REG - Intl Con Airline Grp - IAG FY 2023 Results
29/02/2024 07:00
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RNS Number : 8633E International Cons Airlines Group 29 February 2024
IAG full year results 2023
Strong growth in operating profit in 2023 underpinned by robust and
sustainable demand for travel, alongside continued investment in our
transformation to drive long-term earnings growth.
Summary
• Strong and sustained demand for travel, in particular in leisure
• Full year 2023 operating profit before exceptional items of €3,507
million significantly higher than last year and ahead of 2019 (2022: €1,247
million; 2019*: €3,253 million)
• Operating margin of 11.9% (2022: 5.4%) delivered by our transformation
programme
• Strong free cash flow generation of €1.3 billion has delivered a
strong balance sheet, with net debt to EBITDA before exceptional items of 1.7
times (2022: 3.1 times), below our target of 1.8 times over the cycle
• Positive outlook for 2024: confidence in significant free cash flow
generation; disciplined capital allocation will maintain our strong balance
sheet; committed to sustainable shareholder value creation and cash returns
Strategic highlights
• Capacity growth in 2023 of 22.6% vs 2022, focused on our core North
Atlantic and South Atlantic markets
• Revenue and cost transformation initiatives driving improvements to our
customer proposition
• Our Spanish businesses delivered €1.4 billion of operating profit
(2022: €0.6 billion), highlighting the greater balance in our portfolio
• Our highly cash-generative, high-margin IAG Loyalty business grew
profits by 17% to £280 million, adding 4.9 million new members (17% increase
in new members) during the year
• Quarter 4 2023 operating profit before exceptional items of €502
million (quarter 4 2022: €477 million)
• Continued investment in our people, with 13,000 new colleagues hired in
2023
• One third of our sustainable aviation fuel target for 2030 is now
committed
Luis Gallego, IAG Chief Executive Officer, said:
"In 2023, IAG more than doubled its operating margin and profits compared to
2022, generated excellent free cash flow and strengthened its balance sheet
position, recovering capacity to close to pre-COVID-19 levels in most of its
core markets.
"In 2024, we will execute on our strategy, building long-term value into the
business. We will focus on strengthening our core airline businesses and on
developing IAG Loyalty and our other asset-light growth opportunities, and we
will do this while operating under a strong financial and sustainability
framework. Our airlines operate in the largest and most attractive markets
globally and we will continue to invest in our brands to transform the
business, improve the customer experience and support the delivery of
sustainable growth and world-class margins.
"I would like to thank all of the teams across the Group for their continued
hard work and dedication to delivering our transformation plan."
Financial summary:
Year to 31 December Three months to 31 December
Statutory results (€ million) 2023 2022(1) 2023 2022(1)
Total revenue 29,453 23,066 7,224 6,386
Operating profit 3,507 1,278 502 477
Profit after tax 2,655 431 504 232
Basic earnings per share (€ cents) 53.8 8.7
Cash, cash equivalents and interest-bearing deposits 6,837 9,599
Borrowings 16,082 19,984
Alternative performance measures (€ million) 2023 2022(1) 2023 2022(1)
Total revenue before exceptional items 29,453 23,066 7,224 6,386
Operating profit before exceptional items 3,507 1,247 502 477
Operating margin before exceptional items 11.9% 5.4% 6.9% 7.5%
Profit after tax before exceptional items 2,655 402 504 232
Adjusted earnings per share (€ cents) 50.6 5.6
Net debt 9,245 10,385
Net debt to EBITDA before exceptional items (times) 1.7 3.1
Total liquidity(2) 11,624 13,999
1 The 2022 results include a reclassification to conform with the current
year presentation for the Net gain on sale of property, plant and equipment.
There is no impact on the Profit after tax.
2 Total liquidity includes Cash, cash equivalents and interest-bearing
deposits, plus committed and undrawn general and aircraft-specific financing
facilities.
*The 2019 results include a reclassification to conform with the current year
presentation for the Net gain on sale of property, plant and equipment, and a
restatement for the treatment of administration costs associated with the
Group's defined benefit pension schemes.
The definition of the Group's alternative performance measures is set out in
the Alternative performance measures note to the consolidated financial
statements, which includes: Free cash flow; Net debt to EBITDA before
exceptional items ('leverage'); and Return on invested capital. Capital
expenditure is measured as the 'Acquisition of property, plant and equipment
and intangible assets' from the Cash flow statement. Operating margin is shown
before exceptional items. All other profit, revenue and cost metrics are
quoted on a statutory basis, unless indicated otherwise.
Financial highlights for 2023
• Restored 95.7% of 2019 capacity, measured in available seat kilometres
(ASKs), with quarter 4 at 98.6% of 2019
• Passenger unit revenue for the year was 8.2% higher than in 2022, with
strong leisure traffic recovery and business traffic recovering more slowly.
The premium leisure segment continued to perform very well
• Non-fuel unit costs reduced by 4.4% versus 2022, driven by a passenger
capacity increase and transformation initiatives, offsetting inflation and the
investments we are making in our customer offering and our systems
• Fuel unit cost was up 0.7% versus 2022, with effective fuel prices after
hedging broadly unchanged from 2022 and the Group's investment in more
fuel-efficient aircraft partially offsetting increased costs of Emissions
Trading Schemes
• Profit after tax for the year of €2,655 million (2022: €431 million)
Outlook
• Demand continues to be robust, with particular strength in leisure
travel. We are currently 92% booked for Q1 2024 and 62% booked for H1 2024*,
ahead of our position last year
• We are continuing to invest in our core markets and in growing our
global leadership positions. We plan to grow capacity (ASK) by c.7% in 2024.
In particular British Airways will continue to rebuild to its pre-COVID-19
long-haul capacity and Iberia to grow efficiently in the attractive and
growing Latin American market
• We expect our non-fuel unit costs to increase slightly in 2024, as we
invest in our businesses. Our ongoing transformation programme will help us to
offset the impact of inflation, improve our customer proposition and support
the delivery of world-class margins and returns over the medium term
• We expect to generate significant free cash flow during the year, prior
to the benefit of any leasing transactions and with no additional pension or
material debt maturity repayments this year. This is net of capital
expenditure related to our investment plans of around €3.7 billion in 2024
Delivering our strategy
Our strategy is designed to generate sustainable earnings growth at
world-class margins, the combination of which we expect to drive sustainable
returns to shareholders.
This will be achieved by focusing on three strategic imperatives:
1 Strengthening our core
Growing our portfolio of global leadership positions
IAG has leading positions in highly attractive, secular growth markets, in
particular the valuable North Atlantic, South Atlantic and Domestic Spanish
markets.
Airline markets worldwide were particularly strong in 2023 as demand for
experiences increased and lifestyle priorities changed post-COVID-19. Leisure
travel has been the strongest driver of passenger demand across all of our
cabins. Corporate travel continues to return more slowly, in particular in
short duration and short-haul trips.
Investing in our market-leading positions
We are focused on ensuring disciplined capacity deployment into our markets.
British Airways is planned to return to pre-pandemic levels of non-premium
capacity in 2024; long-haul capacity by 2025; and premium capacity by 2026.
Iberia is deploying capacity into a structurally attractive long-term market
which is supporting profitable growth. All of our airlines are supporting
their growth in an efficient way through a combination of improved aircraft
utilisation and more modern, new generation aircraft.
Investing in the North Atlantic - the largest aviation market from Europe
IAG and its joint business partners have market share of 45% on the North
Atlantic market and it represents 32% of IAG's total capacity by ASK. We serve
North America 150 times each day to 29 destinations, 30% more than nearest
competitor.
Aer Lingus
• Aer Lingus has a unique advantage of strong cultural and geographic
links to its core US long-haul market, as well as US-border pre-clearance at
Dublin airport
• 2023: reopened Hartford and launched Cleveland
• 2024: expanding network to 21 routes to the US and Canada, including
restarting Minneapolis and new route to Denver
British Airways
• British Airways is the market leader to North America from London, a
highly-valuable and mainly point-to-point market
• 2023: new route to Cincinnati and back to 100% of pre-COVID-19 total
capacity
• 2024: focus on frequencies and adding premium seats as it builds back
towards its pre-COVID-19 premium and non-premium North Atlantic capacity
Iberia
• Iberia serves destinations in North America with strong commercial or
cultural links to Spain
• 2023: consolidation of the new routes to Dallas and Washington that were
launched in 2022
• 2024: growth to Los Angeles and further investment in route maturity
through reinforcing its presence in select US markets
LEVEL
• Strong growth to Boston and New York, as it develops the long-haul,
low-cost model from the valuable Barcelona market. New route to Miami in 2024
Delivery of three Airbus A321 XLRs in 2024 will allow us to create a
competitive advantage over our European peers by using our geographic
advantage to develop our network at low cost.
*as of 25 February 2024
Investing in the structurally growing South Atlantic market
IAG and its joint business partners have market share of 32% on the attractive
South Atlantic market representing 19% of IAG's total capacity by ASK. IAG
operates 45 flights each day to and from Latin America.
Iberia
• Iberia has strong cultural links to Latin America. It is also
well-placed to build on the growing traffic from Latin America to Madrid as
investment and migration of a wealthier demographic increases
• 2023: Increasing frequencies to primary cities in core LATAM markets,
including Bogotá, Mexico City, Lima, Montevideo and Quito
• 2024: further development of frequencies to core markets
• Using new A350-900 is more efficient and supports higher utilisation,
helping to drive a 10 percentage point improvement in unit operating cost
versus the previous generation A340-600
• Opportunities to deploy A321 XLR to select geographies and secondary
cities
LEVEL
• Strengthened its network between Barcelona and Latin America, including
resuming the Santiago de Chile route. Further investment in 2024
British Airways
• Adding frequencies to Rio de Janeiro and adding a tag flight to Buenos
Aires
We announced our proposed Air Europa acquisition in 2023, which will allow for
network development in Latin America. We submitted our regulatory application
to the European Commission in December; this moved to Phase 2 in early 2024
with a resolution expected in late 2024.
European short-haul market
This represents 34% of IAG's total capacity and is served by our network
carriers delivering feeder traffic, alongside our efficient low cost
operations providing a combination of feeder and point-to-point services. Our
disciplined approach to capital allocation gives us the flexibility to focus
investment in order to maximise sustainable, profitable growth.
Vueling
• Delivering efficient growth through higher utilisation and up-gauging of
existing fleet
• De-seasonalising its network, with a focus on winter sun destinations
• Strengthening its Spanish domestic position through investment in
Barcelona and Bilbao
• Leader in select European hubs, such as Paris-Orly to Spain; investing
in London Gatwick to Spain
Strong performance from Iberia Express, including to the Spanish Islands
throughout the year.
BA Euroflyer started operations under its own Air Operator Certificate ('AOC')
in January 2023, focusing on the leisure point-to-point market in Europe. Its
fleet increased from five to 20 aircraft during the year.
Once LEVEL has established a new AOC this gives the Group further flexibility
in considering its options in short-haul operations.
Strengthening our portfolio of world-class brands and operations
Investing in our products and services to drive better customer experiences
We recognise that we need to continue to drive investment in the propositions
of all our airlines to improve the customer experience. We are investing in
our propositions to ensure we are competitive and remain attractive to our
loyal customers.
Investing in our fleet:
• 34 aircraft delivered in 2023, of which 32 were new generation,
efficient and sustainable aircraft with the latest onboard seat offerings
• British Airways now has 68% of its Heathrow-based long-haul fleet
embodied with the Club Suite product. The focus in 2024 will be on the Boeing
787 fleet
• Iberia is delivering a step-change in customer experience with its new
A350 fleet, retrofitting its A330 fleet with its new cabins and its
A320-family fleet for the new 'L' overhead bins
• In 2023 we converted 10 A320neo options to firm deliveries in 2028 as
replacement aircraft for our short-haul network
• We also announced a new order for six Boeing 787-10 aircraft to be
delivered to British Airways in 2025 and 2026 to accelerate its premium
widebody capacity recovery; and one new Airbus A350-900 aircraft for Iberia
Investing in our products and services:
• Aer Lingus aims to maximise the benefits of its unique customer base
with a competitive onboard product, including its next generation business
seat, digital self-service capability, as well as a differentiated service
from our Connected Crew programme
• British Airways is focused on investing in a premium proposition across
its cabins, including its lounges (London Heathrow, Edinburgh, Glasgow, Miami,
New York JFK), onboard food and in-flight entertainment content. Investment in
all of its customers across every cabin includes further development of its
call centre in Delhi, using better IT and systems as well as a proactive
customer care team
• Iberia similarly continues to invest in its highly-rated customer
proposition, including at check-in and in its Madrid lounges; rolling out new
Do&Co menus in all cabins; and making further progress in the
digitalisation of our customers' journey, specifically with the digital
concierge, WhatsApp text assistant and call-centre Smart Voice assistant
• Vueling's positioning as a value low-cost carrier sees a focus on its
digital proposition across the customer journey: digital touchpoints across
the airport journey, better digital self-service in disruption and digital
assistance in the customer care channels
During 2023 our customer Net Promoter Score ('NPS') increased very slightly,
which was driven positively by our investments in new products and services
but negatively affected mostly by the impact of disruption, much of which is
outside our control.
Investing in our operations
Efficient operations are a major driver of both customer satisfaction and
direct financial (revenue and cost) performance.
• Iberia continues to deliver excellent operational performance. In 2023
Iberia was the most punctual airline in Europe and the fifth-most punctual
airline in the world with On-Time Performance ('OTP') at 88.6%
• Vueling's OTP in 2023 was 80.0% after benefiting from the integrated
approach to planning, scheduling and operations implemented over the last few
years
• Aer Lingus' OTP was 67.5% as it was affected in particular by ATC issues
in the UK and France
• British Airways was affected by similar issues, as well as still
recovering its full operational capability at London Heathrow, with OTP in
2023 of 59.7%. As a result significant resource has been invested to drive
better performance and some early initiatives are now starting to deliver
improvement:
• Improved OTP in December 2023 at 67.2% and a strong start to 2024.
British Airways' OTP in January 2024 up 16 points to 79.8%, significantly
better than January 2023 and close to January 2019 levels
• First wave departures improved to 87% through dedicated resource,
integrated planning, ongoing recruitment and training and better performance
management
• Integrated operations programme tools already adding value
(performance dashboard, predictive maintenance, schedule, aircraft assignment)
• A new operating model for London Heathrow will be rolled out for the
summer
Transforming our businesses to drive sustainable earnings growth
IAG's transformation programmes are designed to create better businesses at
each of its operating companies that are more efficient and resilient in order
to sustain long-term competitive advantage
Customer and Innovation
Many of our revenue transformation initiatives are driven by technology and
data. Some examples are as follows:
• British Airways is in the middle of a major transformation of its
commercial digital platforms which it expects to deliver significant revenue
benefits over the next three years. Improvements to British Airways' 'ba.com'
website and app are expected in 2024, including a better content management
system, as well as improvements in the revenue management system to follow
• Iberia is developing its personalisation capability, which will allow
for greater content differentiation and digital marketing optimisation
• Vueling is continuing to improve its customer offering to drive
ancillary revenue through developing its bundles and products
• The Qatar Joint Business is an opportunity for IAG to develop its
network and customer proposition, particularly into the African and Asian
markets. This includes greater commercial integration, as well as through the
use of Avios
Efficiency
• Disruption was a major cause of cost inflation in 2023, as well as
impacting customer NPS. British Airways has invested significantly to improve
its On Time Performance in 2024, which will lead to cost savings through
greater productivity and efficiency, as well as reducing EU261 costs and
improving customer satisfaction
• IAG's investment in new aircraft will drive significant efficiency
gains, as well as network benefits. New generation aircraft are typically
c.20% more fuel-efficient than the previous generation and Iberia's new A350s'
superiority over the A340s is allowing more capacity to be added to Latin
America much more productively
• As well as supporting revenue growth, New Distribution Capability will
drive cost savings across all of our carriers
• Third party supplier costs have seen significant inflation over the past
couple of years and this is a big area of focus across all parts of IAG.
Savings will be made through procurement in engineering and maintenance, and
food and beverage; efficiencies in handling; and pricing across the supply
chain
2 Driving earnings growth through asset-light businesses
Growing IAG Loyalty
Our loyalty business has continued to deliver a very strong performance,
supporting higher earnings growth and margins, as well as strong cash flow.
• Record operating profit £280 million, up 17% year-on-year and 59%
higher than 2019 operating profit
• Driven by our better customer engagement as we re-invest our margin in
more attractive products:
• 4.9 million new members enrolled in 2023 (17% increase in new members
versus 2022) to support future value growth
• More Avios are being collected through demand to fly on our airlines
and strong third-party partnerships, with issuance up 37%
• More Avios are being redeemed through increasing our range of
offerings: 27 Avios-only flights on offer to a range of 11 popular
destinations; or using Avios as payment for BA Holidays (c.20% of holidays
sold have used some Avios as payment)
• Opportunity to develop BA Holidays further, as part of an integrated
loyalty ecosystem
Leveraging our strategic airline partnerships
IAG also seeks to generate capital-light value through its strategic airline
partnerships, mainly through joint businesses that provide customers with a
worldwide network of destinations and flights.
• In 2023 Iberia joined the Qatar Joint Business (QJB) and launched a
service from Madrid to Doha
• As a result the QJB became the largest joint business in the world by
number of countries, with Qatar bringing a strong network across Africa and
Asia
• In 2024 British Airways will fly two daily services to Doha, giving its
passengers access to that strong onward network
• Iberia will also start flying to Tokyo in 2024 as part of the Siberian
Joint Business and British Airways will be back to two daily flights there in
the summer
3 Operating under a strengthened financial and sustainability framework
Industry leader to Net Zero
We continue to state the case for the positive social impact of aviation.
Specifically, we are making further progress in our initiatives to deliver our
sustainability targets:
• IAG has been awarded Eco-Airline of the year by Air Transport World for
industry leadership and best-in-class Sustainable Aviation Fuel (SAF)
programme
• We are taking an active role in EU and UK discussions on SAF, in
particular around mandate design and potential pricing mechanisms
• IAG was the third largest user of SAF globally in 2023. We have now
announced our largest-ever SAF purchase with Twelve, to provide advanced
power-to-liquid SAF with a lifecycle emissions reduction of at least 80%. Our
total contracted SAF commitment is now at approximately one third of our 2030
target
• We are investing in 178 new aircraft between 2023 and 2028. New aircraft
are generally around 20% more fuel-efficient than the previous generation and
significantly quieter. 24% of IAG's short-haul fleet is currently new
generation and 42% of long-haul
• Carbon intensity reduced by 3.6% year-on-year and is more than 10% down
on 2019 levels
• CORSIA and ETS - IAG spent €264 million on carbon credits in 2023 and
supports the proposed global CORSIA offset scheme
Disciplined capital allocation and balance sheet management
IAG has historically delivered market-leading Return on Invested Capital
through its disciplined allocation of capital to its operating companies. As
disclosed at our Capital Markets Day in 2023, through our strategy we are
targeting the following metrics for the Group in the medium term:
• Operating margins of 12% to 15%.
• Return on Invested Capital of 13% to 16%
• Organic average annual capacity growth of 4% to 5% between 2024 and 2026
Our operational and financial performance in 2023 has allowed us to strengthen
the balance sheet, while investing in our continued transformation. We ended
the year at 1.7 times leverage, below our target of 1.8 times through the
cycle.
Given the Group's strong cash-generation capability, in 2024 we expect to
generate significant free cash flow, prior to the benefit of any leasing
transactions and after capital expenditure of around €3.7 billion in the
year.
This is further strengthened by the fact that we have no additional pension
payments or non-aircraft debt repayments in 2024.
Our first priority is to maintain our strong balance sheet.
We will continue to invest in our business to support sustainable growth and
margins.
We are committed to sustainable shareholder value creation and cash returns.
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", "believes",
"may", "will", "could", "should", "continues", "intends", "plans", "targets",
"predicts", "estimates" "envisages" or "anticipates" or other words of similar
meaning or their negatives. 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, and its assumptions, expectations,
objectives and resilience with respect to climate scenarios. 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, economic and geo-political, market, regulatory, climate, supply
chain or other significant external events, many of which are difficult to
predict and are generally beyond the control of the Group, and it is not
reasonably possible to itemise each item. Accordingly, readers of this
announcement are cautioned against relying on forward-looking statements.
Further information on the primary risks of the business and the Group's risk
management process is set out in the Risk management and principal risk
factors section in the Annual report and accounts 2022; this document is
available on www.iairgroup.com. All forward-looking statements made on or
after the date of this announcement and attributable to IAG are expressly
qualified in their entirety by the primary risks set out in that section.
IAG Investor Relations
Waterside (HAA2),
PO Box 365,
Harmondsworth,
Middlesex,
UB7 0GB
Investor.relations@iairgroup.com
CONSOLIDATED INCOME STATEMENT
Year to 31 December Three months to 31 December
€ million 2023 2022(1) Higher/ 2023 2022(1) Higher/
(lower) (lower)
Passenger revenue 25,810 19,458 32.6 % 6,293 5,438 15.7 %
Cargo revenue 1,156 1,615 (28.4) % 290 399 (27.3) %
Other revenue 2,487 1,993 24.8 % 641 549 16.8 %
Total revenue 29,453 23,066 27.7 % 7,224 6,386 13.1 %
Employee costs 5,423 4,647 16.7 % 1,438 1,230 16.9 %
Fuel, oil costs and emissions charges 7,557 6,120 23.5 % 1,978 1,720 15.0 %
Handling, catering and other operating costs 3,849 2,971 29.6 % 958 828 15.7 %
Landing fees and en-route charges 2,308 1,890 22.1 % 546 499 9.4 %
Engineering and other aircraft costs 2,509 2,101 19.4 % 647 594 8.9 %
Property, IT and other costs 1,058 950 11.4 % 270 280 (3.6) %
Selling costs 1,155 920 25.5 % 304 249 22.1 %
Depreciation, amortisation and impairment 2,063 2,070 (0.3) % 555 539 3.0 %
Net gain on sale of property, plant and equipment(1) (2) (22) (90.9) % 13 9 44.4 %
Currency differences 26 141 (81.6) % 13 (39) nm
Total expenditure on operations 25,946 21,788 19.1 % 6,722 5,909 13.8 %
Operating profit 3,507 1,278 nm 502 477 5.2 %
Finance costs (1,113) (1,017) 9.4 % (246) (294) (16.3) %
Finance income 386 52 nm 101 41 nm
Net change in fair value of financial instruments (11) 81 nm (11) (51) (78.4) %
Net financing credit relating to pensions 103 26 nm 26 7 nm
Net currency retranslation credits/(charges) 176 (115) nm 112 190 (41.1) %
Other non-operating credits(1) 8 110 (92.7) % (43) (121) (64.5) %
Total net non-operating costs (451) (863) (47.7) % (61) (228) (73.2) %
Profit before tax 3,056 415 nm 441 249 77.1 %
Tax (401) 16 nm 63 (17) nm
Profit after tax for the year 2,655 431 nm 504 232 nm
1 The 2022 results include a reclassification to conform with the current
year presentation for the Net gain on sale of property, plant and equipment
within Operating profit. Accordingly, for the year and three month period to
31 December 2022, the Group has reclassified gains of €22 million and losses
of €9 million, respectively, from Other non-operating credits to Expenditure
on operations. There is no impact on the Profit after tax.
ALTERNATIVE PERFORMANCE MEASURES
All figures in the tables below are before exceptional items. Refer to
Alternative performance measures section for more detail.
Year to 31 December Three months to 31 December
Before exceptional items Before exceptional items
€ million 2023 2022(1) Higher/ 2023 2022(1) Higher/
(lower) (lower)
Passenger revenue 25,810 19,458 32.6 % 6,293 5,438 15.7 %
Cargo revenue 1,156 1,615 (28.4) % 290 399 (27.3) %
Other revenue 2,487 1,993 24.8 % 641 549 16.8 %
Total revenue 29,453 23,066 27.7 % 7,224 6,386 13.1 %
Employee costs 5,423 4,647 16.7 % 1,438 1,230 16.9 %
Fuel, oil costs and emissions charges 7,557 6,120 23.5 % 1,978 1,720 15.0 %
Handling, catering and other operating costs 3,849 2,971 29.6 % 958 828 15.7 %
Landing fees and en-route charges 2,308 1,890 22.1 % 546 499 9.4 %
Engineering and other aircraft costs 2,509 2,101 19.4 % 647 594 8.9 %
Property, IT and other costs 1,058 973 8.7 % 270 280 (3.6) %
Selling costs 1,155 920 25.5 % 304 249 22.1 %
Depreciation, amortisation and impairment 2,063 2,078 (0.7) % 555 539 3.0 %
Net gain on sale of property, plant and equipment(1) (2) (22) (90.9) % 13 9 44.4 %
Currency differences 26 141 (81.6) % 13 (39) nm
Total expenditure on operations 25,946 21,819 18.9 % 6,722 5,909 13.8 %
Operating profit 3,507 1,247 nm 502 477 5.2 %
Finance costs (1,113) (1,017) 9.4 % (246) (294) (16.3) %
Finance income 386 52 nm 101 41 nm
Net change in fair value of financial instruments (11) 81 nm (11) (51) (78.4) %
Net financing credit relating to pensions 103 26 nm 26 7 nm
Net currency retranslation credits/(charges) 176 (115) nm 112 190 (41.1) %
Other non-operating credits(1) 8 110 (92.7) % (43) (121) (64.5) %
Total net non-operating costs (451) (863) (47.7) % (61) (228) (73.2) %
Profit before tax 3,056 384 nm 441 249 77.1 %
Tax (401) 18 nm 63 (17) nm
Profit after tax 2,655 402 nm 504 232 nm
Operating figures 2023 2022(1) Higher/ 2023 2022(1) Higher/
(lower) (lower)
Available seat kilometres (ASK million) 323,111 263,592 22.6 % 80,818 71,048 13.8 %
Revenue passenger kilometres (RPK million) 275,727 215,749 27.8 % 67,648 59,125 14.4 %
Seat factor (per cent) 85.3 81.8 3.5pts 83.7 83.2 0.5pts
Passenger numbers (thousands) 115,559 94,726 22.0 % 28,011 25,222 11.1 %
Cargo tonne kilometres (CTK million) 4,666 3,980 17.2 % 1,304 1,090 19.6 %
Sold cargo tonnes (thousands) 596 561 6.2 % 157 153 2.6 %
Sectors 714,562 619,122 15.4 % 176,149 162,285 8.5 %
Block hours (hours) 2,137,749 1,781,829 20.0 % 532,055 473,511 12.4 %
Average headcount 69,762 59,800 16.7 % n/a n/a n/a
Aircraft in service 582 558 4.3 % n/a n/a n/a
Passenger revenue per RPK (€ cents) 9.36 9.02 3.8 % 9.30 9.20 1.1 %
Passenger revenue per ASK (€ cents) 7.99 7.38 8.2 % 7.79 7.65 1.7 %
Cargo revenue per CTK (€ cents) 24.77 40.58 (38.9) % 22.24 36.61 (39.2) %
Fuel cost per ASK (€ cents) 2.34 2.32 0.7 % 2.45 2.42 1.1 %
Non-fuel costs per ASK (€ cents) 5.69 5.96 (4.4) % 5.87 5.90 (0.4) %
Total cost per ASK (€ cents) 8.03 8.28 (3.0) % 8.32 8.32 - %
1 The 2022 results include a reclassification to conform with the current
year presentation for the Net gain on sale of property, plant and equipment
within Operating profit. Accordingly, for the year and three month period to
31 December 2022, the Group has reclassified gains of €22 million and
losses of €9 million, respectively, from Other non-operating credits to
Expenditure on operations. There is no impact on the Profit after tax.
FINANCIAL REVIEW
In the commentary below, references are made in selected places to variances
versus 2019 to aid understanding, due to the significant reductions in
capacity the Group's airlines made due to the impact of the COVID-19 pandemic
in the period from 2020 to 2022. It is anticipated that 2023 will be the last
year for which analysis versus 2019 is required.
IAG capacity
In 2023, passenger capacity operated, measured in available seat kilometres
(ASKs), rose by 22.6% versus 2022. For the year, capacity operated was 95.7%
of 2019 levels and capacity was almost fully restored to 2019 levels by the
end of the year, reaching 98.6% of 2019 levels in the final quarter.
Capacity operated by region
Year to 31 December 2023 ASKs ASKs Passenger load factor (%) Higher/(lower) Higher/(lower)
higher/(lower) higher/(lower) v2022 v2019
v2022 v2019
Domestic 7.8 % 8.4 % 89.5 4.0pts 2.3pts
Europe 15.4 % (3.1) % 85.9 4.4pts 2.3pts
North America 23.0 % 3.2 % 82.9 3.6pts (1.2)pts
Latin America and Caribbean 18.8 % (1.7) % 87.6 2.5pts 1.2pts
Africa, Middle East and South Asia 32.2 % 1.1 % 83.3 2.2pts 0.3pts
Asia Pacific 258.0 % (59.7) % 88.4 4.4pts 2.6pts
Total network 22.6 % (4.3) % 85.3 3.5pts 0.7pts
Whilst capacity was fully restored to most of IAG's markets, the recovery in
the Asia Pacific region was slower, linked to later easing of COVID-19
restrictions in the region.
