115 125
Provided during the year 10 8
Released during the year (1) (11)
Receivables written off during the year (9) (10)
Exchange movements (1) 3
114 115
Trade receivables are generally non-interest-bearing and on 30 days terms
(2021: 30 days).
The credit risk exposure on the Group's trade receivables is set out below:
December 31, 2022
€ million Current <30 days 30-180 days 180-365 days > 365 days
Trade receivables 719 509 91 25 100
Expected credit loss rate 0.3% 0.1% 1.1% 44.0% 100.0%
Provision for expected credit loss 2 - 1 11 100
December 31, 2021
€ million Current <30 days 30-180 days 180-365 days > 365 days
Trade receivables 498 132 94 10 116
Expected credit loss rate 0.2% 0.1% 1.1% 20.0% 95.7%
Provision for expected credit loss 1 - 1 2 111
21 Cash, cash equivalents and other current interest-bearing deposits
€ million 2022 2021
Cash at bank and in hand 3,286 2,569
Short-term deposits maturing within three months 5,910 5,323
Cash and cash equivalents 9,196 7,892
Current interest-bearing deposits maturing after three months 403 51
Cash, cash equivalents and other interest-bearing deposits 9,599 7,943
Cash at bank is primarily held in AAA money market funds and bank deposits.
Short-term deposits are for periods up to three months and earn interest based
on the floating deposit rates.
At December 31, 2022 the Group had no outstanding bank overdrafts (2021:
€nil).
Current interest-bearing deposits have maturities in excess of three months
and typically within 12 months of the reporting date and earn interest based
on the market rates available at the time the deposit was made.
At December 31, 2022 Aer Lingus held €33 million of restricted cash (2021:
€35 million) within interest-bearing deposits maturing after more than three
months to be used for employee-related obligations.
a Net debt
Movements in net debt were as follows:
€ million Balance at January 1, 2022 Cash flows Exchange movements New leases and modifications Other items Balance at December 31, 2022
Bank, other loans and asset financed liabilities 9,973 386 103 - (97) 10,365
Lease liabilities 9,637 (1,455) 415 1,017 5 9,619
Cash and cash equivalents (7,892) (1,316) 12 - - (9,196)
Current interest-bearing deposits (51) (351) (1) - - (403)
11,667 (2,736) 529 1,017 (92) 10,385
€ million Balance at January 1, 2021 Cash flows Exchange movements New leases and modifications Other items Balance at December 31, 2021
Bank, other loans and asset financed liabilities 5,655 4,033 261 - 24 9,973
Lease liabilities 10,024 (1,481) 559 518 17 9,637
Cash and cash equivalents (5,774) (1,913) (205) - - (7,892)
Current interest-bearing deposits (143) 91 1 - - (51)
9,762 730 616 518 41 11,667
22 Trade and other payables
€ million 2022 2021
Trade creditors(1) 2,969 2,068
Other creditors 1,244 898
Other taxation and social security 228 176
Accruals and deferred income 768 570
5,209 3,712
1 Trade creditors includes €48 million (2021: €89 million) due to
suppliers that have signed up to supply chain financing programmes offered by
a number of partner financial institutions. Under these programmes either or
both: (i) the suppliers can elect on an invoice-by-invoice basis to receive a
discounted early payment from the partner financial institutions rather than
being paid in line with the agreed payment terms; and/or (ii) the Group elects
on an invoice-by-invoice basis for the partner financial institution to pay
the supplier in line with the agreed payment terms and the Group enters into
payment terms with the partner financial institution of up to 150 days with
interest incurred at 2.5 per cent.
The Group assesses the arrangement against indicators to assess if liabilities
which suppliers have transferred to the partner financial institutions under
the supplier financing programmes continue to meet the definition of trade
creditors or should be classified as borrowings. The cash flows arising from
such arrangements are reported within cash flows from operating activities or
within cash flows from financing activities, in the Consolidated cash flow
statement, depending on whether the associated liabilities meet the definition
of trade creditors or as borrowings.
At December 31, 2022 these liabilities met the criteria of Trade creditors and
are excluded from the Net debt table in note 21a.
Average payment days to suppliers - Spanish Group companies
Days 2022 2021
Average payment days for payment to suppliers 34 34
Ratio of transactions paid 33 32
Ratio of transactions outstanding for payment 53 78
€ million 2022 2021
Total payments made 6,676 3,945
Total payments outstanding 264 147
Information on invoices paid in a period shorter than the maximum period
established in the late payment regulations - Spanish Group companies
2022 2021
Total payments made (€ million) 5,111 2,623
Percentage share of total payments to suppliers 77% 71%
Number of invoices paid (thousand) 110 63
Percentage share of total number of invoices paid 48% 48%
23 Deferred revenue on ticket sales
€ million Customer loyalty programmes Sales in advance of carriage Total
Balance at January 1, 2022 2,820 3,732 6,552
Cash received from customers(1) - 21,000 21,000
Revenue recognised in the Income statement(2, 3) (780) (19,708) (20,488)
Changes in estimates (21) - (21)
Financing charge recognised in the Income statement 21 - 21
Loyalty points issued to customers(4) 662 82 744
Exchange movements (72) (92) (164)
Balance at December 31, 2022(5, 6) 2,630 5,014 7,644
Analysis:
Current 2,304 5,014 7,318
Non-current 326 - 326
2,630 5,014 7,644
€ million Customer loyalty programmes Sales in advance of carriage Total
Balance at January 1, 2021 2,725 2,405 5,130
Cash received from customers(1) - 7,689 7,689
Revenue recognised in the Income statement(2, 3) (524) (6,518) (7,042)
Financing charge recognised in the Income statement 37 - 37
Loyalty points issued to customers(4) 407 40 447
Exchange movements 175 116 291
Balance at December 31, 2021(5, 6) 2,820 3,732 6,552
Analysis:
Current 2,429 3,732 6,161
Non-current 391 - 391
2,820 3,732 6,552
1 Cash received from customers is net of refunds.
2 Where the Group acts as an agent in the provision of redemption products
and services to customers through loyalty programmes, or in the provision of
interline flights to passengers, revenue is recognised in the Income statement
net of the related costs.
3 Included within revenue recognised in the Income statement during 2022
is an amount of €2,183 million previously held as deferred revenue at
January 1, 2022 (recognised during 2021 and previously held as deferred
revenue at January 1, 2021: €780 million).
4 Included within loyalty points issued to customers at December 31, 2022
is an amount of €82 million (December 31, 2021: €40 million) classified
within Sales in advance of carriage representing the cash component of the
consideration paid by customers, where such consideration comprises both cash
and the redemption of Avios.
5 Included within Deferred revenue on ticket sales at December 31, 2022 is
an amount of €911 million (December 31, 2021: €1,400 million) relating to
unredeemed vouchers (including associated taxes).
6 In the year to December 31, 2022, the Group recognised €266 million
(2021: €154 million) within Other revenue related to performance obligations
associated with brand and marketing services recognised on the issuance of
Avios for both air and non-air partners.
The unsatisfied performance obligation under the Group's customer loyalty
programmes that is classified as non-current was €326 million at December
31, 2022. Of this amount, €317 million is expected to be recognised as
revenue in 1 to 5 years from the reporting date and €9 million thereafter.
Deferred revenue relating to customer loyalty programmes consists primarily of
revenue allocated to performance obligations associated with Avios. Avios are
issued by the Group's airlines through their loyalty programmes, or are sold
to third parties such as credit card providers, who issue them as part of
their loyalty programme. While Avios do not have an expiry date and can be
redeemed at any time in the future, a customer's membership account is closed
if there is a period of 36 months of inactivity in terms of both issuances and
redemptions. Revenue may therefore be recognised at any time in the future.
Deferred revenue in respect of sales in advance of carriage consists of
revenue allocated to airline tickets to be used for future travel. Typically
these tickets expire within 12 months after the planned travel date, if they
are not used within that time period, however, with the significant disruption
caused by the COVID-19 pandemic during 2020 and 2021, the Group extended the
expiry period up to 24 months after the planned travel date, depending on the
operating company. During the course of 2022 with the disruption caused by the
COVID-19 pandemic significantly reduced, flexible fare tickets now typically
expire within 12 months after the planned travel date. In addition, the
significant disruption caused by the COVID-19 pandemic led to a number of
flight cancellations during both 2020 and 2021, which entitled the customer to
either a refund or the issuance of a voucher for future redemption.
24 Other long-term liabilities
€ million 2022 2021
Non-current trade creditors 147 121
Accruals and deferred income 53 87
200 208
25 Long-term borrowings
a Total borrowings
2022 2021
€ million Current Non-current Total Current Non-current Total
Bank and other loans 822 5,724 6,546 761 6,724 7,485
Asset financed liabilities 255 3,564 3,819 171 2,244 2,415
Lease liabilities 1,766 7,853 9,619 1,521 8,116 9,637
Other financing liabilities(1) - - - 73 - 73
Interest-bearing long-term borrowings 2,843 17,141 19,984 2,526 17,084 19,610
1 Other financing liabilities recognised in 2021 included sale and
repurchase agreements with regard to emission allowances and represent the
amount the Group repurchased during 2022.
Long-term borrowings of the Group amounting to €3,962 million (December 31,
2021: €2,434 million) are secured on owned fleet assets with a net book
value of €3,931 million (December 31, 2021: €2,938 million). Asset
financed liabilities are all secured on the associated aircraft or other
property, plant and equipment.
b Bank and other loans
€ million 2022 2021
Floating rate pound sterling term loan guaranteed by UK Export Finance 2,315 2,358
(UKEF)(1)
Floating rate Instituto de Crédito Oficial (ICO) guaranteed loans(2) 1,070 1,095
€700 million fixed rate 3.75 per cent unsecured bond 2029(3) 717 710
€825 million fixed rate 1.125 per cent convertible bond 2028(4) 605 757
€500 million fixed rate 2.75 per cent unsecured bond 2025(3) 509 508
€500 million fixed rate 0.50 per cent bond 2023(5) 501 499
€500 million fixed rate 1.50 per cent bond 2027(5) 499 498
Floating rate euro mortgage loans secured on aircraft(6) 143 171
Fixed rate unsecured US dollar mortgage loan(7) 71 85
Fixed rate unsecured bonds(8) 56 138
Ireland Strategic Investment Fund (ISIF) facility(9) 50 149
Fixed rate unsecured euro loans with the Spanish State (Department of 10 15
Industry)(10)
€500 million fixed rate 0.625 per cent convertible bond 2022(11) - 491
Fixed rate Chinese yuan mortgage loans secured on aircraft(12) - 11
6,546 7,485
Less: current instalments due on bank and other loans (822) (761)
5,724 6,724
1 On February 22, 2021, British Airways entered into a floating rate
five-year term loan Export Development Guarantee Facility of €2.3 billion
(£2.0 billion) underwritten by a syndicate of banks, with 80 per cent of the
principal guaranteed by UKEF. On November 1, 2021, British Airways entered
into a further 5 year term loan Export Development Guarantee Facility of
€1.1 billion (£1.0 billion) underwritten by a syndicate of banks, with 80
per cent of the principal guaranteed by UKEF. The further facility had not
been drawn as at December 31, 2022. The loan contains a number of
non-financial covenants to protect the position of the banks involved,
including restrictions on the upstreaming of cash to the rest of the IAG
companies.
2 On April 30, 2020, Iberia and Vueling entered into floating rate
syndicated financing agreements of €750 million and €260 million
respectively. The loans are repayable from 2023 to 2026. The ICO in Spain
guarantees 70 per cent of the value of loans. The loans contain a number of
non-financial covenants to protect the position of the banks involved,
including restrictions on the upstreaming of cash to the rest of the IAG
companies.
3 On March 25, 2021, the Group issued two tranches of senior unsecured
bonds for an aggregate principal amount of €1.2 billion, €500 million due
March 25, 2025 and €700 million due March 25, 2029. The bonds bear a fixed
rate of interest of 2.75 per cent and 3.75 per cent per annum, payable in
arrears, respectively. The bonds were issued at 100 per cent of their
principal amount, respectively, and, unless previously redeemed or purchased
and cancelled, will be redeemed at 100 per cent of their principal amount on
their respective maturity dates.
4 A senior unsecured bond convertible into ordinary shares of IAG was
issued by the Group on May 11, 2021; €825 million fixed rate 1.125 per cent
raising net proceeds of €818 million and due in 2028. The Group holds an
option to redeem the convertible bond at its principal amount, together with
accrued interest, no earlier than two years prior to the final maturity date.
The bond contains dividend protection and a total of 244,850,715 options at
inception and at December 31, 2022 and 2021 to convert into ordinary shares of
IAG. The Group also holds an option to redeem the convertible bond, in full or
in part, in cash in the event that bondholders exercise their right to convert
the bond into ordinary shares of IAG. See further details below.
5 In July 2019, the Group issued two tranches of senior unsecured bonds
for an aggregate principal amount of €1 billion, €500 million due July 4,
2023 and €500 million due July 4, 2027. The bonds bear a fixed rate of
interest of 0.5 per cent and 1.5 per cent per annum annually payable in
arrears, respectively. The bonds were issued at 99.417 per cent and 98.803 per
cent of their principal amount, respectively, and, unless previously redeemed
or purchased and cancelled, will be redeemed at 100 per cent of their
principal amount on their respective maturity dates.
6 Floating rate euro mortgage loans are secured on specific aircraft
assets of the Group and bear interest of between 2.1 and 3.6 per cent. The
loans are repayable between 2024 and 2027.
7 Fixed rate unsecured US dollar mortgage loan bearing interest between
1.38 to 2.86 per cent. The loan is repayable between 2023 and 2026.
8 Total of €200 million fixed rate unsecured bonds between 3.75 to 4.93
per cent coupon repayable between 2023 and 2027.
9 On December 23, 2020, Aer Lingus entered into a floating rate financing
agreement with the Ireland Strategic Investment Fund (ISIF) for €75 million.
On March 27, 2021, Aer Lingus entered into a further floating rate financing
agreement with the ISIF for an additional €75 million. On March 4, 2022, Aer
Lingus entered into a financing arrangement with ISIF, which subsequently
extinguished the existing €150 million of facilities and replaced them with
a €350 million facility that matures in March 2025. On December 13, 2022,
Aer Lingus early repaid €100 million of the ISIF facility, with the €100
million being available to draw again over the tenor of the facility. The
facility is secured on specific landing rights. At December 31, 2022, €300
million of this facility remained undrawn.
10 Fixed rate unsecured euro loans with
the Spanish State (Department of Industry) bear nil interest and are repayable
between 2023 and 2028.
11 Senior unsecured bond convertible into
ordinary shares of IAG was issued by the Group in November 2015; €500
million fixed rate 0.625 per cent raising net proceeds of €494 million and
due in 2022. The Group held an option to redeem the convertible bond at its
principal amount, together with accrued interest, no earlier than two years
prior to the final maturity date. The Group redeemed the bond at maturity in
November 2022 with no conversion into ordinary shares.
12 Fixed rate Chinese yuan mortgage loans,
secured on specific aircraft assets of the Group were repaid in the fourth
quarter of 2022.
In addition, on March 23, 2021, the Group entered into a three-year US dollar
secured Revolving Credit Facility accessible by British Airways, Iberia and
Aer Lingus. On August 23, 2022, the Group extended the term of the Revolving
Credit Facility by an additional 12 months through to March 2025. The amount
available under the facility is $1.755 billion. As at December 31, 2022 no
amounts had been drawn under the facility (2021: nil). While the Group does
not forecast drawing down on the Revolving Credit Facility, should it do so,
the resultant debt would be secured against specific landing rights and
aircraft in the respective operating companies.
Details of the 2028 convertible bond
The €825 million convertible bond issued in 2021 provides bondholders with
dividend protection and includes a total of 244,850,715 options at inception
and at December 31, 2022 to convert into ordinary shares of IAG. The Group
holds an option to redeem the convertible bond at its principal amount,
together with accrued interest, no earlier than two years prior to the final
maturity date. The Group also holds an option to redeem the convertible bond,
in full or in part, in cash in the event that bondholders exercise their right
to convert the bond into ordinary shares of IAG.
The convertible bond is recorded at its fair value, which at December 31, 2022
was €605 million (2021: €756 million), representing a decrease of €151
million since January 1, 2022. Of this decrease, the charge recorded in Other
comprehensive income arising from credit risk of the convertible bonds was
€8 million and a credit recorded within Finance costs in the Income
statement attributable to changes in market conditions of €159 million.
Transactions with unconsolidated entities
On April 12, 2022, the Group entered into an asset-financing structure, under
which five aircraft were financed. These transactions mature between 2032 and
2036. This arrangement was transacted through an unconsolidated structured
entity, which in turn issued the Iberia Pass Through Certificates, Series
2022-1, commonly referred to as Enhanced Equipment Trust Certificates (EETCs).
In doing so the Group recognised €680 million of Asset financed liabilities.
On October 21, 2022, the Group entered into an asset-financing structure,
under which four aircraft were financed. These transactions mature between
2032 and 2036. This arrangement was transacted through an unconsolidated
structured entity, which in turn issued the British Airways Pass Through
Certificates, Series 2022-1. In doing so the Group recognised €159 million
of Asset financed liabilities.
In July 2021, the Group entered into an asset-financing structure, under which
seven aircraft were financed. These transactions mature between 2031 and 2035.
This arrangement was transacted through an unconsolidated structured entity,
which in turn issued the British Airways Pass Through Certificates, Series
2021-1. In doing so the Group recognised €204 million of Asset financed
liabilities.
In the fourth quarter of 2020, the Group entered into an asset-financing
structure, under which nine aircraft were financed. These transactions mature
between 2028 and 2032. This arrangement was transacted through an
unconsolidated structured entity, which in turn issued the British Airways
Pass Through Certificates, Series 2020-1. In doing so the Group recognised
€472 million of Asset financed liabilities.
