REG - Intl Con Airline Grp - IAG FY 2021 Results
25/02/2022 07:00
For best results when printing this announcement, please click on link below:
http://newsfile.refinitiv.com/getnewsfile/v1/story?guid=urn:newsml:reuters.com:20220225:nRSY7855Ca&default-theme=true
RNS Number : 7855C International Cons Airlines Group 25 February 2022
Full year results announcement
International Consolidated Airlines Group (IAG) today (February 25, 2022)
presented its unaudited Group consolidated results for the year to December
31, 2021.
• Passenger capacity in quarter 4 was 58% of 2019 capacity, up from 43% in
quarter 3 and for the full year was 36% of 2019 capacity.
• The easing of government-imposed travel restrictions as the year
progressed resulted in improving travel demand, in particular following the
opening of the US border to foreign travellers on November 8.
• The impact of Omicron, which became apparent on November 25, had a
negative short-term impact on the operating result, passenger bookings and
cancellations.
• Significantly improved operating cash flow of €1.0bn in the second
half of 2021, driven by positive EBITDA in quarter 4, strong forward bookings
and favourable working capital.
• Capex in 2021 was €0.7 billion, significantly lower than €1.3
billion previously guided and €1.7 billion expected at the start of the
year, due to the delay of Airbus and Boeing aircraft.
• Cash of €7,943 million at December 31, 2021, up €2,026 million on
December 31, 2020. Committed and undrawn general and aircraft facilities were
€4,043 million, bringing total liquidity to €11,986 million, compared to
€8,059 million at December 31, 2020.
• Proceeds from borrowings of €4.8 billion in 2021, including: £2.0
billion UK Export Finance (UKEF) guaranteed 5-year loan for British Airways;
€1.2 billion unsecured bond issuance by IAG; €825 million convertible bond
issuance by IAG; $785 million sustainability-linked EETC for British Airways,
of which $150 million was drawn in 2021; €75 million loan from the Ireland
Strategic Investment Fund (ISIF) by Aer Lingus and other aircraft financing.
• In addition, the Group agreed new general facilities, which have not
been drawn during 2021, including a $1.755 billion 3-year revolving credit
facility available to Aer Lingus, British Airways and Iberia and a £1.0
billion UKEF guaranteed credit facility for British Airways.
• Current passenger capacity plans for 2022 are for around 65% of 2019
capacity in quarter 1 and for around 85% of 2019 capacity for the full year.
Omicron has affected bookings in January and February 2022 but has had a
minimal impact on bookings for Easter and summer 2022.
• Capex in 2022 is expected to be €3.9 billion, reflecting the need to
re-build capacity towards pre-pandemic levels, the delay of aircraft
deliveries from 2021 and certain pre-delivery payments deferred from previous
years. 25 new aircraft are expected to be in delivered in 2022.
IAG results for the period:
• Statutory operating loss for the fourth quarter €278 million (2020
restated(1): operating loss €1,476 million), and operating loss before
exceptional items €305 million (2020 restated(1): operating loss before
exceptional items €1,170 million).
• Statutory operating loss for the year to December 31, 2021 €2,765
million (2020 restated(1): operating loss €7,451 million), and operating
loss before exceptional items €2,970 million (2020 restated(1): operating
loss before exceptional items €4,390 million).
• Loss after tax and exceptional items for the year to December 31, 2021
€2,933 million (2020 restated(1): loss after tax €6,935 million) and loss
after tax before exceptional items €3,038 million (2020 restated(1): loss
€4,337 million).
Performance summary:
( ) Year to December 31
Statutory results (€ million) 2021 2020 Higher /
restated(1 ) (lower)
Passenger revenue 5,835 5,512 5.9 %
Total revenue 8,455 7,806 8.3 %
Operating loss (2,765) (7,451) (62.9)%
Loss after tax (2,933) (6,935) (57.7)%
Basic loss per share (€ cents)(2 ) (59.1) (196.6) (69.9)%
Cash and interest-bearing deposits 7,943 5,917 34.2 %
Borrowings 19,610 15,679 25.1 %
( )
Alternative performance measures (€ million) 2021 2020 Higher /
restated(1 ) (lower)
Passenger revenue before exceptional items 5,830 5,574 4.6 %
Total revenue before exceptional items 8,450 7,868 7.4 %
Operating loss before exceptional items (2,970) (4,390) (32.3)%
Loss after tax before exceptional items (3,038) (4,337) (30.0)%
Adjusted loss per share (€ cents)(2 ) (61.2) (122.9) (50.2)%
Net debt 11,667 9,762 19.5 %
Available seat kilometres (ASK million) 121,965 113,195 7.7 %
Passenger revenue per ASK (€ cents) 4.78 4.92 (2.9)%
Non-fuel costs per ASK (€ cents) 7.78 9.03 (13.8)%
Cash comprises cash, cash equivalents and interest-bearing deposits.