Capacity operated by airline
Year to 31 December 2023 ASKs ASKs Passenger load factor (%) Higher/(lower) Higher/(lower)
higher/(lower) higher/(lower) v2022 v2019
v2022 v2019
Aer Lingus 20.3 % 4.4 % 80.6 3.7pts (1.2)pts
British Airways 28.1 % (9.9) % 83.6 3.8pts 0.0pts
Iberia 18.5 % 3.2 % 87.2 3.0pts 0.0pts
LEVEL 33.1 % (32.8) % 93.4 3.7pts 9.5pts
Vueling 10.5 % 8.5 % 91.4 4.2pts 4.5pts
Group 22.6 % (4.3) % 85.3 3.5pts 0.7pts
In 2023, British Airways had only restored 90.1% of its total 2019 capacity,
as the substantial majority of the Group's capacity to the Asia Pacific region
in 2019, for which recovery following COVID-19 has been slower, was operated
by British Airways. Capacity for British Airways was also impacted by the
accelerated retirement of its Boeing 747-400 fleet during the COVID-19
pandemic and further restoration of capacity is planned for British Airways in
2024 and 2025. The reduction in LEVEL versus 2019 relates to the
discontinuation of operations from Paris Orly in 2020, with the capacity of
LEVEL's operation in Barcelona up 32.4% versus 2019.
Domestic and Europe
Capacity and passenger numbers in IAG's Domestic markets, which are
predominantly within mainland Spain and to the Canary and Balearic Islands,
increased in line with strong leisure demand, with capacity 7.8% higher than
2022, and with a higher passenger load factor of 89.5%, which was up 4.0
points versus the previous year. Capacity and the passenger load factor were
also higher than in 2019, up 8.4% and 2.3 points respectively.
The Group's capacity in Europe was 15.4% higher than in 2022, also boosted by
the demand for leisure travel. Aer Lingus began services to Brindisi, Kos and
Olbia. British Airways expanded the flying undertaken by its subsidiary
launched at London Gatwick airport in 2022, BA Euroflyer, with new routes
including Corfu, Mykonos, Innsbruck, and Fuerteventura. Vueling's new routes
include a service from Barcelona to Rovaniemi (Finland) and the airline added
an extra aircraft at its Bilbao base, with six new routes launched. Passenger
load factor for the region was up 4.4 points versus 2022 to 85.9% and was up
2.3 points versus 2019.
North America
The Group's airlines launched new routes and increased services to North
America, one of the Group's core profit pools, with capacity 23.0% higher than
in 2022 and 3.2% higher than in 2019. Aer Lingus started flights to Cleveland
and resumed its route to Hartford, Connecticut, together with additional
frequencies to Los Angeles, Seattle, Orlando, and Washington DC. The airline
will resume its service to Minneapolis and launch a new route to Denver in
2024. British Airways launched services from London Heathrow to Cincinnati and
from London Gatwick to Vancouver, a destination already served from its London
Heathrow hub. The airline plans further increases in 2024, including doubling
its services to San Diego in the summer. Iberia increased its
recently-launched routes to Dallas and Washington to year-round services.
LEVEL increased its capacity to North America by 23.8% in 2023 and in 2024
will increase further, with a new route from Barcelona to Miami and
significant capacity increases to Boston, Los Angeles and New York, JFK.
Passenger load factor for the region was up 3.6 points versus 2022 to 82.9%
and was down 1.2 points versus 2019.
Latin America and Caribbean (LACAR)
IAG's other core international profit pool is the Latin America and Caribbean
region, including Iberia's network of 20 daily flights to the region and
British Airways flights to the Caribbean. British Airways launched flights
from London Gatwick to Aruba and Guyana. Iberia increased its capacity to
primary cities such as Bogotá, Lima, Mexico City, Montevideo and Quito. LEVEL
increased its route to Santiago de Chile to operate as a year-round service,
with LEVEL's capacity to the region up 45.4% versus 2022. IAG's capacity in
LACAR grew 18.8% versus 2022, although was still down 1.7% on 2019, linked to
the retirement of aircraft following the COVID-19 pandemic, with further
long-haul aircraft due for delivery in 2024. Passenger load factor for the
region at 87.6% increased 2.5 points versus 2022 and was up 1.2 points versus
2019.
Africa, Middle East and South Asia (AMESA)
Capacity to this region was up 32.2% on 2022 and up by 1.1% versus 2019. BA
Euroflyer launched a service from London Gatwick to Sharm El Sheikh. British
Airways began flights from London Gatwick to Accra and the airline will resume
flights to Abu Dhabi in 2024. Iberia started services to Cairo and launched a
new route to Doha, which will serve to develop its network with partner Qatar
Airways. Vueling's new routes from Barcelona included Luxor and Sharm El
Sheikh. Passenger load factor for the region was up 2.2 points versus 2022 to
83.3% and was up 0.3 points versus 2019.
Asia Pacific
During 2023, the Asia Pacific continued to be the least recovered region from
COVID-19, as restrictions linked to the pandemic were lifted later than in
other markets and industry recovery has been slower. British Airways services
to Shanghai and Beijing resumed in the summer 2023 travel season and during
the year the airline increased frequencies to Hong Kong and Tokyo Haneda.
Iberia will re-open its route to Tokyo in October 2024. The increases during
2023 led to capacity 258.0% higher than 2022 but still 59.7% lower than 2019,
with the passenger load factor for the region up 4.4 points versus 2022 to
88.4% and up 2.6 points versus 2019.
Basis of preparation
In its assessment of going concern over the period of at least 12 months from
the date of approval of this report (the 'going concern period'), the Group
has prepared extensive modelling, including considering a severe but plausible
downside scenario. Having reviewed these scenarios and sensitivities, and the
Group's aircraft financing requirements, 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.
Summary
The Group was able to substantially restore its capacity compared with 2019
and saw recovery in all its businesses, with particular strength in Spain and
the North and South Atlantic. Fuel costs were substantially higher than in
2019 and the Group also faced higher supplier cost inflation. The Group was
able to successfully offset both of these challenges through its high-quality
and increasingly diverse revenue stream, and through continued transformation
of its businesses. The net result was an Operating profit for the year of
€3,507 million, versus an Operating profit of €1,278 million in 2022. The
Profit after tax for the year was €2,655 million, versus a profit of €431
million in 2022.
Profit for the year
Statutory results 2023 2022(1) Higher/
€ million
(lower) vly
Operating profit 3,507 1,278 2,229
Profit before tax 3,056 415 2,641
Profit after tax 2,655 431 2,224
1 The 2022 results include a reclassification to conform with the current
year presentation for the Net gain on sale of property, plant and equipment
within Operating profit. Accordingly, for the year to 31 December 2022, the
Group has reclassified gains of €22 million from Other non-operating credits
to Expenditure on operations. There is no impact on the Profit before or after
tax.
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.
There were no exceptional items in 2023. During 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 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
2023 2022
Property, IT and other costs Reversal of fine - 23
Depreciation, amortisation and impairment Impairment reversal of fleet and associated assets - 8
Tax Tax on exceptional items - (2)
The Operating profit before exceptional items for 2023 of €3,507 million was
€2,260 million better than the Operating profit before exceptional items of
€1,247 million for 2022, driven by the increased capacity and higher
revenues, net of higher operating costs, as explained further below. The
Profit after tax and before exceptional items was €2,655 million, €2,253
million higher than the 2022 profit of €402 million.
Alternative performance measures (before exceptional items) 2023 2022(1) Higher/
(lower) vly
€ million
Operating profit 3,507 1,247 2,260
Profit before tax 3,056 384 2,672
Profit after tax 2,655 402 2,253
1 The 2022 results include a reclassification to conform with the current
year presentation for the Net gain on sale of property, plant and equipment
within Operating profit. Accordingly, for the year to 31 December 2022, the
Group has reclassified gains of €22 million from Other non-operating credits
to Expenditure on operations. There is no impact on the Profit before or after
tax.
Revenue
€ million 2023 Higher/ Higher/
(lower) vly
(lower)
vly (%)
Passenger revenue 25,810 6,352 32.6 %
Cargo revenue 1,156 (459) (28.4) %
Other revenue 2,487 494 24.8 %
Total revenue 29,453 6,387 27.7 %
Total revenue increased €6,387 million versus 2022, after adverse foreign
exchange rate movements of €490 million, mainly due to the translation of
British Airways' and IAG Loyalty's results from pound sterling into euro,
which resulted in an adverse variance of €379 million versus 2022.
Passenger revenue
The increase in Passenger revenue of €6,352 million, or 32.6%, was ahead of
the increase in passenger capacity of 22.6%, driven by higher yields and
higher load factors than in 2022. The growth in Passenger revenue was linked
to the reopening of markets, strong leisure demand, together with increases in
ticket prices to reflect higher fuel prices and supplier price inflation. The
recovery in corporate travel was slower than that of leisure travel, with the
Group's premium leisure segment continuing to perform strongly.
The passenger load factor for the year of 85.3% was 3.5 points higher than in
2022 and 0.7 points higher than in 2019. Passenger yields, measured as
passenger revenue per revenue passenger kilometre (RPK) were 3.8% higher than
in 2022 and up 19.0% on 2019. The resulting passenger unit revenue (passenger
revenue per ASK) for the year was 8.2% higher than in 2022 and 20.1% higher
than in 2019.
Cargo revenue
Cargo revenue, at €1,156 million, was 28.4% lower than in 2022. Cargo
volumes, measured in cargo tonne kilometres (CTKs), were 17.2% higher than the
previous year, as the Group's airlines further restored their operations,
leading to an increase in both passenger and cargo capacity. Cargo yields,
measured as cargo revenue per cargo tonne kilometre, were 38.9% lower than in
2022, reflecting the substantial growth in global cargo capacity across the
industry, together with softer market demand, reflecting the macro-economic
conditions. In 2022, cargo yields had benefited from disruption to global
supply chains, and disruption to shipping, particularly in the first half of
the year. Cargo yields benefited from a growth in premium products, enabled by
the opening of a new premium cargo facility at London Heathrow. At Madrid, IAG
Cargo's investment in a perishable goods handling facility was completed,
further boosting cargo handling capacity.
Cargo revenue increased by €39 million, or 3.5% versus 2019. The increase
was primarily driven by a 23.8% increase in cargo yields compared with 2019,
which included the impact of transformation initiatives. The higher cargo
yields more than compensated for a decline in volumes, which were 16.4% lower
than in 2019, mainly due to weaker market demand and reduced cargo capacity,
particularly from the Asia Pacific region.
Other revenue
One of the Group's strategic imperatives is to drive earnings growth through
asset-light businesses, with the growth of IAG Loyalty a particular priority.
The impact of the growth in IAG Loyalty contributes both to the airlines'
Passenger revenue and to Other revenue, through both the issuance and
redemption of its loyalty currency, Avios. IAG Loyalty delivered another
strong year of growth in the number of members collecting Avios, including
through its partnership with American Express. IAG Loyalty's Other revenue was
up 61% versus 2022 to €524 million.
The largest Other revenue streams for the Group are BA Holidays and Iberia's
maintenance, repair and overhaul (MRO) business. BA Holidays grew revenues in
line with the continued increase in flying activity and holiday and hotel
services revenue increasing by €133 million to €938 million. Iberia's MRO
business saw increased engine maintenance activity for third-party airlines,
with revenues from maintenance and overhaul services up €155 million to
€683 million. Revenue from ground handling, at €195 million, was flat
versus 2022. After a competitive tender process for ground handling contracts,
the final resolution in September 2023 resulted in the loss of third-party
handling contracts at eight airports for Iberia and as a result Iberia will
see a reduction in ground handling activity and revenues in 2024.
Overall for the year, Other revenue was up 24.8% versus 2022 to €2,487
million, 29.5% higher than in 2019.
Operating costs
Total operating expenditure rose from €21,788 million in 2022 to €25,946
million in 2023, linked to the higher volume of flights and passenger numbers
and after favourable foreign currency movements of €408 million, of which
€351 million were due to the translation of the operating costs of British
Airways and IAG Loyalty from pound sterling into euros.
Employee costs
€ million 2023 Higher/ Higher/(lower)
(lower) vly vly (%)
Employee costs 5,423 776 16.7 %
The rise in Employee costs of €776 million or 16.7% versus 2022 reflected
the continued restoration of the Group's capacity and the related increase in
employee numbers, as well as the investment in British Airways' London hub to
improve operational performance. Average headcount for the year was 69,762, up
9,962 or 16.7% versus 2022. The Group agreed pay deals with the substantial
majority of its bargaining groups and employees during 2023.
On a unit basis per ASK, Employee costs were down 4.8% versus 2022.
Fuel, oil costs and emissions charges
€ million 2023 Higher/ Higher/(lower)
(lower) vly vly (%)
Fuel, oil costs and emissions charges 7,557 1,437 23.5 %
Fuel, oil costs and emissions charges were up €1,437 million versus 2022,
principally reflecting increased flying volumes. In 2022, the impact of the
significant increase in commodity fuel prices, following the Russian invasion
of Ukraine in February of that year, was mitigated by the Group's fuel hedging
programme. In 2023, whilst average spot fuel prices linked to fuel purchase
contracts were 17% lower than in 2022, the impact of hedging was neutral, with
the result that the Group's effective fuel price after hedging was similar to
the previous year. Foreign exchange movements accounted for only €6 million
of the increase, with the impact of a weaker US dollar against the euro and
pound sterling offset by translation exchange between the pound sterling and
euro. Within Fuel, oil costs and emissions charges, the cost of complying with
emissions trading schemes was €238 million, up from €134 million in 2022,
reflecting both the higher level of capacity flown, market prices under such
schemes, and the reduction in free allowances issued across the EU and UK.
On a unit basis per ASK, Fuel, oil costs and emissions charges were up 0.7%
versus 2022.
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 current fuel hedging policy was approved by the
Board in May 2021 (and has been regularly reviewed for appropriateness by the
Audit and Compliance Committee subsequently) 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% of anticipated requirements in the first 12 months and up
to 30% in the following 12 months, and with flexibility for low-cost airlines
within the Group to adopt hedging up to 75% 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, with 35 newer-generation and more fuel-efficient
aircraft entering service in the year. Increased passenger load factors versus
2022 also contributed to reduced carbon intensity, measured as grammes of
CO(2) per passenger kilometre, which was down 3.6% versus 2022.
Supplier costs
€ million 2023 Higher/ Higher/(lower)
(lower) vly vly (%)
Handling, catering and other operating costs 3,849 878 29.6 %
Landing fees and en-route charges 2,308 418 22.1 %
Engineering and other aircraft costs 2,509 408 19.4 %
Property, IT and other costs(1) 1,058 108 11.4 %
Selling costs 1,155 235 25.5 %
Currency differences 26 (115) (81.6) %
Total Supplier costs 10,905 1,932 21.5 %
1 For 2022 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 €1,932 million, or 21.5% to €10,905 million,
slightly below the increase in capacity. Supplier costs were impacted by
continued high levels of inflation and disruption costs, although the impact
was partially mitigated by the Group's procurement and transformation
initiatives.
Supplier costs include a €26 million currency differences charge in 2023
versus a €141 million currency differences charge in the previous year; 2022
had been impacted by a significant strengthening of the US dollar against both
the pound sterling and the euro versus 2021. Total foreign currency impacts on
Supplier costs, including currency differences, were €298 million favourable
versus 2022, including a favourable impact of €163 million related to
translating British Airways' and IAG Loyalty's supplier costs from pound
sterling into euro and the €141 million favourable currency differences
charge outlined above.
On a unit basis per ASK, Supplier costs were down 1.1% versus 2022.
Ownership costs
Ownership costs include Depreciation, amortisation and impairment of tangible
and intangible assets, including right of use assets, and the Net gain on sale
of property, plant and equipment.
2023 Higher/ Higher/(lower)
€ million (lower) vly vly (%)
Depreciation, amortisation and impairment 2,063 (7) (0.3) %
Net gain on sale of property, plant and equipment (2) 20 (90.9) %
Ownership costs(1) 2,061 13 0.6 %
1 For 2022, includes an exceptional credit of €8 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 34
deliveries of new aircraft in the year. The Net gain on sale of property,
plant and equipment was €2 million, reflecting the disposal of aircraft
withdrawn from service and related spare parts. On a unit basis per ASK,
Ownership costs were down 18.2% versus 2022, mainly reflecting the restoration
of capacity and improvements in aircraft utilisation.
Aircraft fleet
In 2023, the in-service fleet increased by 24 aircraft: 37 aircraft entered
service and 13 aircraft were retired. Of the aircraft entering service, five
re-entered service having previously been stood down and two were delivered in
late 2022. In total, 34 aircraft were delivered in the year, of which four
aircraft entered service early in 2024.
Number of fleet
Number of fleet in-service 2023 2022 Higher/
(lower) vly
Short-haul 389 381 2.1 %
Long-haul 193 177 9.0 %
582 558 4.3 %
In addition to the in-service fleet, there were a further nine aircraft not in
service, made up of five aircraft held by the Group pending disposal or lease
return and four aircraft delivered late in 2023 and not in service by 31
December 2023.
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 pound sterling related to British Airways and IAG
Loyalty. From a transaction perspective, the Group's 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 2023 the Group operating profit before exceptional items was
reduced by €82 million due to adverse exchange rate impacts.
Exchange rate impact before exceptional items
€ million 2023
Favourable/(adverse)
Translation impact Transaction impact Total exchange impact
Total exchange impact on revenue (379) (111) (490)
Total exchange impact on operating expenditures 351 57 408
Total exchange impact on operating profit (28) (54) (82)
€ 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)
The exchange rates of the Group were as follows:
2023 2022 Higher/
(lower) vly
Translation - Balance sheet
£ to € 1.16 1.14 1.8 %
Translation - Income statement (weighted average)
£ to € 1.15 1.17 (1.7) %
Transaction (weighted average)
£ to € 1.15 1.17 (1.7) %
€ to $ 1.09 1.05 3.8 %
£ to $ 1.26 1.23 2.4 %
Total net non-operating costs
Total net non-operating costs for the year were €451 million, versus €863
million in 2022. Finance costs of €1,113 million were €96 million higher
than in 2022, although they fell in the fourth quarter by 16.3% or €48
million, linked to the early debt repayments described in 'Early repayment of
debt raised in 2020 and 2021' below and in note 3 to the Group financial
statements. Finance income was up €334 million, reflecting the Group's
strong cash balances and the higher interest rates earned on deposits. The
other main movement was for net currency retranslation, with a credit of
€176 million in 2023 versus a charge of €115 million in 2022, principally
reflecting the weakening of the US dollar.
The Net change in the fair value of financial instruments of €11 million
reflects fair value adjustments at 31 December 2023 of IAG's €825 million
convertible bond maturing in 2028.
Other non-operating credits of €8 million in 2023 (2022: credit of €110
million) mainly represent net gains or losses on derivative contracts for
which hedge accounting is not applied, together with a net gain of €10
million in 2023 on the sale of investments.
Tax
The tax charge on the Profit for the year was €401 million (2022: tax credit
of €16 million), and the effective tax rate was 13.1% (2022: negative 3.9%).
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 23.5%, 25.0% and 12.5% respectively for 2023. 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 23.5% for the year to 31 December 2023. The
difference between the actual effective tax rate of 13.1% and the expected tax
rate of 23.5% 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 €2,655 million (2022: €431 million).
On 3 March 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% from April 2023. On 24 May 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
charge of €13 million (2022: €17 million credit) is recorded in the Income
statement and a credit of €3 million (2022: €10 million charge) is
recorded in Other comprehensive income.
The Group is monitoring the OECD's proposed two-pillar solution to address the
tax challenges arising from the digitalisation of the economy. This reform to
the international tax system is designed to ensure that multinational
enterprises with consolidated worldwide annual turnover exceeding €750
million will be subject to a minimum 15% effective tax rate, and also proposes
to address the geographical allocation of profits for the purposes of
taxation. On 15 December 2022, the Council of the European Union formally
adopted the EU Pillar Two Directive. On 22 December 2022, the EU Minimum Tax
Directive was published.
On 11 July 2023, the UK enacted Finance (No. 2) Act 2023 which introduced the
Multinational Top-up Tax and the Domestic Top-up Tax with effect for
accounting periods beginning on or after 31 December 2023. These taxes are the
UK's adoption of the income inclusion rule and domestic minimum top-up tax
rule referenced in the OECD's Pillar Two reform.
On 18 December 2023, Ireland enacted Finance (No. 2) Act 2023 which, pursuant
to the EU Minimum Tax Directive, provided for the introduction of a new
minimum effective rate of tax for certain businesses. These rules provide for
a Qualified Domestic Top-Up Tax where an in-scope group's Irish operations
have an effective rate of tax of less than 15%. They come into force for
accounting periods beginning on or after 31 December 2023.
On 19 December 2023, Spain's Council of Ministers approved a draft law to
implement the EU Minimum Tax Directive. This is to be subject to consultation,
prior to being sent to Parliament.
For 2023, the predominant jurisdiction in which the Group operates with an
effective tax rate of less than 15% is Ireland through Aer Lingus. While the
impact on the Group of the adoption of Pillar Two is not yet reasonably
possible to estimate, for indicative purposes, in 2023 Aer Lingus recorded a
current tax expense of €24 million relating to its Irish operations,
representing an effective tax rate of 12.8%. Had the effective tax rate
applied by Aer Lingus to its Irish operations been 15%, the current period tax
expense would have increased by €4 million to €28 million, which would
have increased the overall Group effective tax rate from 13.1% to 13.3%.
On 18 January 2024, the Tribunal Constitucional (Constitutional Court) in
Spain issued a ruling that the amendments to corporate income tax arising from
the introduction of Royal Decree-Law 3/2016 were unconstitutional and
accordingly revoked. The Group has not adjusted the financial statements for
this revocation, but expects to recognise a tax receivable, excluding interest
arising, from the Spanish tax authorities of approximately €191 million and
an associated deferred tax charge of approximately €58 million.
Operating profit performance of airline operating companies
Aer Lingus British Airways Iberia Vueling
€ million
€ million
€ million
£ million
Statutory 2023 Higher/ 2023 Higher/ 2023 Higher/ 2023 Higher/
(lower) vly
(lower) vly
(lower) vly
(lower) vly
Passenger revenue 2,209 530 12,668 3,453 5,262 1,220 3,181 597
Cargo revenue 55 (25) 757 (303) 275 (72) - -
Other revenue 10 - 898 143 1,421 299 17 3
Total revenue 2,274 505 14,323 3,293 6,958 1,447 3,198 600
Fuel, oil costs and emissions charges 639 100 3,825 896 1,496 183 907 168
Employee costs 471 78 2,577 477 1,284 123 399 29
Supplier costs 789 143 5,475 880 2,827 543 1,240 152
Ownership costs(1) 150 16 1,015 (66) 411 47 256 50
Operating profit 225 168 1,431 1,106 940 551 396 201
Operating margin 9.9% 6.7 pts 10.0% 7.0 pts 13.5% 6.4 pts 12.4% 4.9 pts
Alternative performance measures(2)
Passenger revenue 2,209 530 12,668 3,453 5,262 1,220 3,181 597
Cargo revenue 55 (25) 757 (303) 275 (72) - -
Other revenue 10 - 898 143 1,421 299 17 3
Total revenue before exceptional items 2,274 505 14,323 3,293 6,958 1,447 3,198 600
Fuel, oil costs and emissions charges 639 100 3,825 896 1,496 183 907 168
Employee costs 471 78 2,577 477 1,284 123 399 29
Supplier costs 789 143 5,475 861 2,827 543 1,240 152
Ownership costs(1) 150 16 1,015 (66) 411 47 256 42
Operating profit before exceptional items 225 168 1,431 1,125 940 551 396 209
Operating margin before exceptional items 9.9% 6.7 pts 10.0% 7.2 pts 13.5% 6.4 pts 12.4% 5.2 pts
1 Ownership costs reflects Depreciation, amortisation and impairment, and
the Net (gain)/loss on the sale of property, plant and equipment.
2 Further detail is provided in the Alternative performance measures
section.
The Iberia numbers in the table above are presented on the same basis as in
note 5 to the consolidated financial statements and exclude LEVEL Spain.
Review by operating company
All of the airline operating companies saw a significant increase in
profitability in 2023, with Iberia and Vueling achieving record levels of
operating profit, reflecting strong passenger yields, which were able to
offset the impacts of higher effective fuel prices and inflation.
British Airways operated the lowest passenger capacity relative to 2019, with
ASKs at 90.1% of 2019, partly linked to the delayed restoration of its
capacity to the Asia Pacific region, which saw COVID-19 restrictions continue
longer than the rest of IAG's markets. Aer Lingus operated at 104.4% of 2019
capacity, including the impact of its new UK base at Manchester Airport opened
in October 2021. Iberia and Vueling both increased capacity versus 2019,
operating at 103.2% and 108.5% of 2019 levels respectively.
Operating profit before exceptional items
2023 2022(1) 2019(1, 2)
Aer Lingus (€ million) 225 57 276
British Airways (£ million) 1,431 306 1,893
Iberia (€ million) 940 389 498
Vueling (€ million) 396 187 241
IAG Loyalty (£ million) 280 240 176
1 The 2019 and 2022 results include a reclassification to conform with the
current year presentation for the Net gain on sale of property, plant and
equipment within Operating profit.
2 The 2019 results have been restated for the treatment of administration
costs associated with the Group's defined benefit pension schemes.
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 a second successive year of record operating profits, with
operating profit before exceptional items of £280 million (€321 million),
up from £240 million (€282 million) in 2022. IAG Loyalty's operating margin
for 2023 was 21.7%, with the reduction of 6.7 points from 28.4% in 2022 due to
the increased level of Avios redemption activity as well as the mix of Avios
issued between the Group's airlines and other partners.
Capital expenditure
In 2023, the Group continued to invest in its aircraft fleets, customer
products and services, IT infrastructure and sustainability, as the business
continued to recover and restore capacity. Capital expenditure, measured as
the Acquisition of property, plant and equipment and intangible assets from
the Cash flow statement, was €3,544 million, compared with €3,875 million
in 2022, with the reduction of €331 million due to the profile of fleet
deliveries and pre-delivery payments, with investment in IT higher than in
2022, as the Group continues to invest in its IT estate and transformation
projects. In 2023, the Group took delivery of 34 aircraft: ten for British
Airways, 14 for Iberia, six for Vueling, two for Aer Lingus and two for LEVEL.
Of these deliveries, 28 were aircraft acquired from Airbus and Boeing and six
were leased directly from aircraft lessors (2022: 25 aircraft acquired from
Airbus and Boeing and two leased directly from aircraft lessors). One of the
aircraft acquired from Airbus in 2023 was novated to a lessor immediately
prior to the point of delivery as part of a sale and leaseback arrangement,
which resulted in the final delivery payment for the aircraft being made by
the lessor, rather than by the Group as capital expenditure; the Group also
received a refund of the pre-delivery payments it had made in advance of the
delivery date in respect of that aircraft.
Aircraft deliveries 2023 2022
Airbus A320ceo 2 -
Airbus A320neo family 19 12
Airbus A330 2 -
Airbus A350 9 12
Boeing 787-10 2 3
Total 34 27
Aircraft orders
During 2023, the Group converted ten A320neo options to firm deliveries in
2028, as replacement aircraft for its short-haul network. A new order was
placed for British Airways for six Boeing 787-10 aircraft, and one new Airbus
A350-900 aircraft was ordered for Iberia; the aircraft represented by these
new orders will be delivered in 2025 and 2026. In addition to these orders
from Airbus and Boeing, the Group entered into leases directly with lessors
for two Airbus A350-900 aircraft for Iberia, two Airbus A330-200 aircraft for
LEVEL and two A320ceo aircraft for Vueling, all of which were delivered during
the year. The table below includes three further A320ceo aircraft for Vueling,
for which leases were signed prior to 31 December 2023, with the aircraft to
be delivered in 2024.
The Group anticipates introducing eight further A320ceo aircraft for Vueling
in 2024 through operating leases, to cover aircraft availability linked to
additional maintenance requirements for aircraft with Pratt & Whitney
'GTF' engines.
Aircraft future deliveries at 31 December 2023 2022
Airbus A320ceo 3 -
Airbus A320neo family 82 91
Airbus A321XLR 14 14
Airbus A350 3 12
Boeing 737 50 50
Boeing 777-9 18 18
Boeing 787-10 11 7
Total 181 192
In addition to those committed future deliveries shown above, at 31 December
2023, the Group held options to acquire a further 235 aircraft from Airbus and
Boeing.
Capital commitments
Capital expenditure authorised and contracted for at 31 December 2023 amounted
to €12,706 million (2022: €13,749 million), with the decrease attributable
to the net of the aircraft deliveries and the new 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 31 December 2023.
Working capital
The net movement in working capital saw a cash outflow of €142 million in
2023, compared with a significant cash inflow of €1,884 million in 2022. The
year 2022 had seen a significant restoration of airline capacity by the end of
the year, with significant related increases in bookings for future travel
(Deferred revenue), net of trade receivables, together with an increase in
Trade and other payables, linked to the increase in the Group's flying
programmes and the related increase in operating expenditure. By contrast, in
2023, working capital had returned closer to a steady-state position.
Inventories increased by €141 million to €494 million, partially linked to
engine purchases to meet maintenance requirements. Trade receivables were up
by €229 million to €1,559 million, related to higher passenger numbers and
yields, together with some timing differences related to certain receipts due
from the Spanish government.
At 31 December 2023, total Deferred revenue, which includes the Group's
loyalty schemes, was €8,023 million, an increase of €379 million versus
€7,644 million at 31 December 2022. Deferred revenue at 31 December 2023
includes €645 million in respect of unredeemed vouchers, including
associated taxes (2022: €911 million). The unredeemed voucher balance
includes: flight vouchers issued to customers at their election to provide the
flexibility to change their destination and/or date of travel (a policy
introduced in 2020 and still in operation) and loyalty-related companion
vouchers (referred to as 'non-disrupted vouchers'); vouchers issued due to
COVID-19 flight cancellations (referred to as 'disrupted vouchers'); certain
other flexible fare options; and other gift vouchers. The outstanding balance
of disrupted vouchers at 31 December 2023 was €139 million, with the
remaining €506 million relating to ongoing commercial policies, which the
Group expects to continue to be offered in the future.