In the third quarter of 2019, the Group entered into an asset-financing
structure, under which eight aircraft were financed, with the transactions
maturing between 2029 and 2034. This arrangement was transacted through an
unconsolidated structured entity, which in turn issued the British Airways
Pass Through Certificates, Series 2019-1. In doing so the Group recognised
€725 million of Asset financed liabilities.
As at December 31, 2022, Asset financed liabilities include cumulative amounts
of €2,983 million (2021: €1,489 million) and the associated assets
recorded within Property, plant and equipment include cumulative amounts of
€3,400 million (2021: €3,029 million) associated with transactions with
unconsolidated structured entities having issued EETCs.
c Reconciliation of movements of liabilities to cash flows arising
from financing activities
€ million Bank, other loans and asset financed liabilities Lease liabilities Derivatives Total
to mitigate volatility in financial liabilities
Balance at January 1, 2022 9,973 9,637 (136) 19,474
Proceeds from borrowings 1,436 - - 1,436
Repayment of borrowings (1,050) - - (1,050)
Repayment of lease liabilities - (1,455) - (1,455)
Settlement of derivative financial instruments(1) - - 1,029 1,029
Total changes from financing cash flows 386 (1,455) 1,029 (40)
Interest paid (334) (422) - (756)
Interest expense 377 464 - 841
New leases and lease modifications - 1,017 - 1,017
Fair value movements (151) - (990) (1,141)
Other non-cash movements 11 (37) - (26)
Exchange movements 103 415 26 544
Balance at December 31, 2022 10,365 9,619 (71) 19,913
€ million Bank, other loans and asset financed liabilities Lease liabilities Derivatives Total
to mitigate volatility in financial liabilities
Balance at January 1, 2021 5,655 10,024 429 16,108
Proceeds from borrowings 4,817 - - 4,817
Repayment of borrowings (784) - - (784)
Repayment of lease liabilities - (1,481) - (1,481)
Settlement of derivative financial instruments(1) - - (268) (268)
Total changes from financing cash flows 4,033 (1,481) (268) 2,284
Interest paid (212) (367) (26) (605)
Interest expense 307 393 - 700
New leases and lease modifications - 518 - 518
Fair value movements (69) - (286) (355)
Other non-cash movements (2) (9) 15 4
Exchange movements 261 559 - 820
Balance at December 31, 2021 9,973 9,637 (136) 19,474
1 Gain of €1,036 million (2021: loss of €268 million) relating to
derivatives not designated in hedge relationships and reported within Net cash
flows from financing activities in the Cash flow statement, and a loss of €7
million (2021: €nil) relating to interest rate derivatives designated in
hedge relationships and reported within Net cash flows from operating
activities.
d Total loans, asset financed liabilities, other financing liabilities
and lease liabilities
Million 2022 2021
Loans
Bank:
US dollar $75 $98
Euro €1,273 €1,430
Pound sterling £2,026 £2,003
Chinese yuan - CNY 78
€3,659 €3,883
Fixed rate bonds:
Euro €2,887 €3,602
€2,887 €3,602
Asset financed liabilities
US dollar $3,285 $2,192
Euro €542 €408
Japanese yen ¥25,748 ¥8,226
€3,819 €2,415
Other financing liabilities
Euro - €73
- €73
Lease liabilities
US dollar $7,621 $7,709
Euro €1,239 €1,547
Japanese yen ¥71,994 ¥75,450
Pound sterling £620 £569
€9,619 €9,637
Total interest-bearing borrowings €19,984 €19,610
26 Provisions
€ million Restoration and handback provisions Restructuring Employee leaving indemnities and other employee related provisions Legal claims and contractual disputes provisions ETS provisions(1) Other provisions(1) Total
provisions
Net book value January 1, 2022(1) 1,832 274 720 90 9 74 2,999
Provisions recorded during the year 596 14 74 47 134 31 896
Reclassifications (15) - - - - - (15)
Utilised during the year (167) (81) (32) (2) (10) (31) (323)
Release of unused amounts (42) (12) (24) (45) - (14) (137)
Unwinding of discount 38 - 5 - - - 43
Remeasurements 27 - (69) - - - (42)
Exchange differences 131 (1) (1) (1) (1) - 127
Net book value December 31, 2022 2,400 194 673 89 132 60 3,548
Analysis:
Current 508 112 70 66 132 8 896
Non-current 1,892 82 603 23 - 52 2,652
2,400 194 673 89 132 60 3,548
1 During 2022 the Group has separated the ETS provision from Other
provisions. This change resulted in an amount of €9 million recorded within
ETS provisions at January 1, 2022. There was no net change in total
provisions.
Restoration and handback provisions
The provision for restoration and handback costs is maintained to meet the
contractual maintenance and return conditions on aircraft held under lease.
The provision also includes an amount relating to leased land and buildings
where restoration costs are contractually required at the end of the lease.
Such costs are capitalised within ROU assets. The provision is long-term in
nature, typically covering the leased asset term, which for aircraft is up to
12 years.
Included within the release of unused restoration and handback provisions is
an amount of €7 million relating to the reversal of contractual lease
provisions, which represent the estimation of the cost to fulfil the handback
conditions associated with the leased aircraft that had been permanently stood
down and impaired during the year to December 31, 2020, which have
subsequently been stood back up with a resultant impairment reversal during
the year to December 31, 2022.
The provisions are determined by discounting the future cash flows using
pre-tax risk free rates specific to the tenor of the provision and the
currency in which it arises. The unwinding of the discounting of the
provisions is recorded as a finance cost in the Income statement (refer to
note 9a).
Remeasurements arising from changes in estimates relating to the effects of
both discounting and inflation are recorded in the Income statement to the
extent they relate to avoidable provisions or recorded as an adjustment to the
right of use asset (see note 14) for those unavoidable provisions.
Where amounts are finalised and the uncertainty relating to these provisions
removed, the associated liability is reclassified to either current or
non-current Other creditors, dependent on the expecting timing of settlement.
Restructuring provisions
The restructuring provision includes provisions for voluntary redundancies
including the collective redundancy programme for Iberia's Transformation Plan
implemented prior to 2022, which provides for payments to affected employees
until they reach the statutory retirement age. The amount provided for has
been determined by an actuarial valuation made by independent actuaries, and
was based on the same assumptions as those made to determine the provisions
for obligations to flight crew below, with the exception of the discount rate,
which in this case was 3.2 per cent. The payments related to this provision
will continue over the next 7 years.
At December 31, 2022, €185 million of this provision related to collective
redundancy programmes (2021: €270 million).
Employee leaving indemnities and other employee related provisions
This provision includes employees leaving indemnities relating to staff under
various contractual arrangements.
The Group recognises a provision relating to flight crew (both pilots and
cabin crew) who the Group expects to still be in employment by the age of 60,
at which point the individuals will have the option of continuing full time
employment, being placed on reserve and retaining their employment
relationship until reaching the statutory retirement age (referred to as
'active'), or alternatively taking early retirement (referred to as
'inactive'). The Group is required to remunerate these employees until they
reach the statutory retirement age. In determining the provision to be
recognised for the proportion of employees that will elect to be inactive, the
Group estimates a number of financial assumptions, including, but not limited
to: (i) medium to long-term salary growth and inflation; (ii) the discount
rate to apply; (iii) the rate of public social security growth; (iv) mortality
rates; and (vi) staff turnover.
The provision was re-assessed at December 31, 2022 with the use of independent
actuaries using the projected unit credit method, based on a discount rate
consistent with the iBoxx index of 3.72 per cent for active employees and 3.50
per cent for inactive employees (2021: iBoxx index of 0.91 per cent and 0.00
per cent, respectively), the PERM/F-2000P mortality tables, and assuming
contractual salary increases of up to 6.1 per cent in 2023 and 2.0 per cent in
2024 and then 2.0 per cent per annum thereafter derived from increases in the
Consumer Price Index (CPI). At December 31, 2022, there were a total of 4,827
flight crew (December 31, 2021: 4,533) eligible for making such elections when
they reach the age of 60. At December 31, 2022, there were 426 employees
having reached the age of 60 who had elected to become inactive (December 31,
2021: 333). In addition, at December 31, 2022 the average length of employment
of the eligible flight crew was 18 years (December 31, 2021: 20 years). This
is mainly a long-term provision. Remeasurements in the valuation of this
provision are recorded in Other comprehensive income. The amount relating to
this provision was €611 million at December 31, 2022
(2021: €644 million).
Legal claims and contractual disputes provisions
Legal claims and contractual disputes provisions include:
• amounts for multi-party claims from groups of employees on a number of
matters related to their employment, including claims for additional holiday
pay and for age discrimination;
• amounts related to ongoing contractual disputes arising from the Group's
operations; and
• amounts related to investigations by a number of competition authorities
in connection with alleged anti-competitive activity concerning the Group's
passenger and cargo businesses.
The final amount required to settle the remaining claims and fines is subject
to uncertainty.
ETS provisions
ETS provisions relate to the Emissions Trading Scheme for CO(2) equivalent
emitted on flights within the EU, Switzerland and the United Kingdom and due
to be settled in the year subsequent to the reporting date. See note 4 for
further information.
27 Financial risk management objectives and policies
The Group is exposed to a variety of financial risks: market risk (including
fuel price risk, foreign currency risk and interest rate risk), credit risk
and liquidity risk. The principal impacts of these on the financial statements
are discussed below:
a Fuel price risk
The Group is exposed to fuel price risk. In order to mitigate such risk, under
the Group's fuel price risk management strategy a variety of over the counter
derivative instruments are entered into. The Group strategy is to hedge a
proportion of fuel consumption up to two years within the approved hedging
profile.
The following table demonstrates the sensitivity of the Group's principal
foreign exchange exposure to a reasonable possible change in the fuel price,
based on current market volatility, with all other variables held constant on
the result before tax and equity(1). The sensitivity analysis has been
performed on fuel derivatives (both those designated in hedge relationships
and those not designated in hedge relationships) at the reporting date only
and is not reflective of the impact had the sensitised rates been applied
through the duration of the years to December 31, 2022 and 2021.
2022 2021
Increase/(decrease) Effect on result Effect on Increase/(decrease) Effect on result Effect on
in fuel price before tax equity in fuel price before tax equity
per cent € million € million per cent € million € million
45 - 1,402 30 - 834
(45) - (1,200) (30) - (520)
1 The sensitivity analysis on equity excludes the sensitivity amounts
recognised in the result before tax.
During 2022, following a substantial recovery in the global price of crude oil
and jet fuel, which continues to be impacted by geopolitical events in
Ukraine, the fair value of such net asset derivative instruments was €87
million at December 31, 2022, representing a decrease of €201 million since
January 1, 2022.
b Foreign currency risk
The Group is exposed to foreign currency risk on revenue, purchases and
borrowings that are denominated in a currency other than the functional
currency of the Group (the euro). The currencies in which these transactions
are denominated are primarily US dollar and pound sterling. The Group has a
number of strategies to hedge foreign currency risk including hedging a
proportion of its foreign currency sales and purchases for up to three years.
The following table demonstrates the sensitivity of the Group's principal
foreign exchange exposure to a reasonable possible change in the US dollar,
pound sterling and Japanese yen exchange rates, based on current market
volatility, with all other variables held constant on the result before tax
and equity(1). The sensitivity analysis has been performed on interest-bearing
liabilities, lease liabilities and derivatives (both those designated in hedge
relationships and those not designated in hedge relationships) denominated in
foreign currencies at the reporting date only and is not reflective of the
impact had the sensitised rates been applied through the duration of the years
to December 31, 2022 and 2021.
Strengthening/ Effect on result before tax Effect on equity Strengthening/ Effect on result before tax Effect on equity Strengthening/ Effect on result before tax Effect on equity
(weakening) in US dollar rate € million € million (weakening) in pound € million € million (weakening) in Japanese yen rate € million € million
per cent sterling rate per cent
per cent
2022 20 904 1,299 20 (20) 241 20 (58) (70)
(20) (922) (1,161) (20) 18 (241) (20) 58 70
2021 10 255 523 10 (10) 134 10 (17) (41)
(10) (260) (481) (10) 10 (134) (10) 17 41
1 The sensitivity analysis on equity, excludes the sensitivity amounts
recognised in the result before tax.
At December 31, 2022, the fair value of foreign currency net asset derivative
instruments was €108 million, representing a decrease of €77 million since
January 1, 2022. These comprise both derivatives designated in hedge
relationships and those derivatives that are not designated into a hedge
relationship at inception. Those derivatives not designated in a hedge
relationship on inception have their mark-to-market movements recorded
directly in the Income statement and recognised within Net currency
retranslation (charges)/credits.
c Interest rate risk
The Group is exposed to changes in interest rates on debt and on cash
deposits. In order to mitigate the interest rate risk, the Group's policies
allow a variety of over the counter derivative instruments to be entered into.
The following table demonstrates the sensitivity of the Group's interest rate
exposure to a reasonable possible change in the US dollar, euro and sterling
interest rates, based on expectations regarding forward rate movements, on the
result before tax and equity(1). The sensitivity analysis has been performed
on interest rate derivatives (both those designated in hedge relationships and
those not designated in hedge relationships) at the reporting date only and is
not reflective of the impact had the sensitised rates been applied through the
duration of the years to December 31, 2022 and 2021.
Strengthening/ Effect on result before tax Effect on equity Strengthening/ Effect on result before tax Effect on equity Strengthening/ Effect on result before tax Effect on equity
(weakening) in € million € million (weakening) in € million € million (weakening) in sterling interest € million € million
US interest euro interest rate
rate rate Basis points
Basis points Basis points
2022 150 - 6 150 5 17 150 (35) -
(150) - (7) (150) (4) (17) (150) 35 -
2021 50 - - 50 3 10 50 (2) -
(50) - - (50) (3) (9) (50) 2 -
1 The sensitivity analysis on equity excludes the sensitivity amounts
recognised in the result before tax.
For details regarding the Group's management of interest rate benchmark
reform, refer to note 27i.
d Credit risk
Credit risk is the risk that a counterparty will not meet its obligations
under a financial instrument or customer contract, leading to a financial
loss. The Group is exposed to credit risk from its financing activities,
including deposits with banks and financial institutions, foreign exchange
transactions and other financial instruments. The Group has policies and
procedures to monitor the risk by assigning limits to each counterparty by
underlying exposure and by operating company and by only entering into
transactions with counterparties with a very low credit risk.
At each period end, the Group assesses the effect of counterparties' and the
Group's own credit risk on the fair value of derivatives and any
ineffectiveness arising is immediately recognised in the Income statement
within Other non-operating expenses.
e Counterparty risk
The Group is exposed to the non-performance by its counterparties in respect
of financial assets receivable. The Group has policies and procedures to
monitor the risk by assigning limits to each counterparty by underlying
exposure and by operating company. The underlying exposures are monitored on a
daily basis and the overall exposure limit by counterparty is periodically
reviewed by using available market information.
The financial assets recognised in the financial statements, net of impairment
losses (if any), represent the Group's maximum exposure to credit risk,
without taking into account any guarantees in place or other credit
enhancements.
At December 31, 2022 the Group's credit risk position, allocated by region, in
respect of treasury managed cash and derivatives was as follows:
Mark-to-market of treasury controlled financial
instruments allocated by geography
Region 2022 2021
United Kingdom 51% 44%
Spain 1% -
Ireland 20% 18%
Rest of eurozone 27% 34%
Rest of world 1% 4%
f Liquidity risk
The Group invests cash in interest-bearing accounts, time deposits and money
market funds, choosing instruments with appropriate maturities or liquidity to
retain sufficient headroom to readily generate cash inflows required to manage
liquidity risk. The Group has also committed revolving credit facilities.
At December 31, 2022 the Group had undrawn overdraft facilities of €53
million (2021: €53 million).
The Group held the following undrawn general and committed aircraft financing
facilities:
2022
Million Currency € equivalent
General facilities(1)
Euro facilities expiring between January and March 2023 €87 87
US dollar facility expiring November 2023 $50 47
Euro facility expiring March 2025 €300 300
US dollar facility expiring March 2025 $1,755 1,654
Pound sterling facility expiring November 2025 £1,000 1,143
3,231
Committed aircraft facilities
US dollar facilities expiring between February and September 2023(2) $386 364
US dollar facility expiring April 2023(2) $273 257
US dollar facilities expiring between October 2023 and March 2024(3) $525 495
1,116
2021
Million Currency € equivalent
General facilities(1)
Euro facilities expiring between January and July 2022 €27 27
Euro facilities expiring March 2023 €60 60
US dollar facility expiring May 2022 $50 44
US dollar facility expiring March 2024 $1,755 1,556
Pound sterling facility expiring November 2025 £1,000 1,177
2,864
Committed aircraft facilities
US dollar facility expiring September 2022(2) $635 563
US dollar facilities expiring March 2024(3) $635 563
1,126
1 The general facilities can be drawn at any time at the discretion of the
Group subject to the provision of up to three days' notice of the intended
utilisation, depending on the facility.
2 The aircraft facilities maturing in 2023 are available for specific
committed aircraft deliveries.
3 The aircraft facilities maturing between October 2023 and March 2024
(2021: maturing in March 2024) are available for specific committed aircraft
deliveries and require the Group to give three months' notice to the
counterparty of its intention to utilise the facilities.
The following table analyses the Group's (outflows) and inflows in respect of
financial liabilities and derivative financial instruments into relevant
maturity groupings based on the remaining period at December 31 to the
contractual maturity date. The amounts disclosed in the table are the
contractual undiscounted cash flows and include interest.