(1 ) The 2020 results have been restated for the treatment of
administration costs associated with the Group's defined benefit pension
schemes, which increased the loss after tax for the year to December 31, 2020
by €12 million.
(2 ) The loss per share information for the year to December 31,
2020, has been restated to reflect the impact of note 1 above.
Luis Gallego, IAG's Chief Executive Officer, said:
"We are confident that a strong recovery is underway. Our teams across the
Group are taking every opportunity to develop our business while capitalising
on the surge in bookings when travel restrictions are lifted. Our people's
extraordinary work and dedication has been key to weather this crisis. We are
also monitoring recent geopolitical events closely to manage any potential
impact.
"All our airlines continued to show improvements in the fourth quarter,
optimising their performance and further improving their operating results.
Our diversified business model enabled us to make the most of the recovery as
individual markets were affected at different times and in different ways.
"Iberia made €82 million operating profit in the quarter as it seized
opportunities to strengthen its position on routes to Latin America and the
Spanish domestic market.
"IAG Loyalty continued to be profitable and cash generative, as it has been
throughout the pandemic, which shows the benefits of our unique platform.
"Premium leisure has performed strongly at both British Airways and Iberia
while business travel has started to recover especially on the transatlantic
routes.
"Prior to Omicron, longhaul traffic had seen the highest booking activity in
October and November at over 80 per cent of 2019 levels. This was driven by
the re-opening of the North Atlantic corridor and the strength of longhaul
leisure markets and travellers visiting families and friends.
"Demand slowed down for very near-term trips following the emergence of
Omicron in late November. However, bookings have remained strong for Easter
and summer 2022 having picked up in the New Year. We expect a robust summer
with IAG returning to around 85% of its 2019 capacity for the full year.
"As we ramp up operations our customers remain at the heart of everything we
do. This means investment in passenger experience and operational resilience
to provide the best service.
"We know that after the worst crisis in aviation's history we must do things
differently. Our model enables us to capture revenue and cost synergies while
maximising efficiencies which means we are set up to return to profitability
in 2022.
"We're pleased that our work tackling climate change continues to be
recognised as industry-leading. For the second year running, IAG was the only
European airline group to receive a Leadership grade (A-) from the Carbon
Disclosure Project (CDP). This puts us in the top six per cent among nearly
12,000 global companies. We also received the highest score of any airline
from the Transition Pathway Initiative (TPI) which assesses companies'
readiness to transition to a low-carbon economy."
Trading outlook
A significant quarterly operating loss is expected for quarter 1, 2022 due to
normal seasonality, the impact of Omicron on near-term bookings and the impact
on operating costs of re-building capacity. IAG expects its operating result
to be profitable from quarter two, leading both operating profit and net cash
flows from operating activities to be significantly positive for the year.
This assumes no further setbacks related to COVID-19 and government-imposed
travel restrictions or material impact from recent geopolitical developments.
LEI: 959800TZHQRUSH1ESL13
Steve Gunning, Chief Financial Officer
Forward-looking statements:
Certain statements included in this report are forward-looking. These
statements can be identified by the fact that they do not relate only to
historical or current facts. By their nature, they involve risk and
uncertainties because they relate to events and depend on circumstances that
will occur in the future. Actual results could differ materially from those
expressed or implied by such forward-looking statements.
Forward-looking statements often use words such as "expects", "may", "will",
"could", "should", "intends", "plans", "predicts", "envisages" or
"anticipates" or other words of similar meaning. They include, without
limitation, any and all projections relating to the results of operations and
financial conditions of International Consolidated Airlines Group, S.A. and
its subsidiary undertakings from time to time (the 'Group'), as well as plans
and objectives for future operations, expected future revenues, financing
plans, expected expenditure and divestments relating to the Group, discussions
of the Group's business plan, and our assumptions, expectations, objectives
and resilience with respect to climate scenarios. All forward-looking
statements in this report are based upon information known to the Group on the
date of this report and speak as of the date of this report. 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 report as a result of any number of known
and unknown risks, uncertainties and other factors, including, but not limited
to, the effects of the COVID-19 pandemic and uncertainties about its impact
and duration, many of which are difficult to predict and are generally beyond
the control of the Group, and it is not reasonably possible to itemise each
item. Accordingly, readers of this report 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 2020. All forward-looking statements made on or after the date of
this report and attributable to IAG are expressly qualified in their entirety
by the primary risks set out in that section. Many of these risks are, and
will be, exacerbated by the COVID-19 pandemic and any further disruption to
the global airline industry and economic environment as a result.