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 long-term investment-grade credit ratings with a
stable outlook; IAG's credit ratings remained investment-grade up until the
outbreak of COVID-19. In 2023, due to the improvement in the Group's
profitability, cash generation and balance sheet, both S&P and Moody's
raised their credit ratings of IAG in the fourth quarter of the year. The
Group's current ratings (at 28 February 2024) are: S&P: BBB- (investment
grade), Moody's: Ba1. British Airways has separate credit ratings, which were
also increased to BBB- (investment grade) by Fitch and S&P; Moody's rating
of British Airways is Ba1.
Early repayment of debt raised in 2020 and 2021
During 2020 and 2021, the Group's airlines required additional liquidity, due
to the significant adverse impact of COVID-19, and all entered into special
COVID-19-related financing arrangements, partially or fully guaranteed by the
governments in their home countries. This debt was based on floating rate
arrangements and agreed at margins that reflected the condition of the
financial markets and the Group's airlines at the time; this debt was among
the most expensive of the Group's debt to service. As a result of the Group's
profitability and cash generation in 2022 and 2023, and expected continued
strong cash generation over the foreseeable future, in the second half of
2023, the Board agreed that the remainder of this debt should be repaid ahead
of its scheduled maturity, which was between 2024 and 2026. The total amount
repaid early was €3,271 million: £2,000 million (€2,312 million) for
British Airways, partially guaranteed by the UK Export Fund (UKEF); €644
million and €223 million for Iberia and Vueling respectively, partially
guaranteed by Spain's Instituto de Crédito Oficial (ICO); €42 million of
other non-aircraft debt for Iberia; and €50 million to the Ireland Strategic
Investment Fund (ISIF) for Aer Lingus. These early debt repayments will result
in a reduction in interest costs in future years.
Following these early repayments, and the repayment of IAG's €500 million
bond in July 2023, the maturity profile of the Group's debt as of 31 December
2023, aside from aircraft financing payments, includes two €500 million IAG
bonds due in 2025 and 2027, respectively, IAG's €825 million 2028
convertible bond and a €700 million IAG bond due in 2029.
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).
In 2019, the Group set a target of net debt to EBITDA before exceptional items
below 1.8 times, which broadly corresponded to investment grade with the
credit ratings agencies. At its Capital Markets Day in November 2023, the
Group confirmed this target remains appropriate.
As at 31 December 2023, net debt to EBITDA before exceptional items had
reduced to 1.7 times, compared with 3.1 times in 2022, reflecting the strong
recovery in profitability and the related cash generation, with capital
expenditure €331 million lower than the previous year.
Net debt
€ million 2023 2022 Higher / (lower)
Debt 19,984 19,610 374
Cash and cash equivalents and interest-bearing deposits (9,599) (7,943) (1,656)
Net debt at 1 January 10,385 11,667 (1,282)
Decrease/(increase) in cash net of exchange 2,762 (1,656) 4,418
Movements in total borrowings
Net cash outflow repayments of borrowings and lease liabilities (5,999) (2,505) (3,494)
Net cash inflow new borrowings 1,001 1,436 (435)
Non-cash impact of new leases 1,315 1,017 298
Decrease in net debt from regular financing (3,683) (52) (3,631)
Exchange and other non-cash movements (219) 426 (645)
Net debt at 31 December 9,245 10,385 (1,140)
Net debt reduced by €1,140 million, principally due to the recovery in
profitability and operating cash flow generation, partially offset by the
capital expenditure of €3,544 million. Gross debt reduced by €3,902
million during the year to €16,082 million. Repayments exceeded new
borrowings by €4,998 million, mainly due to the early repayments of
non-aircraft debt outlined above, the repayment on maturity of a €500
million IAG bond, and scheduled repayments of aircraft financing exceeding new
aircraft financing raised during the year. The Group also raised financing by
way of sale and leaseback transactions and extended existing leases, which
together added €1,315 million to gross debt. The Group's 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 2023,
the euro and pound sterling strengthened against the US dollar leading to a
decrease in gross debt of €361 million. The remainder of the variance in
gross debt versus 2022 is mainly due to the increase in the fair value of
IAG's €825 million convertible bond due in 2028.
Cash
Cash, cash equivalents and interest-bearing deposits
€ million 2023 2022 Higher/ (lower)
Aer Lingus(1) 356 375 (19)
British Airways 1,361 2,877 (1,516)
Iberia 1,890 2,389 (499)
Vueling 452 766 (314)
IAG Loyalty 1,374 993 381
IAG and other Group companies 1,404 2,199 (795)
Cash and cash equivalents and interest-bearing deposits 6,837 9,599 (2,762)
1 At 31 December 2023 Aer Lingus held €31 million of restricted cash
(2022: €33 million) within interest-bearing deposits maturing after more
than three months to be used for employee-related obligations.
British Airways, Iberia, Vueling, Aer Lingus and IAG Loyalty 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 principally reflects the early repayment of floating
rate unsecured debt in all the airlines, and the repayment of the IAG €500
million 2023 bond on maturity.
Debt
Long-term aircraft financing was drawn for 31 aircraft during 2023, including
five aircraft that were delivered in 2022 to British Airways and for which
funding was committed at 31 December 2022. The Group also secured committed
funding of €375 million, to be drawn in 2024, for three British Airways
aircraft, including two delivered in 2023; this committed funding is included
in committed and undrawn aircraft financing facilities at 31 December 2023.
Linked to its strong cash generation, Iberia did not seek financing for three
new A321neo aircraft delivered in 2023, with these aircraft held unencumbered
at 31 December 2023.
Equity
No equity was raised or repaid during the year, nor in 2022.
Liquidity facilities
During the year, the Group exercised a one-year extension to the availability
of its Revolving Credit Facility (RCF), which now has committed availability
until March 2026. The available amount will remain at $1,755 million (€1,605
million) until March 2025 and reduce to $1,655 million (€1,513 million) for
the final 12 months to March 2026. 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 which 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 31 December 2023.
The Group also added a new £1,000 million (€1,159 million) committed credit
facility for British Airways, partially guaranteed by the UKEF, which was
agreed upon the repayment of British Airways' £2,000 million (€2,312
million) loan in September 2023 and which matures in September 2028. This is
in addition to the existing £1,000 million (€1,159 million) committed
credit facility for British Airways, partially guaranteed by the UKEF, which
was agreed and executed in 2021 and matures in November 2026. Both facilities
were undrawn at 31 December 2023.
Aer Lingus has a €350 million credit facility with Ireland's ISIF, which is
available until March 2025. This facility was undrawn at 31 December 2023. At
31 December 2022 €50 million was drawn; this €50 million was repaid in the
first half of 2023.
The Group also has certain other committed and undrawn general and overdraft
facilities, bringing total committed and undrawn general and overdraft
facilities at 31 December 2023 to €4,412 million (2022: €3,284 million).
The Group also holds €375 million of committed and undrawn aircraft
financing facilities (2022: €1,116 million). The committed amount at 31
December 2023 represents financing for three British Airways aircraft to be
drawn in 2024. The committed and undrawn aircraft financing facilities at 31
December 2022 included committed financing for five aircraft for British
Airways that was drawn in 2023 and certain backstop financing arrangements,
which have now expired. The Group's aircraft deliveries continue to be
successfully financed on regular long-term financing arrangements as required,
and hence no drawing on these backstop arrangements was necessary.
In total, the Group had €4,787 million of committed and undrawn general and
aircraft facilities as at 31 December 2023 (2022: €4,400 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 2023 (2022: nil).
Liquidity and cash flow
Total liquidity, measured as cash, cash equivalents and interest-bearing
deposits of €6,837 million and committed and undrawn general and aircraft
facilities of €4,787 million, was €11,624 million at 31 December 2023.
This represented a decrease of €2,375 million versus total liquidity of
€13,999 million at the end of 2022, linked mainly to the Group's decision to
repay certain of its debt raised in 2020 and 2021 in advance of its scheduled
maturity.
Cash flow
The Group saw strong cash flow generation in 2023, mainly linked to its strong
profit performance; the strong cash generation in turn allowed the Group to
rebalance the mix of gross debt and cash by undertaking the early debt
repayments outlined above.
Free cash flow
In 2023, the Group adopted Free cash flow as an Alternative performance
measure, replacing Levered free cash flow. Free cash flow is defined as Net
cash flows from operating activities less Acquisition of property, plant and
equipment and intangible assets. See Alternative performance measures section
for further details.
€ million 2023 2022 Variance
Net cash flows from operating activities 4,864 4,854 10
Acquisition of property, plant and equipment and intangible assets (3,544) (3,875) 331
Free cash flow 1,320 979 341
In 2023, Free cash flow was €1,320 million, up €341 million versus 2022,
driven by similar Net cash flows from operating activities, but lower capital
expenditure, as outlined above. In 2022, whilst the Operating profit was
significantly lower, Net cash flows from operating activities benefited from
the restoration of capacity and the associated positive impact on working
capital, mainly from the rebuilding of advanced ticket sales.
Condensed cash flow summary
€ million 2023 2022(1) Variance
Net cash flows from operating activities 4,864 4,854 10
Net cash flows from investing activities (3,423) (3,463) 40
Net cash flows from financing activities (5,194) (56) (5,138)
Net (decrease)/increase in cash and cash equivalents (3,753) 1,335 (5,088)
Net foreign exchange differences (2) (31) 29
Cash and cash equivalents at 1 January 9,196 7,892 1,304
Cash and cash equivalents at year end 5,441 9,196 (3,755)
Interest-bearing deposits maturing after more than three months 1,396 403 993
Cash, cash equivalents and other interest-bearing deposits 6,837 9,599 (2,762)
1 The 2022 results include reclassifications to conform with the current
year presentation. Further information is given in note 2 and note 37.
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 the other main movements is provided below.
Cash flows from operating activities
€ million 2023 2022(1) Variance
Operating profit 3,507 1,278 2,229
Depreciation, amortisation and impairment 2,063 2,070 (7)
Net gain on disposal of property, plant and equipment (2) (22) 20
Pension contributions net of service costs (30) (5) (25)
Increase in provisions 237 463 (226)
Unrealised currency differences 51 19 32
Other movements 111 76 35
Interest paid (1,005) (817) (188)
Interest received 365 42 323
Tax paid (291) (134) (157)
Movement in working capital (142) 1,884 (2,026)
Net cash flows from operating activities 4,864 4,854 10
1 The 2022 results include reclassifications to conform with the current
year presentation. Further information is given in note 2 and note 37.
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 31
March 2021 of £1,650 million (€1,887 million). As at 31 December 2023, the
scheme was over 100% funded on the 2021 valuation basis and an overfunding
protection mechanism agreed with the NAPS Trustee had the effect that no
contributions were due in 2022 or 2023. Deficit contributions could resume
should the funding level fall in the future. The pension cash flows shown
above represent payments to various smaller schemes within the Group. The
valuation of the main British Airways pension schemes also showed a surplus on
the IAS 19 accounting basis, which does not impact contributions due to the
schemes. Total Employee benefit assets at 31 December 2023, of which the
principal element is the NAPS accounting surplus, were €1,380 million; the
reduction of €954 million versus 31 December 2022 was predominately due to
the impact of the fall in AA corporate bond yields applied in discounting
scheme liabilities, leading to higher liabilities at the same time as the
market value of assets fell, mainly due to the increase in UK government bond
yields.
Provision and other non-cash movements mainly relate to restoration and
handback provisions for leased aircraft and ETS allowances. Provisions for ETS
allowances are charged to Fuel, oil costs and emissions charges as they are
built up through the year, with the cash payment for ETS credits acquired by
the Group's airlines to meet the requirements of the various emissions trading
schemes accounted for as capital expenditure. Provision and other non-cash
movements also include restructuring payments of €82 million, mainly
relating to redundancy programmes in Iberia agreed prior to 2020.
The increase in interest paid in 2023 reflects higher interest rates,
partially mitigated in the fourth quarter by the early repayment of €3,271
million of floating rate debt outlined above. After including the impact of
hedging, 13% of the Group's total debt at 31 December 2023 was on floating
rate arrangements.
Cash flows from investing activities
€ million 2023 2022 Variance
Acquisition of property, plant and equipment and intangible assets (3,544) (3,875) 331
Sale of PPE, intangible assets and investments 1,091 837 254
Increase in other current interest-bearing deposits (985) (351) (634)
Payment to Globalia for convertible loan - (100) 100
Other investing movements 15 26 (11)
Net cash flows from investing activities (3,423) (3,463) 40
The €1,091 million of cash inflow from the Sale of property, plant and
equipment, 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 assets, principally aircraft being
retired from service. The increase from 2022 reflects the number and type of
aircraft financed through sale and leaseback transactions in 2023 compared
with 2022.
In March 2022, IAG entered into a convertible loan with Globalia for €100
million, convertible into an equity stake in Air Europa Holdings of 20%; the
conversion option was exercised in August 2022, with the equity stake treated
as an equity investment.
Cash flows from financing activities
€ million 2023 2022 Variance
Proceeds from borrowings 1,001 1,436 (435)
Repayment of borrowings (4,268) (1,050) (3,218)
Repayment of lease liabilities (1,731) (1,455) (276)
Settlement of derivative financial instruments (119) 1,036 (1,155)
Acquisition of treasury shares and other financing movements (77) (23) (54)
Net cash flows from financing activities (5,194) (56) (5,138)
Proceeds from borrowings reflect the cash inflows from aircraft financing as
described in the Funding and debt section above. Aside from the additional
liquidity facilities described in 'Liquidity facilities' above, there was no
new non-aircraft financing raised in 2023 (2022: nil).
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 outflow in 2023 relates to the
weakening of the US dollar versus the euro and pound sterling. In 2022, the
significant inflow related to the strengthening of the US dollar versus the
euro and pound sterling.
The Acquisition of treasury shares and other financing movements includes the
purchase of 27 million shares in 2023 related to the Group's intended
acquisition of the remaining shares in Air Europa Holdings, as part of the
consideration is required to be delivered as IAG shares, together with 15
million shares related to employee incentive schemes. In 2022, 15 million
shares were purchased related to employee incentive schemes.
STRATEGIC FRAMEWORK
IAG's purpose 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 three strategic imperatives are:
• Strengthening our core;
• Driving earnings growth through asset-light businesses; and
• Operating under a strengthened financial and sustainability framework.
These imperatives are achieved through a series of strategic priorities:
• Growing our portfolio of global leadership positions and strengthening
our portfolio of world-class brands and operations;
• Developing IAG Loyalty and leveraging our strategic airline
partnerships; and
• Managing our balance sheet, allocating capital in a disciplined manner,
and being an industry leader in sustainability.
PRINCIPAL RISKS AND UNCERTAINTIES
The Group has continued to maintain its framework and processes to identify,
assess and manage risks. Throughout 2023, the Group has monitored the
evolution of the risk landscape, as a result of internal and external changes,
particularly considering how risks combine to create increased threats, and
re-assessing the potential severity and likelihood of risks accordingly. In
assessing its principal risks, the Group has considered Its operational
resilience across its businesses, the status of the financial markets,
customer mix changes, geopolitical and economic risk and government changes,
including upcoming elections, pace of transformation, Artificial Intelligence
(AI) adoption, the Group's industrial relations landscape, people engagement,
and securing talent and expertise to support operations and deliver cultural
change.
No new principal risks were identified through the risk discussions and
assessments across the business and the principal risks and uncertainties
affecting the Group, detailed in the Risk management and principal risk
factors section of the 2022 Annual report and accounts, remain relevant at the
date of this report. However, the profile of certain risks has changed. The
Group's exposure and ability to directly manage the external risk environment,
particularly for aircraft deliveries, engine and component availability
remains a challenge, given the fundamental weaknesses in the resilience of the
aviation sector's supply chain. Other external threats which remain heightened
include: the impact of inflation and interest rates on demand and customer
confidence; higher costs in the supply chain; ongoing geopolitical tensions
and conflict in various regions impacting our customer and flight operations
as well as creating further airspace disruptions; air traffic control (ATC)
resilience issues and industrial unrest impacting operations; and policy
measures taken by governments to address the economic environment or policy
proposals that could impact the Group's airlines' ability to set capacity
and/or pricing. One risk has been reconsidered as part of the reviews and has
been reframed as 'Transformation, innovation and AI' from 'Transformation and
change' to recognise how the Group's change agenda is underpinned by
investment which will leverage innovation and AI tools to accelerate the
delivery of customer-centric, efficient processes and tools to run our
businesses. The risk around 'Critical third parties in the supply chain' is
now assessed under Business and Operational risk given the nature of the
potential impacts facing the Group (having previously been categorised as a
Strategic risk). Management remains focused on mitigating risks at all levels
in the business and investing to increase resilience.
The Board reviews and challenges management on the risk landscape and its
management in the light of changes that influence the Group and the aviation
industry. 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. In addition, the Board and
its sub committees have been appraised of regulatory, competitor and
governmental responses on an ongoing basis.
From the risks identified in the 2022 Annual report and accounts, given the
current environment, the main risks that continue to be a key area of focus,
due to their potential implications for the Group and management's responses,
are outlined below.
• Brand and customer trust. Operational resilience and customer
satisfaction underpin customer trust. Reliability, including on-time
performance, service and product delivery, are key elements of brand value and
of each customer's experience. The Group continues to improve its disruption
management capabilities given the extent of external disruption due to ATC and
third-party resilience issues, particularly over engine reliability. All of
the Group's airlines continue to support their customers through any
disruption including schedule adaptions where required. Investment in cabin
and service propositions helps ensure that our customers choose to fly with
the Group's airlines.
• Critical third parties in the supply chain. The aviation sector
continues to be affected by global supply chain disruption which has impacted
aircraft deliveries, engine and component availability and reliability,
resource availability and/or threat of employee industrial action in critical
third parties and airport services, the level of resilience of airports,
particularly London Heathrow, and ATC capability and restrictions. The Group
proactively assesses its schedules for operability and continues to work with
all critical suppliers to understand any potential disruption within their
supply chains from either a shortage of available resource, strike action or
production delays which could impact the availability of new fleet, engines or
critical goods or services. Delays in new aircraft, technical performance
issues requiring additional maintenance and spare engine availability continue
to impact operations and increase turnaround times for aircraft.
• Cyber attack and data security. The threat of ransomware attacks on
critical infrastructure and services remains high with the Group exposed to
threat actors targeting both the Group's operating companies and its
suppliers. The Group continues to improve its cyber security posture either
through major IT transformational change or additional monitoring through
tools as well as better understanding the risk presented by its suppliers.
• Economic, political and regulatory environment. The economic impact of
geopolitical events, increases in commodity and wage costs from inflation and
higher interest rates drive continued significant uncertainty over the
economic outlook. The Group is closely reviewing the impacts of wage and
supplier inflation on margins and customer demand. Ongoing conflicts, wars and
heightened tensions globally further increase airspace restrictions and
congestion for flows to Asia. Wider macroeconomic trends are being monitored,
with consideration to changes in government in key markets and the
implications for trade, respective economic health and how governments view
the aviation industry. Recent European governments' proposals to set floor or
ceiling caps on pricing, including the scope of ancillaries that airlines may
be allowed to charge their customers for, may impact the ability to freely set
pricing, sell ancillaries to meet customer needs and/or set capacity.
• 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 continues with major programmes and upgrades to
modernise, including new commercial capabilities and customer-centric
enhancements using agile based models, as well as replacing core IT
infrastructure and improving network connectivity and redundancy. Mitigating
actions that prioritise operational stability and resilience have been built
into all cutover plans for the go-live of IT systems related changes.
• Operational resilience. Ongoing labour shortages, industrial unrest and
strike action in the aviation sector, shortages in the supply chain and
airspace and ATC restrictions can all impact the operational environment and
customers of the Group's airlines and increase the costs of running
operations. The Group continues with its ambitious IT infrastructure
transformation agenda to modernise and digitalise its IT estates. The Group is
focused on minimising any unplanned outages or disruption to customers with
additional resilience built into the airlines' networks.
• People, culture and employee relations. Our people, their engagement and
cultural appetite and mindset for change are critical to the Group's current
performance and future success. Our leadership recognises the efforts of our
staff and their commitment through the continued operational challenges facing
our airlines. Our businesses continue to build the knowledge and experience of
their new starters and manage the cultural impacts of onboarding at scale to
ensure they have the right capabilities to operate. Shortages of technical
licensed staff across the aviation sector and in the Group's airlines combined
with aircraft, engines and component shortages are significantly impacting
maintenance delivery timelines. The Group is investing in apprenticeship
programmes and retention initiatives to help secure and train engineers.
Across the Group, collective bargaining is in place with various unions. Where
agreements are open or there is a threat of, or actual strike action, our
operating companies continue to engage in discussions with unions to secure
sustainable agreements and address concerns arising within the negotiations.
In September AENA announced the result of its competitive tender for ground
handling licences at airports across Spain, which resulted in the loss of key
airports to another provider, with the ground handling unions for Iberia
taking strike action in January 2024. Iberia plans to create a new handling
company, which will provide handling services and all airport staff affected
by the AENA decision will be moved to the new company, with a new sector
collective bargaining agreement and conditions for existing Iberia employees.
• Sustainable aviation. Plans implemented by the EU, UK and US governments
to decarbonise aviation have resulted in fragmentation of policy measures and
support offered by governments for green initiatives across the different
regions in which the Group airlines operate. Sustainable Aviation Fuel (SAF)
infrastructure and availability lags demand, impacting the ability to achieve
the aviation sector's carbon reduction commitments.
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
1 January 2023 - 31 December 2023
CONSOLIDATED INCOME STATEMENT
Year to 31 December
€ million Note 2023 2022(1)
Passenger revenue 25,810 19,458
Cargo revenue 1,156 1,615
Other revenue 5 2,487 1,993
Total revenue 5 29,453 23,066
Employee costs 8 5,423 4,647
Fuel, oil costs and emissions charges 7,557 6,120
Handling, catering and other operating costs 3,849 2,971
Landing fees and en-route charges 2,308 1,890
Engineering and other aircraft costs 2,509 2,101
Property, IT and other costs 6 1,058 950
Selling costs 1,155 920
Depreciation, amortisation and impairment 6 2,063 2,070
Net gain on sale of property, plant and equipment(1) (2) (22)
Currency differences 26 141
Total expenditure on operations 25,946 21,788
Operating profit 3,507 1,278
Finance costs 9 (1,113) (1,017)
Finance income 9 386 52
Net change in fair value of financial instruments 9 (11) 81
Net financing credit relating to pensions 9 103 26
Net currency retranslation credits/(charges) 176 (115)
Other non-operating credits(1) 9 8 110
Total net non-operating costs (451) (863)
Profit before tax 3,056 415
Tax 10 (401) 16
Profit after tax for the year 2,655 431
Attributable to:
Equity holders of the parent 2,655 431
Non-controlling interest - -
2,655 431
Basic earnings per share (€ cents) 11 53.8 8.7
Diluted earnings per share (€ cents) 11 50.6 6.1
1 The 2022 results include a reclassification to conform with the current
year presentation for the Net gain on sale of property, plant and equipment.
There is no impact on the Profit after tax. Further information is given in
note 2.
CONSOLIDATED STATEMENT OF OTHER COMPREHENSIVE INCOME
Year to 31 December
€ million Note 2023 2022(1)
Items that may be reclassified subsequently to net profit
Cash flow hedges:
Fair value movements in equity(1) 30d (195) 1,472
Reclassified and reported in net profit 30d (142) (1,233)
Fair value movements on cost of hedging(1) (120) (115)
Cost of hedging reclassified and reported in net profit 82 38
Currency translation differences 33 18 (53)
Items that will not be reclassified to net profit
Fair value movements on other equity investments 19 127 2
Fair value movements on liabilities attributable to credit risk changes (119) (6)
Remeasurements of post-employment benefit obligations (1,076) 662
Remeasurements of long-term employee-related provisions (18) 52
Total other comprehensive (loss)/income for the year, net of tax (1,443) 819
Profit after tax for the year 2,655 431
Total comprehensive income for the year 1,212 1,250
Total comprehensive income is attributable to:
Equity holders of the parent 1,212 1,250
Non-controlling interest 33 - -
1,212 1,250
1 The 2022 results include a reclassification of losses and gains associated
with the fair value movements on cash flow hedges and fair value movements on
cost of hedging, respectively. There is no impact on Total other comprehensive
(loss)/income for the year, net of tax. Further information is given in note
2.
Items in the consolidated Statement of other comprehensive income above are
disclosed net of tax.
CONSOLIDATED BALANCE SHEET
€ million Note 31 December 2023 31 December 2022
Non-current assets
Property, plant and equipment 13 19,776 18,346
Intangible assets 17 3,909 3,556
Investments accounted for using the equity method 18 47 43
Other equity investments 19 188 55
Employee benefit assets 34 1,380 2,334
Derivative financial instruments 30 42 81
Deferred tax assets 10 1,202 1,282
Other non-current assets 20 432 362
26,976 26,059
Current assets
Non-current assets held for sale 16 - 19
Inventories 21 494 353
Trade receivables 20 1,559 1,330
Other current assets 20 1,574 1,226
Current tax receivable 10 159 72
Derivative financial instruments 30 81 645
Current interest-bearing deposits 22 1,396 403
Cash and cash equivalents 22 5,441 9,196
10,704 13,244
Total assets 37,680 39,303
Shareholders' equity
Issued share capital 31 497 497
Share premium 31 7,770 7,770
Treasury shares (100) (28)
Other reserves (4,895) (6,223)
Total shareholders' equity 3,272 2,016
Non-controlling interest 33 6 6
Total equity 3,278 2,022
Non-current liabilities
Borrowings 26 13,831 17,141
Employee benefit obligations 34 175 217
Deferred tax liability 10 4 -
Provisions 27 2,831 2,652
Deferred revenue 24 257 326
Derivative financial instruments 30 106 84
Other long-term liabilities 25 219 200
17,423 20,620
Current liabilities
Borrowings 26 2,251 2,843
Trade and other payables 23 5,590 5,209
Deferred revenue 24 7,766 7,318
Derivative financial instruments 30 461 387
Current tax payable 10 2 8
Provisions 27 909 896
16,979 16,661
Total liabilities 34,402 37,281
Total equity and liabilities 37,680 39,303
CONSOLIDATED CASH FLOW STATEMENT
Year to 31 December
€ million Note 2023 2022(1)
Cash flows from operating activities
Operating profit 3,507 1,278
Depreciation, amortisation and impairment 6 2,063 2,070
Net gain on disposal of property, plant and equipment (2) (22)
Employer contributions to pension schemes (48) (22)
Pension scheme service costs 34 18 17
Increase in provisions 35 237 463
Unrealised currency differences 51 19
Other movements 35 111 76
Interest paid (1,005) (817)
Interest received 365 42
Tax paid (291) (134)
Net cash flows from operating activities before movements in working capital 5,006 2,970
Increase in trade receivables (272) (660)
Increase in inventories (140) (21)
Increase in other receivables and current assets (388) (233)
Increase in trade payables 258 886
Increase in deferred revenue 212 1,236
Increase in other payables and current liabilities 188 676
Net movement in working capital (142) 1,884
Net cash flows from operating activities 4,864 4,854
Cash flows from investing activities
Acquisition of property, plant and equipment and intangible assets 35 (3,544) (3,875)
Sale of property, plant and equipment and intangible assets 1,080 837
Proceeds from sale of investments 11 -
Increase in other current interest-bearing deposits (985) (351)
Payment to Globalia for convertible loan - (100)
Other investing movements 15 26
Net cash flows from investing activities (3,423) (3,463)
Cash flows from financing activities
Proceeds from borrowings 35 1,001 1,436
Repayment of borrowings 35 (4,268) (1,050)
Repayment of lease liabilities 35 (1,731) (1,455)
Settlement of derivative financial instruments 35 (119) 1,036
Acquisition of treasury shares (77) (23)
Net cash flows from financing activities (5,194) (56)
Net (decrease)/increase in cash and cash equivalents (3,753) 1,335
Net foreign exchange differences (2) (31)
Cash and cash equivalents at 1 January 9,196 7,892
Cash and cash equivalents at year end 22 5,441 9,196
Reconciliation to Total cash, cash equivalents and other interest-bearing 2023 2022
deposits
Cash and cash equivalents at year end 22 5,441 9,196
Interest-bearing deposits maturing after more than three months 22 1,396 403
Cash, cash equivalents and other interest-bearing deposits 22 6,837 9,599
1 The 2022 results include reclassifications to conform with the current
year presentation. Further information is given in note 2 and note 37.