€ million Within 6 months 6-12 1-2 2-5 More than 5 years Total
months years years 2022
Interest-bearing loans and borrowings:
Asset financing liabilities (196) (190) (374) (1,081) (2,823) (4,664)
Lease liabilities (955) (1,050) (2,120) (3,374) (5,295) (12,794)
Fixed rate borrowings (64) (523) (78) (1,242) (757) (2,664)
Floating rate borrowings (227) (146) (455) (3,191) - (4,019)
Trade and other payables (5,209) - (200) - - (5,409)
Derivative financial instruments (assets):
Interest rate derivatives 42 9 12 9 - 72
Foreign exchange contracts 245 195 46 - - 486
Fuel derivatives 122 62 13 - - 197
Derivative financial instruments (liabilities):
Interest rate derivatives (4) (1) (1) (3) - (9)
Foreign exchange contracts (185) (121) (68) - - (374)
Fuel derivatives (42) (59) (10) - - (111)
December 31, 2022 (6,473) (1,824) (3,235) (8,882) (8,875) (29,289)
€ million Within 6 months 6-12 1-2 2-5 More than 5 years Total
months years years 2021
Interest-bearing loans and borrowings:
Asset financing liabilities (122) (116) (230) (678) (1,714) (2,860)
Lease liabilities (920) (854) (1,814) (3,839) (5,524) (12,951)
Fixed rate borrowings (151) (529) (578) (690) (2,094) (4,042)
Floating rate borrowings (129) (285) (428) (3,368) (16) (4,226)
Other financing liabilities (73) - - - - (73)
Trade and other payables (3,712) - (208) - - (3,920)
Derivative financial instruments (assets):
Interest rate derivatives - 1 2 3 - 6
Foreign exchange contracts 227 52 46 1 - 326
Fuel derivatives 157 129 48 - - 334
Derivative financial instruments (liabilities):
Interest rate derivatives (12) (10) (7) (3) - (32)
Foreign exchange contracts (67) (38) (33) (6) - (144)
Fuel derivatives (14) (13) (18) - - (45)
December 31, 2021 (4,816) (1,663) (3,220) (8,580) (9,348) (27,627)
g Offsetting financial assets and liabilities
The Group enters into derivative transactions under ISDA (International Swaps
and Derivatives Association) documentation. In general, under such agreements
the amounts owed by each counterparty on a single day in respect of all
transactions outstanding are aggregated into a single net amount that is
payable by one party to the other.
The following financial assets and liabilities are subject to offsetting,
enforceable master netting arrangements and similar agreements.
December 31, 2022
€ million Gross value of financial instruments Gross amounts set off in the Balance sheet(1) Net amounts of financial instruments in the Balance sheet Related amounts not offset in the Balance sheet(1) Net amount
Financial assets
Derivative financial assets 760 (34) 726 (5) 721
Financial liabilities
Derivative financial liabilities 505 (34) 471 5 476
1 The Group has pledged cash and cash equivalents as collateral against
certain of its derivative financial liabilities. As December 31, 2022, the
Group recognised €nil of collateral (2021: €nil) offset in the balance
sheet and €5 million (2021: €30 million) not offset in the Balance sheet.
December 31, 2021
€ million Gross value of financial instruments Gross amounts set off in the Balance sheet Net amounts of financial instruments in the Balance sheet Related amounts not offset in the Balance sheet Net amount
Financial assets
Derivative financial assets 628 (8) 620 (30) 590
Financial liabilities
Derivative financial liabilities 181 (8) 173 30 203
h Capital risk management
The Group's objectives when managing capital are to safeguard the Group's
ability to continue as a going concern, to maintain an optimal capital
structure, to reduce the cost of capital and to provide returns to
shareholders.
The Group monitors capital on the basis of the net debt to EBITDA before
exceptional items ratio. For the year to December 31, 2022, the net debt to
EBITDA before exceptional items was 3.1 times (2021: minus 11.5 times). The
definition and calculation for this performance measure is included in the
Alternative performance measures section.
Further detail on liquidity and capital resources and capital risk management
is disclosed in the going concern section in note 2.
i Managing interest rate benchmark reform and associated risks
Overview
A reform of major interest rate benchmarks is being undertaken globally,
including the replacement of certain interbank offered rates (IBORs) with
alternative nearly risk-free rates (referred to as 'IBOR reform'). The Group
has exposures to IBORs on its financial instruments that are expected to
mature subsequent to December 31, 2022, and as such will be replaced as part
of these market-wide initiatives. The Group anticipates that IBOR reform will
impact its risk management and hedge accounting.
During 2020 the Group established an IBOR transition working group and project
plan, led by Group Treasury. This project has and continues to consider the
required changes to systems, processes, risk management and valuation models,
as well as managing any accounting and tax implications. During the course of
2022, the Group, and the counterparties to the financial instruments, have
transitioned the majority of such instruments to an alternative benchmark rate
and in order to enable such transitions, changes to systems, processes and
models have been implemented. Those financial instruments that have not
transitioned at December 31, 2022 relate to
those with a US dollar LIBOR component, which is not expected to convert to an
alternative risk-free rate until mid-2023, subject to
further consultation.
Reforms to the Euro Interbank Offered Rate (EURIBOR) methodology to enable it
to meet the criteria of a risk-free rate were completed in 2019. As such the
Group expects to continue to utilise financial instruments with a EURIBOR
component without transitioning to an alternative benchmark rate.
Derivative and non-derivative financial instruments and hedge accounting
While the Group has transitioned a number of its derivative and non-derivative
financial instruments to an alternative benchmark rate, certain interest rate
swap derivative financial instruments and non-derivative financial instruments
continue to have their floating legs indexed to US dollar LIBOR.
For derivative financial instruments there is no uncertainty associated with
IBOR reform as at December 31, 2022, as such instruments either mature prior
to the date of withdrawal of the US dollar LIBOR, or where maturity is
subsequent to the date of withdrawal of the US dollar LIBOR, the final pricing
date for such instruments is prior to the date of withdrawal. Accordingly, the
Group does not intend to transition such instruments to an alternative
benchmark and these derivatives continue to be recognised as hedging
instruments in hedge relationships, with the hedged item being those
non-derivative financial instruments indexed to US dollar LIBOR.
Non-derivative financial instruments predominantly relate to those lease
liabilities with a US dollar LIBOR component. The Group has such leases with a
limited number of counterparties for which the Group expects to transition to
an alternative benchmark by June 30, 2023.
The table below provides an overview of the IBOR-related exposures as at
December 31, 2022. Non-derivative financial instruments are presented on the
basis of their carrying values, while derivative financial instruments are
presented on the basis of their nominal amounts.
€ million Non-derivative financial instruments - carrying value Derivative financial instruments - nominal amount
US dollar LIBOR 461 305
28 Financial instruments
a Financial assets and liabilities by category
The detail of the Group's financial instruments at December 31, 2022 and
December 31, 2021 by nature and classification for measurement purposes is as
follows:
December 31, 2022
Financial assets
€ million Amortised cost Fair value Fair value through Income statement Non-financial Total
assets
through Other comprehensive income carrying amount by
balance sheet item
Non-current assets
Other equity investments - 55 - - 55
Derivative financial instruments - - 81 - 81
Other non-current assets 180 - - 182 362
( )
Current assets
Trade receivables 1,330 - - - 1,330
Other current assets 308 - - 918 1,226
Derivative financial instruments - - 645 - 645
Other current interest-bearing deposits 403 - - - 403
Cash and cash equivalents 9,196 - - - 9,196
Financial liabilities
€ million Amortised cost Fair value Fair value through Non-financial Total
through Other comprehensive income Income statement liabilities carrying amount by
balance sheet item
Non-current liabilities
Lease liabilities 7,853 - - - 7,853
Interest-bearing long-term borrowings 8,692 - 596 - 9,288
Derivative financial instruments - - 84 - 84
Other long-term liabilities 131 - - 69 200
( )
Current liabilities
Lease liabilities 1,766 - - - 1,766
Current portion of long-term borrowings 1,068 - 9 - 1,077
Trade and other payables 4,898 - - 311 5,209
Derivative financial instruments - - 387 - 387
December 31, 2021
Financial assets
€ million Amortised cost Fair value Fair value through Income statement Non-financial Total
assets
through Other comprehensive income carrying amount by
balance sheet item
Non-current assets
Other equity investments - 31 - - 31
Derivative financial instruments - - 77 - 77
Other non-current assets 126 10 - 114 250
( )
Current assets
Trade receivables 735 - - - 735
Other current assets 363 - - 597 960
Derivative financial instruments - - 543 - 543
Other current interest-bearing deposits 51 - - - 51
Cash and cash equivalents 7,892 - - - 7,892
Financial liabilities
€ million Amortised cost Fair value Fair value through Non-financial Total
through Other comprehensive income Income statement liabilities carrying amount by
balance sheet item
Non-current liabilities
Lease liabilities 8,116 - - - 8,116
Interest-bearing long-term borrowings 8,220 - 748 - 8,968
Derivative financial instruments - - 47 - 47
Other long-term liabilities 132 - - 76 208
( )
Current liabilities
Lease liabilities 1,521 - - - 1,521
Current portion of long-term borrowings 996 - 9 - 1,005
Trade and other payables 3,506 - - 206 3,712
Derivative financial instruments - - 126 - 126
b Fair value of financial assets and financial liabilities
The fair values of the Group's financial instruments are disclosed in
hierarchy levels depending on the nature of the inputs used in determining the
fair values and using the following methods and assumptions:
Level 1: Quoted prices (unadjusted) in active markets for identical assets and
liabilities. A market is regarded as active if quoted prices are readily and
regularly available from an exchange, dealer, broker, industry group, pricing
service, or regulatory agency, and those prices represent actual and regularly
occurring market transactions on an arm's length basis. Level 1 methodologies
(market values at the balance sheet date) were used to determine the fair
value of listed asset investments classified as equity investments and listed
interest-bearing borrowings. The fair value of financial liabilities and
financial assets incorporates own credit risk and counterparty credit risk,
respectively.
Level 2: Inputs other than quoted prices included within Level 1 that are
observable for the asset or liability, either directly or indirectly. The fair
value of financial instruments that are not traded in an active market is
determined by valuation techniques. These valuation techniques maximise the
use of observable market data where it is available and rely as little as
possible on entity-specific estimates.
Derivative instruments are measured based on the market value of instruments
with similar terms and conditions using forward pricing models, which include
forward exchange rates, forward interest rates, forward fuel curves and
corresponding volatility surface data at the reporting date. The fair value of
derivative financial assets and liabilities are determined as follows,
incorporating adjustments for own credit risk and counterparty credit risk:
• commodity reference contracts including swaps and options transactions,
referenced to (i) CIF NWE cargoes jet fuel; (ii) ICE Gasoil; (iii) ICE Brent;
(iv) ICE Gasoil Brent crack; (v) Jet Differential and (vi) Jet fuel Brent
crack - the mark-to-market valuation prices are determined by reference to
current forward curve and standard option pricing valuation models, values are
discounted to the reporting date based on the corresponding interest rate;
• currency forward and option contracts - by reference to current forward
prices and standard option pricing valuation models, values are discounted to
the reporting date based on the corresponding interest rate; and
• interest rate swap contracts - by discounting the future cash flows of
the swap contracts at market interest rate valued with the current forward
curve.
The fair value of the Group's interest-bearing borrowings including leases is
determined by discounting the remaining contractual cash flows at the relevant
market interest rates at the balance sheet date. The fair value of the Group's
interest-bearing borrowings is adjusted for own credit risk.
Level 3: Inputs for the asset or liability that are not based on observable
market data. The principal method of such valuation is performed using a
valuation model that considers the present value of the dividend cash flows
expected to be generated by the associated assets. For the methodology in the
determination of the fair value of the investment in Air Europa Holdings,
refer to note 19.
The fair value of cash and cash equivalents, other current interest-bearing
deposits, trade receivables, other current assets and trade and other payables
approximate their carrying value largely due to the short-term maturities of
these instruments.
The carrying amounts and fair values of the Group's financial assets and
liabilities at December 31, 2022 are as follows:
Fair value Carrying
value
€ million Level 1 Level 2 Level 3 Total Total
Financial assets
Other equity investments - - 55 55 55
Other non-current financial assets - 20 - 20 31
Derivative financial assets:
Interest rate swaps(1) - 66 - 66 66
Foreign exchange contracts(1) - 467 - 467 467
Fuel derivatives(1) - 193 - 193 193
Financial liabilities
Interest-bearing loans and borrowings:
Asset financed liabilities - 2,925 - 2,925 3,819
Fixed rate borrowings 2,538 72 - 2,610 2,967
Floating rate borrowings - 3,419 - 3,419 3,579
Derivative financial liabilities:
Interest rate derivatives(2) - 6 - 6 6
Foreign exchange contracts(2) - 386 - 386 386
Fuel derivatives(2) - 79 - 79 79
1 Current portion of derivative financial assets is €645 million.
2 Current portion of derivative financial liabilities is €387 million.
The carrying amounts and fair values of the Group's financial assets and
liabilities at December 31, 2021 are set out below:
Fair value Carrying value
€ million Level 1 Level 2 Level 3 Total Total
Financial assets
Other equity investments - - 31 31 31
Derivative financial assets:
Interest rate swaps(1) - 5 - 5 5
Foreign exchange contracts(1) - 314 - 314 314
Fuel derivatives(1) - 301 - 301 301
Financial liabilities
Interest-bearing loans and borrowings:
Asset financed liabilities - 2,583 - 2,583 2,415
Fixed rate borrowings 3,492 265 - 3,757 3,863
Floating rate borrowings - 3,622 - 3,622 3,622
Other financing liabilities - 73 - 73 73
Derivative financial liabilities:
Interest rate derivatives(2) - 31 - 31 31
Foreign exchange contracts(2) - 129 - 129 129
Fuel derivatives(2) - 13 - 13 13
1 Current portion of derivative financial assets is €543 million.
2 Current portion of derivative financial liabilities is €126 million.
On June 15, 2022, the Group entered into a financing arrangement with
Globalia, which was classified as a Level 2 financial asset. On August 16,
2022, the Group exercised the conversion option within the financing
arrangement leading to the de-recognition of the Level 2 financial asset and
the recognition of an Other equity investment in Air Europa Holdings, which
was recorded as an addition to a Level 3 financial asset. Refer to note 19 for
further details. There have been no other transfers between levels of the fair
value hierarchy during the year.
Financial assets, other equity instruments, financial liabilities and
derivative financial assets and liabilities are all measured at fair value in
the consolidated financial statements. Interest-bearing borrowings, with the
exception of the €825 million convertible bond due 2028 which is measured at
fair value, are measured at amortised cost.
c Level 3 financial assets reconciliation
The following table summarises key movements in Level 3 financial assets:
€ million 2022 2021
Opening balance for the year 31 29
Addition of Air Europa Holdings 22 -
Additions - other 2 2
Losses recognised in Income statement (2) -
Gains recognised in Other comprehensive income 2 -
Closing balance for the year 55 31
For details regarding the valuation of Air Europa Holdings, refer to note 19.
d Hedges
Cash flow hedges
At December 31, 2022 the Group's principal risk management activities that
were hedging future forecast transactions were:
• foreign exchange contracts, hedging foreign currency exchange risk on
cash inflows and certain operational payments. Remeasurement gains and losses
on the derivatives are (i) recognised in equity and transferred to the Income
statement, where the hedged item is recorded directly in the Income statement,
to the same caption as the underlying hedged item is classified; (ii)
recognised in equity and transferred to the Balance sheet, where the hedged
item is a non-financial asset or liability, are recorded to the Balance sheet
to the same caption as the hedged item is recognised; and (iii) recognised in
equity and transferred to the Income statement, where the hedged item is a
financial asset or liability, at the same time as the financial asset or
liability is recorded in the Income statement. Reclassification gains and
losses on derivatives, arising from the discontinuance of hedge accounting,
are recognised in the Income statement when the future transaction is no
longer expected to occur and recorded in the relevant Income statement caption
to which the hedged item is classified;
• forward crude, gas oil and jet kerosene derivative contracts, hedging
price risk on fuel expenditure. Remeasurement gains and losses on the
derivatives are (i) recognised in equity and transferred to the Income
statement within Fuel, oil costs and emissions charges to match against the
related fuel cash outflow, where the underlying hedged item does not give rise
to the recognition of fuel inventory; and (ii) recognised in equity and
transferred to the Balance sheet within Inventory, where the underlying hedged
item is fuel inventory. Gains and losses recorded within Inventory are
recognised in the Income statement when the underlying fuel inventory is
consumed, within Fuel, oil costs and emission charges. Reclassification gains
and losses on derivatives, arising from the discontinuance of hedge
accounting, are recognised in the Income statement within Fuel, oil costs and
emissions charges when the future transaction is no longer expected to occur;
• interest rate contracts, hedging interest rate risk on floating rate
debt and certain operational payments. Remeasurement gains and losses on the
derivatives are recognised in equity and transferred to the Income statement
within Interest expense; and
• future loan repayments denominated in foreign currency are designated in
a hedge relationship hedging foreign exchange fluctuations on revenue cash
inflows. Remeasurement gains and losses on the associated loans are recognised
in equity and transferred to the Balance sheet, where the hedged item is a
non-financial asset or liability when the loan repayments are made (generally
in instalments over the life of the loan).
The amounts included in equity are summarised below:
(Gains)/losses in respect of cash flow hedges included within equity
€ million 2022 2021
Loan repayments to hedge future revenue 87 98
Foreign exchange contracts to hedge future revenue and expenditure(1) (178) 25
Crude, gas oil and jet kerosene derivative contracts(1) (127) (276)
Derivatives used to hedge interest rates(1) (46) 58
Instruments for which hedge accounting no longer applies(1, 2) 213 247
(51) 152
Related deferred tax charge/(credit) 20 (24)
Total amount included within equity (31) 128
1 The carrying value of derivative instruments recognised in assets and
liabilities is analysed in parts a and b above.
2 Relates to previously terminated hedge relationships for which the
underlying forecast transactions remain expected to occur.