IAG Investor Relations
Waterside (HAA2),
PO Box 365,
Harmondsworth,
Middlesex,
UB7 0GB
Tel: +44 (0)208 564 2990
Investor.relations@iairgroup.com
CONSOLIDATED INCOME STATEMENT
Year to December 31 Three months to December 31
€ million 2021 2020(1) Higher/ 2021 2020(1) Higher/
(lower) (lower)
Passenger revenue 5,835 5,512 5.9 % 2,695 684 nm
Cargo revenue 1,673 1,306 28.1 % 499 389 28.3 %
Other revenue 947 988 (4.1)% 340 228 49.1 %
Total revenue 8,455 7,806 8.3 % 3,534 1,301 nm
Employee costs 3,013 3,585 (16.0)% 914 698 30.9 %
Fuel, oil costs and emissions charges 1,781 3,735 (52.3)% 732 453 61.6 %
Handling, catering and other operating costs 1,308 1,340 (2.4)% 520 260 nm
Landing fees and en-route charges 923 918 0.5 % 325 181 79.6 %
Engineering and other aircraft costs 1,085 1,456 (25.5)% 383 321 19.3 %
Property, IT and other costs 758 782 (3.1)% 218 185 17.8 %
Selling costs 434 405 7.2 % 154 65 nm
Depreciation, amortisation and impairment 1,932 2,955 (34.6)% 548 620 (11.6)%
Currency differences (14) 81 nm 18 (6) nm
Total expenditure on operations 11,220 15,257 (26.5)% 3,812 2,777 37.3 %
Operating loss (2,765) (7,451) (62.9)% (278) (1,476) (81.2)%
Finance costs (830) (670) 23.9 % (218) (167) 30.5 %
Finance income 13 41 (68.3)% 8 14 (42.9)%
Net change in fair value of convertible bond 89 - - 85 - -
Net financing (charge)/credit relating to pensions (2) 12 nm (4) 1 nm
Net currency retranslation (charges)/credits (82) 245 nm (19) 62 nm
Other non-operating credits/(charges) 70 (4) nm (31) (47) (34.0)%
Total net non-operating costs (742) (376) 97.3 % (179) (137) 30.7 %
Loss before tax (3,507) (7,827) (55.2)% (457) (1,613) (71.7)%
Tax 574 892 (35.7)% 146 254 (42.5)%
Loss after tax (2,933) (6,935) (57.7)% (311) (1,359) (77.1)%
(1 ) The 2020 results have been restated for the treatment of
administration costs associated with the Group's defined benefit pension
schemes. The restatement increased the loss after tax for the year to December
31, 2020 by €12 million and for the three months to December 31, 2020 by
€3 million.
ALTERNATIVE PERFORMANCE MEASURES
All figures in the tables below are before exceptional items. Refer to
Alternative performance measures section for more detail.
Year to December 31 Three months to December 31
Before exceptional items Before exceptional items
€ million 2021 2020(1) Higher/ 2021 2020(1) Higher/
(lower)(2) (lower)(2)
Passenger revenue 5,830 5,574 4.6 % 2,695 686 nm
Cargo revenue 1,673 1,306 28.1 % 499 389 28.3 %
Other revenue 947 988 (4.1)% 340 228 49.1 %
Total revenue before exceptional items 8,450 7,868 7.4 % 3,534 1,303 nm
Employee costs 3,031 3,272 (7.4)% 932 654 42.5 %
Fuel, oil costs and emissions charges 1,935 2,041 (5.2)% 733 358 nm
Handling, catering and other operating costs 1,308 1,340 (2.4)% 520 260 nm
Landing fees and en-route charges 923 918 0.5 % 325 181 79.6 %
Engineering and other aircraft costs 1,092 1,348 (19.0)% 383 296 29.4 %
Property, IT and other costs 758 754 0.5 % 218 185 17.8 %
Selling costs 434 405 7.2 % 154 65 nm
Depreciation, amortisation and impairment 1,953 2,099 (7.0)% 556 480 15.8 %
Currency differences (14) 81 nm 18 (6) nm
Total expenditure on operations before exceptional items 11,420 12,258 (6.8)% 3,839 2,473 55.2 %
Operating loss before exceptional items (2,970) (4,390) (32.3)% (305) (1,170) (73.9)%
Finance costs (830) (670) 23.9 % (218) (167) 30.5 %
Finance income 13 41 (68.3)% 8 14 (42.9)%
Net change in fair value of convertible bond 89 - - 85 - -
Net financing (charge)/credit relating to pensions (2) 12 nm (4) 1 nm
Net currency retranslation (charges)/credits (82) 245 nm (19) 62 nm