For details on restricted cash balances see note 22 Cash, cash equivalents and
other current interest-bearing deposits.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the year to 31 December 2023
€ million Issued share capital (note 31) Share premium (note 31) Treasury shares (note 31) Other reserves (note 33) Retained earnings Total shareholders' equity Non-controlling interest (note 33) Total equity
1 January 2023 497 7,770 (28) (1,717) (4,506) 2,016 6 2,022
Profit for the year - - - - 2,655 2,655 - 2,655
Other comprehensive income for the year
Cash flow hedges reclassified and reported in net profit:
Fuel and oil costs - - - (81) - (81) - (81)
Currency differences - - - (20) - (20) - (20)
Finance costs - - - (35) - (35) - (35)
Ineffectiveness recognised in other non-operating costs - - - (6) - (6) - (6)
Net change in fair value of cash flow hedges - - - (195) - (195) - (195)
Net change in fair value of equity investments - - - 127 - 127 - 127
Net change in fair value of cost of hedging - - - (120) - (120) - (120)
Cost of hedging reclassified and reported in net profit - - - 82 - 82 - 82
Fair value movements on liabilities attributable to credit risk changes - - - (119) - (119) - (119)
Currency translation differences - - - 18 - 18 - 18
Remeasurements of post-employment benefit obligations - - - - (1,076) (1,076) - (1,076)
Remeasurements of long-term employee-related provisions - - - - (18) (18) - (18)
Total comprehensive income for the year - - - (349) 1,561 1,212 - 1,212
Hedges transferred and reported in property, plant and equipment - - - (6) - (6) - (6)
Hedges transferred and reported in sales in advance of carriage - - - 85 - 85 - 85
Hedges transferred and reported in inventory - - - (9) - (9) - (9)
Cost of share-based payments - - - - 52 52 - 52
Vesting of share-based payment schemes - - 5 - (6) (1) - (1)
Acquisition of treasury shares - - (77) - - (77) - (77)
31 December 2023 497 7,770 (100) (1,996) (2,899) 3,272 6 3,278
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the year to 31 December 2022
€ million Issued share capital (note 31) Share premium (note 31) Treasury shares (note 31) Other reserves (note 33) Retained earnings Total shareholders' equity Non-controlling interest (note 33) Total equity
1 January 2022 497 7,770 (24) (1,673) (5,730) 840 6 846
Profit for the year - - - - 431 431 - 431
Other comprehensive income 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 income for the year - - - 105 1,145 1,250 - 1,250
Hedges transferred and reported in property, plant and equipment - - - (65) - (65) - (65)
Hedges transferred and reported in sales in advance of carriage - - - 36 - 36 - 36
Hedges transferred 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 - - -
31 December 2022 497 7,770 (28) (1,717) (4,506) 2,016 6 2,022
NOTES TO THE ACCOUNTS
For the year to 31 December 2023
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 17 December 2009. The registered address of IAG is El
Caserío, Zona industrial 2, Camino de La Muñoza s/n, 28042, Madrid, Spain.
On 21 January 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 26 April 2013, and Aer
Lingus Group Plc ('Aer Lingus') on 18 August 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 employee benefit assets and liabilities, 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 31 December 2023 were
authorised for issue, and approved by the Board of Directors on 28 February
2024.
Change in presentation of results
Income statement - Net gain on sale of property, plant and equipment
The prior year Income statement includes a reclassification to conform with
the current year presentation for the Net gain on sale of property, plant and
equipment within Operating profit. Accordingly, for the year to 31 December
2022, the Group has reclassified €22 million of gains from Other
non-operating credits to Net gain on sale of property, plant and equipment
within Expenditure on operations. There is no impact on the Profit after tax.
The segmental operating profit/(loss) has been updated to reflect the
reclassification.
Statement of other comprehensive income
The prior year Statement of other comprehensive income includes a
reclassification of €173 million of gains associated with the fair value
movements on cash flow hedges and €9 million of losses associated with the
fair value movements on cost of hedging, which had been previously presented
under the sub-heading Items that will not be reclassified to net profit, to
the sub-heading Items that may be reclassified subsequently to net profit, as
these may recycle to net profit in future periods. There is no impact on Total
other comprehensive (loss)/income for the year, net of tax.
Cash flow statement
The prior year Cash flow statement has been represented and further detailed
in note 37. Accordingly, the Group has reclassified the results for the year
to 31 December 2022.
Going concern
At 31 December 2023, the Group had total liquidity of €11,624 million (31
December 2022: total liquidity of €13,999 million), comprising cash, cash
equivalents and interest-bearing deposits of €6,837 million, €4,412
million of committed and undrawn general facilities and a further €375
million of committed and undrawn aircraft specific facilities. At 31 December
2023, the Group has no financial covenants associated with its loans and
borrowings.
The decrease in liquidity during the year to 31 December 2023 was attributable
to, amongst other actions: (i) the repayment of borrowings of €4,268
million, which consisted of, amongst others, the €2,330 million (£2.0
billion) early repayment of the UK Export Finance (UKEF) Credit Facility, the
€867 million of early repayment of the syndicated financing agreement,
partially guaranteed by Instituto de Crédito Oficial (ICO) in Spain and the
€500 million redemption of the senior unsecured bond at maturity; (ii)
securing an additional five-year Export Development Guarantee Facility of
€1,159 million (£1.0 billion), offset by a reduction in aircraft specific
facilities of €741 million; and (iii) offset by strong operational cash flow
generation.
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 of at
least 12 months from the date of the approval of these consolidated financial
statements (the 'going concern period'). 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 2023. The business plan takes into account the Board's and
management's views on capacity, based on the potential impact of 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
through to 31 March 2025, include:
• capacity recovery modelled by geographical region with total capacity to
remain above the levels obtained in 2023 throughout the going concern period;
• passenger unit revenue per ASK is forecast to remain above the levels
obtained in 2023 throughout the going concern period;
• the Group has assumed that the committed and undrawn general facilities
of €4,412 million will not be drawn over the going concern period. The
availability of certain of these facilities reduces over time, with €3,843
million being available to the Group at 31 March 2025;
• the Group has assumed that the undrawn aircraft facilities of €375
million, relating to specific financing structures, will be utilised over the
going concern period;
• the Group has assumed that the €500 million bond that matures in March
2025 will not be refinanced;
• of the capital commitments detailed in note 15, €3,207 million is due
to be paid over the period to 31 March 2025;
• while the Group does not expect to finance all expected deliveries over
the going concern period, for those it does expect to finance, it has forecast
securing between 90 and 100 per cent depending on aircraft type, or €2,235
million, of the aircraft financing that is currently uncommitted, to align
with the timing and payments for those aircraft deliveries it expects to
finance, including aircraft delivered in 2023 that had not had their financing
secured at the reporting date; and
• the Group has assumed that the relevant approvals required in relation
to the acquisition of the remaining 80 per cent of the share capital of Air
Europa Holdings that it does not currently own are obtained by the end of the
going concern period, and that cash outflows of €149 million will be
incurred, comprising €100 million of the cash consideration and €49
million for the purchase of ordinary shares in the Company that have not
already been purchased at the balance sheet date. The deferred consideration
of €100 million to be paid on the first anniversary and the €100 million
to be paid on the second anniversary of the completion of the acquisition are
assumed to occur outside of the going concern period and accordingly not
included in these forecasts.
The Downside Case applies stress to the Base Case to model adverse commercial
and operational impacts over the going concern period, represented by: reduced
levels of capacity operated in each month, including reductions of 25 per cent
for three months over the going concern period; reduced passenger unit revenue
per available seat kilometre (ASK); increases in the price of jet fuel by 20
per cent above that assumed in the Base Case; and increased operational costs.
In the Downside Case, over the going concern period capacity would be 10 per
cent down when compared to the Base Case. The Downside Case assumes that
British Airways would be required to draw down, in full, its portion of the
available US dollar Revolving Credit Facility (further information given in
notes 3 and 29f). The Downside Case also assumes that upon completion of the
Air Europa Holdings acquisition, a further €200 million of working capital
needs are funded by the Group. The Directors consider the Downside Case to be
a severe but plausible scenario.
Having reviewed the Base Case and the Downside Case, the Directors have a
reasonable expectation that the Group has sufficient liquidity to continue in
operational existence for a period of at least 12 months from the date of
approval of these consolidated financial statements and hence continue to
adopt the going concern basis in preparing the consolidated financial
statements at 31 December 2023.
Consolidation
The Group financial statements include the financial statements of the Company
and its subsidiaries, each made up to 31 December 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 26.
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 credits/(charges) 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 and pre-delivery instalment payments
(referred to as progress payments). 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
short-haul aircraft and between 23 and 29 years (depending on aircraft) and up
to 5 per cent residual value for long-haul 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.
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
Certain of the Group's contractual arrangements with aircraft and engine
manufacturers contain liquidated damage clauses, whereby if the supplier
breaches one or more contractual clauses (such as delays in the timing of
delivery of an aircraft or engine) then damages are payable to the Group.
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.
When compensation, not related to the loss of income and/or incremental
operating costs, is received in advance of the associated delivery of the
aircraft and/or engine, the Group recognises the amount within Other creditors
until such time as the aircraft and/or engine is delivered, at which time the
amounts are transferred and recorded as a reduction in the cost of the
associated asset. Such compensation is recorded in the Cash flow statement
within cash flows from investing activities under the caption of Acquisition
of property, plant and equipment and intangible assets.
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. 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 counterparty 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 from 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.
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.
f Maintenance, repairs and overhaul
Owned aircraft
Major overhaul expenditure, including replacement spares and labour costs for
airframes and engines, is capitalised and amortised over the expected life
between major overhauls or to the end of the useful life of the asset.
All other replacement spares and other costs relating to maintenance of owned
fleet assets (including maintenance provided under 'pay-as-you-go' contracts)
are charged to the Income statement on consumption or as incurred
respectively.
Leased aircraft
The Group records a provision for major maintenance and overhaul events,
including for airframes and engines, that occur through usage or through the
passage of time that is recognised as such activity occurs through to the next
maintenance event, with a corresponding expense recorded in the Income
statement. Any subsequent changes in estimation are recognised in the Income
statement. When the maintenance and/or overhaul event occurs, the associated
provision is de-recognised.
Restoration and handback obligations that arise on the 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.
All other replacement spares and other costs relating to maintenance of leased
fleet assets (including maintenance provided under 'pay-as-you-go' contracts)
are charged to the Income statement on consumption or as incurred
respectively.
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.
In certain instances, the Group enters into cloud computing arrangements with
third-party providers, such as software as a service (SaaS), where the Group
is provided the right to access and use the application software over the
contract term. At inception of the contract, the Group will assess whether
such an arrangement gives rise to the recognition of a software intangible
asset.
Where the Group determines that no software intangible asset should be
recognised, the cloud computing arrangement is determined to be a service
contract and the associated fees paid are expensed as incurred. In addition,
the costs incurred for both the customisation and configuration of the
application software are generally expensed as incurred.
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
associate 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.
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 or 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
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 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 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.
Financial instruments held for trading
Financial instruments are classified as held for trading if they are incurred
for the purpose of selling the associated asset in the near term and not
having been purchased for operational purposes.
By entering into short-term forward sales contracts, the Group seeks to
optimise capital allocation while minimising the associated economic risk.
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 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. The effective portion of 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.
The effective portion of 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 the Income statement.
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 cash flow 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.
The Group assesses whether the derivative designated as the hedging instrument
in a hedge relationship is expected to be on inception and at each reporting
date effective in offsetting the changes in cash flows of the hedged item
using the hypothetical derivative model.
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;
• 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; and
• in all hedges, ineffectiveness may arise if there are differences
between the critical terms of the hedging instrument and the hypothetical
derivative, such as where on inception of the hedge relationship the fair
value of the hedging instrument is not zero.
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 credits.
Reclassification and transfer adjustments
Gains and losses accumulated in the Cash flow hedge reserve within equity are
either reclassified from the Cash flow hedge reserve when the hedged item
affects the Income statement, or transferred from the Cash flow hedge reserve
when the hedged item gives rise to recognition in the Balance sheet 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 transferred and
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, amortisation and impairment over the
expected life of the aircraft, for fuel inventory through Fuel, oil costs and
emission charges when it is consumed and for sales in advance of carriage
through Passenger revenue when the flight is flown); and
• where the forecast hedged item 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 the Income
statement to Interest expense within Finance costs at the same time as the
interest income or expense arises on the hedged item.
Further information on the risk management activities of the Group is given in
note 29.
e Fair value hedges
Changes in the fair value of derivative financial instruments designated in a
fair value hedge relationship are recorded within the Income statement as Net
change in the fair value associated with fair value hedges within Other
non-operating credits. The change in the fair value of the hedged item
attributable to the risk being hedged is recorded as part of the overall
carrying amount of the hedged item and is recorded within the Income statement
as Net change in the fair value associated with fair value hedges within Other
non-operating credits.
For fair value hedges associated with financial liabilities measured at
amortised cost, any adjustment to the carrying value is amortised to the
Income statement from the date of the cessation of the hedge relationship
through to the maturity of the hedged item using the effective interest rate
method.
If the hedged item is de-recognised, the unamortised fair value is recognised
immediately in the Income statement.
Ineffectiveness included in fair value hedges of interest rate payments 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.
f 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
During the course of 2023, the Group ceased to apply the Phase 1 amendments,
as the last of the associated IBORs transitioned to alternative benchmarks.
Prior to these transitions and where the Group applied the Phase 1 amendments,
the following reliefs were applied:
• when considering the highly probable requirement, the Group assumed that
those benchmark rates that needed to be transitioned to an alternative
benchmark rate, on which the Group's hedged long-term borrowings were based,
did not change as a result of IBOR reform;
• in assessing whether the hedge was expected to be highly effective on a
forward-looking basis the Group assumed that those benchmark rates that needed
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
were based, were not altered by IBOR reform; and
• the Group has not reclassified the Cash flow hedge reserve relating to
the period after the IBOR reform is expected to take effect.
When the Group ceased to apply the Phase 1 amendments, the Group amended 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 was updated to reflect these changes in
designation by the end of the reporting period in which the changes were made.
Such amendments did not give rise to the hedge relationship being
discontinued.
When the Group transitioned to alternative benchmark rates, the accumulated
amounts within the cash flow hedge reserve were determined to be based on the
alternative benchmark rates and no reclassification adjustments were made from
the cash flow hedge reserve to the Income statement.
Long-term borrowings and lease liabilities
Phase 2 of the amendments required 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 was recognised upon transition to the new benchmark. The expedient was
only applicable to direct changes that are required by interest rate benchmark
reform.
For lease liabilities where there was a change to the basis for determining
the contractual cash flows, as a practical expedient the lease liability was
remeasured by discounting the revised lease payments using a discount rate
that reflected the change in the interest rate where the change was required
by IBOR reform.
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 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.
c Flight crew provisions
The Group's obligations in respect of flight crew provisions are calculated
separately for each collective bargaining agreement. In estimating these
obligations, the Group makes assumptions regarding the number of employees
that will elect to take early retirement under these agreements, and the age
at which they make this election (where relevant), using the probability
weighted methodology. The Group recognises a provision for service costs from
the date of employment of the relevant individual, with the corresponding
amount recorded within the Income statement. The provisions recognised are
discounted, at the reporting date and the effect of unwinding of these
discount rates are recognised as a finance cost in the Income statement.
Remeasurements of the provisions are made for changes in financial assumptions
and recorded in Other comprehensive income. The Group records changes through
Other comprehensive income, where assumptions regarding the elections to be
made by individuals differs to actual elections. These calculations are
performed by a qualified actuary using the projected unit credit method.
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.
Treasury shares
When the share capital of the Company is repurchased, the amount of the
consideration paid, including directly attributable transaction costs, is
recognised as a deduction from equity within the treasury share reserve. When
treasury shares are sold or reissued, the amount received is recognised as an
increase in equity and the resulting gain or loss on the transaction is
presented as an adjustment to Retained earnings with no gain or loss recorded
in the Income statement.
Provisions
Provisions are made when all of the following criteria have been met: (i) an
obligation exists for a present liability in respect of a past event; (ii)
where the amount of the obligation can be reliably estimated; and (iii) 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 qualified 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.
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 and presented within current
liabilities until either: (i) the customer has flown; or (ii) where the
customer does not fly on the intended date and has purchased a non-flexible
fare.
For flexible and semi-flexible tickets, when the customer does not travel on
the intended date, a term referred to as 'unused tickets', the customer has a
number of options they can elect to apply, depending on the fare type: (i)
reschedule the date of intended travel; (ii) request a refund; or (iii)
request a voucher.
The Group estimates the amount of these unused tickets for which customers are
not expected to exercise their remaining rights prior to expiry based on the
terms and conditions of the ticket and analysis of historical experience, a
term referred to as 'unused ticket breakage'. This revenue is recognised based
on the terms and conditions of the ticket and analysis of historical
experience. For unused ticket breakage, revenue is recognised only when the
risk of a significant reversal of revenue is remote. The estimation regarding
historical experience is updated at each reporting date.
Where a flight is cancelled, the customer has a number of options they can
elect to apply to their unused tickets: (i) compensation; (ii) a refund; (iii)
changing to an alternative flight; or (iv) the receipt of a voucher.
The presentation in the financial statements of these customer options, to the
extent they differ to the recognition criteria stated above, are as follows:
• Compensation for flight cancellation - such payments are presented net
within Passenger revenue against the original ticket purchased;
• Refund - deferred revenue is reduced and no amount is recorded within
revenue;
• Changing to an alternative flight - amounts are retained within Deferred
revenue until such time as the flight is flown, at which time it is recorded
within Passenger revenue; and
• Voucher - retained within Deferred revenue until such time as it is
redeemed for a flight or it expires, at which time it is recorded within
Passenger revenue.
In relation to vouchers, the Group also recognises revenue by estimating the
amount of vouchers that customers are not expected to exercise their remaining
rights 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 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 principal 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 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 within
the Income statement as Other finance costs within Finance costs.
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.
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 31 December 2023 the Group recognised €1,380 million in respect of
employee benefit assets (2022: €2,334 million) and €175 million in respect
of employee benefit obligations (2022: €217 million). Further information on
employee benefit obligations is disclosed in note 34.
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 34. 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 34.
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 31 December 2023 the Group recognised €8,023 million (2022: €7,644
million) in respect of deferred revenue of which €2,712 million (2022:
€2,630 million) related to customer loyalty programmes. Further information
on deferred revenue is included in note 24.
Passenger revenue
Passenger revenue is recognised when the transportation service is provided.
At the time of intended transportation, revenue is also recognised in respect
of estimated unused tickets breakage 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. A 2
percentage point increase in the level of unused ticket breakage of the sales
in advance of carriage balance (excluding vouchers) at 31 December 2023 would
result in an adjustment to Deferred revenue of €93 million, with an
offsetting adjustment to increase revenue and operating profit recognised in
the year.
For details regarding the voucher liability at 31 December 2023 and the
associated sensitivity, see note 24.
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 2022, 2021 and 2020, due to the significant restrictions imposed on the
ability of customers to redeem Avios, as a result of the COVID-19 pandemic,
coupled with the disruption in the patterns of redemption caused by the
COVID-19 pandemic, 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 that were
experienced over the period of the pandemic. Accordingly, for the years to 31
December 2022, 31 December 2021 and 31 December 2020, the Group estimated the
level of redemption activity based on pre-COVID-19 pandemic customer
behaviour.
During 2023, the Group considers historical redemption activity, including
customers' more recent behaviours following the COVID-19 pandemic,
representative of long-term behavioural trends, such that the Group considers
that the risk of a significant reversal of revenue to be sufficiently low.
Accordingly, the Group has updated its estimated level of redemption activity
to incorporate current 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 5 percentage point increase in the assumption
of Avios not expected to be redeemed would result in an adjustment to Deferred
revenue of €94 million, with an offsetting adjustment to increase revenue
and operating profit recognised in the year.
Unredeemed vouchers liability
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 the COVID-19 pandemic, the Group issued a
greater volume of vouchers than it would have otherwise done. 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 to 31 December 2022, 31 December 2021 and 31 December 2020, the
Group did not recognise revenue arising from those vouchers issued due to
COVID-19 pandemic-related cancellations until either the voucher was redeemed
or it expired.
During 2023, the Group considers historical redemption activity, including
customers' more recent behaviours following the COVID-19 pandemic,
representative of the redemption trends expected through to expiry of the
vouchers, such that the Group considers that the risk of a significant
reversal of revenue to be sufficiently low. Accordingly, the Group has updated
its estimated level of redemption activity to incorporate current customer
behaviour.
c Income taxes
At 31 December 2023, the Group recognised €1,202 million in respect of
deferred tax assets (2022: €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 31 December 2023, the Group had unrecognised deferred tax assets of
€1,584 million relating to tax losses and other temporary differences 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 tax losses would have reduced by
€575 million. Conversely, if the forecast profit before tax for each
operating company was reduced by 2 percentage points over the forecast period,
the amount of the unrecognised tax losses would increase by €12 million.
d Impairment of non-financial assets
At 31 December 2023 the Group recognised €2,428 million (2022: €2,423
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 (CGU), 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 31 December 2023 the Group recognised €2,529 million in respect of
maintenance, restoration and handback provisions, principally in respect of
leased aircraft (2022: €2,400 million). Information on movements on the
provision is disclosed in note 27.
IFRS 16 does not address the accounting for maintenance, restoration and
handback provisions that arise through the usage of the underlying asset and
accordingly, the Group has applied judgement in applying an accounting policy
with regard to the recognition and subsequent measurement of such provisions
for leased aircraft. The Group's accounting policy for provisions that arise
through usage or through the passage of time, is to recognise the associated
estimated costs in the Income statement as the underlying asset is used or
through the passage of time. The approach applied by the Group is consistent
with the majority of major airlines that prepare their financial statements
under IFRS. Were the Group to apply an alternative accounting policy, the
financial impact would be materially different at the reporting date. An
alternative accounting policy that the Group could have applied was the
components approach, where the Group would capitalise the estimated costs of
major maintenance events and depreciating them until the subsequent
maintenance event (or to the end of lease term) and providing over the lease
term for any expected cash compensation for maintenance obligations at the end
of the lease. The Group considers that the current accounting policy for
maintenance, restoration and handback activities reflects the obligations
under its lease arrangements.
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 major maintenance event occurs. Other assumptions not
considered to be significant include aircraft utilisation, expected
maintenance intervals and the aircraft's condition. The associated forecast
costs are discounted to their present value. While the Group considers that
there are no reasonably possible change to any of the individual assumptions
that would have a material impact on the provisions, a combination of changes
in several assumptions may. The Group considers that a reasonably possible
change in the inflation rate and discount rate assumptions of a 100 basis
points increase would give rise to an increase of €53 million (2022: €51
million) and a decrease of €59 million (2022: €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; and 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, with
those transactions arising in the normal course of business being immaterial
in nature; 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 cost on inception and subsequently
measured using the equity method.
At 31 December 2023, the fair value of its shareholding in Air Europa Holdings
was €129 million. Further information is given in note 19.
c Determining whether the HMRC enquiries into the IAG Loyalty VAT accounting
gives rise to a provision or a contingent liability
The Group applies judgement in the determination as to whether it considers
the outcome of the enquiries between IAG Loyalty and His Majesty's Revenue and
Customs (HMRC), in the UK, on the IAG Loyalty VAT accounting, is more probable
than not to result in an adverse outcome to the Group, and accordingly whether
to record the matter as a provision or as a contingent liability.
In forming its judgement, the Group, with its legal and tax advisors, have
reviewed the emerging view issued by HMRC, as well has having considered the
historic tax ruling issued by HMRC to the Group on this matter. As a result,
the Group does not consider it probable that an adverse outcome will eventuate
and accordingly no provision has been recorded at 31 December 2023 and the
matter has been disclosed as a contingent liability.
Had the Group, with its legal and tax advisors, considered that it was more
probable than not that an adverse outcome would eventuate, then the Group
would have recognised a provision for the best estimate of the potential
outflow of economic benefit to the Group, with a corresponding charge recorded
within the Income statement. Further information is given in note 10g.
New standards, amendments and interpretations
The following amendments and interpretations apply for the first time in 2023,
but do not have a material impact on the consolidated financial statements of
the Group:
• IFRS 17 Insurance contracts - effective for periods beginning on or
after 1 January 2023;
• definition of accounting estimate - amendments to IAS 8 effective for
periods beginning on or after 1 January 2023;
• disclosure of accounting policies - amendments to IAS 1 and IFRS
Practice statement 2 effective for periods beginning on or after 1 January
2023;
• deferred tax related to assets and liabilities arising from a single
transaction - amendments to IAS 12 effective for periods beginning on or after
1 January 2023; and
• international tax reform: Pillar Two model reforms - amendments to IAS
12 effective for periods beginning on or after 1 January 2023.
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:
• disclosures: Supplier Finance Arrangements - amendments to IAS 7 and
IFRS 7 effective for periods beginning on or after 1 January 2024;
• lease liability in a sale and leaseback - amendments to IFRS 16
effective for periods beginning on or after 1 January 2024; and
• on 31 October 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 1 January 2024. The Amendments
will require the €825 million convertible bond that matures in 2028, which
as at 31 December 2023, had a carrying value of €735 million, to be
reclassified from a non-current liability to a current liability with the
comparative presentation as at 31 December 2022 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 12 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 31 December 2023
as detailed below:
• on 23 February 2023, the Group entered into an agreement to acquire the
remaining 80 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. Under the agreement, this
24-month period can be extended, by mutual consent. 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;
• on 4 March 2023, Aer Lingus repaid in full the €50 million of the
financial arrangement with the Ireland Strategic Investment Fund (ISIF). At 31
December 2023, €350 million of undrawn facilities remain available for draw
down;
• in May 2023, the Group announced its intention to carry out a share
purchase programme in order to acquire approximately 50 per cent of the
aforementioned ordinary shares required as part of the acquisition of Air
Europa Holdings. The programme completed during the year to 31 December 2023,
with the Group having purchased 27 million treasury shares amounting to €49
million;
• on 30 June 2023, the Group converted 10 Airbus A320neo options into firm
orders. The aircraft will be delivered in 2028 and will be used by any of the
Group's airlines to replace A320ceo family aircraft;
• on 4 July 2023, the Group redeemed upon maturity the senior unsecured
€500 million fixed rate bond;
• on 27 July 2023, the Group announced that it had converted six Boeing
787-10 options held by British Airways into firm orders and at the same time
is adding a further six 787-10 options to its long-haul order book. The Group
also converted one Airbus A350-900 option held by Iberia into a firm order.
These aircraft will be delivered in 2025 and 2026 and will be used by British
Airways and Iberia to restore capacity in the airlines' long-haul fleets;
• on 23 August 2023, the Group extended the terms of $1.655 billion of
the $1.755 billion Revolving Credit Facility available to British Airways,
Iberia and Aer Lingus by an additional 12 months through to March 2026 with
the remaining $100 million available through to March 2025. At 31 December
2023, the Revolving Credit Facility remains undrawn;
• on 28 September 2023, British Airways repaid its syndicated loan of
£2.0 billion (€2.3 billion), which was partially guaranteed by the UK
Export Finance (UKEF). At the same time, British Airways entered into a new
five-year Export Development Guarantee Facility of £1.0 billion (€1.2
billion), with commitments from a syndicate of banks, partially guaranteed by
the UKEF, and available through to September 2028. The new facility is in
addition to the £1.0 billion Export Development Guarantee Facility, which
was entered into in 2021 and which is available through to November 2026. Both
facilities were undrawn at 31 December 2023;
• on 31 October 2023 Iberia repaid the remaining outstanding €644
million of the €750 million floating rate syndicated financing agreement,
partially guaranteed by the Instituto de Crédito Oficial (ICO) in Spain;
• on 15 November 2023, Iberia early repaid other loans and borrowings of
€42 million; and
• on 30 November 2023, Vueling repaid the remaining outstanding €223
million of the €260 million floating rate syndicated financing agreement,
partially guaranteed by ICO.
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 10 per cent by 2030 and to 70 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.
As a result of the impact of the COVID-19 pandemic, the Group retired 72
aircraft, their associated engines and rotable inventories. These retired
aircraft were older generation aircraft, that were less fuel-efficient, more
carbon-intensive and more expensive to operate than more modern models.
Subsequent to the retirement of these aircraft, coupled with the future
committed delivery of 178 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, being to 2030. These adjustments are limited to
those that: (i) the Group can reliably estimate at the reporting date, with
those costs subsequent to 2030 having such a high degree of uncertainty that
they cannot be reliably estimated; (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 to 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 and 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's companies, 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. As the provision
is recognised, a corresponding amount is recorded in the Income statement
within Fuel, oil costs and emission charges. 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.
For the year to, and as at, 31 December 2023, the Group has recorded the
following within the financial statements:
• additions to the ETS allowance provision and accordingly an expense
within Fuel, oil costs and emission charges, of €238 million (see note 27);
• purchases of ETS allowances recorded as additions to intangible assets
of €264 million (see note 17);
• total ETS allowances at the reporting date recorded within intangible
assets of €577 million (see note 17); and
• commitments for forward purchase agreements for ETS allowances of €216
million (see note 15).
At 31 December 2023, the Group has acquired and committed to acquire at fixed
prices, the following percentages of its total emissions allowances forecast
to be purchased over the business plan period to 31 December 2026:
Percentage of forecast emission allowances required
Within 12 months 100 %
1-2 years 62 %
2-3 years 24 %
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, loyalty and platform functions. Each operating
company 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 operating companies based on
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.
There are varying levels of transactions between operating segments, which
principally relate to the provision of maintenance services from the Iberia
operating segment to the other operating segments, the provision of flight
services by the airlines to the IAG Loyalty segment and the provision of
loyalty services from IAG Loyalty to the airline operating segments.
The platform functions of the business primarily support the airline and
loyalty 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 31 December 2023
2023
€ million British Airways Iberia Vueling Aer IAG Loyalty Other Group companies(1) Total
Lingus
Revenue
Passenger revenue 14,204 5,215 3,180 2,194 679 338 25,810
Cargo revenue 862 233 - 55 - 6 1,156
Other revenue 962 986 17 10 512 - 2,487
External revenue 16,028 6,434 3,197 2,259 1,191 344 29,453
Inter-segment revenue 431 524 1 15 294 392 1,657
Segment revenue 16,459 6,958 3,198 2,274 1,485 736 31,110
Depreciation and amortisation charge (1,168) (409) (259) (150) (11) (66) (2,063)
Operating profit/(loss) 1,650 940 396 225 321 (25) 3,507
Net non-operating costs (451)
Profit before tax 3,056
Total assets 22,255 9,454 3,049 1,999 3,786 (2,863) 37,680
Total liabilities (19,295) (8,390) (3,461) (1,856) (3,115) 1,715 (34,402)
1 Includes eliminations on total assets of €16,268 million and total
liabilities of €5,417 million.