The notional amounts of significant financial instruments used as cash flow
hedging instruments are set out below, with the prior period presentation
amended to reflect the current presentation:
Notional principal amounts Average hedge rate Hedge range Within 1-2 years 2-5 years 5+ years Total December 31, 2022
1 year
(€ million)
Foreign exchange contracts to hedge future revenue and expenditure from US 1.23 1.05 to 1.45 3,582 1,355 - - 4,937
dollars to pound sterling(1)
Foreign exchange contracts to hedge future revenue and expenditure from US 1.08 0.91 to 1.26 2,578 1,318 - - 3,896
dollars to euros(1)
Foreign exchange contracts to hedge future revenue and expenditure from euros 1.23 1.00 to 1.42 371 406 458 14 1,249
to pound sterling(1)
Fuel commodity price contracts to hedge future US dollar fuel expenditure(2) 718 416 to 2,200 2,935 331 - - 3,266
Interest rate contracts to hedge future interest expenditure(3) 1.04 (0.03) to 3.13 2,360 504 238 9 3,111
1 Expenditure includes both operating and capital expenditure.
2 Notional amounts of fuel commodity price hedging instruments represent
5.4 million metric tonnes of jet fuel equivalent and the hedge range is
expressed as the US dollar price per metric tonne, which for those products
typically priced in barrels, has been determined using a conversion factor of
7.88.
3 The hedge range for interest rate contracts is expressed as a
percentage.
Notional principal amounts Average hedge rate Hedge range Within 1-2 years 2-5 years 5+ years Total
(€ million) 1 year December 31, 2021
Foreign exchange contracts to hedge future revenue and expenditure from US 1.31 1.15 to 1.45 2,606 1,030 42 - 3,678
dollars to pound sterling(1)
Foreign exchange contracts to hedge future revenue and expenditure from US 1.18 1.08 to 1.32 1,632 735 26 - 2,393
dollars to euros(1)
Foreign exchange contracts to hedge future revenue and expenditure from euros 1.23 1.08 to 1.42 396 334 543 166 1,439
to pound sterling(1)
Fuel commodity price contracts to hedge future US dollar fuel expenditure(2) 649 395 to 737 2,386 826 - - 3,212
Interest rate contracts to hedge future interest expenditure(3) 1.40 (0.03) to 3.13 3,099 1,080 738 60 4,977
1 Expenditure includes both operating and capital expenditure.
2 Notional amounts of fuel commodity price hedging instruments represent
5.8 million metric tonnes of jet fuel equivalent and the hedge range is
expressed as the US dollar price per metric tonne, which for those products
typically priced in barrels, has been determined using a conversion factor of
7.88.
3 The hedge range for interest rate contracts is expressed as a
percentage.
Amounts recognised in the Income statement
For the year to December 31, 2022 Ineffectiveness(1) Discontinuance of hedge accounting Recycling to the Income Statement Total recognised movements Fair value movements recognised in Other comprehensive income(2) Amounts reclassified to the Balance sheet
(€ million)
Foreign exchange contracts to hedge future revenue and expenditure - 29 228 257 (525) 43
Crude, gas oil and jet kerosene derivative contracts 19 - 1,299 1,318 (1,249) 66
Derivatives used to hedge interest rates - - (12) (12) (95) -
Loan repayments to hedge future revenue - - - - (1) (7)
Instruments for which hedge accounting no longer applies - - - - - (27)
19 29 1,515 1,563 (1,870) 75
Related deferred tax (330) 398 (1)
Total movements recorded in the cash flow hedge reserve 1,233 (1,472) 74
1 Ineffectiveness recognised in the Income statement is presented as
Realised and Unrealised gains and losses on derivatives not qualifying for
hedge accounting within non-operating items.
2 Amounts recognised in Other comprehensive income represent gains and
losses on the hedging instrument.
Amounts recognised in the Income statement
For the year to December 31, 2021 Ineffectiveness(1) Discontinuance of hedge accounting Recycling to the Income Statement Total recognised movements Fair value movements recognised in Other comprehensive income(2) Amounts reclassified to the Balance sheet
(€ million)
Foreign exchange contracts to hedge future revenue and expenditure - 4 39 43 (178) (24)
Crude, gas oil and jet kerosene derivative contracts (1) 73 88 160 (737) -
Derivatives used to hedge interest rates - - (29) (29) 21 -
Loan repayments to hedge future revenue - - (15) (15) (120) -
Instruments for which hedge accounting no longer applies - - (54) (54) - -
(1) 77 29 105 (1,014) (24)
Related deferred tax (24) 166 3
Total movements recorded in the cash flow hedge reserve 81 (848) (21)
1 Ineffectiveness recognised in the Income statement is presented as
Realised and Unrealised gains and losses on derivatives not qualifying for
hedge accounting within non-operating items.
2 Amounts recognised in Other comprehensive income represent gains and
losses on the hedging instrument.
The losses associated with the discontinuance of hedge accounting recognised
in the Income statement and the subsequent fair value movements of those
derivative instruments recorded in the Income statement through to the earlier
of the reporting date and the maturity date of the derivative are set out
below:
€ million 2022 2021
Gains associated with the discontinuance of hedge accounting recognised in the (29) (77)
Income statement
Fair value movements subsequently recorded in the Income statement - (82)
Total effect of discontinuance of hedge accounting in the Income statement (29) (159)
The Group has no significant fair value hedges at December 31, 2022 and 2021.
29 Share capital, share premium and treasury shares
Allotted, called up and fully paid Number of shares Ordinary share capital Share premium
'000s € million € million
December 31, 2021: Ordinary shares of €0.10 each 4,971,476 497 7,770
December 31, 2022: Ordinary shares of €0.10 each 4,971,476 497 7,770
a Treasury shares
The treasury shares balance consists of shares held directly by the Group.
During the year to December 31, 2022, the Group purchased 15.0 million shares
at a weighted average share price of €1.51 per share totalling €23
million, which are held as Treasury shares. A total of 8.1 million shares
(2021: 5.4 million) were issued to employees during the year as a result of
vesting of employee share schemes. At December 31, 2022 the Group held 17.1
million shares (2021: 10.2 million) which represented 0.34 per cent (2021:
0.20 per cent) of the issued share capital of the Company.
30 Share-based payments
The Group operates share-based payment schemes as part of the total
remuneration package provided to employees. These schemes comprise both share
option schemes where employees acquire shares at an option price and share
award plans whereby shares are issued to employees at no cost, subject to the
achievement by the Group of specified performance targets.
a IAG Performance Share Plan
The IAG Performance Share Plan (PSP) is granted to senior executives and
managers of the Group who are most directly involved in shaping and delivering
business success over the medium to long term. Since 2015, awards have been
made as nil-cost options, with a two-year holding period following the
three-year performance period, before options can be exercised. All awards
since 2015 have three independent performance measures with equal weighting:
Total Shareholder Return (TSR) relative to the STOXX Europe 600 Travel and
Leisure Index (for 2020 awards) or MSCI European Transportation Index (for
prior to 2020 awards), earnings per share, and Return on Invested Capital.
b IAG Restricted Share Plan
During 2021, the Group revised its approach to long-term incentives, replacing
the existing PSP with a Restricted Share Plan (RSP) proposal under the new
Executive Share Plan approved by shareholders in June 2021. The RSP was
introduced to increase the alignment of both interests and outcomes between
the Group's senior management and shareholders through the build-up and
maintenance of senior management shareholdings and an increased focus on the
long-term, sustainable performance of the Group. Awards have been made as
nil-cost options, with a two-year holding period following the three-year
performance period, before options vest. There are no performance measures
associated with the awards, although approval at the end of the vesting period
will be at the discretion of the Remuneration Committee, considering the
Group's overall performance, including financial and non-financial performance
measures over the course of the vesting period, as well as any material risk
or regulatory failures identified.
c IAG Full Potential Incentive Plan
During 2021, the Group launched the new Full Potential Incentive Plan (FPIP),
which is granted to key individuals involved in the delivery of a series of
transformation projects that will enable the Group to deliver business success
over the medium to long term. The awards have been made as nil-cost options,
vesting in 2025 and dependent on stretch performance targets for 2024 and the
approval of the Board.
d IAG Incentive Award Deferral Plan
The IAG Incentive Award Deferral Plan (IADP) is granted to qualifying
employees based on performance and service tests. It will be awarded when an
incentive award is triggered subject to the employee remaining in employment
with the Group for three years after the grant date. The relevant population
will receive 50 per cent of their incentive award up front in cash, and the
remaining 50 per cent in shares after three years through the IADP.
e Share-based payment schemes summary
Outstanding at January 1, 2022 Granted number Lapsed number Vested number Outstanding at December 31, 2022 Exercisable December 31, 2022
'000s '000s '000s '000s '000s '000s
Performance Share Plan 24,706 - 5,273 3,094 16,339 3,683
Restricted Share Plan 16,198 26,796 1,911 749 40,334 -
Full Potential Incentive Plan 27,879 2,386 2,560 - 27,705 -
Incentive Award Deferral Plan 5,359 111 96 2,963 2,411 -
74,142 29,293 9,840 6,806 86,789 3,683
The weighted average share price at the date of exercise of options exercised
during the year to December 31, 2022 was £1.35 (2021: £1.78).
The Group recognised a share-based payment charge of €39 million for the
year to December 31, 2022 (2021: €23 million).
31 Other reserves and non-controlling interests
For the year to December 31, 2022
Other reserves
€ million Unrealised gains and losses(1) Cost of hedging reserve(2) Currency translation(3) Equity portion of convertible bond(4) Merger reserve(5) Capital reserves(6) Total other reserves Non-controlling interest
January 1, 2022 (94) 24 (65) 62 (2,467) 867 (1,673) 6
Other comprehensive income for the year
Cash flow hedges reclassified and reported in net profit:
Fuel and oil costs (1,115) - - - - - (1,115) -
Currency differences (90) - - - - - (90) -
Finance costs 10 - - - - - 10 -
Discontinuance of hedge accounting (22) - - - - - (22) -
Ineffectiveness recognised in other non-operating costs (16) - - - - - (16) -
Net change in fair value of cash flow hedges 1,472 - - - - - 1,472 -
Net change in fair value of other equity investments 2 - - - - - 2 -
Net change in fair value of cost of hedging - (115) - - - - (115) -
Cost of hedging reclassified and reported in net profit - 38 - - - - 38 -
Fair value movements on liabilities attributable to credit risk changes (6) - - - - - (6) -
Currency translation differences - - (53) - - - (53) -
Hedges reclassified and reported in property, plant and equipment (51) (14) - - - - (65) -
Hedges reclassified and reported in sales in advance of carriage 35 1 - - - - 36 -
Hedges reclassified and reported in inventory (58) - - - - - (58) -
Redemption of convertible bond - - - (62) - - (62) -
December 31, 2022 67 (66) (118) - (2,467) 867 (1,717) 6
Other reserves
€ million Unrealised gains and losses(1) Cost of hedging reserve(2) Currency translation(3) Equity portion of convertible bond(4) Merger reserve(5) Redeemed capital reserve(6) Total other reserves Non-controlling interest
January 1, 2021 (867) 38 (53) 62 (2,467) 867 (2,420) 6
Other comprehensive income for the year
Cash flow hedges reclassified and reported in net loss:
Passenger revenue 18 - - - - - 18 -
Fuel and oil costs (45) - - - - - (45) -
Currency differences (15) - - - - - (15) -
Finance costs 23 - - - - - 23 -
Discontinuance of hedge accounting (62) - - - - - (62) -
Net change in fair value of cash flow hedges 848 - - - - - 848 -
Net change in fair value of cost of hedging - 10 - - - - 10 -
Cost of hedging reclassified and reported in net profit - (12) - - - - (12) -
Fair value movements on liabilities attributable to credit risk changes (15) - - - - - (15)
Currency translation differences - - (12) - - - (12) -
Hedges reclassified and reported in property, plant and equipment 21 (12) - - - - 9 -
December 31, 2021 (94) 24 (65) 62 (2,467) 867 (1,673) 6
1 The unrealised gains and losses reserve records fair value changes on
equity investments and the portion of the amounts on hedging instruments in
cash flow hedges that are determined to be effective hedges. The amounts at
December 31, 2022 that relate to the fair value changes on equity instruments
and to the cash flow hedge reserve were €11 million credit and €56 million
credit, respectively.
2 The cost of hedging reserve records, amongst others, changes on the time
value of options.
3 The currency translation reserve records exchange differences arising
from the translation of the financial statements of non-euro functional
currency subsidiaries and investments accounted for under the equity method
into the Group's reporting currency of euros. The movement through this
reserve is affected by the fluctuations in the pound sterling to euro foreign
exchange translation rate.
4 At December 31, 2021 the equity portion of convertible bond reserve
represented the equity portion of the €500 million fixed rate 0.625 per cent
convertible bond that matured in 2022. During 2022 the Group redeemed the
€500 million convertible bond with no conversion into ordinary shares. On
redemption, an amount of €62 million was transferred to Retained earnings.
5 The merger reserve originated from the merger transaction between
British Airways and Iberia. The balance represents the difference between the
fair value of the Group on the transaction date, and the fair value of Iberia
and the book value of British Airways (including its reserves).
6 Capital reserves include a Redeemed capital reserve of €70 million
(2021: €70 million) associated with the decrease in share capital relating
to cancelled shares and a Share capital reduction reserve of €797 million
(2021: €797 million) associated with a reduction in the nominal value of the
Company's share capital (note 29).
32 Employee benefit obligations
The Group operates a variety of post-employment benefit arrangements, covering
both defined contribution and defined benefit schemes. The Group also has a
scheme for flight crew who meet certain conditions and therefore have the
option of being placed on reserve and retaining their employment relationship
until reaching the statutory retirement age, or taking early retirement (note
26).
Defined contribution schemes
The Group operates a number of defined contribution schemes for its employees.
Costs recognised in respect of defined contribution pension plans in Spain, UK
and Ireland for the year to December 31, 2022 were €251 million (2021:
€200 million).
Defined benefit schemes
The principal funded defined benefit pension schemes within the Group are the
Airways Pension Scheme (APS) and the New Airways Pension Scheme (NAPS), both
of which are in the UK and are closed to new members.
APS has been closed to new members since 1984, but remains open to future
accrual. The benefits provided under APS are based on final average
pensionable pay and, for the majority of members, are subject to inflationary
increases in payment.
NAPS has been closed to new members since 2003 and closed to future accrual
since 2018. Following closure, members' deferred pensions are increased
annually by inflation up to five per cent per annum (measured using the
Government's annual Pension Increase (Review) Orders, which since 2011 have
been based on CPI).
APS and NAPS are governed by separate Trustee Boards. Although APS and NAPS
have separate Trustee Boards, certain aspects of the business of the two
schemes are common. APS and NAPS have developed certain joint working groups
that are attended by the Trustee Board members of each scheme although each
Trustee Board reaches its decisions independently. There are sub committees
which are separately responsible for the governance, operation and investments
of each scheme. British Airways Pension Trustees Limited holds the assets of
both schemes on behalf of their respective Trustees.
Triennially, the Trustees of APS and NAPS undertake actuarial valuations,
which are subsequently agreed with British Airways to determine the cash
contributions and any deficit payment plans through to the next valuation
date, as well as ensuring that the schemes have sufficient funds available to
meet future benefit payments to members. These actuarial valuations are
prepared using the principles set out in UK Pension legislation. This differs
from the IAS 19 'Employee benefits' valuation, which is used for deriving the
Income statement and Balance sheet positions and uses a best-estimate approach
overall. The different purpose and principles lead to different assumptions
being used, and therefore a different estimate for the liabilities and funding
levels.
During 2022, the triennial valuations, as at March 31, 2021, were finalised
for APS and NAPS which resulted in a technical surplus of €343 million
(£295 million) for APS and a technical deficit of €1,887 million (£1,650
million) for NAPS. The actuarial valuations performed for APS and NAPS are
different to the valuation performed as at December 31, 2022 under IAS 19
'Employee Benefits' mainly due to timing differences of the measurement dates
and to the specific scheme assumptions in the actuarial valuation performed as
at March 31, 2021 compared with IAS 19 requirements used in the accounting
valuation assumptions as at the reporting date. The triennial actuarial
valuation of neither APS and NAPS is updated outside of the triennial
valuations, making comparability between the scheme liabilities applying the
principles set out in the UK Pension legislation and the requirements of IAS
19 not possible. The principal difference relates to the discount rate
applied, which under the triennial actuarial valuation, aligns with a prudent
estimate of the future investment returns on the assets of the respective
schemes, whereas, under IAS 19, the rates are based on high quality corporate
bond yields, regardless of how the assets are invested.
The triennial valuation as at March 31, 2021 for NAPS supersedes the previous
agreements reached in 2020 and 2021 between British Airways and the Trustee of
NAPS relating to the deferral of deficit contributions. The deferred deficit
contributions have been incorporated into the deficit payment plan agreed as
part of the triennial valuation as at March 31, 2021.
As part of the triennial valuation as at March 31, 2021 for NAPS, British
Airways has agreed to provide certain property assets as security, which will
remain in place until September 30, 2028.
Other plans
British Airways also operates post-retirement schemes in a number of
jurisdictions outside of the UK. The principal scheme is the British Airways
Plc Pension Plan (USA) based in the United States and referred to as the 'US
Plan'. The US Plan is considered to be a defined benefit scheme and is closed
to new members and to future accrual.
The majority of British Airways' other plans are fully funded, but there are
also a number of unfunded plans, for which the Group meets the benefit payment
obligations as they fall due.
In addition, Aer Lingus operates certain defined benefit plans, both funded
and unfunded.