Other non-operating credits/(charges) 145 (4) nm 44 (47) nm
Total net non-operating costs (667) (376) 77.4 % (104) (137) (24.1)%
Loss before tax before exceptional items (3,637) (4,766) (23.7)% (409) (1,307) (68.7)%
Tax 599 429 39.6 % 146 155 (5.8)%
Loss after tax before exceptional items (3,038) (4,337) (30.0)% (263) (1,152) (77.2)%
( )Operating figures 2021(2) 2020(1,2) Higher/ 2021(2) 2020(1,2) Higher/
(lower) (lower)
Available seat kilometres (ASK million) 121,965 113,195 7.7 % 47,842 21,801 nm
Revenue passenger kilometres (RPK million) 78,689 72,262 8.9 % 34,225 9,817 nm
Seat factor (per cent) 64.5 63.8 0.7 pts 71.5 45.0 26.5 pts
Passenger numbers (thousands) 38,864 31,275 24.3 % 15,309 4,298 nm
Cargo tonne kilometres (CTK million) 3,970 3,399 16.8 % 1,129 928 21.7 %
Sold cargo tonnes (thousands) 539 444 21.4 % 157 118 33.1 %
Sectors 307,519 267,748 14.9 % 114,686 48,195 nm
Block hours (hours) 892,455 820,983 8.7 % 328,739 160,230 nm
Average manpower equivalent(3) 50,222 60,612 (17.1)% 49,114 53,553 (8.3)%
Aircraft in service 531 533 (0.4)% n/a n/a -
Passenger revenue per RPK (€ cents) 7.41 7.71 (3.9)% 7.87 6.99 12.7 %
Passenger revenue per ASK (€ cents) 4.78 4.92 (2.9)% 5.63 3.15 79.0 %
Cargo revenue per CTK (€ cents) 42.14 38.42 9.7 % 44.20 41.92 5.4 %
Fuel cost per ASK (€ cents) 1.59 1.80 (12.0)% 1.53 1.64 (6.7)%
Non-fuel costs per ASK (€ cents) 7.78 9.03 (13.8)% 6.49 9.70 (33.1)%
Total cost per ASK (€ cents) 9.36 10.83 (13.5)% 8.02 11.34 (29.3)%
(1 ) The 2020 results have been restated for the treatment of
administration costs associated with the Group's defined benefit pension
schemes. The restatement increased the loss after tax before exceptional items
for the year to December 31, 2020 by €12 million and for the three months to
December 31, 2020 by €3 million.
(2 ) Financial ratios are before exceptional items. Refer to
Alternative performance measures section for detail.
(3 ) Included in the average manpower equivalent are staff on
furlough, wage support and equivalent schemes, including the Temporary
Redundancy Plan arrangements in Spain.
FINANCIAL REVIEW
Structure of Financial Review
Due to the continued impact of COVID-19 and governments' travel restrictions,
many of the usual variance analysis and measures are significantly less
meaningful than in previous years and in some cases, measures used previously
no longer provide relevant insight into understanding the performance of the
Group. As a consequence, and in keeping with the Financial Review of 2020, in
this review there is no detail on industry growth rates and GDP by market; in
2021 the main drivers of capacity and revenue were COVID-19 and the related
governmental travel bans and restrictions, rather than broader economic
factors. This review, therefore, is structured to provide detail about the
impact of COVID-19 on the Group, including the measures the Group has taken to
mitigate the financial impact of the pandemic. Where variances exceed 100 per
cent they have been substituted with 'nm' for 'not meaningful' and the
absolute values are shown.
Capacity
IAG capacity
In 2021, IAG capacity, measured in available seat kilometres (ASKs), was lower
by 63.9 per cent versus 2019, with the impact of the COVID-19 pandemic felt
across all regions. However, Group capacity was up 7.7 per cent versus 2020,
as global travel restrictions began to ease as vaccine programmes progressed.
Capacity was increasingly restored during the year, in line with the easing of
travel restrictions, although with some impact of the Omicron variant of
COVID-19 felt in December.