For the year to 31 December 2022
2022
€ million British Airways Iberia Vueling Aer Lingus IAG Loyalty Other Group companies(2) Total
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)(1) 366 389 195 57 282 (11) 1,278
Exceptional items(3) 23 - 8 - - - 31
Operating profit/(loss) before exceptional items 343 389 187 57 282 (11) 1,247
Net non-operating costs(1) (863)
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 Segment information for 2022 has been restated for the reclassification to
conform with the current year presentation for the Net gain on sale of
property, plant and equipment. Further information is given in note 2.
2 Includes eliminations on total assets of €16,159 million and total
liabilities of €5,755 million.
3 For details on exceptional items refer to the Alternative performance
measures section.
b Other revenue
Year to 31 December
€ million 2023 2022(1)
Holiday and hotel services 938 805
Maintenance and overhaul services 683 528
Brand and marketing 347 267
Ground handling services 195 193
Other 324 200
2,487 1,993
1 For the year to 31 December 2023, the Group has elected to provide a
disaggregated breakdown of the Income statement caption 'Other revenue' and
has accordingly provided figures for the comparative year to 31 December 2022.
c Geographical analysis
Revenue by area of original sale
Year to 31 December
€ million 2023 2022
UK 10,177 7,923
Spain 5,234 4,313
USA 5,069 3,735
Rest of world 8,973 7,095
29,453 23,066
Assets by area
31 December 2023
€ million Property, plant and equipment Intangible
assets
UK 12,764 1,685
Spain 5,644 1,569
USA 100 18
Rest of world 1,268 637
19,776 3,909
31 December 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
6 Operating expenses
a Expenses by nature - Operating result is arrived at after charging
Depreciation, amortisation and impairment of non-current assets:
€ million 2023 2022
Depreciation charge on right of use assets 1,077 1,092
Depreciation charge on owned assets 768 748
Gain arising on de-designation of foreign exchange hedges recorded in - (29)
Depreciation(1)
Amortisation and impairment of intangible assets 193 218
Impairment reversal on right of use assets - (8)
Depreciation charge on other leasehold assets 25 49
2,063 2,070
1 Included in the depreciation charge for 2022, 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 2023 2022
Cost of inventories recognised as an expense 1,165 749
1,165 749
b Property, IT and other costs
€ million 2023 2022(1)
IT costs 365 340
Property costs 296 293
Insurance costs, professional fees and other costs 397 317
1,058 950
1 For the year to 31 December 2023, the Group has elected to provide a
disaggregated breakdown of the Income statement caption 'Property, IT and
other costs' and has accordingly provided figures for the comparative year to
31 December 2022.
7 Auditor's remuneration
The fees for the years to 31 December 2023 and 31 December 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 2023 2022
Fees payable for the audit of the Group and individual accounts 6,929 6,378
Fees payable for other services:
Audit of the Group's subsidiaries pursuant to legislation 1,284 985
Other services pursuant to legislation 218 195
Other audit and assurance services 1,589 1,644
Services relating to working capital review - 1,022
10,020 10,224
Fees payable to the Group's auditor for the audit of the Group's pension
scheme during the year total €251 thousand (2022: €236 thousand).
8 Employee costs and numbers
€ million 2023 2022
Wages and salaries 3,711 3,207
Social security costs 604 519
Costs related to pension scheme benefits 297 272
Share-based payment charge 52 39
Other employee costs(1) 759 610
Total employee costs 5,423 4,647
1 Other employee costs include allowances and accommodation for crew.
The number of employees during the year and at 31 December was as follows:
2023 2022
31 December 2023 31 December 2022
Average number of employees Number of employees(2) Percentage Average number of employees(1) Number of employees(2) Percentage
of women of women
In the air:
Cabin crew 23,473 24,004 70 % 19,801 22,278 70 %
Pilots 8,085 8,223 7 % 7,340 7,864 7 %
On the ground:
Airports 16,395 16,784 37 % 13,798 15,087 38 %
Corporate 14,774 15,586 48 % 11,741 13,819 49 %
Maintenance 6,813 6,972 8 % 6,908 6,775 8 %
Senior leaders 222 225 36 % 212 221 34 %
69,762 71,794 44 % 59,800 66,044 44 %
1 In 2022, 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; the total average number of employees
including these schemes was 61,192.
2 The number of employees is based on actual headcount at 31 December.
9 Finance costs, income and other non-operating credits
a Finance costs
€ million 2023 2022
Interest expense on:
Bank borrowings (237) (191)
Asset financed liabilities (170) (107)
Lease liabilities (508) (464)
Bonds (63) (83)
Provisions unwinding of discount (103) (43)
Other borrowings (42) (102)
Capitalised interest on progress payments 28 11
Other finance costs (18) (38)
(1,113) (1,017)
b Finance income
€ million 2023 2022
Interest on other interest-bearing deposits, cash and cash equivalents 386 51
Other finance income - 1
386 52
c Net change in fair value of financial instruments
€ million 2023 2022
Net change in the fair value of convertible bond (note 26b) (11) 159
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
(11) 81
d Net financing credit relating to pensions
€ million 2023 2022
Net financing credit relating to pensions 103 26
e Other non-operating credits
€ million 2023 2022(1)
Gain on sale of investments 10 -
Credit/(charge) related to equity investments (note 19) 3 (3)
Share of profits in investments accounted for using the equity method (note 6 5
18)
Realised (losses)/gains on derivatives not qualifying for hedge accounting (23) 190
Unrealised gains/(losses) on derivatives not qualifying for hedge accounting 13 (82)
Net change in the fair value associated with fair value hedges (note 30) (1) -
8 110
1 The 2022 Other non-operating credits include a reclassification to conform
with the current year presentation of the Income statement. See note 2 for
further details.
10 Tax
a Tax (charges)/credits
Tax (charges)/credits recognised in the Income statement, Other comprehensive
income and directly in equity:
2023 2022
€ 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 (1) - - (1) (6) - - (6)
Movement in respect of current year (206) 8 - (198) (64) 3 - (61)
Total current tax (207) 8 - (199) (70) 3 - (67)
Deferred tax
Movement in respect of prior years (10) (2) 12 - (36) (2) - (38)
Movement in respect of current year (171) 106 (17) (82) 105 (60) 5 50
Rate change/rate differences (13) 3 - (10) 17 (10) - 7
Total deferred tax (194) 107 (5) (92) 86 (72) 5 19
Total tax (401) 115 (5) (291) 16 (69) 5 (48)
The current tax credit in Other comprehensive income relates to movements
relating to employee benefit plans of €8 million (2022: €1 million) and to
the fair value movements on the IAG €825 million convertible bond maturing
in 2028 of €nil (2022: €2 million).
Tax recognised directly in equity of a €5 million charge (2022: €5 million
credit) relates to cash flow hedges.
Within tax in Other comprehensive income is a tax credit of €114 million
(2022: tax credit of €8 million) that may be reclassified to the Income
statement and a tax credit of €1 million (2022: tax charge of €77 million)
that will not.
b Current tax asset
€ million 2023 2022
Balance at 1 January 64 (5)
Income statement (207) (70)
Other comprehensive income 8 3
Cash 291 134
Exchange movements and other 1 2
Balance at 31 December 157 64
Current tax asset 159 72
Current tax liability (2) (8)
Balance at 31 December 157 64
c Deferred tax (liability)/asset
€ 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 1 January 2023 (680) (44) 9 197 54 (3) 17 1,636 96 1,282
Income statement (325) 68 (2) 11 (1) - 9 78 (32) (194)
Other comprehensive income - - - 6 (8) 114 - (3) (2) 107
Recognised directly in equity - - - - - (5) - - - (5)
Exchange movements and other (8) - - - - 15 - 10 (9) 8
Balance at 31 December 2023 (1,013) 24 7 214 45 121 26 1,721 53 1,198
Balance at 1 January 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 - - - (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 31 December 2022 (680) (44) 9 197 54 (3) 17 1,636 96 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 2023 was
€104 million (2022: €68 million, see note 30d).
€ million 2023 2022
Deferred tax asset 1,202 1,282
Deferred tax liability (4) -
Balance at 31 December 1,198 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 (2022: charge) and the actual tax
charge (2022: credit) on the profit for the year to 31 December 2023 (2022:
profit) are explained below:
€ million 2023 2022
Accounting profit before tax 3,056 415
Weighted average tax charge of the Group(1) (718) (102)
Unrecognised losses and deductible temporary differences arising in the year 11 (2)
Fair value movement on convertible bond 30 -
Effect of tax rate changes (13) 17
Prior year tax assets recognised 289 153
Effect of lower tax rate in the Canary Islands 3 5
Movement in respect of prior years (11) (42)
Employee benefit plans accounted for net of withholding tax 22 3
Non-deductible expenses (21) (22)
Other items 7 6
Tax (charge)/credit in the Income statement (401) 16
1 The expected tax charge 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 2023 corporate tax rates for the
Group's main countries of operation are Spain 25% (2022: 25%), the UK 23.5%
(2022: 19%) and Ireland 12.5% (2022: 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 2023 2022
Payroll related taxes 604 522
UK Air Passenger Duty 936 722
1,540 1,244
f Factors that may affect future tax charges
Unrecognised deductible temporary differences and losses
€ million 2023 2022
Income tax losses
Spanish corporate income tax losses 569 1,596
Openskies SASU trading losses 406 405
UK trading losses - 72
Other trading losses 13 11
988 2,084
Other losses and temporary differences
Spanish deductible temporary differences 238 481
UK capital losses 341 343
Irish capital losses 17 17
596 841
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.
Revocation of Royal Decree-Law 3/2016 in Spain
On 18 January 2024, the Tribunal Constitucional (Constitutional Court) in
Spain issued a ruling that the amendments to corporate income tax introduced
by Royal Decree Law 3/2016 were unconstitutional. Further details are given in
note 38.
Unrecognised temporary differences - investment in subsidiaries and associates
No deferred tax liability has been recognised in respect of €1,910 million
(2022: €823 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 3 March 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 24 May 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 charge of €13 million (2022: €17 million credit) is recorded
in the Income statement and a credit of €3 million (2022: €10 million
charge) is recorded in Other comprehensive income.
Engagement with tax authorities
The Group is subject to audit and enquiry by tax authorities in the
territories in which it operates, and engages with those tax authorities in a
cooperative manner.
During the course of 2023, the Directorate General of GST Intelligence (DGGI)
in India has been enquiring into the quantum and nature of any services
provided by the corporate head offices of a number of international airlines,
including British Airways, to their Indian branches. As at 31 December 2023
and through to the date of these financial statements, the DGGI's enquiries
are ongoing.
Pillar Two minimum effective tax rate reform
In 2021 the OECD released the Two Pillar solution to address the tax
challenges arising from the digitalisation of the economy. This 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 15 December 2022, the Council of the European Union formally adopted the EU
Pillar Two Directive. On 22 December 2022 the EU Minimum Tax Directive was
published.
On 11 July 2023, the UK enacted Finance (No. 2) Act 2023 which introduced the
Multinational Top-up Tax and the Domestic Top-up Tax with effect for
accounting periods beginning on or after 31 December 2023. These taxes are the
UK's adoption of the income inclusion rule and domestic minimum top-up tax
rule referenced in the OECD's Pillar Two reform.
On 18 December 2023, Ireland enacted Finance (No. 2) Act 2023 which, pursuant
to the EU Minimum Tax Directive, provided for the introduction of a new
minimum effective rate of tax for certain businesses. These rules provide for
a Qualified Domestic Top-Up Tax where an in-scope group's Irish operations
have an effective rate of tax of less than 15%. They come into force for
accounting periods beginning on or after 31 December 2023.
On 19 December 2023, Spain's Council of Ministers approved a draft law to
implement the EU Minimum Tax Directive. This is to be subject to consultation,
prior to being sent to Parliament.
Under the legislation, the Group is liable to pay a top-up tax for the
difference between the effective rate per jurisdiction and the 15 per cent
minimum rate. Such legislation applies prospectively for accounting periods
beginning on or after 31 December 2023.
For 2023, the predominant jurisdiction in which the Group operates with an
effective tax rate of less than 15 per cent is Ireland through Aer Lingus.
While the impact of Pillar Two is not yet reasonably possible to estimate, for
indicative purposes, in 2023 Aer Lingus recorded a current tax expense of
€24 million relating to its Irish operations, representing an effective tax
rate of 13 per cent. Had the effective tax rate applied by Aer Lingus to its
Irish operations been 15 per cent, the current tax expense would have
increased by €4 million to €28 million, which would not have had a
significant impact on the overall Group effective tax rate of 13 per cent.
On 23 May 2023, the IASB issued the amendments to IAS 12 - international tax
reform: Pillar Two model reforms, effective for periods beginning on or after
1 January 2023. The amendments to IAS 12 provide temporary mandatory relief
from the recognition of deferred tax balances arising from the implementation
of the Pillar Two legislation. Accordingly, the Group has developed an
accounting policy with regard to the recognition of deferred taxes arising
from the Pillar Two model rules, where no adjustments to deferred tax assets
and liabilities are recognised that arise from the introduction of the minimum
15 per cent effective tax rate.
g Tax-related contingent liabilities
The Group has certain contingent liabilities that could be reliably estimated,
across all taxes, but excluding the IAG Loyalty VAT matter detailed below, at
31 December 2023 amounting to €110 million (31 December 2022: €110
million). While the Group does not consider it more likely than not that there
will be material losses on these matters, given the inherent uncertainty
associated with tax litigation and tax audits, there can be no guarantee that
material losses will not eventuate. As the Group considers that its chances of
success in each of these matters is more probable than not, it is not
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 'Merger'). The
maximum exposure in this case is €100 million (31 December 2022: €98
million), being the amount in the tax assessment with an estimate of the
interest accrued on that assessment through to 31 December 2023.
The Company appealed the assessment to the Tribunal Económico-Administrativo
Central or 'TEAC' (Central Administrative Tax Tribunal). On 23 October 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 20 December 2019, and on 24 July 2020 filed submissions in support
of its case. To assist it in its deliberations as to whether a gain arose from
the Merger, on 15 September 2023, the Audiencia Nacional commissioned an
independent accounting expert to provide a report on the appropriate basis of
accounting. As at 31 December 2023 and through to the date of these financial
statements, the Audiencia Nacional has not ruled on whether a gain arose from
the Merger. The Company does not expect a hearing at the Audiencia Nacional on
this case until mid to late 2024 at the earliest.
The Company disputes the technical merits of the assessment and ruling of the
TEAC. Based on legal advice and an external accounting expert's opinion, the
Company believes that it has strong arguments to support its appeal. The
Company does not consider it appropriate to make a provision for these amounts
and accordingly has classified this matter as a contingent liability.
Should the Company be unsuccessful in its appeal to the Audiencia Nacional, it
would re-assess its position and the associated accounting treatment
accordingly.
Within the context of the aforementioned tax audits, the Spanish tax
authorities concluded on the value of Iberia's business within the Merger.
This valuation was contested by the Company in a separate case, where no tax
liability is due. The Company believes there are technical merits for a higher
value, something that would indirectly reduce the quantum of the merger gain
assessed in the dispute described above. On 18 January 2024, the Audiencia
Nacional served notice on its judgment issued on 13 December 2023, whereby it
ruled in favour of the Spanish tax authorities. The Company believes there are
grounds to appeal the judgement to the Supreme Court in Spain. If an appeal on
this matter was ultimately successful, it would reduce the exposure of the
merger gain described above.
IAG Loyalty VAT
At 31 December 2023, and through to the date of this report, His Majesty's
Revenue and Customs (HMRC) has issued protective notices of VAT assessments
for the 24 months ended March 2020 to Avios Group (AGL) Limited, a controlled
undertaking of the Group trading as IAG Loyalty. At the date of this report
none of these protective notices of assessment are due for payment.
During the second quarter of 2023, and while its enquiries are ongoing at the
date of this report, HMRC shared with the Group its emerging view on the
appropriate VAT accounting, which differs to the current approach by IAG
Loyalty. HMRC's emerging view asserts that the charges made by IAG Loyalty are
for participating/membership in the Avios scheme and the associated charges
and are subject to VAT. IAG Loyalty accounts for VAT depending on the nature
of the goods or services for which Avios are redeemed, the vast majority of
which are flights, and zero-rated. IAG Loyalty's VAT accounting has and
continues to be based on a ruling issued by HMRC.
As at the date of this report, this emerging view did not consider the
validity of the rulings HMRC has previously issued with regard to IAG
Loyalty's VAT accounting. Accordingly, and while having issued the protective
notices, HMRC has not confirmed whether it considers its emerging view to be
retroactive or only prospective in nature. The Group expects further
developments in this matter during 2024, which may include HMRC issuing an
update to its emerging view.
While the Group has continued to engage with HMRC on the underlying facts,
circumstances and technical analysis of the matter, as at the date of this
report there remain a number of possible scenarios that could eventuate. The
Group has reviewed HMRC's emerging view with its legal and tax advisors and
considers it has strong arguments to support its VAT accounting, including
having received a ruling previously from HMRC on the matter, and therefore
does not consider it probable that an adverse outcome will eventuate.
Accordingly, the Group does not consider it appropriate to record any
provision for this case at 31 December 2023. The Group, in conjunction with
its advisors, considers the disclosure of a potential range of exposures,
associated with the aforementioned possible scenarios that could eventuate,
could prejudice seriously the position of the Group in its ongoing engagement
with HMRC.
Should the Group and HMRC be unable to reach agreement on the appropriate VAT
accounting, then the Group will have the ability to advance the case by
initiating legal proceedings. To enable the Group to advance to initiate legal
proceedings, it will need to pay, without admission of liability, to HMRC the
total amount of assessments issued at the relevant time, which will be
recoverable, in part or in full, should the Group be successful in the case.
Until HMRC further progresses its enquiries, it is not possible to determine
the payment required, if any, but any potential payment may result in a
material cash outflow from the Group.
11 Earnings per share
€ million 2023 2022
Earnings attributable to equity holders of the parent for basic earnings per 2,655 431
share
Income statement impact of convertible bonds 15 (104)
Diluted earnings attributable to equity holders of the parent for diluted 2,670 327
earnings per share
2023 2022
Number Number
'000 '000
Weighted average number of ordinary shares in issue used for basic earnings 4,932,631 4,958,420
per share
Assumed conversion on convertible bonds 244,851 299,557
Dilutive employee share schemes outstanding 99,093 86,175
Weighted average number of ordinary shares used for diluted earnings per share 5,276,575 5,344,152
€ cents 2023 2022
Basic earnings per share 53.8 8.7
Diluted earnings per share 50.6 6.1
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 years to 31 December 2023 and 31 December 2022 due to the
reported profit after tax for the respective years.
For information relating to Adjusted earnings per share refer to the
Alternative performance measures section.
12 Dividends
The Directors propose that no dividend be paid for the year to 31 December
2023 (2022: €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.
As at 31 December 2022, certain debt obligations placed 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 the UKEF and loans to Iberia and Vueling partially guaranteed by
the Instituto de Crédito Oficial (ICO) in Spain.
As at 31 December 2023, the Group had no restrictions on the payment of
dividends from the Group's main operating companies to the Company, other than
for British Airways, which has several undrawn committed credit facilities for
which the commitments available are subject to certain conditions depending on
the scale of any dividend from British Airways to the Company.
In addition, British Airways agreed with the Trustee of its main UK defined
benefit pension scheme (NAPS) as part of the triennial valuation as at 31
March 2021 that, subject to the scheme being in technical deficit, any
dividends paid to IAG from 1 January 2024 through to 31 December 2024, will
trigger a pension contribution of 50 per cent of the amount of the dividend.
For the period of 1 January 2025 to 30 September 2025, any dividend in excess
of 50 per cent of British Airways' profit after tax will trigger a pension
contribution of 50 per cent of the amount of the dividend in excess of the 50
per cent of profit after tax. At 31 December 2023, NAPS was in technical
surplus, and any dividend that British Airways were to pay to IAG, would not
trigger a payment into NAPS unless NAPS were to move back into technical
deficit. Further details on the British Airways dividend restrictions agreed
with NAPS are given in note 34a.
13 Property, plant and equipment
€ million Fleet Property Equipment Total
Cost
Balance at 1 January 2022 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)
Balance at 31 December 2022 27,702 2,836 1,400 31,938
Additions 3,543 47 163 3,753
Modification of leases 224 204 1 429
Disposals (1,360) (35) (40) (1,435)
Reclassifications (2) (1) (7) (10)
Exchange movements 264 35 15 314
Balance at 31 December 2023 30,371 3,086 1,532 34,989
Depreciation and impairment
Balance at 1 January 2022 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)
Balance at 31 December 2022 11,385 1,206 1,001 13,592
Depreciation charge for the year 1,676 122 72 1,870
Disposals (331) (34) (34) (399)
Exchange movements 121 16 13 150
Balance at 31 December 2023 12,851 1,310 1,052 15,213
1 For details regarding the 2022 impairment reversal on fleet assets refer
to the Alternative performance measures section. For details regarding the
operating segment in which the 2022 impairment reversal arose, see note 5.
Net book values
31 December 2023 17,520 1,776 480 19,776
31 December 2022 16,317 1,630 399 18,346
€ million Fleet Property Equipment Total
Analysis at 31 December 2023
Owned 8,828 907 384 10,119
Right of use assets (note 14) 7,681 838 15 8,534
Progress payments 914 31 79 1,024
Assets not in current use 97 - 2 99
Property, plant and equipment 17,520 1,776 480 19,776
Analysis at 31 December 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
The net book value of property comprises:
€ million 2023 2022
Freehold 482 469
Right of use assets (note 14) 838 684
Long leasehold improvements with a contractual life in excess of 50 years 308 301
Short leasehold improvements with a contractual life of less than 50 years 148 176
Property 1,776 1,630
At 31 December 2023, bank and other loans of the Group are secured on owned
fleet assets with a net book value of €4,736 million
(2022: €3,931 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 1 January 2022 14,218 949 74 15,241
Additions 586 28 1 615
Modifications of leases 241 129 - 370
Disposals (214) (171) (2) (387)
Reclassifications(1) (849) - (24) (873)
Exchange movements (232) (24) - (256)
31 December 2022 13,750 911 49 14,710
Additions 853 17 - 870
Modification of leases 224 204 1 429
Disposals (117) (5) (6) (128)
Reclassifications(1) (831) - (1) (832)
Exchange movements 104 13 - 117
31 December 2023 13,983 1,140 43 15,166
Depreciation and impairment
Balance at 1 January 2022 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)
31 December 2022 5,757 227 29 6,013
Depreciation charge for the year 996 76 5 1,077
Disposals (117) (4) (6) (127)
Reclassifications(1) (380) - - (380)
Exchange movements 46 3 - 49
31 December 2023 6,302 302 28 6,632
Net book value
31 December 2023 7,681 838 15 8,534
31 December 2022 7,993 684 20 8,697
1 Amounts with a net book value of €452 million (2022: €331 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 2022 impairment reversal on fleet assets refer
to the Alternative performance measures section.
Interest-bearing long-term borrowings includes the following amount relating
to lease liabilities:
€ million 2023 2022
1 January 9,619 9,637
Additions 876 639
Modifications of leases 439 378
Repayments (2,216) (1,886)
Interest expense 508 464
Disposals - (28)
Exchange movements (259) 415
31 December 8,967 9,619
Current 1,826 1,766
Non-current 7,141 7,853
b Amounts recognised in the Income statement
€ million 2023 2022
Amounts not included in the measurement of lease liabilities
Variable lease payments 1 2
Expenses relating to short-term leases 24 39
Amounts expensed as a result of the recognition of ROU assets and lease
liabilities
Interest expense on lease liabilities 508 464
(Gains)/losses arising from sale and leaseback transactions (7) 1
Depreciation charge for the year 1,077 1,092
Impairment reversal for the year - (8)
c Amounts recognised in the Cash flow statement
See note 35 for details of the amounts recognised in the Cash flow statement
for the years to 31 December 2023 and 31 December 2022.
The Group is exposed to future cash outflows (on an undiscounted basis) at 31
December 2023, for which an amount of €36 million (2022: nil) 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 29f.
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 31
December 2023, for which no amount has been recognised, for potential
extension options of €979 million (2022: €945 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 2023 was €2
million (2022: €4 million). 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 2023 2022
Within one year 6 2
One to two years 5 6
Two to five years 3 -
More than five years - -
Total undiscounted lease receipts 14 8
Less finance income (1) (1)
Net investment in finance leases 13 7
15 Capital expenditure commitments
Capital expenditure authorised and contracted but not provided for in the
accounts, including outstanding aircraft commitments, at 31 December 2023
amounted to €12,706 million (31 December 2022: €13,749 million). The
outstanding aircraft commitments including the expected delivery timeframes,
totalling €11,966 million (2022: €13,484 million), are as follows:
Aircraft future deliveries at 31 December 2023(1) 2022(1)
Airbus A320 (from 2024 to 2028) 49 45
Airbus A321 (from 2024 to 2028) 33 46
Airbus A321 XLR (from 2024 to 2026) 14 14
Airbus A350-900 (from 2024 to 2025) 2 7
Airbus A350-1000 (in 2024) 1 5
Boeing 777-9 (from 2026 to 2028) 18 18
Boeing 787-10 (from 2024 to 2026) 11 7
Boeing 737-8200 (from 2025 to 2027) 25 25
Boeing 737-10 (from 2027 to 2028) 25 25
Total(2) 178 192
1 Capital commitments exclude options to purchase additional aircraft.
2 Total deliveries excludes three Airbus A320 aircraft committed for
delivery under lease agreements in 2024. For further information see note 14.
On 30 June 2023 the Group converted 10 Airbus A320neo options into firm
orders. The aircraft will be delivered in 2028 and will be used by any of the
Group's current airlines to replace A320ceo family aircraft.
On 27 July 2023, the Group converted six Boeing 787-10 options held by British
Airways into firm orders and at the same time added a further six 787-10
options to its long-haul order book. The Group also converted one Airbus
A350-900 option held by Iberia into a firm order. These aircraft will be
delivered in 2025 and 2026 and will be used by British Airways and Iberia to
restore capacity in the airlines' long-haul fleets.
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 progress
payments towards the purchase price, with the commitments above stated net of
progress 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 31
December 2023.
16 Non-current assets held for sale
As at 31 December 2023, there were no non-current assets held for sale.
As at 31 December 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 exited the business during
the first half of 2023.
17 Intangible assets and impairment review
a Intangible assets
€ million Goodwill Brand Customer loyalty programmes Landing rights(1) Software ETS assets Other Total
Cost
Balance at 1 January 2022 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)
Balance at 31 December 2022 595 451 253 1,588 1,806 407 88 5,188
Additions - - - - 365 264 1 630
Disposals - - - (6) (49) (96) - (151)
Reclassifications - - - - 23 - (15) 8
Exchange movements 1 - - 11 18 2 - 32
31 December 2023 596 451 253 1,593 2,163 577 74 5,707
Amortisation and impairment
Balance at 1 January 2022 249 - - 142 1,032 - 66 1,489
Amortisation charge for the year - - - 6 210 - 2 218
Disposals - - - - (50) - - (50)
Exchange movements - - - (2) (23) - - (25)
Balance at 31 December 2022 249 - - 146 1,169 - 68 1,632
Amortisation charge for the year - - - 6 185 - 2 193
Disposals - - - - (39) - - (39)
Exchange movements - - - 1 11 - - 12
31 December 2023 249 - - 153 1,326 - 70 1,798
Net book values
31 December 2023 347 451 253 1,440 837 577 4 3,909
31 December 2022 346 451 253 1,442 637 407 20 3,556
1 The net book value includes non-UK and non-EU based landing rights of
€63 million (2022: €69 million) that have a definite life. The remaining
average life of these landing rights is 12 years.
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 Brand Customer loyalty programmes Landing rights(1) Total
2023
Iberia
1 January and 31 December 2023 - 306 - 423 729
British Airways
1 January 2023 46 - - 794 840
Disposals - - - (6) (6)
Exchange movements 1 - - 10 11
31 December 2023 47 - - 798 845
Vueling
1 January and 31 December 2023 28 35 - 94 157
Aer Lingus
1 January and 31 December 2023 272 110 - 62 444
IAG Loyalty
1 January and 31 December 2023 - - 253 - 253
31 December 2023 347 451 253 1,377 2,428
€ million Goodwill Brand Customer loyalty programmes Landing rights(1) Total
2022
Iberia
1 January and 31 December 2022 - 306 - 423 729
British Airways
1 January 2022 47 - - 809 856
Additions - - - 14 14
Disposals - - - (6) (6)
Exchange movements (1) - - (23) (24)
31 December 2022 46 - - 794 840
Vueling
1 January and 31 December 2022 28 35 - 94 157
Aer Lingus
1 January and 31 December 2022 272 110 - 62 444
IAG Loyalty
1 January and 31 December 2022 - - 253 - 253
31 December 2022 346 451 253 1,373 2,423
1 Landing rights excludes non-UK and non-EU based landing rights of €63
million (2022: €69 million) that have a definite life.
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 their respective boards
approve three-year business plans, and the IAG Board approves 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 (see 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 wider economic and
geopolitical environments, including updated projected cash flows for activity
from 2024 through to the end of 2026. For each of the Group's CGUs the key
assumptions used in the value-in-use calculations are as follows:
2023
Per cent British Airways Iberia Vueling Aer Lingus IAG Loyalty
Operating margin(1) 7-14 7-14 4-12 6-14 23
Average ASK growth per annum(1) 3-9 4-10 1-6 2-16 n/a
Long-term growth rate 1.7 1.5 0.9 1.3 1.5
Pre-tax discount rate 11.2 12.2 14.3 10.9 14.8
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
1 Average ASK growth per annum, ASKs as a proportion of 2019 and operating
margin are stated as the weighted average derived from the multi-scenario
discounted cash flow model.