Risk associated with the defined benefit schemes
The defined benefit schemes expose the Group to a range of risks, with the
following being the most significant:
• asset volatility risk - the scheme obligations are calculated using a
discount rate set with reference to high quality corporate bond yields. If
scheme assets underperform this yield, this will reduce the surplus / increase
the deficit, depending on the scheme. Certain of the schemes hold a
significant proportion of equities, which are expected to outperform corporate
bonds in the long term while creating volatility and risk in the short term;
• longevity risk - the majority of the scheme obligations are to provide
benefits over the life of the scheme members. An increase in life expectancy
will result in a corresponding increase in the defined benefit obligation;
• interest rate risk - a decrease in interest rates will increase plan
liabilities, although this will be partially offset by an increase in the
value of certain of the scheme assets;
• inflation risk - a significant proportion of the scheme obligations are
linked to inflation, such that any increase in inflation will cause an
increase in the obligations. While certain of the scheme assets are indexed to
inflation, any expected increase in the scheme assets from inflation would be
disproportionately lower than the increase in the scheme obligations; and
• currency risk - a number of scheme assets are denominated in currencies
other than the pound sterling. Weakening of those currencies, or strengthening
of the pound sterling, in the long term, will have the effect of reducing the
value of scheme assets.
a Cash payments and funding arrangements
Cash payments in respect to pension obligations comprise normal employer
contributions by the Group and deficit contributions based on the agreed
deficit payment plan with NAPS. Total payments for the year to December 31,
2022 net of service costs made by the Group were €20 million (2021: €38
million) being the employer contributions of €22 million (2021: €41
million) less the current service cost of €2 million (2021: €3 million)
(note 32b,c).
Future funding arrangements
Pension contributions for APS and NAPS were determined by actuarial valuations
made at March 31, 2021, using assumptions and methodologies agreed between the
Group and Trustee of each scheme.
In total, the Group expects to pay €1 million in employer contributions to
APS and NAPS in 2023.
The following graph provides the undiscounted benefit payments to be made by
the Trustees of APS and NAPS over the remaining expected duration of the
schemes:
Projected benefit payments from the reporting date (€ million, unaudited)
The amounts and timing of these projected benefit payments are subject to the
aforementioned risks to the schemes.
Deficit contributions
At the date of the actuarial valuation, the actuarial deficit of NAPS amounted
to €1,887 million. In order to address the deficit in the scheme, the Group
has also committed to deficit contribution payments through to June 30, 2023,
amounting to approximately €58 million per year, increasing by €58 million
each year up to June 30, 2026 and subsequently capped at €257 million per
year through to May 31, 2032. The deficit contribution plan includes an
over-funding protection mechanism, based on the triennial valuation
methodology for measuring the deficit, whereby deficit contributions are
suspended if the funding position reaches 100 per cent, with a mechanism for
contributions to resume if the contribution level subsequently falls below 100
per cent, or until such point as the scheme funding level reaches 100 per
cent.
During the year ended and as at December 31, 2022, given the funding level of
the scheme, the NAPS funding position exceeded 100 per cent and accordingly
deficit contributions were suspended. At December 31, 2022, the valuation of
the funding level incorporates significant forward-looking assumptions, such
that the Group currently does not expect to make further deficit
contributions. Given the long-term nature of the NAPS scheme, these
assumptions are subject to uncertainty and there can be no guarantee that
deficit contributions will not resume in the future or that additional deficit
contributions will not need to be incorporated into future triennial actuarial
valuations.
At December 31, 2022, had the over-funding protection mechanism not been
applied, then the asset ceiling adjustment (as detailed in note 32c) would
have been €661 million higher.
At December 31, 2022, the Group is committed to the following undiscounted
deficit payments, which are deductible for tax purposes at the statutory rate
of tax:
€ million NAPS(1) Other schemes
Within 12 months - 49
1-2 years - 44
2-5 years - 44
Greater than 5 years - -
Total expected deficit payments - 137
1 Committed deficit contributions for NAPS are stated after the effect of
the over-funding protection mechanism.
Deficit payments in respect of local arrangements outside of the UK have been
determined in accordance with local practice.
Under the triennial valuation of NAPS as at March 31, 2021, in the period up
to December 31, 2023, no dividend payment is permitted from British Airways to
IAG. In the period from January 1 to December 31, 2024, any dividends paid by
British Airways will be matched by contributions to NAPS of 50 per cent of the
value of dividends paid. In the period from January 1 to September 30, 2025,
any dividend payment from British Airways to IAG that exceeds 50 per cent of
the pre-exceptional profit after tax in each financial year will require
additional payments to be made to NAPS if the scheme is not at least 100 per
cent funded. All dividend restrictions cease from October 1, 2025, onwards.
British Airways must maintain a minimum cash level of €1,829 million
(£1,600 million) as at the date of the declaration of any dividends as well
as immediately following the payment of any dividends to IAG and the
associated matching contributions to NAPS. The amount of any deficit
contributions and dividend matching contributions in a single financial year
is limited to €343 million (£300 million).
b Employee benefit scheme amounts recognised in the financial
statements
i Amounts recognised on the Balance sheet
2022
€ million APS NAPS Other Total
Scheme assets at fair value(1) 6,283 17,029 356 23,668
Present value of scheme liabilities(1) (6,052) (13,692) (548) (20,292)
Net pension asset/(liability) 231 3,337 (192) 3,376
Effect of the asset ceiling(2) (80) (1,168) - (1,248)
Other employee benefit obligations - - (11) (11)
December 31, 2022 151 2,169 (203) 2,117
Represented by:
Employee benefit asset 2,334
Employee benefit obligation (217)
Net employee benefit asset(3) 2,117
2021
€ million APS NAPS Other Total
Scheme assets at fair value(1) 8,869 25,055 446 34,370
Present value of scheme liabilities(1) (8,333) (22,583) (706) (31,622)
Net pension asset/(liability) 536 2,472 (260) 2,748
Effect of the asset ceiling(2) (186) (1,061) - (1,247)
Other employee benefit obligations - - (11) (11)
December 31, 2021 350 1,411 (271) 1,490
Represented by:
Employee benefit asset 1,775
Employee benefit obligation (285)
Net employee benefit obligation(3) 1,490
1 Includes Additional Voluntary Contributions (AVCs), which the Trustees
hold as assets to secure additional benefits on a defined contribution basis
for those members who elect to make such AVCs. At December 31, 2022, such
assets were €320 million (2021: €391 million) with a corresponding amount
recorded in the scheme liabilities.
2 APS and NAPS have an accounting surplus under IAS 19, which would be
available to the Group as a refund upon wind up of the scheme. This refund is
restricted due to withholding taxes that would be payable by the Trustee
arising on both the net pension asset and the future contractual minimum
funding requirements.
3 The net deferred tax asset recognised on the net employee benefit asset
(2021: asset) was €54 million at December 31, 2022 (2021: €62 million).
The defined benefit obligation includes €21 million (2021: €25 million)
arising from unfunded plans.
ii Amounts recognised in the Income statement
Pension costs charged to operating result are:
€ million 2022 2021
Defined benefit plans:
Current service cost 2 3
Administrative expenses 19 29
21 32
Defined contribution plans 251 200
Pension costs recorded as employee costs 272 232
€ million 2022 2021
Interest income on scheme assets (633) (432)
Interest expense on scheme liabilities 584 425
Interest expense on asset ceiling 23 9
Net financing (credit)/charge relating to pensions (26) 2
iii Amounts recognised in the Statement of other comprehensive income
€ million 2022 2021
Return on plan assets excluding interest income 9,360 (2,495)
Remeasurement of plan liabilities from changes in financial assumptions(1) (10,476) 95
Remeasurement of plan liabilities from changes in demographic assumptions(1) (202) (49)
Remeasurement of experience losses 627 427
Remeasurement of the APS and NAPS asset ceilings 14 419
Exchange movements 6 (14)
Pension remeasurements charged to Other comprehensive income (671) (1,617)
Deferred tax arising on pension remeasurements 9 217
Pension remeasurements charged to Other comprehensive income, net of tax (662) (1,400)
1 The prior year figures include a reclassification between remeasurements
of plan liabilities from changes in financial assumptions to remeasurement of
plan liabilities from changes in demographic assumptions to align with the
current year presentation. There is no change in the total pension
remeasurements charged to Other comprehensive income.
c Fair value of scheme assets
i Investment strategies
For both APS and NAPS, the Trustee has ultimate responsibility for decision
making on investments matters, including the asset-liability matching
strategy. The latter is a form of investing designed to match the movement in
pension plan assets with the movement in the projected benefit obligation over
time. The Trustees' investment committee adopts an annual business plan which
sets out investment objectives and work required to support achievement of
these objectives. The committee also deals with the monitoring of performance
and activities, including work on developing the strategic benchmark to
improve the risk return profile of the scheme where possible, as well as
having a trigger-based dynamic governance process to be able to take advantage
of opportunities as they arise. The investment committee reviews the existing
investment restrictions, performance benchmarks and targets, as well as
continuing to develop the de-risking and liability hedging portfolio.
Both schemes use derivative instruments for investment purposes and to manage
exposures to financial risks, such as interest rate, foreign exchange,
longevity and liquidity risks arising in the normal course of business.
Exposure to interest rate risk is managed through the use of Inflation-Linked
Swap contracts. Foreign exchange forward contracts are entered into to
mitigate the risk of currency fluctuations. Longevity risk is managed through
the use of buy-in insurance contracts, asset swaps and longevity swaps.
Along with existing contracts with Rothesay Life (as detailed in note
32c(iii)), APS is 90 per cent protected against all longevity risk and fully
protected in relation to all pensions that were already being paid as at March
31, 2018. It is also more than 90 per cent protected against interest rates
and inflation (on a Retail Price Index basis).
The strategic benchmark for asset allocations differentiates between 'return
seeking assets' and 'liability matching assets' depending on the maturity of
each scheme. At December 31, 2022, the benchmark for NAPS was 31 per cent
(2021: 37 per cent) in return seeking assets and 69 per cent (2021: 63 per
cent) in liability matching investments. Bandwidths are set around these
strategic benchmarks that allow for tactical asset allocation decisions,
providing parameters for the investment committee and their investment
managers to work within. APS no longer has a 'strategic benchmark' as instead,
APS now runs off its liquidation portfolio to a liability matching portfolio
of bonds and cash. The actual asset allocation for APS at December 31, 2022
was 1 per cent (2021: 1 per cent) in return seeking assets and 99 per cent
(2021: 99 per cent) in liability matching investments. NAPS uses Liability
Driven Investments (LDIs) to effectively hedge volatility in the scheme
liabilities. This is achieved through direct bond holdings as opposed to the
use of derivatives and as such leverage is low. Accordingly, as at December
31, 2022, NAPS has not been required to raise additional cash or liquidate
existing assets in order to fund derivative positions.
ii Movement in scheme assets
A reconciliation of the opening and closing balances of the fair value of
scheme assets is set out below:
€ million 2022 2021
January 1 34,370 31,185
Interest income 633 432
Administrative expenses (13) (21)
Return on plan assets excluding interest income (9,360) 2,495
Employer contributions(1) 22 41
Employee contributions 6 13
Benefits paid (1,301) (1,930)
Exchange movements (689) 2,155
December 31 23,668 34,370
1 Includes employer contributions to APS of €1 million (2021: €1
million) and to NAPS of €nil (2021: €nil) of which deficit-funding
payments represented €nil for APS (2021: €nil) and €nil for NAPS (2021:
€nil).
iii Composition of scheme assets
Scheme assets held by the Group at December 31 comprise:
2022
€ million APS NAPS Other Total 2021
Return seeking investments
Listed equities - UK 8 125 6 139 224
Listed equities - Rest of world 1 883 163 1,047 4,441
Private equities 38 1,518 10 1,566 1,643
Properties 2 2,124 16 2,142 2,481
Alternative investments 41 1,837 3 1,881 1,925
90 6,487 198 6,775 10,714
Liability matching investments
Government issued fixed bonds 790 4,390 99 5,279 10,681
Government issued index-linked bonds 860 7,225 8 8,093 8,511
Asset and longevity swaps(1) 1,114 - - 1,114 1,716
Insurance contract(1) 3,356 - 36 3,392 4,662
6,120 11,615 143 17,878 25,570
Other
Cash and cash equivalents 117 563 4 684 1,139
Derivative financial instruments (47) (1,650) 9 (1,688) (3,135)
Other investments 3 14 2 19 82
73 (1,073) 15 (985) (1,914)
Total scheme assets 6,283 17,029 356 23,668 34,370
1 The prior year scheme asset balances split between Asset and longevity
swaps and Insurance contracts have been updated to reflect the current year
presentation. There is no change in total scheme assets.
The fair values of the Group's scheme assets, which are not derived from
quoted prices on active markets, are determined depending on the nature of the
inputs used in determining the fair values (see note 28b for further details)
and using the following methods and assumptions:
• private equities are valued at fair value based on the most recent
transaction price or third-party net asset, revenue or earnings-based
valuations that generally result in the use of significant unobservable
inputs. The dates of these valuations typically precede the reporting date and
have been adjusted for any cash movements between the date of the valuation
and the reporting date. Typically, the valuation approach and inputs for these
investments are not updated through to the reporting date unless there are
indications of significant market movements.
• properties are valued based on an analysis of recent market transactions
supported by market knowledge derived from third-party professional valuers
that generally result in the use of significant unobservable inputs.
• alternative investments fair values, which predominantly include
holdings in investment and infrastructure funds are determined based on the
most recent available valuations applying the Net Asset Value methodology and
issued by fund administrators or investment managers and adjusted for any cash
movements having occurred from the date of the valuation to the reporting
date. The dates of these valuations typically precede the reporting date and
have been adjusted for any cash movements between the date of the valuation
and the reporting date. Typically, the valuation approach and inputs for these
investments are not updated through to the reporting date unless there are
indications of significant market movements.
• other investments predominantly includes: interest receivable on bonds;
dividends from listed and private equities that have been declared but not
received at the balance sheet date; receivables from the sale of assets for
which the proceeds have not been collected at the balance sheet date; and
payables for the purchase of assets which have not been settled at the balance
sheet date.
• asset and longevity swaps - APS has a contract with Rothesay Life,
entered into in 2010 and extended in 2013, which covers 25 per cent (2021: 25
per cent) of the pensioner liabilities for an agreed list of members. Under
the contract, to reduce the risk of long-term longevity risk, Rothesay Life
makes benefit payments monthly in respect of the agreed list of members in
return for the contractual return receivable on a portfolio of assets (made up
of quoted government debt) held by the scheme and the contractual payments
made by APS to Rothesay Life on the longevity swaps. The Group holds the
portfolio of assets at their fair value, with the government debt held at
their quoted market price and the swaps accounted for at their estimated
discounted future cash flows.
During 2011, APS entered into a longevity swap with Rothesay Life, which
covers an additional 21 per cent (2021: 21 per cent) of the pensioner
liabilities for the same agreed list of members as the 2010 contract. Under
the longevity swap, to reduce the risk of long-term longevity risk, APS makes
a fixed payment to Rothesay Life each month reflecting the prevailing
mortality assumptions at the inception of the contract, and Rothesay Life make
a monthly payment to APS reflecting the actual monthly benefit payments to
members. The cash flows are settled net each month. If pensioners live longer
than expected at inception of the longevity swap, Rothesay Life will make
payments to the scheme to offset the additional cost of paying pensioners and
if pensioners do not live as long as expected, then the scheme will make
payments to Rothesay Life. The Group holds the longevity swap at fair value,
determined at the estimated discounted future cash flows.
• insurance contract - During 2018 the Trustee of APS secured a buy-in
contract with Legal & General. The buy-in contract covers all members in
receipt of pensions from APS at March 31, 2018, excluding dependent children,
receiving a pension at that date and members in receipt of equivalent pension
only benefits, who were alive on October 1, 2018. Benefits coming into payment
for retirements after March 31, 2018 are not covered. The contract covers
benefits payable from October 1, 2018 onwards. The policy covers approximately
60 per cent of all benefits APS expects to pay out in future.
iv Effect of the asset ceiling
In measuring the valuation of the net defined benefit asset for each scheme,
the Group limits such measurement to the lower of the surplus in each scheme
and the respective asset ceiling. The asset ceiling represents the present
value of the economic benefits available in the form of a refund or a
reduction in future contributions after they are paid into the plan. The Group
has determined that the recoverability of such surpluses, including minimum
funding requirements, will be subject to withholding taxes in the UK, payable
by the Trustee, of 35 per cent.
The future committed NAPS deficit contributions, as detailed in note 32a, are
treated as minimum funding requirements under IAS 19 and are not recognised as
part of the scheme assets or liabilities. The Group has determined that upon
the wind up of the scheme, that if the scheme is in surplus, including the
incorporation of the minimum funding requirements, then the surplus will be
available as a refund or a reduction in future contributions after they are
paid into the scheme. The recovery of such amounts are subject to UK
withholding tax payable by the Trustee. In measuring the recoverability of the
surplus for each scheme, the Group limits such measurement to the lower of the
surplus in each scheme and the respective asset ceiling. The asset ceiling
represents the present value of the economic benefits available upon wind up
of the scheme, less the application of withholding taxes in the UK, payable by
the Trustee, at 35 per cent.
A reconciliation of the effect of the asset ceiling used in calculating the
IAS 19 irrecoverable surplus in APS and NAPS is set out below:
€ million 2022 2021
January 1 1,247 761
Interest expense 23 9
Remeasurements 14 419
Exchange movements (36) 58
December 31 1,248 1,247
d Present value of scheme liabilities
i Movement in scheme liabilities
A reconciliation of the opening and closing balances of the present value of
the defined benefit obligations is set out below:
€ million 2022 2021
January 1 31,622 30,556
Current service cost 2 3
Interest expense 584 425
Remeasurements - financial assumptions(1, 2) (10,476) 95
Remeasurements - demographic assumptions(2) (202) (49)
Remeasurements of experience losses 627 427
Benefits paid (1,301) (1,930)
Employee contributions 6 13
Exchange movements (570) 2,082
December 31 20,292 31,622
1 Included in the remeasurements from financial assumptions is an amount
of €10,299 million (2021: reduction of €1,866 million) that reduces the
scheme liabilities relating to changes in the discount rates and €177
million (2021: increase of €1,961 million) that reduces the scheme
liabilities relating to changes in inflation rates.
2 The prior year figures include a reclassification between remeasurements
of plan liabilities from changes in financial assumptions to remeasurement of
plan liabilities from changes in demographic assumptions to align with the
current year presentation. There is no change in total scheme liabilities.
ii Scheme liability assumptions
The principal assumptions used for the purposes of the IAS 19 valuations were
as follows:
2022 2021
Per cent per annum APS NAPS Other schemes(4) APS NAPS Other schemes(4)
Discount rate(1) 4.85 4.80 0.8-7.2 1.80 1.90 0.3-6.5
Rate of increase in pensionable pay(2) 3.40 - 2.0-6.0 3.55 - 2.0-6.0
Rate of increase of pensions in payment(3) 3.40 2.80 0.3-3.0 3.55 2.85 2.0-3.0
RPI rate of inflation 3.40 3.20 2.2-3.1 3.55 3.30 1.8-2.5
CPI rate of inflation 2.80 2.80 2.0-2.6 2.95 2.85 1.8-2.5
1 Discount rate is determined by reference to the yield on high quality
corporate bonds of currency and term consistent with the scheme liabilities.
2 Rate of increase in pensionable pay, which reflects inflationary
increases, is assumed to be in line with increases in RPI.
3 It has been assumed that the rate of increase of pensions in payment,
which reflects inflationary increases, will be in line with CPI for NAPS and
RPI for APS as at December 31, 2022.
4 The rate of increase in healthcare costs for schemes based in the United
States is based on medical trend rates of 6.25 per cent grading down to 5.00
per cent over five years (2021: 6.00 per cent to 5.00 per cent over five
years).
The current longevities underlying the values of the scheme liabilities were
as follows:
Mortality assumptions 2022 2021
Life expectancy at age 60 for a:
• male currently aged 60 27.9 28.1
• male currently aged 40 29.1 29.9
• female currently aged 60 29.3 29.5
• female currently aged 40 31.5 31.9
For APS, the base mortality tables are based on the Agreed Valuation Basis
(AVB) as agreed between British Airways and the trustees of APS. For NAPS, the
base mortality tables are based on the most recent model published by the UK
actuarial profession's Continuous Mortality Investigation (CMI), being their
2021 model. These standard mortality tables, for both APS and NAPS,
incorporate adjustments specific to the demographics of scheme members,
including a long-term improvement parameter of 1.00 per cent per annum (2021:
1.25 per cent). Allowance has been made with regard to the long-term
uncertainty arising from the effects of COVID-19.
For schemes in the United States, mortality rates were based on the MP-2021
mortality tables incorporating adjustments for the long-term impact COVID-19
is expected to have on mortality.
At December 31, 2022, the weighted-average duration of the defined benefit
obligation was 10 years for APS (2021: 12 years) and 15 years for NAPS (2021:
19 years). The weighted average duration of the defined benefit obligations
was 3 to 19 years for other schemes (2021: 11 to 23 years). The weighted
average duration represents a single figure for the average number of years
over which the employee benefit liability discounted cash flows is
extinguished and is highly dependent on movements in the aforementioned
discount rates, such that with an increase in the discount rates experienced
in 2022, the weighted-average duration for both schemes has reduced.
iii Sensitivity analysis
Reasonably possible changes at the reporting date to significant valuation
assumptions, holding other assumptions constant, would have affected the
present value of scheme liabilities by the amounts shown:
Increase in scheme liabilities
€ million APS NAPS Other schemes
Discount rate (decrease of 50 basis points)(1) 286 983 34
Future pension growth (increase of 50 basis points)(1) 252 949 5
Future mortality rate (one year increase in life expectancy) 286 354 24
1 Sensitivities smaller than those disclosed can be approximately
interpolated from those sensitivities above.
Although the analysis does not take into account the full distribution of cash
flows expected under the plan, it does provide an approximation of the
sensitivity of the assumptions shown.
33 Contingent liabilities
There are a number of legal and regulatory proceedings against the Group in a
number of jurisdictions which at December 31, 2022, where they could be
reliably estimated, amounted to €11 million (December 31, 2021: €22
million). The Group does not consider it probable that there will be an
outflow of economic resources with regard to these proceedings and accordingly
no provisions have been recorded.
Contingent liabilities associated with income taxes, deferred taxes and
indirect taxes are presented in note 10.
34 Government grants and assistance
The Group has availed itself of government grants and assistance as follows:
The Coronavirus Job Retention Scheme (CJRS) - recognised net within Employee
costs
The CJRS was implemented by the Government of the United Kingdom from March 1,
2020 to August 30, 2020, where those employees designated as being 'furloughed
workers' were eligible to have 80 per cent of their wage costs paid up to a
maximum of £2,500 per month.
From September 1, 2020 to September 30, 2020, the level of eligibility reduced
to 70 per cent of wage costs and up to a maximum of £2,197.50 per month. From
October 1, 2020 to October 31, 2020, the level of eligibility reduced to 60
per cent of wage costs and up to a maximum of £1,875 per month. Following the
introduction of further lockdown restrictions in the United Kingdom in
November 2020, the CJRS was extended from November 1, 2020 to November 30,
2020 and then further to March 31, 2021 and then further again to September
30, 2021 with the level of eligibility increased to 80 per cent of wage costs
and a maximum of £2,500 per month through to the end of June 2021. From July
1, 2021 the eligibility decreased down each month to 60 per cent of wage costs
and a maximum of £1,875 per month by September 30, 2021, at which time the
CJRS ended.
Such costs were paid by the Government to the Group in arrears. The Group was
obliged to continue to pay the associated social security costs and employer
pension contributions.
The Temporary Wage Subsidy Scheme (TWSS) and the Employment Wage Subsidy
Scheme (EWSS) - recognised net within Employee costs
The TWSS was implemented by the government of Ireland from March 1, 2020 to
August 30, 2020, where those employees designated as being furloughed workers
were eligible to have 85 per cent of their wage costs paid up to a maximum of
€410 per week. This scheme was replaced with the EWSS from September 1, 2020
and ran through to April, 2022. For those qualifying employees (earning less
than €1,462 per week), the government reimbursed wage costs up to a maximum
of €203 per week. Such costs were paid by the government to the Group in
arrears.
The total amount of the relief received under the CJRS, the TWSS and the EWSS
by the Group during 2022 amounted to €11 million (2021: €286 million).
Temporary Redundancy Plan (ERTE) - no recognition in the financial statements
of the Group
The ERTE was implemented by the government of Spain from March 1, 2020 and ran
through to February 28, 2022. Under this plan, employment was temporarily
suspended and those designated employees were paid directly by the government
and there was no remittance made to the Group. The Group was obliged to
continue to pay the associated social security costs.
Had those designated employees not been temporarily suspended during 2022, the
Group would have incurred further employee costs of €3 million (2021: €269
million).
The Ireland Strategic Investment Fund (ISIF) - recognised within Long-term
borrowings
On December 23, 2020, Aer Lingus entered into a financing arrangement for
€75 million. On March 27, 2021, Aer Lingus entered into a further financing
arrangement to extend the total amount to €150 million. On March 4, 2022,
Aer Lingus entered into a financing arrangement with ISIF, which subsequently
extinguished the existing €150 million of facilities and replaced them with
a €350 million facility that matures in March 2025. On December 13, 2022,
Aer Lingus repaid €100 million of this financing arrangement with the amount
repaid available to be redrawn through to March 2025. The facility is secured
on specific landing rights. At December 31, 2022 €300 million of the
facility remained undrawn.
The UK Export Finance (UKEF) - recognised within Long-term borrowings
On February 22, 2021, British Airways entered into a 5-year term loan Export
Development Guarantee Facility of €2.3 billion (£2.0 billion) underwritten
by a syndicate of banks, with 80 per cent of the principal guaranteed by UKEF.
The facility is unsecured.
On November 1, 2021, British Airways entered into a further 5-year term loan
Export Development Guarantee Facility of €1.1 billion (£1.0 billion)
underwritten by a syndicate of banks, with 80 per cent of the principal
guaranteed by UKEF. The facility is unsecured. At December 31, 2022 the
facility remained undrawn.
35 Related party transactions
The following transactions took place with related parties for the financial
years to December 31:
€ million 2022 2021
Sales of goods and services
Sales to associates(1) 5 6
Sales to significant shareholders(2) 141 16
Purchases of goods and services
Purchases from associates(3) 61 49
Purchases from significant shareholders(2) 113 69
Receivables from related parties
Amounts owed by associates(4) 1 1
Amounts owed by significant shareholders(5) 25 5
Payables to related parties
Amounts owed to associates(6) - 3
Amounts owed to significant shareholders(5) 26 2
1 Sales to associates: Consisted primarily of sales for airline related
services to Dunwoody Airline Services (Holding) Limited (Dunwoody) of €4
million (2021: €5 million) and €1 million (2021: €1 million) to
Serpista, S.A. and Multiservicios Aeroportuarios.
2 Sales to and purchases from significant shareholders related to
interline services with Qatar Airways.
3 Purchases from associates: Consisted primarily of €35 million of
airport auxiliary services purchased from Multiservicios Aeroportuarios, S.A.
(2021: €33 million), €14 million of handling services provided by Dunwoody
(2021: €8 million) and €13 million of maintenance services received from
Serpista, S.A. (2021: €8 million).
4 Amounts owed by associates: Consisted primarily of €1 million of
services provided to Multiservicios Aeroportuarios, Serpista, Dunwoody and
Empresa Hispano Cubana de Mantenimiento de Aeronaves, Ibeca, S.A. (2021: €1
million).
5 Amounts owed by and to significant shareholders related to Qatar
Airways.
6 Amounts owed to associates: €nil (2021: €3 million).
During the year to December 31, 2022 British Airways met certain costs of
administering its retirement benefit plans, including the provision of support
services to the Trustees. Costs borne on behalf of the retirement benefit
plans amounted to €2 million (2021: €6 million) in relation to the costs
of the Pension Protection Fund levy.
The Group has transactions with related parties that are conducted in the
normal course of the airline business, which include the provision of airline
and related services. All such transactions are carried out on an arm's length
basis.
During the course of 2022, the Group renewed its loyalty currency exchange
agreement with Qatar Airways, where Avios could be exchanged for points within
the Qatar Airways' loyalty programme, the Privilege Club. In addition, in
renewing the agreement, IAG Loyalty licensed the Avios brand name for use
within the Privilege Club.
During the course of 2022, the Group provided a long-term shareholder loan of
€12 million ($14 million) to LanzaJet, Inc., a company which specialises in
the generation of Sustainable Aviation Fuels of which the Group has a 16.7 per
cent equity interest, classified as an associate and presented within
Investments accounted for using the equity method in the Balance sheet.
For the year to December 31, 2022, the Group has not made any provision for
expected credit loss arising relating to amounts owed by related parties
(2021: €nil).
Significant shareholders
In this instance, significant shareholders are those parties who have the
power to participate in the financial and operating policy decisions of the
Group, as a result of their shareholdings in the Group, but who do not have
control over these policies. At December 31, 2022, the only significant
shareholder of the Group was Qatar Airways.
At December 31, 2022 the Group had cash deposit balances with shareholders
holding a participation of between 3 to 5 per cent, of €nil (2021: €nil).
Board of Directors and Management Committee remuneration
Compensation received by the Group's Board of Directors and Management
Committee, in 2022 and 2021 is as follows:
Year to December 31
€ million 2022 2021
Base salary, fees and benefits
Board of Directors
Short-term benefits 4 3
Share-based payments 1 -
Management Committee
Short-term benefits 15 11
Share-based payments 2 1
For the year to December 31, 2022 the Board of Directors includes remuneration
for one Executive Director (December 31, 2021: one Executive Director). The
Management Committee includes remuneration for 14 members (December 31, 2021:
14 members).
The Company provides life insurance for the Executive Director and all members
of the Management Committee. For the year to December 31, 2022 the Company's
obligation was €38,000 (2021: €35,000).
At December 31, 2022 the transfer value of accrued pensions covered under
defined benefit pension obligation schemes, relating to the current members of
the Management Committee totalled €5 million (2021: €9 million).
No loan or credit transactions were outstanding with Directors or officers of
the Group at December 31, 2022 (2021: €nil).
36 Post balance sheet events
On February 23, 2023, the Group entered into an agreement to acquire the
remaining eighty per cent of the share capital of Air Europa Holdings that it
had not previously owned. On successful completion of the transaction,
54,064,575 ordinary shares of the Company (which represented €100 million at
the date of the agreement) will be transferred to and €100 million in cash
will be paid to Globalia, with a further €100 million paid on both the first
and second anniversary of completion.
In addition, the Group has agreed to pay a break-fee to Globalia of €50
million should: (i) the relevant approvals, detailed below, not be forthcoming
within 24 months of entering into the agreement; or (ii) the Group terminates
the agreement at any time prior to completion.
The acquisition is conditional on Globalia receiving approval from the
syndicated banks that provide the loan agreements that are partially
guaranteed by the Instituto de Crédito Oficial (ICO) and Sociedad Estatal de
Participaciones Industriales (SEPI) in Spain. The acquisition is also subject
to approval by relevant competition authorities. Until the completion of these
approvals, the acquisition does not meet the recognition criteria under IFRS 3
Business combinations, and no accounting has been made for the transaction in
these consolidated financial statements.
The execution of the agreement has not impacted the fair value of the 20 per
cent shareholding in Air Europa Holdings as detailed in note 19. The fair
value of the non-controlling equity interest in Air Europa Holdings will be
remeasured to reflect the transaction price upon successful completion of the
transaction.
ALTERNATIVE PERFORMANCE MEASURES
The performance of the Group is assessed using a number of alternative
performance measures (APMs), some of which have been identified as key
performance indicators of the Group. These measures are not defined under
International Financial Reporting Standards (IFRS), should be considered in
addition to IFRS measurements, may differ to definitions given by regulatory
bodies applicable 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'.
During 2022, other than enhancing the definition and reconciliation associated
with the net debt to EBITDA before exceptional items detailed in note e, the
Group has made no changes to its pre-existing disclosures and treatments of
APMs compared to those disclosed in the Annual Report and Accounts for the
year to December 31, 2021.
The impact of and the recovery from the COVID-19 pandemic has significantly
changed the basis on which the Board, Management Committee and external
parties monitor the performance of the Group. In this regard measures relating
to Levered free cash flow, Net debt to EBITDA before exceptional items and
Return on capital employed do not provide the level of meaningful additional
information that they have done in the past. However, the Group continues to
present these APMs for consistency and they will become more prominent and
relevant subsequent to the recovery from the COVID-19 pandemic.
The definition of each APM, together with a reconciliation to the nearest
measure prepared in accordance with IFRS is presented below.
a Profit/(loss) after tax before exceptional items
Exceptional items are those that in the Board's and management's view need to
be separately disclosed by virtue of their size or incidence to supplement the
understanding of the entity's financial performance. The Management Committee
of the Group uses financial performance on a pre-exceptional basis to evaluate
operating performance and to make strategic, financial and operational
decisions, and externally because it is widely used by security analysts and
investors in evaluating the performance of the Group between reporting periods
and against other companies.
Exceptional items in the year to December 31, 2022 and 2021 include:
significant changes in the long-term fleet plans that result in the reversal
of impairment of fleet assets, legal re-imbursements, significant
discontinuation of hedge accounting, and reversal of significant restructuring
events recorded in prior reporting periods.
The table below reconciles the statutory Income statement to the Income
statement before exceptional items of the Group:
Year to December 31
€ million Statutory 2022 Exceptional items Before exceptional items 2022 Statutory 2021 Exceptional items Before exceptional items 2021
Passenger revenue(3) 19,458 - 19,458 5,835 5 5,830
Cargo revenue 1,615 - 1,615 1,673 - 1,673
Other revenue 1,993 - 1,993 947 - 947
Total revenue 23,066 - 23,066 8,455 5 8,450
Employee costs(4) 4,647 - 4,647 3,013 (18) 3,031
Fuel, oil costs and emissions charges(3) 6,120 - 6,120 1,781 (154) 1,935
Handling, catering and other operating costs 2,971 - 2,971 1,308 - 1,308
Landing fees and en-route charges 1,890 - 1,890 923 - 923
Engineering and other aircraft costs(5) 2,101 - 2,101 1,085 (7) 1,092
Property, IT and other costs(1) 950 (23) 973 758 - 758
Selling costs 920 - 920 434 - 434
Depreciation, amortisation and impairment(2) 2,070 (8) 2,078 1,932 (21) 1,953
Currency differences 141 - 141 (14) - (14)
Total expenditure on operations 21,810 (31) 21,841 11,220 (200) 11,420
Operating profit/(loss) 1,256 31 1,225 (2,765) 205 (2,970)
Finance costs (1,017) - (1,017) (830) - (830)
Finance income 52 - 52 13 - 13
Net change in fair value of financial instruments 81 - 81 89 - 89
Net financing credit/(charge) relating to pensions 26 - 26 (2) - (2)
Net currency retranslation charges (115) - (115) (82) - (82)
Other non-operating credits(6) 132 - 132 70 (75) 145
Total net non-operating costs (841) - (841) (742) (75) (667)
Profit/(loss) before tax 415 31 384 (3,507) 130 (3,637)
Tax 16 (2) 18 574 (25) 599
Profit/(loss) after tax for the year 431 29 402 (2,933) 105 (3,038)
Three months to December 31
€ million Statutory 2022 Exceptional items Before exceptional items 2022 Statutory 2021 Exceptional items Before exceptional items 2021
Passenger revenue(3) 5,438 - 5,438 2,695 - 2,695
Cargo revenue 399 - 399 499 - 499
Other revenue 549 - 549 340 - 340
Total revenue 6,386 - 6,386 3,534 - 3,534
Employee costs(4) 1,230 - 1,230 914 (18) 932
Fuel, oil costs and emissions charges(3) 1,720 - 1,720 732 (1) 733
Handling, catering and other operating costs 828 - 828 520 - 520
Landing fees and en-route charges 499 - 499 325 - 325
Engineering and other aircraft costs(5) 594 - 594 383 - 383
Property, IT and other costs(1) 280 - 280 218 - 218
Selling costs 249 - 249 154 - 154
Depreciation, amortisation and impairment(2) 539 - 539 548 (8) 556
Currency differences (39) - (39) 18 - 18
Total expenditure on operations 5,900 - 5,900 3,812 (27) 3,839
Operating profit/(loss) 486 - 486 (278) 27 (305)
Finance costs (294) - (294) (218) - (218)
Finance income 41 - 41 8 - 8
Net change in fair value of financial instruments (51) - (51) 85 - 85
Net financing credit/(charge) relating to pensions 7 - 7 (4) - (4)
Net currency retranslation charges 190 - 190 (19) - (19)
Other non-operating credits(6) (130) - (130) (31) (75) 44
Total net non-operating costs (237) - (237) (179) (75) (104)
Profit/(loss) before tax 249 - 249 (457) (48) (409)
Tax (17) - (17) 146 - 146
Profit/(loss) after tax for the period 232 - 232 (311) (48) (263)
The rationale for each exceptional item is given below.