2 Given the impact of the COVID-19 pandemic, in 2022 the Group 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
2023 895 829 800 800
2022 867 809 780 780
Forecast ASKs in the current year modelling represent the range of average
annual increases in capacity 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
(see note 4). The airlines' network plans and the IAG Loyalty forecasts 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 calculations are
based on the circumstances of the airline industry, the loyalty scheme
industry, the Group and the CGU. These rates are derived from the weighted
average cost of capital (WACC). The WACC takes into consideration both debt
and equity available to airlines and loyalty schemes. The cost of equity is
derived from the expected return on investment by airline and loyalty scheme
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. The Group engages an external valuation expert as at the
valuation date to assist in the determination of the post-tax discount rate.
Jet fuel price assumptions are derived from forward price curves in the fourth
quarter of each year and sourced externally from readily available market data
at the valuation date. 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 and the incremental price
differentials expected for the purchase of SAF.
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 through to 2030. 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 €3,412
per metric tonne; (ii) a kerosene tax of €526 per metric tonne on all
intra-EU flights; (iii) for costs of carbon, prices of €173, €173, €110
and €19 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 31 December 2023 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,
reducing ASKs by 5 percentage points in each year, reducing long-term growth
rates in the terminal value calculation to zero, increasing pre-tax discount
rates by 2.5 percentage points and increasing the fuel price (both jet fuel
and SAF) by 40 per cent, both with cost recovery consistent with that
experienced historically and with no assumed cost recovery. Given the inherent
uncertainty associated with the impact of climate change, these sensitivities
represent a reasonably possible impact of climate change on the CGUs greater
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 €15,752
million, €4,736 million, €1,271 million and €1,884 million,
respectively, the recoverable amounts would be below the carrying amounts when
applying reasonable possible but not probable changes, over the forecast
period, in assumptions in each of the following scenarios:
• British Airways: (i) if ASKs had been 5 per cent lower combined with a
fuel price increase without cost recovery of 24 per cent; and (ii) if the fuel
price had been 29 per cent higher without cost recovery;
• Iberia: (i) if ASKs had been 5 per cent lower combined with a fuel price
increase without cost recovery of 21 per cent; and (ii) if the fuel price had
been 24 per cent higher without cost recovery;
• Vueling: (i) if ASKs had been 5 per cent lower combined with a fuel
price increase without cost recovery of 12 per cent; and (ii) if the fuel
price had been 18 per cent higher without cost recovery; and
• Aer Lingus: (i) if ASKs had been 5 per cent lower combined with a fuel
price increase without cost recovery of 16 per cent; and (ii) if the fuel
price had been 23 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 31 December 2023 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 31 December 2023 is €6 million (2022:
€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 2023 2022
Total assets 166 148
Total liabilities (119) (104)
Revenue 107 89
Profit for the year 6 5
The detail of the movement in investment in associates and joint ventures is
shown as follows:
€ million 2023 2022
At beginning of year 43 40
Share of retained profits 6 5
Dividends received (2) (2)
47 43
At 31 December 2023 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 31 December 2023 and 31 December 2022 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 2023 2022
Unlisted securities 188 55
188 55
The credit relating to Other equity investments was €3 million (2022: charge
of €3 million).
Investment in Air Europa Holdings
On 15 June 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'), a wholly owned subsidiary of Globalia.
Subsequently, on 16 August 2022, the Group exercised its exchange option with
Globalia and converted the aforementioned loan into an investment in 20 per
cent of the share capital of Air Europa Holdings, which is recorded as an
Other equity investment.
On 23 February 2023, the Group entered into an agreement to acquire the
remaining 80 per cent of the share capital of Air Europa Holdings that it had
not previously owned. 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 accordingly the Group
continues to recognise the 20 per cent share capital ownership of Air Europa
Holdings as an Other equity investment (see note 2 for critical judgement
applied in this classification).
At 31 December 2023, the fair value of the investment in Air Europa Holdings
was €129 million, representing an increase of €105 million from the €24
million recorded at 31 December 2022, with the fair value movement having been
recorded within Other comprehensive income.
The Group, with its external valuation advisors, determined the fair value of
the investment in Air Europa Holdings at 31 December 2023 and 31 December
2022, 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.
In determining the fair value of the investment in Air Europa Holdings at 31
December 2023, the Group used the following significant unobservable inputs:
(i) revenue compound annual growth rate of 4.0 per cent; (ii) an EBITDA range
of 3.6 to 6.5 per cent; and (iii) a risk-adjusted pre-tax discount rate of
13.9 per cent.
20 Trade and other receivables
€ million 2023 2022
Amounts falling due within one year
Trade receivables 1,673 1,444
Provision for expected credit loss (114) (114)
Net trade receivables 1,559 1,330
Prepayments(1) 750 639
Accrued income(1, 2) 495 231
Other non-trade receivables 329 356
Other current receivables 1,574 1,226
Amounts falling due after one year
Prepayments 401 337
Accrued income 9 -
Other non-trade receivables 22 25
Other receivables due after one year 432 362
1 For the year ended 31 December 2023, the Group has elected to disaggregate
prepayments and accrued income, which had previously been aggregated into a
single line item. Accordingly figures for the comparative year to 31 December
2022 have been reclassified to conform with the current year presentation.
2 The accrued income balance (representing contract assets) predominantly
relates to revenue earned from ongoing maintenance and overhaul services,
where the balances vary depending on the number of ongoing activities at the
reporting date.
Movements in the provision for expected credit loss were as follows:
€ million 2023 2022
At beginning of year 114 115
Provided during the year 4 10
Released during the year (3) (1)
Receivables written off during the year (1) (9)
Exchange movements - (1)
114 114
Trade receivables are generally non-interest-bearing and on 30 days terms
(2022: 30 days).
The credit risk exposure on the Group's trade receivables is set out below:
31 December 2023
€ million Current <30 days 30-180 days 180-365 days > 365 days
Trade receivables 959 296 241 53 124
Expected credit loss rate 0.1% 0.1% 1.7% 7.5% 85.2%
Provision for expected credit loss - - 4 4 106
31 December 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
21 Inventories
€ million 2023 2022(1)
Engineering expendables 417 296
Catering consumables 43 36
Other inventories 34 21
494 353
1 For the year to 31 December 2023, the Group has elected to provide a
disaggregated breakdown of the Balance sheet caption 'Inventories' and has
accordingly provided figures for the comparative year at 31 December 2022.
22 Cash, cash equivalents and other current interest-bearing deposits
a Cash
€ million 2023 2022
Cash at bank and in hand 1,531 3,286
Short-term deposits maturing within three months 3,910 5,910
Cash and cash equivalents 5,441 9,196
Current interest-bearing deposits maturing after three months 1,396 403
Cash, cash equivalents and other interest-bearing deposits 6,837 9,599
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 31 December 2023, the Group had no outstanding bank overdrafts (2022:
€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 31 December 2023, Aer Lingus held €31 million of restricted cash (2022:
€33 million) within interest-bearing deposits maturing after more than three
months to be used for employee-related obligations.
b Net debt
Movements in net debt were as follows:
€ million Balance at 1 January 2023 Cash flows Exchange movements New leases and modifications Other items Balance at 31 December 2023
Bank, other loans, convertible bond and asset financed liabilities 10,365 (3,267) (102) - 119 7,115
Lease liabilities 9,619 (1,731) (259) 1,315 23 8,967
Cash and cash equivalents (9,196) 3,753 2 - - (5,441)
Current interest-bearing deposits (403) (985) (8) - - (1,396)
10,385 (2,230) (367) 1,315 142 9,245
€ million Balance at 1 January 2022 Cash flows Exchange movements New leases and modifications Other items Balance at 31 December 2022
Bank, other loans, convertible bond 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
23 Trade and other payables
€ million 2023 2022
Trade creditors(1) 3,177 2,969
Other creditors 1,244 1,244
Other taxation and social security 262 228
Accruals(1) 683 665
Deferred income relating to non-flight activity(2) 224 103
5,590 5,209
1 Trade creditors includes €nil (2022: €48 million) due to suppliers
that have signed up to supply chain financing programmes offered by a number
of partner financial institutions. While the Group no longer provides such a
service to its suppliers, in 2022, these programmes either or both: (i) the
suppliers could 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 could have
elected 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 enter
into payment terms with the partner financial institution of up to 150 days
with interest incurred at 2.5 per cent.
The Group, in 2022, assessed the arrangement against indicators to assess if
liabilities which suppliers had transferred to the partner financial
institutions under the supplier financing programmes continued to meet the
definition of trade creditors or should have been classified as borrowings.
The cash flows arising from such arrangements were 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 met the definition of trade creditors or as borrowings.
At 31 December 2023 and 31 December 2022, these liabilities met the criteria
of Trade creditors and are excluded from the Net debt table in note 22b.
2 For the year ended 31 December 2023, the Group has elected to disaggregate
accruals and deferred income, which had previously been aggregated into a
single line item. Accordingly figures for the comparative year to 31 December
2022 have been reclassified to conform with the current year presentation.
Average payment days to suppliers - Spanish Group companies
Days 2023 2022
Average payment days for payment to suppliers 25 34
Ratio of transactions paid 25 33
Ratio of transactions outstanding for payment 17 53
€ million 2023 2022
Total payments made 10,966 6,676
Total payments outstanding 158 264
Information on invoices paid in a period shorter than the maximum period
established in the late payment regulations - Spanish Group companies
2023 2022
Total payments made (€ million) 10,002 5,111
Percentage share of total payments to suppliers 91% 77%
Number of invoices paid (thousand) 213 110
Percentage share of total number of invoices paid 76% 48%
24 Deferred revenue
€ million Customer loyalty programmes Sales in advance of carriage Total
Balance at 1 January 2023 2,630 5,014 7,644
Cash received from customers(1) - 21,107 21,107
Revenue recognised in the Income statement(2, 3) (1,052) (21,015) (22,067)
Financing charge recognised in the Income statement 15 - 15
Loyalty points issued to customers(4) 1,085 161 1,246
Exchange movements 34 44 78
Balance at 31 December 2023 2,712 5,311 8,023
Analysis:
Current 2,455 5,311 7,766
Non-current 257 - 257
2,712 5,311 8,023
€ million Customer loyalty programmes Sales in advance of carriage Total
Balance at 1 January 2022 2,820 3,732 6,552
Cash received from customers(1) - 21,000 21,000
Revenue recognised in the Income statement(2, 3, 5) (801) (19,708) (20,509)
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 31 December 2022 2,630 5,014 7,644
Analysis:
Current 2,304 5,014 7,318
Non-current 326 - 326
2,630 5,014 7,644
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 2023 is
an amount of €3,914 million previously held as deferred revenue at 1 January
2023 (recognised during 2022 and previously held as deferred revenue at 1
January 2022: €2,183 million).
4 Included within loyalty points issued to customers at 31 December 2023 is
an amount of €161 million (31 December 2022: €82 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 The 2022 results include an aggregation to conform with the current basis
of preparation, where the changes in estimates have been amalgamated with
revenue recognised in the Income statement.
The unsatisfied performance obligation under the Group's customer loyalty
programmes that is classified as non-current was €241 million at 31 December
2023, all of which is expected to be recognised as revenue within one to five
years from the reporting date.
Deferred revenue relating to customer loyalty programmes consists primarily of
consideration 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 programmes. 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.
Unredeemed vouchers liability
At 31 December 2023 the Group recognised €645 million in respect of
unredeemed vouchers, including associated taxes (2022: €911 million) within
Deferred revenue. Of the €645 million, €139 million relates to vouchers
issued due to COVID-19 pandemic flight cancellations, referred to as
'disrupted flights' and €506 million relates to non-disrupted voucher
issuance, such as the British Airways 'Book with Confidence' policy (where
customers were provided the flexibility to change their destination and/or
date of travel on non-disrupted flights), certain other flexible fare options,
non-air partner companion vouchers and gift vouchers.
The jurisdiction in which a voucher is issued, dictates the period over which
a customer can redeem the voucher, which ranges up to six years from the point
of issuance. This period of time is also influenced by whether the voucher was
issued for disrupted flights or non-disrupted issuance and whether statutory
or commercial expiry policies prevail. The Group expects the majority of the
total voucher liability to mature within 12 months of the reporting date.
During, and subsequent to, the recovery from the COVID-19 pandemic, the Group,
across each of its operating companies, has engaged in marketing campaigns and
direct customer engagement in an attempt to maximise redemption of these
vouchers. Despite these efforts, the Group expects some of these vouchers to
expire unredeemed. The Group estimates the number of these vouchers, both for
disrupted flights and non-disrupted issuance, not expected to be redeemed
prior to expiry using statistical modelling based on historical experience and
expected future redemptions, recognising this estimated value as passenger
revenue when it can be reasonably determined that there will not be a
significant reversal of this revenue in future accounting periods.
A 5 percentage point increase in the assumption of the number of vouchers
outstanding at 31 December 2023 and not expected to be redeemed prior to
expiry would result in a reduction to Deferred revenue of €32 million, with
an offsetting adjustment to increase Passenger revenue and Operating profit
recognised in the year.
25 Other long-term liabilities
€ million 2023 2022
Non-current trade creditors 164 147
Accruals and deferred income 55 53
219 200
26 Long-term borrowings
a Total borrowings
2023 2022
€ million Current Non-current Total Current Non-current Total
Bank and other loans(1) 113 1,840 1,953 813 5,128 5,941
Convertible bond(1) 9 726 735 9 596 605
Asset financed liabilities 303 4,124 4,427 255 3,564 3,819
Lease liabilities 1,826 7,141 8,967 1,766 7,853 9,619
Interest-bearing long-term borrowings 2,251 13,831 16,082 2,843 17,141 19,984
1 The 2022 total borrowings include a reclassification to conform with the
current basis of presentation, where the 2028 convertible bond, amounting to
€605 million at 31 December 2022 and accounted for at fair value, has been
separated from Bank and other loans. There is no change to total borrowings.
Long-term borrowings of the Group amounting to €4,516 million (31 December
2022: €3,962 million) are secured on owned fleet assets with a net book
value of €4,736 million (31 December 2022: €3,931 million). All asset
financed liabilities, included within long-term borrowings, are all secured on
the associated aircraft or other property, plant and equipment.
b Bank, other loans and convertible bond
€ million 2023 2022
€825 million fixed rate 1.125 per cent convertible bond 2028(1) 735 605
€700 million fixed rate 3.75 per cent unsecured bond 2029(2) 717 717
€500 million fixed rate 2.75 per cent unsecured bond 2025(2) 510 509
€500 million fixed rate 1.50 per cent bond 2027(3) 500 499
Floating rate euro mortgage loans secured on aircraft(4) 114 143
Fixed rate secured bonds(5) 56 56
Fixed rate unsecured US dollar mortgage loan(6) 46 71
Fixed rate unsecured euro loans with the Spanish State (Department of 10 10
Industry)(7)
Floating rate pound sterling term loan guaranteed by the UK Export Finance - 2,315
(UKEF)(8)
Floating rate Instituto de Crédito Oficial (ICO) guaranteed loans(9) - 1,070
€500 million fixed rate 0.50 per cent bond 2023(3) - 501
Ireland Strategic Investment Fund (ISIF) facility(10) - 50
Total bank, other loans and convertible bond 2,688 6,546
Less: current instalments due on bank, other loans and convertible bond (122) (822)
Total non-current bank, other loans and convertible bond 2,566 5,724
1 See details of the 2028 convertible bond below.
2 On 25 March 2021, the Group issued two tranches of senior unsecured bonds
for an aggregate principal amount of €1.2 billion, €500 million due
25 March 2025 and €700 million due 25 March 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.
3 In July 2019, the Group issued two tranches of senior unsecured bonds for
an aggregate principal amount of €1 billion, €500 million due 4 July 2023
and €500 million due 4 July 2027. The 2023 bond bore a fixed rate of
interest of 0.5 per cent per annum and was redeemed in full at maturity on 4
July 2023. The 2027 bond bears a fixed rate of interest of 1.5 per cent per
annum annually payable in arrears. The 2027 bond was issued at 98.803 per cent
of its principal amount, and, unless previously redeemed or purchased and
cancelled, will be redeemed at 100 per cent of its principal amount on its
maturity date.
4 Floating rate euro mortgage loans are secured on specific aircraft assets
of the Group and bear interest of between 4.45 and 5.46 per cent. The loans
are repayable between 2024 and 2027.
5 Total of €55 million fixed rate secured bonds with 3.75 per cent coupon
repayable between 2024 and 2027.
6 Fixed rate unsecured US dollar mortgage loan bearing interest between 1.38
to 2.86 per cent. The loan is repayable between 2025 and 2026.
7 Fixed rate unsecured euro loans with the Spanish State (Department of
Industry) bear nil interest and are repayable in 2031.
8 On 22 February 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 the UKEF. On 1 November 2021, British Airways entered
into a further five-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 the UKEF. On 28 September 2023,
British Airways repaid the £2.0 billion term loan in full, while
concurrently entering into a further five-year term loan Export Development
Guarantee Facility of €1.2 billion (£1.0 billion) underwritten by a
syndicate of banks, with 80 per cent of the principal guaranteed by the UKEF.
The terms and maturity of the Export Development Guarantee Facility entered
into in November 2021 remain unchanged. These two remaining UKEF guaranteed
facilities had not been drawn as at 31 December 2023.
9 On 30 April 2020, Iberia and Vueling entered into floating rate syndicated
financing agreements of €750 million and €260 million respectively. On 31
October 2023, Iberia repaid its loan in full. On 30 November 2023, Vueling
repaid its loan in full.
10 On 23 December 2020, Aer Lingus entered into a
floating rate financing agreement with the Ireland Strategic Investment Fund
(ISIF) for €75 million. On 27 March 2021, Aer Lingus entered into a further
floating rate financing agreement with the ISIF for an additional €75
million. On 4 March 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 13 December 2022 and 4 March 2023, Aer Lingus early repaid
€100 million and €50 million, respectively, of the ISIF facility, with
these amounts being available to draw again over the tenor of the facility.
The facility is secured on specific landing rights. At 31 December 2023,
€350 million of this facility remained undrawn.
In addition, on 23 March 2021, the Group entered into a three-year US dollar
secured Revolving Credit Facility of $1.755 billion accessible by British
Airways, Iberia and Aer Lingus. On 23 August 2022, the Group extended the term
of the Revolving Credit Facility by an additional 12 months through to March
2025. On 23 August 2023, of the $1.755 billion facility, the Group further
extended the terms of the $1.655 billion Revolving Credit Facility by an
additional 12 months through to March 2026 with the remaining $100 million
available through to March 2025. As at 31 December 2023 no amounts had been
drawn under the facility (2022: nil). While the Group does not forecast
drawing down on the Revolving Credit Facility, should it do so, the resultant
debt would be secured, in the respective operating companies, against: (i)
specific landing rights; or (ii) aircraft; or (iii) or a combination of both.
Details of the 2028 convertible bond
On 11 May 2021, the Group issued the €825 million fixed rate 1.125 per cent
senior unsecured bond convertible into ordinary shares of IAG. The convertible
bond raised net proceeds of €818 million and matures 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 convertible bond provides bondholders with dividend protection and
includes a total of 244,850,715 options at inception and at 31 December 2023
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. The bondholders conversion right is currently exercisable.
The convertible bond is recorded at its fair value, which at 31 December 2023
was €735 million (2022: €605 million), representing an increase of €130
million since 1 January 2023. Of this increase, the charge recorded in Other
comprehensive income arising from credit risk of the convertible bonds was
€119 million and a charge recorded within Finance costs in the Income
statement attributable to changes in market conditions of €11 million.
Transactions with unconsolidated entities
The Group has entered into asset financing transactions with unconsolidated
entities as follows:
• The British Airways Pass Through Certificates, Series 2019-1 were
entered into in the third quarter of 2019, recognising Asset financed
liabilities of €725 million for eight aircraft that mature between 2029 and
2034;
• The British Airways Pass Through Certificates, Series 2020-1 were
entered into in the fourth quarter of 2020, recognising Asset financed
liabilities of €472 million for nine aircraft that mature between 2028 and
2032;
• The British Airways Pass Through Certificates, Series 2021-1 were
entered into in the third quarter of 2021, recognising Asset financed
liabilities of €204 million for seven aircraft that mature between 2031 and
2035;
• The Iberia Pass Through Certificates, Series 2022-1 were entered into in
April 2022, recognising Asset financed liabilities of €680 million for five
aircraft that mature between 2032 and 2036;
• The British Airways Pass Through Certificates, Series 2022-1 were
entered into in October 2022, recognising Asset financed liabilities of €159
million for four aircraft that mature between 2032 and 2036; and
• There have been no asset financing transactions with unconsolidated
entities during the year to 31 December 2023.
As at 31 December 2023, Asset financed liabilities include cumulative amounts
of €2,948 million (2022: €2,983 million) and the associated assets
recorded within Property, plant and equipment include cumulative amounts of
€2,757 million (2022: €3,400 million) associated with transactions with
unconsolidated structured entities having issued EETCs.
c Total loans, convertible bond, asset financed liabilities and lease
liabilities
Million 2023 2022
Loans
Bank:
US dollar $50 $75
Euro €124 €1,273
Pound sterling - £2,026
€170 €3,659
Fixed rate bonds:
Euro €1,783 €2,282
€1,783 €2,282
Convertible bond
Euro €735 €605
€735 €605
Asset financed liabilities
US dollar $3,849 $3,285
Euro €746 €542
Japanese yen ¥28,432 ¥25,748
€4,427 €3,819
Lease liabilities
US dollar $7,399 $7,621
Euro €1,008 €1,239
Japanese yen ¥68,998 ¥71,994
Pound sterling £690 £620
€8,967 €9,619
Total interest-bearing borrowings €16,082 €19,984
27 Provisions
€ million Restoration and handback provisions Restructuring provisions Employee leaving indemnities and other employee related provisions Legal claims and contractual disputes provisions ETS provisions Other provisions Total
Net book value 1 January 2023 2,400 194 673 89 132 60 3,548
Provisions recorded during the year 520 1 53 15 238 32 859
Reclassifications 4 - - (1) - (6) (3)
Utilised during the year (338) (82) (35) (9) - (32) (496)
Extinguished during the year - - - - (98) - (98)
Release of unused amounts (68) (21) (2) (15) (26) (1) (133)
Unwinding of discount 78 2 23 - - - 103
Remeasurements 4 - 24 - - - 28
Exchange differences (71) - (1) 3 1 - (68)
Net book value 31 December 2023 2,529 94 735 82 247 53 3,740
Analysis:
Current 467 59 73 56 247 7 909
Non-current 2,062 35 662 26 - 46 2,831
2,529 94 735 82 247 53 3,740
Restoration and handback provisions
Provisions for restoration and handback costs are maintained to meet the
contractual maintenance and return conditions on aircraft held under lease.
For those obligations arising on inception of an aircraft lease, the
associated estimated cost is capitalised within the ROU asset. For those
obligations that arise through usage or through the passage of time, the
associated estimated costs are recognised in the Income statement as the
associated asset is used or through the passage of time. The provision is long
term in nature, typically covering the leased asset term, which for aircraft
is up to 12 years.
The provisions also include 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 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 (see 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 2023, 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 six years.
At 31 December 2023, €88 million of this provision related to collective
redundancy programmes (2022: €185 million).
Employee leaving indemnities and other employee related provisions
This provision includes employee leaving indemnities relating to staff under
various contractual arrangements. As part of these provisions, the Group
recognises provisions relating to the Iberia flight crew (both pilots and
cabin crew):
• Pilots - under the relevant collective bargaining agreement, pilots have
the option at the age of 60 to elect to: continue in 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').
Additionally, and in certain cases, those pilots from the age of 55, may apply
for retaining their employment relationship, but with reduced activity
(referred to as 'special leave'); and
• Cabin crew - under the relevant collective bargaining agreement, cabin
crew have the option at the age of 62 to elect to: continue in full-time
employment; being transferred to active status; or being transferred to
inactive status. Additionally, and in certain cases, those cabin crew
employees from the age of 57, may apply for 'special leave'.
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 either special leave or 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 (v) staff turnover.
The provision was re-assessed at 31 December 2023 with the use of independent
actuaries using the projected unit credit method, based on a discount rate
consistent with the iBoxx index of 3.17 per cent for active employees and 2.98
per cent for inactive employees (2022: iBoxx index of 3.72 per cent and 3.50
per cent, respectively), the PER_Col_2020.1er.orden. mortality tables, and
assuming contractual salary increases of up to 3.8 per cent in 2024 and 3.3
per cent in 2025 and then 2.0 per cent per annum thereafter derived from
increases in the Consumer Price Index (CPI). At 31 December 2023, there were a
total of 5,179 flight crew (31 December 2022: 4,827) eligible for making such
elections when they reach the age of 60. At 31 December 2023, there were 479
employees who had not reached the age of retirement, and eligible to elect for
early retirement ('special leave') who had elected to become inactive (31
December 2022: 426). In addition, at 31 December 2023, there were 25 employees
having reached the age of retirement, who had elected to become inactive (31
December 2022: 15).
At 31 December 2023, the average length of employment of the eligible flight
crew was 17 years (31 December 2022: 18 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 €677
million at 31 December 2023 (2022: €611 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 UK and due to be
extinguished in the year subsequent to the reporting date through settlement
with the relevant authorities. See notes 2 and 4 for further information.
28 Contingent liabilities
There are a number of legal and regulatory proceedings against the Group in a
number of jurisdictions which at 31 December 2023, where they could be
reliably estimated, but excluding the Vueling hand luggage matter detailed
below, amounted to €58 million (31 December 2022: €11 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.
Included in contingent liabilities is the following:
Air Europa Holdings acquisition break-fee
On 23 February 2023, the Group entered into an agreement to acquire the
remaining 80 per cent of the share capital of Air Europa Holdings from
Globalia that it had not previously owned. 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.
In the event that the relevant approvals, detailed above, are not forthcoming
within 24 months of entering into the agreement or the Group terminates the
agreement at any time prior to completion, then the Group is required to pay a
break-fee to Globalia of €50 million. Under the agreement, this 24-month
period can be extended, by mutual consent.
At 31 December 2023 and through to the date of the consolidated financial
statements, the Group considers that it is probable that the acquisition will
successfully complete and accordingly does not consider it probable that the
break-fee shall be paid. Given the above the Group does not consider it
appropriate to record a provision for the break-fee.
Vueling commercial hand luggage policy
In the year ended 31 December 2023, Vueling received a number of information
requests from the Ministerio de Consumo (Ministry of Consumer Affairs) in
Spain, with regard to its commercial hand luggage policy, for which Vueling
complied with. On 12 January 2024, the Ministerio de Consumo issued Vueling
with a List of Charges asserting that the Vueling commercial hand luggage
policy infringes consumers rights under Article 47.1 of Royal Legislative
Decree 1/2007. While the List of Charges notifies Vueling of its intention to
sanction the company for such infringements, it stipulates that the basis for
determining such penalties is subject to the provision of further information
by the company. Accordingly, it is not possible to estimate reliably any
exposure that may arise from this matter until ongoing proceedings with the
Ministerio de Consumo are further progressed. The Group, with its advisors,
has reviewed the correspondence and List of Charges from the Ministerio de
Consumo and considers it has strong arguments to support its commercial hand
luggage policy and does not consider it probable that an adverse outcome will
result in the future. As such, the Group does not consider it appropriate to
record any provision. The Group expects further developments on this matter
during the remainder of 2024.
29 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
exposure to a reasonable possible change in the fuel price, based on current
market volatility, with all other variables held constant on the profit 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 31 December 2023 and 2022.
2023 2022
Increase/(decrease) Effect on profit Effect on Increase/(decrease) Effect on profit Effect on
in fuel price before tax equity in fuel price before tax equity
per cent € million € million per cent € million € million
40 - 1,497 45 - 1,402
(40) - (1,526) (45) - (1,200)
1 The sensitivity analysis on equity excludes the sensitivity amounts
recognised in the profit before tax.
During 2023, following a substantial recovery in the global price of crude oil
and jet fuel, which continues to be impacted by geopolitical events, the fair
value of such net liability derivative instruments was €115 million at 31
December 2023 (2022: net asset of €87 million), representing a decrease of
€202 million since 1 January 2023. Of the carrying amount of the net
liability at 31 December 2023, all (2022: all) of the associated derivatives
were designated within hedge relationships.
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 each of the Group's operating companies, being pound sterling and
the euro. The currencies in which these transactions are denominated are
primarily US dollar, pound sterling and the euro. 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 profit 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 31 December 2023 and 2022.
Strengthening/ Effect on profit Effect on Strengthening/ Effect on profit Effect on Strengthening/ Effect on profit Effect on
(weakening) in US dollar rate before tax equity (weakening) in pound before tax equity (weakening) in Japanese yen rate before tax equity
per cent € million € million sterling rate € million € million per cent € million € million
per cent
2023 20 343 1,005 20 6 262 20 (50) (64)
(20) (346) (1,159) (20) (8) (262) (20) 50 64
2022 20 904 1,299 20 (20) 241 20 (58) (70)
(20) (922) (1,161) (20) 18 (241) (20) 58 70
1 The sensitivity analysis on equity, excludes the sensitivity amounts
recognised in the profit before tax.