1 Partial reversal of historical fine
The exceptional credit of €23 million for the year to December 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. The cash inflow associated with the partial reversal of
the fine was recognised during 2022.
2 Impairment reversal of fleet and associated assets
The exceptional impairment reversal of €8 million for the year to December
31, 2022 relates to six Airbus A320s in Vueling, previously stood down in the
fourth quarter of 2020 and subsequently stood up in the second and third
quarters of 2022. The exceptional impairment reversal was recorded within
Right of use assets on the Balance sheet and within Depreciation, amortisation
and impairment in the Income statement.
The exceptional impairment reversal of €21 million, recorded in 2021,
includes an amount of €14 million relating to the reversal of aircraft
impairment and an amount of €7 million relating to the reversal of engine
impairment. The aircraft impairment reversal relates to four Airbus A320
aircraft in Vueling, previously permanently stood down in the fourth quarter
of 2020, being stood up in the third quarter of 2021. The engine impairment
reversal relates to certain engines which had been fully impaired during 2020
having been leased to a third party in the fourth quarter of 2021. Of the
exceptional impairment reversal, €8 million was recorded within Property,
plant and equipment relating to owned aircraft and €12 million was recorded
within Right of use assets relating to leased aircraft. The exceptional
impairment reversal is recorded within Depreciation, amortisation and
impairment in the Income statement.
There is no cash flow impact and there has been a tax charge of €2 million
on the recognition of the impairment reversal (2021: charge of €1 million).
In the year to December 31, 2021:
3 Discontinuation of hedge accounting
The exceptional credit of €159 million, recorded in 2021, arose from a
combination of the discontinuance of hedge accounting in the year to December
31, 2021 and the fair value movement on those relationships where hedge
accounting was discontinued in the year to December 31, 2020, but for which
the underlying hedging instrument had not matured at January 1, 2021. This was
represented by credit of €162 million relating to fuel derivatives and an
expense of €8 million related to the associated fuel foreign currency
derivatives. The credit to Passenger revenue of €5 million relates to the
discontinuation of hedge accounting of the associated foreign currency
derivatives on forecast revenue.
The cash outflow impact associated with the discontinuance of hedge accounting
was €nil in the year to December 31, 2022 (2021: €338 million). The
related tax charge in 2021 was €26 million.
4 Restructuring costs
The exceptional credit of €18 million, recorded in 2021, relates to the
reversal of restructuring provisions that have been released unutilised. There
was no cash flow impact relating to the exceptional restructuring credit in
2021 and the related tax charge was €3 million.
5 Engineering and other aircraft costs
The exceptional credit of €7 million, recorded in 2021, relates to the
reversal of contractual lease provisions for those aircraft in Vueling that
were stood up during 2021, where the estimated costs to fulfil the hand back
conditions will be recognised over the remaining operating activity of the
aircraft. The exceptional credit was recorded within Engineering and other
aircraft costs. There was no cash flow impact relating to the exceptional
credit in 2021 and there was no tax impact on the recognition of this credit.
6 Air Europa Holdings termination agreement
The exceptional charge of €75 million, recorded in 2021, represents the
amount agreed with Globalia to terminate the agreements signed on November 4,
2019 and January 20, 2021 under which Iberia had agreed to acquire the issued
share capital of Air Europa Holdings. The exceptional charge was recorded
within Other non-operating charges in the Income statement and was settled
prior to December 31, 2021. The related tax credit was €5 million. The Group
recognised the cash outflow impact of the termination agreement in 2021.
The table below provides a reconciliation of the statutory to pre-exceptional
condensed alternative income statement by operating segment for the years to
December 31, 2022 and 2021:
Year to December 31, 2022
British Airways (£) British Airways (€) Iberia Vueling Aer Lingus
€ million Statutory Exceptional items Before exceptional items Statutory Exceptional items Before exceptional items Statutory Exceptional items Before exceptional items Statutory Exceptional items Before exceptional items Statutory Exceptional items Before exceptional items
Passenger revenue 9,215 - 9,215 10,790 - 10,790 4,042 - 4,042 2,584 - 2,584 1,679 - 1,679
Cargo revenue 1,060 - 1,060 1,245 - 1,245 347 - 347 - - - 80 - 80
Other revenue 755 - 755 886 - 886 1,122 - 1,122 14 - 14 10 - 10
Total revenue 11,030 - 11,030 12,921 - 12,921 5,511 - 5,511 2,598 - 2,598 1,769 - 1,769
Employee costs 2,100 - 2,100 2,464 - 2,464 1,161 - 1,161 370 - 370 393 - 393
Fuel, oil costs and emissions charges 2,929 - 2,929 3,432 - 3,432 1,313 - 1,313 739 - 739 539 - 539
Depreciation, amortisation and impairment 1,084 - 1,084 1,272 - 1,272 371 - 371 206 (8) 214 146 - 146
Other operating costs 4,595 (19) 4,614 5,391 (23) 5,414 2,284 - 2,284 1,088 - 1,088 646 - 646
Total expenditure on operations 10,708 (19) 10,727 12,559 (23) 12,582 5,129 - 5,129 2,403 (8) 2,411 1,724 - 1,724
Operating profit 322 19 303 362 23 339 382 - 382 195 8 187 45 - 45
Operating margin (%) 2.9% 2.7% 6.9% 6.9% 7.5% 7.2% 2.6% 2.6%
Year to December 31, 2022
IAG Loyalty (£) IAG Loyalty (€)
€ million Statutory Exceptional items Before exceptional items Statutory Exceptional items Before exceptional items
Passenger revenue 569 - 569 676 - 676
Other revenue 274 - 274 325 - 325
Total revenue 843 - 843 1,001 - 1,001
Employee costs 50 - 50 56 - 56
Depreciation, amortisation and impairment 7 - 7 8 - 8
Other operating costs 546 - 546 655 - 655
Total expenditure on operations 603 - 603 719 - 719
Operating profit 240 - 240 282 - 282
Operating margin (%) 28.4% 28.4%
Year to December 31, 2021
British Airways (£) British Airways (€) Iberia Vueling Aer Lingus
€ million Statutory Exceptional items Before exceptional items Statutory Exceptional items Before exceptional items Statutory Exceptional items Before exceptional items Statutory Exceptional items Before exceptional items Statutory Exceptional items Before exceptional items
Passenger revenue 2,321 5 2,316 2,715 6 2,709 1,724 - 1,724 1,011 - 1,011 307 (1) 308
Cargo revenue 1,097 - 1,097 1,275 - 1,275 394 - 394 - - - 65 - 65
Other revenue 281 - 281 328 - 328 666 - 666 5 - 5 4 - 4
Total revenue 3,699 5 3,694 4,318 6 4,312 2,784 - 2,784 1,016 - 1,016 376 (1) 377
Employee costs 1,471 (11) 1,482 1,708 (13) 1,721 723 (5) 728 200 - 200 180 - 180
Fuel, oil costs and emissions charges 830 (109) 939 967 (125) 1,092 519 (9) 528 198 (9) 207 89 (10) 99
Depreciation, amortisation and impairment 979 (6) 985 1,134 (7) 1,141 350 - 350 227 (13) 240 140 - 140
Other operating costs 2,188 - 2,188 2,550 - 2,550 1,412 - 1,412 624 (7) 631 305 - 305
Total expenditure on operations 5,468 (126) 5,594 6,359 (145) 6,504 3,004 (14) 3,018 1,249 (29) 1,278 714 (10) 724
Operating loss (1,769) 131 (1,900) (2,041) 151 (2,192) (220) 14 (234) (233) 29 (262) (338) 9 (347)
Operating margin (%) (47.8)% (51.4)% (7.9)% (8.4)% (23.0)% (25.8)% (90.0)% (92.1)%
Year to December 31, 2021
IAG Loyalty (£) IAG Loyalty (€)
€ million Statutory Exceptional items Before exceptional items Statutory Exceptional items Before exceptional items
Passenger revenue 215 - 215 252 - 252
Other revenue 162 - 162 186 - 186
Total revenue 377 - 377 438 - 438
Employee costs 33 - 33 37 - 37
Depreciation, amortisation and impairment 6 - 6 7 - 7
Other operating costs 225 - 225 263 - 263
Total expenditure on operations 264 - 264 307 - 307
Operating profit 113 - 113 131 - 131
Operating margin (%) 29.9% 29.9%
b Adjusted earnings/(loss) per share ((KPI))
Adjusted earnings are based on results before exceptional items after tax and
adjusted for earnings attributable to equity holders and interest on
convertible bonds, divided by the weighted average number of ordinary shares,
adjusted for the dilutive impact of the assumed conversion of the bonds and
employee share schemes outstanding.
€ million Note 2022 2021
Profit/(loss) after tax attributable to equity holders of the parent a 431 (2,933)
Exceptional items a 29 105
Profit/(loss) after tax attributable to equity holders of the parent before 402 (3,038)
exceptional items
Income statement impact of convertible bonds (104) -
Adjusted profit/(loss) 298 (3,038)
Weighted average number of shares used for basic earnings/(loss) per share 11 4,958 4,964
Weighted average number of shares used for diluted earnings/(loss) per share 11 5,344 4,964
Basic earnings/(loss) per share (€ cents) 8.7 (59.1)
Basic earnings/(loss) per share before exceptional items (€ cents) 8.1 (61.2)
Adjusted earnings/(loss) per share before exceptional items (€ cents) 5.6 (61.2)
c Airline non-fuel costs per ASK
The Group monitors airline unit costs (per ASK, a standard airline measure of
capacity) as a means of tracking operating efficiency of the core airline
business. As fuel costs can vary with commodity prices, the Group monitors
fuel and non-fuel costs individually. Within non-fuel costs are the costs
associated with generating Other revenue, which typically do not represent the
costs of transporting passengers or cargo and instead represent the costs of
handling and maintenance for other airlines, non-flight products in BA
Holidays and costs associated with other miscellaneous non-flight revenue
streams. Airline non-fuel costs per ASK is defined as total operating
expenditure before exceptional items, less fuel, oil costs and emission
charges and less non-flight specific costs divided by total available seat
kilometres (ASKs), and is shown on a constant currency basis (abbreviated to
'ccy').
€ million Note 2022 Reported ccy adjustment 2022 2021
ccy
Total expenditure on operations a 21,810 (1,104) 20,706 11,220
(Add)/less: exceptional items in operating expenditure a (31) (31) (200)
Less: fuel, oil costs and emission charges a 6,120 (505) 5,615 1,935
Non-fuel costs 15,721 (599) 15,122 9,485
Less: Non-flight specific costs 1,716 (84) 1,632 815
Airline non-fuel costs 14,005 (515) 13,490 8,670
ASKs (millions) 263,592 263,592 121,965
Airline non-fuel unit costs per ASK (€ cents) 5.31 5.12 7.11
d Levered free cash flow ((KPI))
Levered free cash flow represents the cash generated, and the financing
raised, by the businesses before shareholder returns and is defined as the net
increase in cash and cash equivalents taken from the Cash flow statement,
adjusting for movements in Current interest-bearing deposits and adding back
the cash outflows associated with dividends paid and the acquisition of
treasury shares. The Group believes that this measure is useful to the users
of the financial statements in understanding the cash generating ability of
the Group that is available to return to shareholders, to improve leverage
and/or to undertake inorganic growth opportunities.
€ million 2022 2021
Net Increase in cash and cash equivalents 1,316 1,913
Less: Decrease in other current interest-bearing deposits 351 (91)
Levered free cash flow 1,667 1,822
e Net debt to EBITDA before exceptional items ((KPI))
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 against
internal and external security analyst and investor benchmarks. During 2022
the Group has amended the name of the APM to clarify that the EBITDA element
is before exceptional items, however the determination of the calculation of
the APM has not changed.
Net debt is defined as long-term borrowings (both current and non-current),
less cash, cash equivalents and current interest-bearing deposits. Net debt
excludes supply chain financing arrangements which are classified within trade
payables (note 22).
EBITDA before exceptional items is defined as operating result before
exceptional items, interest, taxation, depreciation, amortisation and
impairment.
The Group believes that this additional measure, which is used internally to
assess the Group's financial capacity, is useful to the users of the financial
statements in helping them to see how the Group's financial capacity has
changed over the year. It is a measure of the profitability of the Group and
of the core operating cash flows generated by the business model.
€ million Note 2022 2021
Interest-bearing long-term borrowings 25 19,984 19,610
Less: Cash and cash equivalents 21 (9,196) (7,892)
Less: Other current interest-bearing deposits 21 (403) (51)
Net debt 10,385 11,667
Operating profit/(loss) a 1,256 (2,765)
Add: Depreciation, amortisation and impairment a 2,070 1,932
EBITDA 3,326 (833)
Add: Exceptional items (excluding those reported within Depreciation, a (23) (184)
amortisation and impairment)
EBITDA before exceptional items 3,303 (1,017)
Net debt to EBITDA before exceptional items 3.1 (11.5)
f Return on invested capital ((KPI))
The Group monitors return on invested capital (RoIC) as it gives an indication
of the Group's capital efficiency relative to the capital invested as well as
the ability to fund growth and to pay dividends. RoIC is defined as EBITDA
before exceptional items, less fleet depreciation adjusted for inflation,
depreciation of other property, plant and equipment, and amortisation of
software intangibles, divided by average invested capital and is expressed as
a percentage.
Invested capital is defined as the average of property, plant and equipment
and software intangible assets over a 12-month period between the opening and
closing net book values. The fleet aspect of property, plant and equipment is
inflated over the average age of the fleet to approximate the replacement cost
of the associated assets.
€ million Note 2022(1) 2021
EBITDA before exceptional items e 3,303 (1,017)
Less: Fleet depreciation multiplied by inflation adjustment (1,944) (1,777)
Less: Other property, plant and equipment depreciation (247) (257)
Less: Software intangible amortisation (210) (167)
902 (3,218)
Invested capital
Average fleet value(2) 13 15,717 15,241
Less: Average progress payments(3) 13 (910) (729)
Fleet book value less progress payments 14,807 14,512
Inflation adjustment(4) 1.18 1.16
17,435 16,893
Average net book value of other property, plant and equipment(5) 13 2,037 2,106
Average net book value of software intangible assets(6) 17 640 640
Total invested capital 20,112 19,639
Return on Invested Capital 4.5 % (16.4)%
1 The 2022 RoIC calculation excludes the effect of the €29 million
credit recorded in Depreciation, amortisation and impairment in the Income
statement relating to the de-designation of hedge accounting (refer to note
6).
2 The average net book value of aircraft is calculated from an amount of
€15,116 million at December 31, 2021 and €16,317 million at December 31,
2022.
3 The average net book value of progress payments is calculated from an
amount of €748 million at December 31, 2021 and €1,071 million at December
31, 2022.
4 Presented to two decimal places and calculated using a 1.5 per cent
inflation (December 31, 2021: 1.5 per cent inflation) rate over the weighted
average age of the fleet at December 31, 2022: 11.3 years (December 31, 2021:
10.6 years).
5 The average net book value of other property, plant and equipment is
calculated from an amount of €2,045 million at December 31, 2021 and
€2,029 million at December 31, 2022.
6 The average net book value of software intangible assets is calculated
from an amount of €642 million at December 31, 2021 and €637 million at
December 31, 2022.
g Results on a constant currency basis
Movements in foreign exchange rates impact the Group's financial results. The
Group reviews the results, including revenue and operating costs at constant
rates of exchange. The Group calculates these financial measures at constant
rates of exchange based on a retranslation, at prior year exchange rates, of
the current year's results of the Group. Although the Group does not believe
that these measures are a substitute for IFRS measures, the Group does believe
that such results excluding the impact of currency fluctuations year-on-year
provide additional useful information to investors regarding the Group's
operating performance on a constant currency basis. Accordingly, the financial
measures at constant currency within the discussion of the Group Financial
review should be read in conjunction with the information provided in the
Group financial statements.
The following table represents the main average and closing exchange rates for
the reporting periods. Where 2022 figures are stated at a constant currency
basis, they have applied the 2021 rates stated below:
Foreign exchange rates
Weighted average Closing
2022 2021 2022 2021
Pound sterling to euro 1.17 1.15 1.14 1.18
Euro to US dollar 1.05 1.20 1.06 1.13
Pound sterling to US dollar 1.23 1.38 1.21 1.33
h Liquidity
The Board and the Management Committee monitor liquidity in order to assess
the resilience of the Group to adverse events and uncertainty and develop
funding initiatives to maintain this resilience.
Liquidity is used by analysts, investors and other users of the financial
statements as a measure to the financial health and resilience of the Group.
Liquidity is defined as Cash and cash equivalents plus Current
interest-bearing deposits, plus Committed general undrawn facilities and
committed aircraft undrawn facilities.
€ million Note 2022 2021
Cash and cash equivalents 21 9,196 7,892
Current interest-bearing deposits 21 403 51
Committed general undrawn facilities 27f 3,231 2,864
Committed aircraft undrawn facilities 27f 1,116 1,126
Overdrafts and other facilities 27f 53 53
Total liquidity 13,999 11,986
Subsidiaries
British Airways
Name and address Principal activity Country of Incorporation Percentage of equity owned
BA and AA Holdings Limited* Holding company England 100%
Waterside, PO Box 365, Harmondsworth, UB7 0GB
BA Call Centre India Private Limited (callBA) Call centre India 100%
F-42, East of Kailash, New-Delhi, 110065
BA Cityflyer Limited* Airline operations England 100%
Waterside, PO Box 365, Harmondsworth, UB7 0GB
BA Euroflyer Limited Airline operations England 100%
Waterside, PO Box 365, Harmondsworth, UB7 0GB
BA European Limited Holding company England 100%
Waterside, PO Box 365, Harmondsworth, UB7 0GB
BA Excepted Group Life Scheme Limited Life insurance England 100%
Waterside, PO Box 365, Harmondsworth, UB7 0GB
BA Healthcare Trust Limited Healthcare England 100%
Waterside, PO Box 365, Harmondsworth, UB7 0GB
BA Holdco Limited Holding company England 100%
Waterside, PO Box 365, Harmondsworth, UB7 0GB
BA Number One Limited Dormant England 100%
Waterside, PO Box 365, Harmondsworth, UB7 0GB
BA Number Two Limited Dormant Jersey 100%
IFC 5, St Helier, JE1 1ST
Bealine Plc Dormant England 100%
Waterside, PO Box 365, Harmondsworth, UB7 0GB
BritAir Holdings Limited* Holding company England 100%
Waterside, PO Box 365, Harmondsworth, UB7 0GB
British Airways (BA) Limited Dormant England 100%
Waterside, PO Box 365, Harmondsworth, UB7 0GB
British Airways 777 Leasing Limited* Aircraft leasing England 100%
Waterside, PO Box 365, Harmondsworth, UB7 0GB
British Airways Associated Companies Limited Holding company England 100%
Waterside, PO Box 365, Harmondsworth, UB7 0GB
British Airways Avionic Engineering Limited* Aircraft maintenance England 100%
Waterside, PO Box 365, Harmondsworth, UB7 0GB
British Airways Capital Limited Aircraft financing Jersey 100%
Queensway House, Hilgrove Street, St Helier, JE1 1ES
British Airways Holdings B.V. Holding company Netherlands 100%
Strawinskylaan 3105, Atrium, Amsterdam, 1077ZX
British Airways Holidays Limited* Tour operator England 100%
Waterside, PO Box 365, Harmondsworth, UB7 0GB
British Airways Interior Engineering Limited* Aircraft maintenance England 100%
Waterside, PO Box 365, Harmondsworth, UB7 0GB
British Airways Leasing Limited* Aircraft leasing England 100%
Waterside, PO Box 365, Harmondsworth, UB7 0GB
British Airways Maintenance Cardiff Limited* Aircraft maintenance England 100%
Waterside, PO Box 365, Harmondsworth, UB7 0GB
British Airways Pension Trustees (No 2) Limited Trustee company England 100%
Waterside, PO Box 365, Harmondsworth, UB7 0GB
British Midland Airways Limited Former airline England 100%
Waterside, PO Box 365, Harmondsworth, UB7 0GB
British Midland Limited Dormant England 100%
Waterside, PO Box 365, Harmondsworth, UB7 0GB
Flyline Tele Sales & Services GmbH Call centre Germany 100%
Hermann Koehl-Strasse 3, 28199, Bremen
Gatwick Ground Services Limited Ground services England 100%
Waterside, PO Box 365, Harmondsworth, UB7 0GB
Overseas Air Travel Limited Transport England 100%
Waterside, PO Box 365, Harmondsworth, UB7 0GB
Speedbird Insurance Company Limited* Insurance Bermuda 100%
Canon's Court, 22 Victoria Street, Hamilton, HM 12
Teleflight Limited Call centre England 100%
Waterside, PO Box 365, Harmondsworth, UB7 0GB
British Mediterranean Airways Limited Former airline England 99%
Waterside, PO Box 365, Harmondsworth, UB7 0GB
Avios Group (AGL) Limited* Management of airline loyalty programmes England 86%(1)
Waterside, PO Box 365, Harmondsworth, UB7 0GB
Iberia
Name and address Principal activity Country of incorporation Percentage of equity owned
Compañía Operadora de Corto y Medio Radio Iberia Express, S.A.* Airline operations Spain 100%
Calle Alcañiz 23, Madrid, 28006
Compañía Explotación Aviones Cargueros Cargosur, S.A. Cargo transport Spain 100%
Calle Martínez Villergas 49, Madrid, 28027
Iberia LAE México SA de CV Merchandise storage, security and custody services Mexico 100%
Xochicalco 174, Col. Narvarte, Alcaldía Benito Juárez,
Mexico City, 03020
Iberia Líneas Aéreas de España, S.A. Operadora* Airline operations and maintenance Spain 100%(2)
Calle Martínez Villergas 49, Madrid, 28027
Iberia México, S.A.* Storage and Mexico 100%
Calle Montes Urales 424, Colonia Lomas de Chapultepec V,
custody services
Mexico City, 11000
Iberia Operadora UK Limited Dormant England 100%(1)
Waterside, PO Box 365, Harmondsworth, UB7 0GB
Iberia Tecnología, S.A.* Aircraft maintenance Spain 100%
Calle Martínez Villergas 49, Madrid, 28027
Iberia Desarrollo Barcelona, S.L.* Airport infrastructure development Spain 75%
Avenida de les Garrigues 38-44, Edificio B,
El Prat de Llobregat, Barcelona, 08220
Avios Group (AGL) Limited* Management of airline loyalty programmes England 14%(1)
Waterside, PO Box 365, Harmondsworth, UB7 0GB
Aer Lingus
Name and address Principal activity Country of incorporation Percentage of equity
owned
Aer Lingus (Ireland) Limited Provision of human resources Republic of Ireland 100%
Dublin Airport, Dublin
support to fellow group companies
Aer Lingus 2009 DCS Trustee Limited Trustee Republic of Ireland 100%
Dublin Airport, Dublin
Aer Lingus Beachey Limited Dormant Isle of Man 100%
Penthouse Suite, Analyst House, Peel Road, IM1 4LZ
Aer Lingus Group DAC* Holding company Republic of Ireland 100%(3)
Dublin Airport, Dublin
Aer Lingus Limited* Airline operations Republic of Ireland 100%
Dublin Airport, Dublin
Aer Lingus (UK) Limited Airline operations Northern 100%
Aer Lingus Base, Belfast City Airport, Sydenham Bypass, Belfast, Co. Antrim,
Ireland
BT3 9JH
ALG Trustee Limited Trustee Isle of Man 100%
33-37 Athol Street, Douglas, IM1 1LB
Dirnan Insurance Company Limited Insurance Bermuda 100%
Canon's Court, 22 Victoria Street, Hamilton, HM 12
Santain Developments Limited Dormant Republic of Ireland 100%
Dublin Airport, Dublin
IAG Loyalty
Name and address Principal activity Country of incorporation Percentage
of equity
owned
Avios South Africa Proprietary Limited Dormant South Africa 100%
Block C, 1 Marignane Drive, Bonaero Park, Gauteng, 1619
IAG Loyalty Limited Dormant England 100%
Waterside, PO Box 365, Harmondsworth, UB7 0GB
IAG Loyalty Retail Limited Retail services England 100%
Waterside, PO Box 365, Harmondsworth, UB7 0GB
IAG
Cargo
Name and address Principal activity Country of Incorporation Percentage
of equity
owned
Cargo Innovations Limited Dormant England 100%
Carrus Cargo Centre, PO Box 99, Sealand Road, London Heathrow Airport,
Hounslow, Middlesex, TW6 2JS
Zenda Group Limited Dormant England 100%
Carrus Cargo Centre, PO Box 99, Sealand Road, London Heathrow Airport,
Hounslow, Middlesex, TW6 2JS
Vueling
Name and address Principal activity Country of incorporation Percentage
of equity
owned
Yellow Handling, S.L.U Ground handling services Spain 100%
Carrer de Catalunya 83
Viladecans, Barcelona 08840
Vueling Airlines, S.A.* Airline operations Spain 99.5%
Carrer de Catalunya 83
Viladecans, Barcelona 08840
LEVEL
Name and address Principal activity Country of incorporation Percentage
of equity
owned
FLYLEVEL UK Limited Airline operations England 100%
Waterside, PO Box 365, Harmondsworth, UB7 0GB
Openskies SASU Airline operations France 100%
3 Rue le Corbusier, Rungis, 94150
International Consolidated Airlines Group, S.A.
Name and address Principal activity Country of incorporation Percentage
of equity
owned
AERL Holding Limited Holding company England 100%
Waterside, PO Box 365, Harmondsworth, UB7 0GB
British Airways Plc* Airline operations England 100%(4)
Waterside, PO Box 365, Harmondsworth, UB7 0GB
FLY LEVEL, S.L. Airline operations Spain 100%
Camino de la Muñoza s/n, El Caserío,
Iberia Zona Industrial 2, Madrid, 28042
IAG Cargo Limited* Air freight operations England 100%
Carrus Cargo Centre, PO Box 99, Sealand Road, London Heathrow Airport,
Hounslow, TW6 2JS
IAG Connect Limited Inflight eCommerce platform Republic of Ireland 100%
Waterside, PO Box 365, Harmondsworth, UB7 0GB
IAG GBS Limited* IT, finance, procurement services England 100%
Waterside, PO Box 365, Harmondsworth, UB7 0GB
IAG GBS Poland sp z.o.o.* IT, finance, procurement services Poland 100%
Ul. Opolska 114, Krakow, 31-323
IB Opco Holding, S.L. Holding company Spain 100%(2)
Calle Martínez Villergas 49, Madrid, 28027
Veloz Holdco, S.L.U. Holding company Spain 100%
Carrer de Catalunya 83
Viladecans, Barcelona 08840
* Principal subsidiaries
1 The Group holds 100% of both the nominal share capital and economic
rights in Avios Group (AGL) Limited, held directly by British Airways Plc,
which owns 86% and Iberia Operadora UK Limited which owns 14%.
2 The Group holds 49.9% of both the total nominal share capital and the
total number of voting rights in IB Opco Holding, S.L. (and thus, indirectly,
in Iberia Líneas Aéreas de España, S.A. Operadora), such stake having
almost 100% of the economic rights in these companies. The remaining shares,
representing 50.1% of the total nominal share capital and the total number of
voting rights belong to a Spanish company incorporated for the purposes of
implementing the Iberia nationality structure.
3 The Group holds 49.75% of the total number of voting rights and the
majority of the economic rights in Aer Lingus Group DAC. The remaining voting
rights, representing 50.25 per cent, correspond to a trust established for
implementing the Aer Lingus nationality structure.
4 The Group holds 49.9% of the total number of voting rights and 99.65% of
the total nominal share capital in British Airways Plc, such stake having
almost 100% of the economic rights. The remaining nominal share capital and
voting rights, representing 0.35% and 50.1% respectively, are held by a trust
established for the purposes of implementing the British Airways nationality
structure.
Associates
Name and address Country of Incorporation Percentage
of equity
owned
Empresa Hispano Cubana de Mantenimiento de Aeronaves, Ibeca, S.A. Cuba 50%
Avenida de Vantroi y Final,
Jose Martí Airport, Havana
Empresa Logística de Carga Aérea, S.A. Cuba 50%
Carretera de Wajay km 1 ½,
Jose Martí Airport, Havana
Multiservicios Aeroportuarios, S.A. Spain 49%
Avenida de Manoteras 46, 2ª planta, Madrid, 28050
Dunwoody Airline Services Limited England 40%
Building 552 Shoreham Road East, London Heathrow Airport, Hounslow, TW6 3UA
Serpista, S.A. Spain 39%
Calle Cardenal Marcelo Spínola 10, Madrid, 28016
Air Miles España, S.A. Spain 26.7%
Avenida de Bruselas 20, Alcobendas, Madrid, 28108
Inloyalty by Travel Club, S.L.U. Spain 26.7%
Avenida de Bruselas 20, Alcobendas, Madrid, 28108
Viajes Ame, S.A. Spain 26.7%
Avenida de Bruselas 20, Alcobendas, Madrid, 28108
DeepAir Solutions Limited England 23%
Flat 10, 28 Cranley Gardens, London, SW7 3DD
LanzaJet USA 16.7%
520 Lake Cook Road, Suite 680, Deerfield, Illinois, 60015
Joint ventures
Name and address Country of incorporation Percentage
of equity
owned
Sociedad Conjunta para la Emisión y Gestión de Medios de Pago EFC, S.A. Spain 50.5%
Calle de O'Donnell 12, Madrid, 28009
Other equity investments
The Group's principal other equity investments are as follows:
Name and address Country of Incorporation Percentage of equity owned Currency Shareholder's funds (million) Profit/(loss) before tax (million)
Air Europa Holdings S.L.(1) Spain 20% EUR 24 -
Carretera Arenal - Llucmajor, km 21.5
Llucmajor, 07620
Servicios de Instrucción de Vuelo, S.L. Spain 19.9% EUR 73 2
Camino de la Muñoza s/n, El Caserío,
Iberia Zona Industrial 2, Madrid, 28042
The Airline Group Limited England 16.7% GBP 208 -
5th Floor, Brettenham House South, Lancaster Place, London,
WC2N 7EN
Travel Quinto Centenario, S.A. Spain 10% EUR - -
Calle Alemanes 3, Sevilla, 41004
i6 Group Limited England 7.4% GBP 4 (1)
Farnborough Airport, Ively Road, Farnborough, Hampshire, GU14 6XA
NAYAKJV1, S.L. Spain 5% EUR - -
C/ d'Osona, 2, El Prat de Llobregat, 08820
Monese Limited England 4.8% GBP 18 (28)
Eagle House 163 City Road, London, EC1V 1NR
1 The Shareholder funds and result before tax of Air Europa Holdings S.L.
represent the data for the year to December 31, 2021 and are prepared under
Spanish GAAP. The Group does not have access to any financial information
Statement of directors' responsibilities
LIABILITY STATEMENT OF DIRECTORS FOR THE PURPOSES ENVISAGED UNDER ARTICLE
11.1.b OF SPANISH ROYAL DECREE 1362/2007 OF 19 OCTOBER (REAL DECRETO
1362/2007).
At a meeting held on February 23, 2023, the directors of International
Consolidated Airlines Group, S.A. state that, to the best of their knowledge,
the consolidated financial statements for the year to December 31, 2022
prepared in accordance with the applicable international accounting standards,
offer a true and fair view of the assets, liabilities, financial position and
profit or loss of the Company and the undertakings included in the
consolidation taken as a whole, and the interim consolidated management report
includes a fair review of the required information.
February 23, 2023
Javier Ferrán Larraz Luis Gallego Martín
Chairman Chief Executive Officer
Giles Agutter Peggy Bruzelius
Eva Castillo Sanz Margaret Ewing
Maurice Lam Heather Ann McSharry
Robin Phillips Emilio Saracho Rodríguez de Torres
Lucy Nicola Shaw
AIRCRAFT FLEET
Number in service with Group companies(1)
Owned Finance lease Operating lease Total Total Changes since Future Options(2)
December 31, December 31, December 31, deliveries
2022 2021 2021
Airbus A319ceo 8 - 33 41 39 2 - -
Airbus A320ceo 42 21 136 199 190 9 - -
Airbus A320neo 2 35 23 60 50 10 45 50
Airbus A321ceo 11 3 30 44 51 (7) - -
Airbus A321neo - 2 14 16 14 2 46 -
Airbus A321 LR - - 8 8 8 - - -
Airbus A321 XLR - - - - - - 14 14
Airbus A330-200 - 1 15 16 18 (2) - -
Airbus A330-300 4 4 12 20 18 2 - -
Airbus A350-900 - 6 9 15 9 6 7 16
Airbus A350-1000 3 10 - 13 8 5 5 36
Airbus A380 2 10 - 12 12 - - -
Boeing 737-8200 - - - - - - 25 100
Boeing 737-10 - - - - - - 25 -
Boeing 777-200 38 2 3 43 43 - - -
Boeing 777-300 5 4 7 16 16 - - -
Boeing 777-9 - - - - - - 18 24
Boeing 787-8 - 10 2 12 12 - - -
Boeing 787-9 1 8 9 18 18 - - -
Boeing 787-10 - 4 - 4 2 2 7 6
Embraer E190 9 - 12 21 23 (2) - -
Group total 125 120 313 558 531 27 192 246
1 During the year to December 31, 2022, the Group has changed the basis in
which it presents the aircraft fleet table.
Aircraft are reported based on their contractual definitions as opposed to
their accounting determination. For accounting purposes, while all operating
leases are presented as lease liabilities, finance leases are presented as
either lease liabilities or asset financed liabilities, depending on the
nature of the individual arrangement. Refer to note 2 for further information.
2 The options to purchase 100 Boeing 737 aircraft allow for flexibility in
the choice of variant.
As well as those aircraft in service the Group also holds 18 aircraft
(December 31, 2021: 29) not in service.
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact
rns@lseg.com (mailto:rns@lseg.com)
or visit
www.rns.com (http://www.rns.com/)
.
RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our
Privacy Policy (https://www.lseg.com/privacy-and-cookie-policy)
. END FR EAKALAAEDEEARecent news on International Consolidated Airlines SA
See all newsREG - Intl Con Airline Grp - Completion of share purchase programme
AnnouncementREG - Intl Con Airline Grp - Transaction in Own Shares
AnnouncementREG - Intl Con Airline Grp - Transaction in Own Shares
AnnouncementREG - Intl Con Airline Grp - Transaction in Own Shares
AnnouncementREG - Intl Con Airline Grp - Total Voting Rights
Announcement