At 31 December 2023, the fair value of foreign currency net liability
derivative instruments was €357 million (2022: net asset of €108 million),
representing a decrease of €465 million since 1 January 2023. These comprise
both derivatives designated in hedge relationships and those derivatives that
are not designated in a hedge relationship at inception. Of the carrying
amount of the net liability at 31 December 2023, €151 million (2022: net
asset of €96 million) of the associated derivatives were designated within
hedge relationships. 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
credits/(charges).
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
profit 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 31 December 2023 and 2022.
Strengthening/ Effect on profit Effect on Strengthening/ Effect on profit Effect on Strengthening/ Effect on profit Effect on
(weakening) in before tax equity (weakening) in before tax equity (weakening) in sterling interest before tax equity
US interest € million € million euro interest € million € million rate € million € million
rate rate Basis points
Basis points Basis points
2023 100 - - 100 (12) 16 100 - -
(100) - - (100) 12 (16) (100) - -
2022 150 - 6 150 5 17 150 (35) -
(150) - (7) (150) (4) (17) (150) 35 -
1 The sensitivity analysis on equity excludes the sensitivity amounts
recognised in the profit before tax.
At 31 December 2023, the fair value of interest rate net asset derivative
instruments was €28 million (2022: net asset of €60 million), representing
a decrease of €32 million since 1 January 2023. Of the carrying amount of
net asset at 31 December 2023, all (2022: all) of the associated derivatives
were designated within hedge relationships.
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 credits.
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 31 December 2023 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 2023 2022
United Kingdom 55 % 51 %
Spain - % 1 %
Ireland 16 % 20 %
Rest of eurozone 24 % 27 %
Rest of world 5 % 1 %
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 31 December 2023, the Group had undrawn overdraft facilities of €53
million (2022: €53 million).
The Group held the following undrawn general and committed aircraft financing
facilities:
2023
Million Currency € equivalent
General facilities(1)
Euro facilities expiring between March and May 2024 €87 87
Euro facility expiring March 2025(2) €350 350
US dollar facilities expiring March 2025 and March 2026(2) $1,755 1,605
Pound sterling facilities expiring November 2026 and September 2028(2) £2,000 2,317
4,359
Committed aircraft facilities
US dollar facilities expiring between June and July 2024(4) $410 375
375
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(2) €300 300
US dollar facility expiring March 2025(2) $1,755 1,654
Pound sterling facility expiring November 2026(2) £1,000 1,143
3,231
Committed aircraft facilities
US dollar facilities expiring between February and September 2023(3) $386 364
US dollar facility expiring April 2023(3) $273 257
US dollar facilities expiring between October 2023 and March 2024(4) $525 495
1,116
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 Further information regarding these facilities is given in note 26b.
3 The aircraft facilities that matured in 2023 were available for specific
committed aircraft deliveries.
4 The aircraft facilities maturing between June 2024 and July 2024 (2022:
maturing between October 2023 and March 2024) are available for specific
committed aircraft deliveries.
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 31 December 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 2023
months years years
Interest-bearing loans and borrowings:
Asset financing liabilities (241) (230) (448) (1,317) (3,195) (5,431)
Lease liabilities (1,303) (864) (1,546) (3,798) (5,017) (12,528)
Fixed rate borrowings (59) (16) (588) (1,513) (726) (2,902)
Floating rate borrowings (15) (38) (27) (42) - (122)
Trade and other payables (5,590) - (219) - - (5,809)
Derivative financial instruments (assets):
Interest rate derivatives 12 9 8 4 1 34
Foreign exchange contracts 35 17 6 - - 58
Fuel derivatives 5 4 26 - - 35
Derivative financial instruments (liabilities):
Interest rate derivatives (1) (1) (1) (1) - (4)
Foreign exchange contracts (206) (179) (38) - - (423)
Fuel derivatives (42) (43) (35) (39) - (159)
31 December 2023 (7,405) (1,341) (2,862) (6,706) (8,937) (27,251)
€ million Within 6 months 6-12 1-2 2-5 More than 5 years Total 2022
months years years
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)
31 December 2022 (6,473) (1,824) (3,235) (8,882) (8,875) (29,289)
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.
31 December 2023
€ 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 151 (28) 123 (2) 121
Financial liabilities
Derivative financial liabilities 595 (28) 567 (2) 565
1 The Group has pledged cash and cash equivalents as collateral against
certain of its derivative financial liabilities. As 31 December 2023, the
Group recognised €nil of collateral (2022: €nil) offset in the balance
sheet and €2 million (2022: €5 million) not offset in the Balance sheet.
31 December 2022
€ 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 760 (34) 726 (5) 721
Financial liabilities
Derivative financial liabilities 505 (34) 471 (5) 466
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 31 December 2023, the net debt to
EBITDA before exceptional items was 1.7 times (2022: 3.1 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.
30 Financial instruments
a Financial assets and liabilities by category
The detail of the Group's financial instruments at 31 December 2023 and 31
December 2022 by nature and classification for measurement purposes is as
follows:
31 December 2023
Financial assets
€ million Amortised cost Fair value Fair value through Income statement Non-financial assets Total
through Other comprehensive income carrying amount by
balance sheet item
Non-current assets
Other equity investments - 188 - - 188
Derivative financial instruments - - 42 - 42
Other non-current assets 211 - - 221 432
Current assets
Trade receivables 1,559 - - - 1,559
Other current assets 545 - - 1,029 1,574
Derivative financial instruments - - 81 - 81
Other current interest-bearing deposits 1,396 - - - 1,396
Cash and cash equivalents 5,441 - - - 5,441
Financial liabilities
€ million Amortised cost Fair value through Non-financial Total
Income statement liabilities carrying amount by
balance sheet item
Non-current liabilities
Lease liabilities 7,141 - - 7,141
Interest-bearing long-term borrowings 5,964 726 - 6,690
Derivative financial instruments - 106 - 106
Other long-term liabilities 151 - 68 219
Current liabilities
Lease liabilities 1,826 - - 1,826
Current portion of long-term borrowings 416 9 - 425
Trade and other payables 5,198 - 392 5,590
Derivative financial instruments - 461 - 461
31 December 2022
Financial assets
€ million Amortised cost Fair value Fair value through Income statement Non-financial assets Total
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 through Non-financial Total
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
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
the principal 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, excluding lease
liabilities, 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 other equity
investments where cash flow information is not available, an adjusted net
asset method is applied. For the methodology in the determination of the fair
value of the investment in Air Europa Holdings, see 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 31 December 2023 are as follows:
Fair value Carrying value
€ million Level 1 Level 2 Level 3 Total Total
Financial assets
Other equity investments 1 - 187 188 188
Other non-current financial assets - 12 - 12 25
Derivative financial assets:
Interest rate swaps(1) - 32 - 32 32
Foreign exchange contracts(1) - 58 - 58 58
Fuel derivatives(1) - 33 - 33 33
Financial liabilities
Interest-bearing loans and borrowings:
Asset financed liabilities - 3,900 - 3,900 4,427
Fixed rate borrowings 2,429 53 - 2,482 2,574
Floating rate borrowings - 111 - 111 114
Derivative financial liabilities:
Interest rate derivatives(2) - 4 - 4 4
Foreign exchange contracts(2) - 415 - 415 415
Fuel derivatives(2) - 148 - 148 148
1 Current portion of derivative financial assets is €81 million.
2 Current portion of derivative financial liabilities is €461 million.
The carrying amounts and fair values of the Group's financial assets and
liabilities at 31 December 2022 are set out below:
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) - 359 - 359 359
Fuel derivatives(2) - 106 - 106 106
1 Current portion of derivative financial assets is €645 million.
2 Current portion of derivative financial liabilities is €387 million.
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 2023 2022
Opening balance for the year 55 31
Additions - other 5 2
Addition of Air Europa Holdings - 22
Transfers to Level 1 financial assets (1) -
Net gains recognised in Other comprehensive income 128 2
Net losses recognised in the Income statement - (2)
Closing balance for the year 187 55
For details regarding the valuation of Air Europa Holdings, see note 19.
During the year to 31 December 2023, the Group recorded a transfer of an Other
equity instrument of €1 million from Level 3 to Level 1 following the public
listing of the associated investment. There have been no other transfers
between levels of the fair value hierarchy during the year.
d Hedges
Cash flow hedges
At 31 December 2023, 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;
• 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:
Losses/(gains) in respect of cash flow hedges included within equity
€ million 2023 2022
Loan repayments to hedge future revenue 22 87
Foreign exchange contracts to hedge future revenue and expenditure(1) 94 (178)
Crude, gas oil and jet kerosene derivative contracts(1) 67 (127)
Derivatives used to hedge interest rates(1) (1) (46)
Instruments for which hedge accounting no longer applies(1, 2) 123 213
305 (51)
Related deferred tax (credit)/charge (75) 20
Total amount included within equity 230 (31)
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.
Notional amounts of significant financial instruments used as cash flow
hedging instruments:
Notional principal amounts Average hedge rate Hedge range Within 1-2 years 2-5 years 5+ years Total 31 December 2023
(€ million) 1 year
Foreign exchange contracts to hedge future revenue and expenditure from US 1.21 1.05 to 1.35 3,147 1,239 - - 4,386
dollars to pound sterling(1)
Foreign exchange contracts to hedge future revenue and expenditure from US 1.00 0.86 to 1.24 2,458 939 305 - 3,702
dollars to euros(1)
Foreign exchange contracts to hedge future revenue and expenditure from euros 1.21 1.07 to 1.42 479 375 357 124 1,335
to pound sterling(1)
Fuel commodity price contracts to hedge future US dollar fuel expenditure(2) 722 489 to 1,200 5,425 1,948 980 - 8,353
Interest rate contracts to hedge future interest expenditure(3, 4) 1.83 (0.06) to 3.90 2,127 912 493 2
1 Expenditure includes both operating and capital expenditure.
2 Notional amounts of fuel commodity price hedging instruments represent
10.0 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.
4 The notional amounts of interest rate contracts at 31 December 2023 were
€1,354 million. Amounts included reflect the notional amortising amounts
outstanding at the end of each period and align with the profiles of the
underlying hedged items.
Notional principal amounts Average hedge rate Hedge range Within 1-2 years 2-5 years 5+ years Total 31 December 2022
(€ million) 1 year
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, 4) 1.04 (0.03) to 3.13 2,360 504 238 9
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.
4 The notional amounts of interest rate contracts at 31 December 2022 were
€1,703 million. Amounts included reflect the notional amortising amounts
outstanding at the end of each period and align with the profiles of the
underlying hedged items.
Movements recorded in the cash flow hedge reserve
Amounts recognised in the Income statement
For the year to 31 December 2023 Ineffectiveness(1) Discontinuance of hedge accounting Reclassified to the Income statement Total recognised movements Fair value movements recognised in Other comprehensive income(2) Amounts transferred to the Balance sheet
(€ million)
Foreign exchange contracts to hedge future revenue and expenditure (1) - 31 30 234 3
Crude, gas oil and jet kerosene derivative contracts 9 - 99 108 71 13
Derivatives used to hedge interest rates - - 48 48 (3) -
Loan repayments to hedge future revenue - - - - (47) (18)
Instruments for which hedge accounting no longer applies - - - - - (92)
8 - 178 186 255 (94)
Related deferred tax (44) (60) 10
Total movements recorded in the cash flow hedge reserve 142 195 (84)
Amounts recognised in the Income statement
For the year to 31 December 2022 Ineffectiveness(1) Discontinuance of hedge accounting Reclassified to the Income statement Total recognised movements Fair value movements recognised in Other comprehensive income(2) Amounts transferred 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.
Discontinuance of hedge accounting
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 2023 2022
Losses associated with the discontinuance of hedge accounting recognised in - (29)
the Income statement
Fair value movements subsequently recorded in the Income statement - -
Total effect of discontinuance of hedge accounting in the Income statement - (29)
Fair value hedges
At 31 December 2023, the Group's principal risk management activities
associated with fair value hedging were related to interest rate contracts
hedging the fair value risk on fixed rate lease liabilities. Remeasurement
gains and losses on both the derivatives and the host financial liability are
recognised in Income statement within Other non-operating credits.
The carrying values of the hedged items and hedging instruments of the Group's
fair value hedges at 31 December 2023 are as follows:
€ million 2023 2022
Carrying value of lease liabilities to which fair value hedging has been (65) -
applied (hedged items)(1)
Carrying amount of the interest rate derivatives (hedging instruments) (4) -
Accumulated amount of fair value hedge adjustments on the hedged item included (2) -
in the carrying amount of the hedged item
Change in value used for calculating hedge ineffectiveness 3 -
1 Hedged items included in the fair value hedges are presented within
Borrowings in the Balance sheet and in note 26.
31 Share capital, share premium and treasury shares
Allotted, called up and fully paid Number of shares Ordinary share capital Share premium
'000s € million € million
31 December 2022: Ordinary shares of €0.10 each 4,971,476 497 7,770
31 December 2023: Ordinary shares of €0.10 each 4,971,476 497 7,770
a Treasury shares
During the year to 31 December 2023, the Group purchased 42.0 million shares
at a weighted average share price of €1.83 per share totalling €77
million, which are held as Treasury shares. A total of 3.3 million shares
(2022: 8.1 million) were issued to employees during the year as a result of
vesting of employee share schemes. At 31 December 2023 the Group held 55.8
million shares (2022: 17.1 million) which represented 1.12 per cent (2022:
0.34 per cent) of the issued share capital of the Company.
32 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) was 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. Awards made from 2015 to 2020
were nil-cost options, with a two-year holding period following the three-year
performance period, before options can be exercised. All awards had three
independent performance measures with equal weighting: Total Shareholder
Return (TSR) relative to the STOXX Europe 600 Travel and Leisure Index (2020
awards) or MSCI European Transportation Index (prior to 2020 awards), earnings
per share, and Return on Invested Capital.
b IAG Restricted Share Plan
The IAG Restricted Share Plan (RSP) was introduced in 2021 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 conditional awards, with a two-year
holding period following the three-year vesting period. There are no
performance measures associated with the awards. Vesting will be contingent on
the satisfaction of a discretionary underpin, normally assessed over three
financial years commencing from the financial year in which the award was
granted. 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
In 2021, the Group launched the Full Potential Incentive Plan (FPIP), which
was 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 conditional awards,
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
annual 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
Number of awards '000s Outstanding at 1 January 2023 Granted number Lapsed number Vested number Outstanding at 31 December 2023 Exercisable 31 December 2023
Performance Share Plan 16,339 - 6,263 944 9,132 4,166
Restricted Share Plan 40,334 24,462 5,152 431 59,213 -
Full Potential Incentive Plan 27,705 5,681 3,786 - 29,600 -
Incentive Award Deferral Plan 2,411 1,007 173 2,387 858 -
86,789 31,150 15,374 3,762 98,803 4,166
The weighted average share price at the date of exercise of options exercised
during the year to 31 December 2023 was £1.52 (2022: £1.35).
The Group recognised a share-based payment charge of €52 million for the
year to 31 December 2023 (2022: €39 million).
33 Other reserves and non-controlling interests
For the year to 31 December 2023
Other reserves
€ million Unrealised gains and losses(1) Cost of hedging reserve(2) Currency translation(3) Merger reserve(5) Capital reserves(6) Total other reserves Non-controlling interest
1 January 2023 67 (66) (118) (2,467) 867 (1,717) 6
Other comprehensive (loss)/income for the year
Cash flow hedges reclassified and reported in net profit:
Fuel and oil costs (81) - - - - (81) -
Currency differences (20) - - - - (20) -
Finance costs (35) - - - - (35) -
Ineffectiveness recognised in other non-operating costs (6) - - - - (6) -
Net change in fair value of cash flow hedges (195) - - - - (195) -
Net change in fair value of other equity investments 127 - - - - 127 -
Net change in fair value of cost of hedging - (120) - - - (120) -
Cost of hedging reclassified and reported in net profit - 82 - - - 82 -
Fair value movements on liabilities attributable to credit risk changes (119) - - - - (119) -
Currency translation differences - - 18 - - 18 -
Hedges transferred and reported in property, plant and equipment 9 (15) - - - (6) -
Hedges transferred and reported in sales in advance of carriage 84 1 - - - 85 -
Hedges transferred and reported in inventory (9) - - - - (9) -
31 December 2023 (178) (118) (100) (2,467) 867 (1,996) 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
1 January 2022 (94) 24 (65) 62 (2,467) 867 (1,673) 6
Other comprehensive income/(loss) 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 transferred and reported in property, plant and equipment (51) (14) - - - - (65) -
Hedges transferred and reported in sales in advance of carriage 35 1 - - - - 36 -
Hedges transferred and reported in inventory (58) - - - - - (58) -
Redemption of convertible bond - - - (62) - - (62) -
31 December 2022 67 (66) (118) - (2,467) 867 (1,717) 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 31
December 2023 that relate to the fair value changes on equity instruments and
to the cash flow hedge reserve were €138 million credit and €305 million
charge, 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 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
(2022: €70 million) associated with the decrease in share capital relating
to cancelled shares and a Share capital reduction reserve of €797 million
(2022: €797 million) associated with a historical reduction in the nominal
value of the Company's share capital.
34 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 (see
note 27).
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 31 December 2023 were €279 million (2022: €251
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 5 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 31 March 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 31 December 2023 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 31
March 2021 compared with IAS 19 requirements used in the accounting valuation
assumptions as at the reporting date. The 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 31 March 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 31 March 2021.
As part of the triennial valuation as at 31 March 2021 for NAPS, British
Airways has agreed to provide certain property assets as security, which will
remain in place until 30 September 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 31 December
2023 net of service costs made by the Group were €48 million (2022: €20
million) being the employer contributions of €49 million (2022: €22
million) less the current service cost of €1 million (2022: €2 million)
(note 34b,c).
Future funding arrangements
Pension contributions for APS and NAPS were determined by actuarial valuations
made at 31 March 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 2024.
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)
n APS n NAPS
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
committed to deficit contribution payments through to 30 June 2023, amounting
to approximately €58 million per year, increasing by €58 million each year
up to 30 June 2026 and subsequently capped at €257 million per year through
to 31 May 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 31 December 2023, the NAPS funding position
exceeded 100 per cent and accordingly deficit contributions were suspended.
At 31 December 2023, 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 31 December 2023, had the over-funding protection mechanism not been
applied, then the asset ceiling adjustment (as detailed in note 34c) would
have been €638 million higher, reducing the surplus accordingly.
At 31 December 2023, 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 - 36
1-2 years - 37
2-5 years - 38
Greater than 5 years - -
Total expected deficit payments - 111
1 Committed deficit contributions, agreed as part of the 31 March 2021
actuarial valuation, were suspended at 31 December 2023 as an 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 31 March 2021, in the period up to
31 December 2023, no dividend payment was permitted from British Airways to
IAG. In the period from 1 January to 31 December 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 1 January to 30 September 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 1 October 2025, onwards.
British Airways must maintain a minimum cash level of €1,854 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 €348 million (£300 million).
b Employee benefit scheme amounts recognised in the financial statements
i Amounts recognised on the Balance sheet
2023
€ million APS NAPS Other Total
Scheme assets at fair value(1) 6,070 16,724 393 23,187
Present value of scheme liabilities(1) (6,048) (14,644) (547) (21,239)
Net pension asset/(liability) 22 2,080 (154) 1,948
Effect of the asset ceiling(2) (7) (728) - (735)
Other employee benefit obligations - - (8) (8)
31 December 2023 15 1,352 (162) 1,205
Represented by:
Employee benefit asset 1,380
Employee benefit obligation (175)
Net employee benefit asset(3) 1,205
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)
31 December 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
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 31 December 2023, such
assets were €322 million (2022: €320 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
(2022: asset) was €48 million at 31 December 2023 (2022: €54 million). The
defined benefit obligation includes €20 million (2022: €21 million)
arising from unfunded plans.
ii Amounts recognised in the Income statement
Pension costs charged to operating result are:
€ million 2023 2022
Defined benefit plans:
Current service cost 1 2
Administrative expenses 17 19
18 21
Defined contribution plans 279 251
Pension costs recorded as employee costs 297 272
€ million 2023 2022
Interest income on scheme assets (1,117) (633)
Interest expense on scheme liabilities 955 584
Interest expense on asset ceiling 59 23
Net financing credit relating to pensions (103) (26)
iii Amounts recognised in the Statement of other comprehensive income
€ million 2023 2022
Return on plan assets excluding interest income 857 9,360
Remeasurement of plan liabilities from changes in financial assumptions 314 (10,476)
Remeasurement of plan liabilities from changes in demographic assumptions 55 (202)
Remeasurement of experience losses 430 627
Remeasurement of the APS and NAPS asset ceilings (583) 14
Exchange movements - 6
Pension remeasurements credited/(charged) to Other comprehensive income 1,073 (671)
Tax arising on pension remeasurements 3 9
Pension remeasurements charged to Other comprehensive income, net of tax 1,076 (662)
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
34c(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 31
March 2018. APS is nearly 90 per cent protected against interest rates and
inflation (on a Retail Price Index basis). NAPS is 95 per cent protected
against interest rates and inflation (on a Consumer Price Index basis).
The assets held by APS and NAPS are split between 'return seeking assets' and
'liability matching assets' depending on the maturity of each scheme. At 31
December 2023, the actual asset allocation for NAPS was 19 per cent (2022: 31
per cent) in return seeking assets and 81 per cent (2022: 69 per cent) in
liability matching investments. For NAPS, the Trustee agreed an updated
investment framework with British Airways as part of the Scheme's 31 March
2021 actuarial valuation agreement. The Trustee aims towards an overall asset
allocation with an agreed modest expected return relative to liabilities, and
sufficient liquidity to manage investment risk appropriately on an on-going
basis. The actual asset allocation for APS at 31 December 2023 was 1 per cent
(2022: 1 per cent) in return seeking assets and 99 per cent (2022: 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 31 December 2023,
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 2023 2022
1 January 23,668 34,370
Interest income 1,114 633
Administrative expenses (14) (13)
Return on plan assets excluding interest income (857) (9,360)
Employer contributions(1) 49 22
Employee contributions 8 6
Benefits paid (1,065) (1,301)
Exchange movements 284 (689)
31 December 23,187 23,668
1 Includes employer contributions to APS of €1 million (2022: €1
million) and to NAPS of €nil (2022: €nil) of which deficit-funding
payments represented €nil for APS (2022: €nil) and €nil for NAPS (2022:
€nil).
iii Composition of scheme assets
Scheme assets held by the Group at 31 December comprise:
2023
€ million APS NAPS Other Total 2022
Return seeking investments
Listed equities - UK 8 109 6 123 139
Listed equities - Rest of world 1 438 163 602 1,047
Private equities 29 677 15 721 1,566
Properties - 1,577 14 1,591 2,142
Alternative investments 35 1,695 2 1,732 1,881
73 4,496 200 4,769 6,775
Liability matching investments
Government issued fixed bonds 861 5,132 127 6,120 5,279
Government issued index-linked bonds 874 9,438 8 10,320 8,093
Asset and longevity swaps 899 - - 899 1,114
Insurance contract 3,353 - 38 3,391 3,392
5,987 14,570 173 20,730 17,878
Other
Cash and cash equivalents 50 640 7 697 684
Derivative financial instruments (38) (2,985) 8 (3,015) (1,688)
Other investments (2) 3 5 6 19
10 (2,342) 20 (2,312) (985)
Total scheme assets 6,070 16,724 393 23,187 23,668
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 30b 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.
• derivative financial instruments are entered into predominantly to
mitigate interest rate and inflation rate risks. These derivative financial
instruments are stated at their fair value using pricing models and relevant
market data as 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 (2022: 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 (2022: 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 31 March 2018, excluding dependent children,
receiving a pension at that date and members in receipt of equivalent pension
only benefits, who were alive on 1 October 2018. Benefits coming into payment
for retirements after 31 March 2018 are not covered. The contract covers
benefits payable from 1 October 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 34a, 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 is 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 2023 2022
1 January 1,248 1,247
Interest expense 59 23
Remeasurements (583) 14
Exchange movements 11 (36)
31 December 735 1,248
On 22 November 2023, the UK Government announced that it intended to reduce
the withholding tax payable upon winding up of pension schemes from 35 per
cent to 25 per cent. While this change had not been substantively enacted at
the reporting date and as such not reflected in the figures above, had the
rate of withholding tax been reduced to 25 per cent at 31 December 2023, the
effect would have been to reduce the effect of the asset ceiling by €210
million to €525 million, with a corresponding increase in the net employee
benefit asset.
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 2023 2022
1 January 20,292 31,622
Current service cost 1 2
Interest expense 952 584
Remeasurements - financial assumptions(1) 314 (10,476)
Remeasurements - demographic assumptions 55 (202)
Remeasurements of experience losses 430 627
Benefits paid (1,065) (1,301)
Employee contributions 8 6
Exchange movements 252 (570)
31 December 21,239 20,292
1 Included in the remeasurements from financial assumptions is an amount of
€670 million (2022: increase of €10,299 million) that increases the scheme
liabilities relating to changes in the discount rates and €356 million
(2022: increase of €177 million) that reduces the scheme liabilities
relating to changes in inflation rates.
ii Scheme liability assumptions
The principal assumptions used for the purposes of the IAS 19 valuations were
as follows:
2023 2022
Per cent per annum APS NAPS Other schemes(4) APS NAPS Other schemes(4)
Discount rate(1) 4.50 4.55 1.0 - 7.1 4.85 4.80 0.8 - 7.2
Rate of increase in pensionable pay(2) 3.20 - 2.0 - 5.0 3.40 - 2.0 - 6.0
Rate of increase of pensions in payment(3) 3.20 2.65 0.7 - 3.4 3.40 2.80 0.3 - 3.0
RPI rate of inflation 3.20 3.00 2.2 - 2.9 3.40 3.20 2.2 - 3.1
CPI rate of inflation 2.65 2.65 2.0 - 2.5 2.80 2.80 2.0 - 2.6
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 31 December 2023.
4 The rate of increase in healthcare costs for schemes based in the United
States, which is based on medical trends, is assumed at 7.00 per cent grading
down to 5.00 per cent over six years (2022: 6.25 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 2023 2022
Life expectancy at age 60 for a:
• male currently aged 60 27.5 27.9
• male currently aged 40 28.8 29.1
• female currently aged 60 29.0 29.3
• female currently aged 40 31.2 31.5
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 analysis undertaken for the purpose of the
triennial valuation dated 31 March 2021. Future mortality improvements reflect
the most recent model published by the UK actuarial profession's Continuous
Mortality Investigation (CMI), being its 2022 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 (2022: 1.00 per cent).
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 31 December 2023, the weighted-average duration of the defined benefit
obligation was 9 years for APS (2022: 10 years) and 14 years for NAPS (2022:
15 years). The weighted average duration of the defined benefit obligations
was 2 to 16 years for other schemes (2022: 3 to 19 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.
iii Sensitivity analysis
Reasonable 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) 278 1,020 29
Future pension growth (increase of 50 basis points)(1) 243 973 5
Future mortality rate (one year increase in life expectancy) 301 394 22
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.
35 Supplemental cash flow information
a Reconciliation of movements of liabilities to cash flows arising from
financing activities
€ million Bank, other loans and asset financed liabilities Convertible bond Lease liabilities Derivatives to mitigate volatility in financial liabilities Total
Balance at 1 January 2023 9,760 605 9,619 (71) 19,913
Proceeds from borrowings 1,001 - - - 1,001
Repayment of borrowings (4,268) - - - (4,268)
Repayment of lease liabilities - - (1,731) - (1,731)
Settlement of derivative financial instruments - - - (119) (119)
Total changes from financing cash flows (3,267) - (1,731) (119) (5,117)
Interest paid (488) (9) (472) 44 (925)
Interest expense 476 9 508 - 993
New leases and lease modifications - - 1,315 - 1,315
Fair value movements - 130 - 322 452
Other non-cash movements 1 - (13) (2) (14)
Exchange movements (102) - (259) 6 (355)
Balance at 31 December 2023 6,380 735 8,967 180 16,262
€ million Bank, other loans and asset financed liabilities(2) Convertible bond(2) Lease liabilities Derivatives to mitigate volatility in financial liabilities Total
Balance at 1 January 2022 9,217 756 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) - - - 1,036 1,036
Total changes from financing cash flows 386 - (1,455) 1,036 (33)
Interest paid(1) (325) (9) (422) (7) (763)
Interest expense 368 9 464 - 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 31 December 2022 9,760 605 9,619 (71) 19,913
1 The 2022 reconciliation includes a reclassification of €7 million from
the Settlement of derivative financial instruments to Interest paid to reflect
the settlement loss arising on interest rate derivatives designated in hedge
relationships. The reclassification of the settlement loss aligns with the
classification within Net cash flows from operating activities in the Cash
flow statement.
2 The 2022 reconciliation includes a reclassification to conform with the
2023 presentation, whereby, the 2028 convertible bond has been disclosed
separately from the Bank, other loans and asset financed liabilities category.
The reclassification resulted in an amount of €735 million and €605
million being recorded within the 2028 convertible bond at 1 January 2022 and
31 December 2022, respectively.
b Reconciliation of movement in provisions included within Net cash flows from
operating activities
€ million 2023 2022
Opening provisions 3,548 2,999
Non-cash additions recorded in operating profit 862 896
Non-cash releases of unused provisions recorded in operating profit (133) (137)
Other non-cash amounts recorded within operating profit 4 27
Cash settlements relating to operating provisions (496) (323)
Movements in provisions recorded within net cash flows from operating 237 463
activities
Movements in provisions recorded within Other comprehensive income 24 (69)
Movements elsewhere within the Balance sheet (6) (15)
Unrealised currency differences arising on provisions recorded within (68) 127
operating profit
Non-cash settlement of ETS obligations (98) (10)
Movements in provisions recorded in the Income statement outside of operating 103 53
profit
Closing provisions (note 27) 3,740 3,548
c Other items included within Net cash flows from operating activities
€ million 2023 2022
Non-cash equity settled share-based payments 50 36
Ineffectiveness arising on hedge accounting 6 17
Non-cash movements on derivative and non-derivative financial instruments 16 45
Settlement of interest rate derivatives 44 (7)
Other (5) (15)
111 76
d Details of acquisition of property, plant and equipment and intangible
assets within Net cash flows from investing activities
€ million 2023 2022
Purchase of property, plant and equipment - fleet 2,715 3,146
Purchase of property, plant and equipment - other 193 132
Purchase of intangible assets - ETS allowances 264 360
Purchase of intangible assets - other 372 237
3,544 3,875
e Details of cash flows arising from lease transactions presented in the Cash
flow statement
€ million 2023 2022
Cash flows arising from transactions giving rise to lease liabilities
Total cash outflows arising from lease liabilities - aircraft (2,076) (1,699)
Total cash outflows arising from lease liabilities - other (127) (178)
Total cash inflows arising from sale and leaseback transactions - aircraft 826 718
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 (25) (41)
variable lease payments
Total cash inflows arising from the recognition of asset financed liabilities (999) 1,424
Total cash outflows arising from asset financed liabilities (416) (292)
36 Related party transactions
The following transactions took place with related parties for the financial
years to 31 December:
€ million 2023 2022
Sales of goods and services
Sales to associates(1) 5 5
Sales to significant shareholders(2) 261 141
Purchases of goods and services
Purchases from associates(3) 72 61
Purchases from significant shareholders(2) 131 113
Receivables from related parties
Amounts owed by associates(4) 18 13
Amounts owed by significant shareholders(5) 136 25
Payables to related parties
Amounts owed to associates(6) 6 -
Amounts owed to significant shareholders(5) 12 26
1 Sales to associates: Consisted primarily of sales for airline-related
services to Dunwoody Airline Services (Holding) Limited (Dunwoody) of €4
million (2022: €4 million) and €1 million (2022: €1 million) to
Serpista, S.A. and Multiservicios Aeroportuarios, S.A.
2 Sales to and purchases from significant shareholders principally relates
to interline services, the purchase of cargo capacity, the provision of
maintenance services and the income from licensing of the Avios brand with
Qatar Airways (Q.C.S.C.).
3 Purchases from associates: Consisted primarily of €41 million of airport
auxiliary services purchased from Multiservicios Aeroportuarios, S.A. (2022:
€35 million), €13 million of handling services provided by Dunwoody (2022:
€14 million) and €17 million of maintenance services received from
Serpista, S.A. (2022: €13 million).
4 Amounts owed by associates: Consisted primarily of €17 million from a
long-term loan provided to LanzaJet, Inc. (2022: €12 million) and €1
million of services provided to Multiservicios Aeroportuarios, S.A., Serpista,
S.A., Dunwoody, Empresa Hispano Cubana de Mantenimiento de Aeronaves, Ibeca,
S.A., Empresa Logística de Carga Aérea, S.A., Sociedad Conjunta para la
Emisión y Gestión de Medios de Pago, EFC, S.A. and Viajes AME, S.A.U. (2022:
€1 million).
5 Amounts owed by and to significant shareholders related to Qatar Airways
(Q.C.S.C.).
6 Amounts owed to associates: Consisted primarily of €2 million of
maintenance of airport equipment to Serpista, S.A. (2022: €nil) and €3
million of auxiliary airport services to Multiservicios Aeroportuarios, S.A.
and Dunwoody (2022: €nil).
During the year to 31 December 2023 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 €1 million (2022: €2 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 and loyalty operating companies, which include
the provision of airline and related services and loyalty 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 (Q.C.S.C.), where Avios could be exchanged for
points within the Qatar Airways (Q.C.S.C.)'s 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 2023, the Group provided a long-term shareholder loan of
€5 million ($5 million) to LanzaJet, Inc., in addition to the initial
long-term shareholder loan of €12 million ($14 million) provided to
LanzaJet, Inc. in 2022. LanzaJet, Inc. is 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 31 December 2023, the Group has not made any provision for
expected credit loss arising relating to amounts owed by related parties
(2022: €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 31 December 2023, the only significant
shareholder of the Group was Qatar Airways (Q.C.S.C.).
At 31 December 2023 the Group had cash deposit balances with shareholders
holding a participation of between 3 to 5 per cent, of €nil (2022: €nil).
Board of Directors and Management Committee remuneration
Compensation received by the Group's Board of Directors and Management
Committee, in 2023 and 2022 is as follows:
Year to 31 December
€ million 2023 2022
Base salary, fees and benefits
Board of Directors
Short-term benefits 4 4
Share-based payments 1 1
Management Committee
Short-term benefits 15 15
Share-based payments - 2
For the year to 31 December 2023, the Board of Directors includes remuneration
for one Executive Director (31 December 2022: one Executive Director). The
Management Committee includes remuneration for 14 members (31 December 2022:
14 members), and excludes remuneration for the one Executive Director.
The Company provides life insurance for the Executive Director and all members
of the Management Committee. For the year to 31 December 2023, the Company's
obligation was €45,000 (2022: €38,000).
At 31 December 2023 the transfer value of accrued pensions covered under
defined benefit pension obligation schemes, relating to the current members of
the Management Committee totalled €4 million (2022: €5 million).
No loan or credit transactions were outstanding with Directors or officers of
the Group at 31 December 2023 (2022: €nil).
37 Change in presentation of the Cash flow statement
During the course of 2023, the Group has made a number of changes to the
presentation of its Cash flow statement. These changes have been applied
retrospectively to the Cash flow statement and are detailed below.
Net gain on sale of property plant and equipment
Previously gains/losses on the sale of property, plant and equipment were
recorded in the Income statement within Other non-operating credits. Under the
updated presentation, Net (gain)/loss on sale of property, plant and equipment
is presented separately in the Income statement and included within Operating
profit. Accordingly, operating profit included within Net cash flows from
operating activities has been updated. See note 2 for further information.
Unrealised currency differences
Previously all unrealised foreign currency gains/losses arising in the Cash
flow statement were recorded within Net foreign exchange differences. Under
the updated presentation, Net foreign exchange differences has been amended to
only include those unrealised currency differences arising from the
retranslation of opening cash and cash equivalent balances, while unrealised
currency differences arising from working capital used in operating activities
are presented within Net cash flows from operating activities.
Other cash flows from operating activities
Previously movements in working capital balances were presented aggregated
between working capital assets and working capital liabilities. Under the
updated presentation working capital balances have been disaggregated by their
nature to allow greater visibility as to the cash flow impacts associated with
these balances. There has been no change in the overall total movement in
working capital.
In addition, previously the Group presented the non-cash movements in
provisions combined with other non-cash movements. Under the updated
presentation these items have been separated into individual row items within
the Cash flow statement.
The following table summarises the impact of the changes in presentation in
the Cash flow statement for the year to 31 December 2022:
Cash flow statement (extract for the year to 31 December 2022)
€ million As reported Adjustment - net gain on sale of property, plant and equipment Adjustment - unrealised currency differences Adjustment - operating cash flow items Restated
Cash flows from operating activities
Operating profit 1,256 22 1,278
Depreciation, amortisation and impairment 2,070 2,070
Net gain on disposal of property, plant and equipment - (22) (22)
Movement in working capital 1,884 (1,884) -
(Increase)/decrease in trade receivables, inventories and other current assets (914) 914 -
Increase/(decrease) in trade and other payables and deferred revenue 2,798 (2,798) -
Employer contributions to pension schemes (22) (22)
Pension scheme service costs 17 17
Payments related to restructuring (81) 81 -
Provisions and other non-cash movements 627 (627) -
Increase in provisions - 463 463
Unrealised currency differences - 19 19
Other movements - 76 76
Interest paid (824) 7 (817)
Interest received 42 42
Tax paid (134) (134)
Net cash flows from operating activities before movements in working capital 4,835 - 19 (1,884) 2,970
Increase in trade receivables - (660) (660)
Increase in inventories - (21) (21)
Increase in other receivables and current assets - (233) (233)
Increase in trade payables - 886 886
Increase in deferred revenue - 1,236 1,236
Increase in other payables and current liabilities - 676 676
Net cash flows from operating activities 4,835 - 19 - 4,854
Net cash flows from investing activities (3,463) - - - (3,463)
Net cash flows from financing activities (56) - - - (56)
Net increase in cash and cash equivalents 1,316 - 19 - 1,335
Net foreign exchange differences (12) (19) (31)
Cash and cash equivalents at 1 January 7,892 7,892
Cash and cash equivalents at year end 9,196 - - - 9,196
Interest-bearing deposits maturing after more than three months 403 - - - 403
Cash, cash equivalents and interest-bearing deposits 9,599 - - - 9,599
38 Post balance sheet events
Revocation of Royal Decree-Law 3/2016 in Spain
On 18 January 2024 the Tribunal Constitucional (Constitutional Court) in
Spain, issued a ruling that a number of the amendments to corporate income tax
arising from the introduction of Royal Decree-Law 3/2016 were unconstitutional
and accordingly revoked. The revocation of Royal Decree-Law 3/2016 impacts the
Groups operations as follows:
• Limitation of the use of historic tax losses
Prior to the introduction of Royal Decree-Law 3/2016, the Spanish subsidiaries
of the Group were permitted to offset up to 70 per cent of their taxable
profit with historical accumulated tax losses (to the extent there were
sufficient tax losses to do so). With the introduction of the Royal Decree-Law
3/2016, this limitation of tax losses applied to taxable profit was reduced to
25 per cent.
• Tax deductibility of impairments of investment in subsidiary
undertakings
Where companies had impaired investments in subsidiaries prior to 2013 and
deducted those impairments for tax purposes, Royal Decree-Law 3/2016
retrospectively required companies to reverse those impairment charges, for
tax purposes, with the effect recognised equally over the five years
commencing 1 January 2016.
The Group does not consider that the ruling by the Tribunal Constitucional
constitutes an adjusting post-balance sheet event and accordingly the impact
of these changes are not reflected in the financial statements. As at the date
of these financial statements, there remains uncertainty as to how the
revocation of Royal Decree-Law 3/2016 will be applied and accordingly the
methodology by which the Group, with its external tax advisors, quantifies the
impacts of this revocation. Had the Group reflected the impact of ruling into
the financial statements as at 31 December 2023, the impact would have been as
follows:
• Current tax impact of historic loss limitation and deductibility of
historic impairments of investments for fiscal years 2016 through 2022
The Royal Decree Law 3/2016 restricted the use of prior year tax losses to 25
per cent of current year profits in the Group's Spanish companies. In
addition, prior to 2013, Iberia impaired its subsidiary undertakings in
Venezuela. Had the loss limitation been 70 per cent and the historic
impairment been tax deductible, the tax paid to the Spanish tax authorities,
would have been up to approximately €83 million lower. The Group expects to
record an associated current tax credit, with a corresponding receivable from
the Spanish tax authorities. The Group is currently assessing the potential
interest due, if any, from the Spanish tax authorities arising on this
receivable.
• Current tax impact of loss limitation for fiscal year 2023
The Group measures current tax expense based on the regulations in effect as
of the date when corporate income taxes are accrued. With the change in loss
limitation, the Group anticipates the ability to offset up to 70 per cent of
their Spanish taxable profits with prior-year losses for their 2023 Spanish
taxes. If this limit had been applied at 31 December 2023 the Group foresees a
reduction in the 2023 current tax expense of approximately €108 million.
• Deferred tax impact of future loss limitation
The Group measures deferred tax assets at the tax rates that are expected to
apply when the related asset is realised. As detailed in note 2, the Group
uses future cash flow projections over periods of up to ten years to determine
the recoverability of deferred tax assets. With the change in loss limitation,
the Group expects to be able to utilise more of its historical tax losses
within this ten-year period. Had the Royal Decree-Law 3/2016 not applied at 31
December 2023, the Group expects that the deferred tax assets of the Group,
attributable to tax losses and tax credits, would have decreased by
approximately €58 million, with a corresponding charge to Tax in the Income
statement.
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 the Group's strategic imperatives of: strengthening
our core; driving earnings growth through asset-light businesses; and
operating under a strengthened financial and sustainability framework.
During 2023, the Group has replaced the Levered free cash flow measure with
the Free cash flow measure. The Free cash flow measure represents the cash
generating ability of the Group to support operations and maintain its capital
assets. This measure is monitored by the Group in making both investment and
capital decisions. In addition, the Group has added an APM regarding the
Ownership costs of the Group to enable a better understanding of how the
capital assets of the Group contribute to the operating result in each
reporting period. Other than the aforementioned change, 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 31 December
2022.
The definition of each APM, together with a reconciliation to the nearest
measure prepared in accordance with IFRS is presented below.
a Profit 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.
While there have been no exceptional items recorded in the year to 31 December
2023, exceptional items in the year to 31 December 2022 include: significant
changes in the long-term fleet plans that result in the reversal of impairment
of fleet assets and legal reimbursements.
The table below reconciles the statutory Income statement to the Income
statement before exceptional items of the Group:
Year to 31 December
€ million Statutory Exceptional Before Statutory Exceptional Before
2023 items exceptional 2022(1) items exceptional
items items
2023 2022(1)
Passenger revenue 25,810 - 25,810 19,458 - 19,458
Cargo revenue 1,156 - 1,156 1,615 - 1,615
Other revenue 2,487 - 2,487 1,993 - 1,993
Total revenue 29,453 - 29,453 23,066 - 23,066
Employee costs 5,423 - 5,423 4,647 - 4,647
Fuel, oil costs and emissions charges 7,557 - 7,557 6,120 - 6,120
Handling, catering and other operating costs 3,849 - 3,849 2,971 - 2,971
Landing fees and en-route charges 2,308 - 2,308 1,890 - 1,890
Engineering and other aircraft costs 2,509 - 2,509 2,101 - 2,101
Property, IT and other costs(2) 1,058 - 1,058 950 (23) 973
Selling costs 1,155 - 1,155 920 - 920
Depreciation, amortisation and impairment(3) 2,063 - 2,063 2,070 (8) 2,078
Net gain on sale of property, plant and equipment(1) (2) - (2) (22) - (22)
Currency differences 26 - 26 141 - 141
Total expenditure on operations 25,946 - 25,946 21,788 (31) 21,819
Operating profit 3,507 - 3,507 1,278 31 1,247
Finance costs (1,113) - (1,113) (1,017) - (1,017)
Finance income 386 - 386 52 - 52
Net change in fair value of financial instruments (11) - (11) 81 - 81
Net financing credit relating to pensions 103 - 103 26 - 26
Net currency retranslation credits/(charges) 176 - 176 (115) - (115)
Other non-operating credits(1) 8 - 8 110 - 110
Total net non-operating costs (451) - (451) (863) - (863)
Profit before tax 3,056 - 3,056 415 31 384
Tax (401) - (401) 16 (2) 18
Profit after tax 2,655 - 2,655 431 29 402
Three months to 31 December
€ million Statutory Exceptional Before Statutory Exceptional Before
2023 items exceptional 2022(1) items exceptional
items items
2023 2022(1)
Passenger revenue 6,293 - 6,293 5,438 - 5,438
Cargo revenue 290 - 290 399 - 399
Other revenue 641 - 641 549 - 549
Total revenue 7,224 - 7,224 6,386 - 6,386
Employee costs 1,438 - 1,438 1,230 - 1,230
Fuel, oil costs and emissions charges 1,978 - 1,978 1,720 - 1,720
Handling, catering and other operating costs 958 - 958 828 - 828
Landing fees and en-route charges 546 - 546 499 - 499
Engineering and other aircraft costs 647 - 647 594 - 594
Property, IT and other costs(2) 270 - 270 280 - 280
Selling costs 304 - 304 249 - 249
Depreciation, amortisation and impairment(3) 555 - 555 539 - 539
Net loss on sale of property, plant and equipment(1) 13 - 13 9 - 9
Currency differences 13 - 13 (39) - (39)
Total expenditure on operations 6,722 - 6,722 5,909 - 5,909
Operating profit 502 - 502 477 - 477
Finance costs (246) - (246) (294) - (294)
Finance income 101 - 101 41 - 41
Net change in fair value of financial instruments (11) - (11) (51) - (51)
Net financing credit relating to pensions 26 - 26 7 - 7
Net currency retranslation credits 112 - 112 190 - 190
Other non-operating charges(1) (43) - (43) (121) - (121)
Total net non-operating costs (61) - (61) (228) - (228)
Profit before tax 441 - 441 249 - 249
Tax 63 - 63 (17) - (17)
Profit after tax 504 - 504 232 - 232
1 The 2022 results include a reclassification to conform with the current
year presentation for the Net loss/(gain) on sale of property, plant and
equipment. There is no impact on the Profit after tax. Further information is
given in note 2.
The rationale for each exceptional item is given below.
2 Partial reversal of historical fine
The exceptional credit of €23 million for the year to 31 December 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.
3 Impairment reversal of fleet and associated assets
The exceptional impairment reversal of €8 million for the year to 31
December 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.
There is no cash flow impact and there has been a tax charge of €2 million
on the recognition of the impairment reversal.
The table below provides a reconciliation of the statutory to pre-exceptional
condensed alternative income statement by operating segment for the years to
31 December 2023 and 2022:
Year to 31 December 2023
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 12,668 - 12,668 14,558 - 14,558 5,262 - 5,262 3,181 - 3,181 2,209 - 2,209
Cargo revenue 757 - 757 869 - 869 275 - 275 - - - 55 - 55
Other revenue 898 - 898 1,032 - 1,032 1,421 - 1,421 17 - 17 10 - 10
Total revenue 14,323 - 14,323 16,459 - 16,459 6,958 - 6,958 3,198 - 3,198 2,274 - 2,274
Employee costs 2,577 - 2,577 2,960 - 2,960 1,284 - 1,284 399 - 399 471 - 471
Fuel, oil costs and emissions charges 3,825 - 3,825 4,395 - 4,395 1,496 - 1,496 907 - 907 639 - 639
Ownership costs 1,015 - 1,015 1,166 - 1,166 411 - 411 256 - 256 150 - 150
Supplier costs 5,475 - 5,475 6,288 - 6,288 2,827 - 2,827 1,240 - 1,240 789 - 789
Total expenditure on operations 12,892 - 12,892 14,809 - 14,809 6,018 - 6,018 2,802 - 2,802 2,049 - 2,049
Operating profit 1,431 - 1,431 1,650 - 1,650 940 - 940 396 - 396 225 - 225
Operating margin (%) 10.0% 10.0% 13.5% 13.5% 12.4% 12.4% 9.9% 9.9%
Year to 31 December 2023
IAG Loyalty (£) IAG Loyalty (€)
Million Statutory Exceptional items Before exceptional items Statutory Exceptional items Before exceptional items
Passenger revenue 837 - 837 961 - 961
Other revenue 455 - 455 524 - 524
Total revenue 1,292 - 1,292 1,485 - 1,485
Employee costs 61 - 61 70 - 70
Ownership costs 10 - 10 11 - 11
Supplier costs 941 - 941 1,083 - 1,083
Total expenditure on operations 1,012 - 1,012 1,164 - 1,164
Operating profit 280 - 280 321 - 321
Operating margin (%) 21.7% 21.7%
Year to 31 December 2022(1)
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
Ownership costs(1) 1,081 - 1,081 1,268 - 1,268 364 - 364 206 (8) 214 134 - 134
Supplier 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(1) 10,705 (19) 10,724 12,555 (23) 12,578 5,122 - 5,122 2,403 (8) 2,411 1,712 - 1,712
Operating profit(1) 325 19 306 366 23 343 389 - 389 195 8 187 57 - 57
Operating margin (%)(1) 2.9% 2.8% 7.1% 7.1% 7.5% 7.2% 3.2% 3.2%
Year to 31 December 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
Ownership costs 7 - 7 8 - 8
Supplier 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%
1 Segment information for 2022 has been restated for the reclassification to
conform with the current year presentation for the Net gain on sale of
property, plant and equipment.
b Adjusted earnings 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 2023 2022
Profit after tax attributable to equity holders of the parent a 2,655 431
Exceptional items a - 29
Profit after tax attributable to equity holders of the parent before 2,655 402
exceptional items
Income statement impact of convertible bonds 11 15 (104)
Adjusted profit 2,670 298
Weighted average number of ordinary shares in issue used for basic earnings 11 4,933 4,958
per share
Weighted average number of ordinary shares used for diluted earnings per share 11 5,277 5,344
Basic earnings per share (€ cents) 53.8 8.7
Basic earnings per share before exceptional items (€ cents) 53.8 8.1
Adjusted earnings per share before exceptional items (€ cents) 50.6 5.6
c Ownership costs
Ownership costs represents the income statement impact of the historical
purchase of capital assets and is defined as depreciation, amortisation and
impairment, arising on both property, plant and equipment and intangible
assets, and the net loss/(gain) on the sale of property, plant and equipment.
The Group believes that this measure is useful to the users of the financial
statements in understanding the impact of capital assets in deriving the
operating result of the Group.
€ million 2023 2022
Depreciation, amortisation and impairment 2,063 2,070
Net gain on sale of property, plant and equipment (2) (22)
Ownership costs 2,061 2,048
d Airline non-fuel costs per ASK
The Group monitors airline unit costs (per available seat kilometre (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 2023 Reported ccy adjustment 2023 ccy 2022(1)
Total expenditure on operations(1) a 25,946 408 26,354 21,788
Add: exceptional items in operating expenditure a - - (31)
Less: fuel, oil costs and emission charges a 7,557 6 7,563 6,120
Non-fuel costs(1) 18,389 402 18,791 15,699
Less: Non-flight specific costs(1) 2,141 68 2,209 1,716
Airline non-fuel costs 16,248 334 16,582 13,983
ASKs (millions) 323,111 323,111 263,592
Airline non-fuel unit costs per ASK (€ cents) 5.03 5.13 5.30
1 The 2022 results include a reclassification to conform with the current
year presentation for the Net gain on sale of property, plant and equipment.
e Free cash flow ((KPI))
Free cash flow represents the cash generated by the businesses and is defined
as the net cash flows from operating activities taken from the Cash flow
statement, less the cash flows associated with the acquisition of property,
plant and equipment and intangible assets reported in net cash flows from
investing activities from the Cash flow statement. The Group believes that
this measure is useful to the users of the financial statements in
understanding the cash generating ability of the Group to support operations
and maintain its capital assets.
€ million 2023 2022
Net cash flows from operating activities 4,864 4,854
Acquisition of property, plant and equipment and intangible assets (3,544) (3,875)
Free cash flow 1,320 979
f 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.
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 23).
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 2023 2022(1)
Interest-bearing long-term borrowings 26 16,082 19,984
Less: Cash and cash equivalents 22 5,441 9,196
Less: Other current interest-bearing deposits 22 1,396 403
Net debt 9,245 10,385
Operating profit(1) a 3,507 1,278
Add: Depreciation, amortisation and impairment a 2,063 2,070
EBITDA 5,570 3,348
Add: Exceptional items (excluding those reported within Depreciation, a - (23)
amortisation and impairment)
EBITDA before exceptional items 5,570 3,325
Net debt to EBITDA before exceptional items (times) 1.7 3.1
1 The 2022 results include a reclassification to conform with the current
year presentation for the Net gain on sale of property, plant and equipment.
g 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 2023 2022(1, 2)
EBITDA before exceptional items f 5,570 3,325
Less: Fleet depreciation multiplied by inflation adjustment (1,976) (1,944)
Less: Other property, plant and equipment depreciation (194) (247)
Less: Software intangible amortisation (185) (210)
3,215 924
Invested capital
Average fleet value(3) 13 16,919 15,717
Less: Average progress payments(4) 13 (993) (910)
Fleet book value less progress payments 15,926 14,807
Inflation adjustment(5) 1.18 1.18
18,811 17,435
Average net book value of other property, plant and equipment(6) 13 2,143 2,037
Average net book value of software intangible assets(7) 17 737 640
Total invested capital 21,691 20,112
Return on invested capital 14.8% 4.6%
1 The 2022 results include a reclassification to conform with the current
year presentation for the Net gain on sale of property, plant and equipment.
2 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 (see note 6 of the Group
financial statements).
3 The average net book value of aircraft is calculated from an amount of
€17,520 million at 31 December 2023 and €16,317 million at 31 December
2022.
4 The average net book value of progress payments is calculated from an
amount of €914 million at 31 December 2023 and €1,071 million at 31
December 2022.
5 Presented to two decimal places and calculated using a 1.5 per cent
inflation (31 December 2022: 1.5 per cent inflation) rate over the weighted
average age of the fleet at 31 December 2023: 11.0 years (31 December 2022:
11.3 years).
6 The average net book value of other property, plant and equipment is
calculated from an amount of €2,256 million at 31 December 2023 and €2,029
million at 31 December 2022.
7 The average net book value of software intangible assets is calculated
from an amount of €837 million at 31 December 2023 and €637 million at 31
December 2022.
h Results on a constant currency basis
Movements in foreign exchange rates impact the Group's financial results. The
IAG Board and Management Committee review the results, including revenue and
operating costs at constant rates of exchange. These financial measures are
calculated 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
Board and Management Committee do not believe that these measures are a
substitute for IFRS measures, the Board and Management Committee do 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 2023 figures are stated at a constant currency
basis, the 2022 rates stated below have been applied:
Foreign exchange rates
Weighted average Closing
2023 2022 2023 2022
Pound sterling to euro 1.15 1.17 1.16 1.14
Euro to US dollar 1.09 1.05 1.09 1.06
Pound sterling to US dollar 1.26 1.23 1.27 1.21
i 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 of 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 2023 2022
Cash and cash equivalents 22 5,441 9,196
Current interest-bearing deposits 22 1,396 403
Committed general undrawn facilities 29f 4,359 3,231
Committed aircraft undrawn facilities 29f 375 1,116
Overdrafts and other facilities 29f 53 53
Total liquidity 11,624 13,999
GROUP INVESTMENTS
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 Holding company England 100 %
Waterside, PO Box 365, Harmondsworth, UB7 0GB
BA Number Two Limited Holding company 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 Aircraft technical assistance 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 Operadora UK Limited Holding company 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, Douglas, 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
LEVEL
Name and address Principal activity Country of incorporation Percentage of equity owned
FLYLEVEL UK Limited Dormant 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
Vueling Airlines, S.A.* Airline operations 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%, 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 %
Carretera Aerocaribbean y Final, Terminal No 5
Jose Martí Airport, Wajay, Municipio Boyeros, Havana
Empresa Logística de Carga Aérea, S.A. Cuba 50 %
Carretera de Wajay km 1 ½, Jose Martí Airport, Havana
Mundiplan Turismo y Ocio S.L. Spain 50 %
Calle Hermanos García Noblejas 41, Madrid, 28037
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.U. Spain 26.7 %
Avenida de Bruselas 20, Alcobendas, Madrid, 28108
LanzaJet Inc. 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 Profit/(loss) before tax (million)
(million)
Air Europa Holdings S.L.(1) Spain 20 % € 25 -
Carretera Arenal - Llucmajor, km 21.5, Llucmajor, 07620
Servicios de Instrucción de Vuelo, S.L. Spain 19.9 % € 70 6
Camino de la Muñoza s/n, El Caserío,
Iberia Zona Industrial 2, Madrid, 28042
The Airline Group Limited England 16.7 % £ 241 -
5th Floor, Brettenham House South, Lancaster Place, London,
WC2N 7EN
Travel Quinto Centenario, S.A. Spain 10 % € - -
Calle Alemanes 3, Sevilla, 41004
i6 Group Limited England 7.4 % £ 2 (2)
Farnborough Airport, Ively Road, Farnborough, Hampshire, GU14 6XA
Monese Limited England 4.8 % £ 8 (31)
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 31 December 2022 and are prepared under
Spanish GAAP. The Group does not have access to financial information other
than that reported in the statutory financial statements of the company, which
are published subsequent to the authorisation of these consolidated financial
statements.
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 28 February 2024, 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 31 December 2023
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.
28 February 2024
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
Owned Finance lease Operating lease Total Total Changes since Future Options(1)
31 December 2023 31 December 2022 31 December 2022 deliveries
Airbus A319ceo 9 - 32 41 41 - - -
Airbus A320ceo 49 13 128 190 199 (9) 3 -
Airbus A320neo - 38 28 66 60 6 49 40
Airbus A321ceo 11 3 29 43 44 (1) - -
Airbus A321neo 4 6 19 29 16 13 33 -
Airbus A321 LR - - 8 8 8 - - -
Airbus A321 XLR - - - - - - 14 14
Airbus A330-200 2 1 16 19 16 3 - -
Airbus A330-300 4 4 12 20 20 - - -
Airbus A350-900 3 6 12 21 15 6 2 15
Airbus A350-1000 1 14 2 17 13 4 1 36
Airbus A380 3 9 - 12 12 - - -
Boeing 737-8200 - - - - - - 25 100
Boeing 737-10 - - - - - - 25 -
Boeing 777-200 38 2 3 43 43 - - -
Boeing 777-300 8 1 7 16 16 - - -
Boeing 777-9 - - - - - - 18 24
Boeing 787-8 2 8 2 12 12 - - -
Boeing 787-9 1 8 9 18 18 - - -
Boeing 787-10 - 5 2 7 4 3 11 6
Embraer E190 9 - 11 20 21 (1) - -
Group total 144 118 320 582 558 24 181 235
1 The options to purchase 100 Boeing 737 aircraft allow for flexibility in
the choice of variant.
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. See note 2 in the Group financial
statements for further information.
As well as those aircraft in service the Group also holds 9 aircraft (31
December 2022: 18) not in service.
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