Proportion of 2019 passenger capacity operated by quarter
Q1 Q2 Q3 Q4
Aer Lingus 15.2% 10.9% 27.1% 44.3%
British Airways 14.8% 14.1% 31.7% 52.7%
Iberia 37.5% 43.5% 62.7% 75.3%
LEVEL 10.0% 4.3% 15.5% 10.8%
Vueling 14.7% 32.2% 76.6% 79.4%
Group 19.6% 21.9% 43.4% 58.3%
Across the year, the travel restrictions for Ireland and the UK were greater
than for Spain and consequently Iberia and Vueling were able to increase
capacity earlier than the other Group airlines, with both reaching over 75 per
cent of 2019 capacity in the final quarter of the year.
In the first three months of 2021, IAG capacity, measured in available seat
kilometres (ASKs), was restricted to 19.6 per cent of that in the first
quarter of 2019, with reductions across all regions. Capacity was
significantly affected by the travel restrictions put in place, including new
national lockdowns in the UK and Ireland in response to the third wave of
infections at the start of the year. Passenger capacity for quarter 2 was up
marginally at 21.9 per cent of 2019, with capacity increased where limited
easing of travel restrictions allowed. Quarter 3 saw the highest passenger
numbers and load factors since the start of the pandemic, but capacity was
still severely constrained at 43.4 per cent of 2019. Capacity continued to
increase in quarter 4, up to 58.3 per cent of 2019. The emergence of the
Omicron variant impacted demand, mainly in December, as governments introduced
stricter travel requirements and border restrictions in response.
The IAG passenger load factor was down 20.1 points from 2019 to 64.5 per cent,
also impacted by travel restrictions, which changed frequently, together with
low demand and a higher than normal level of passengers not checking in for
flights that were still operating ('no-shows'). The passenger load factor for
2021 was up marginally on the 63.8 per cent seen in 2020. Some flights were
operated mainly for cargo purposes, with low passenger load factors, but still
cash-positive for the Group. The reduction in capacity across the industry
continues to benefit cargo operations with favourable cargo yields and record
cargo revenues.
IAG regional capacity
Year to December 31, 2021 ASKs ASKs Passenger load factor Higher/ Higher/
higher/ higher/ (lower) (lower)
(lower) (lower) v2019 v2020
v2019 v2020
Domestic (26.5)% 46.3% 74.9 (12.3) pts 3.9 pts
Europe (64.7)% 19.3% 69.1 (14.5) pts 4.5 pts
North America (71.3)% (6.8)% 49.4 (34.7) pts (3.8) pts
Latin America and Caribbean (52.3)% 33.7% 69.8 (16.6) pts (2.9) pts
Africa, Middle East and South Asia (66.8)% (14.0)% 67.4 (15.6) pts 0.2 pts
Asia Pacific (87.9)% (58.7)% 39.4 (46.4) pts (21.9) pts
Total network (63.9)% 7.7% 64.5 (20.1) pts 0.7 pts
Domestic and Europe
Together, IAG's Domestic and European markets continue to represent the
Group's largest region. However, capacity across both was, and continues to
be, significantly impacted by travel restrictions and quarantine requirements.
Capacity in IAG's Domestic markets recovered to a greater extent than other
regions, with capacity lower by only 26.5 per cent versus 2019 and 46.3 per
cent higher than in 2020. British Airways' capacity reflected demand from UK
holidaymakers avoiding overseas destinations, which were subject to quarantine
restrictions and expensive testing requirements. Vueling operations focused on
connecting the Spanish peninsula with both the Canary and Balearic Islands and
Iberia maintained similar Domestic routes for connectivity. Aer Lingus
maintained its route between London and Belfast and benefitted from UK
citizens opting for domestic holidays. Passenger load factor for the region
was the highest for the Group at 74.9 per cent, down only 12.3 points versus
2019.
The Group's capacity in Europe was 64.7 per cent lower than 2019, however it
recovered 19.3 per cent above 2020 as vaccination rates increased and travel
restrictions eased. Aer Lingus, Vueling and Iberia benefitted from the
introduction of the EU Digital Covid Certificate in the summer, allowing EU
travellers to avoid self-isolation on travelling to other member states, with
passenger load factors in the second half of the year significantly higher as
a result. British Airways had a good performance throughout the summer on the
routes operated to destinations included on the UK Government's 'Travel
Corridor' Green and Amber list countries, once self-isolation requirements for
double-vaccinated passengers were removed.
North America
IAG's North American capacity was severely limited by the United States
government's COVID-19 restrictions, which for a large portion of the year only
allowed residents and nationals to enter the country. These restrictions were
only lifted for EU and UK citizens on November 8, 2021. Prior to the entry
requirements being relaxed, flights were operated primarily for cargo
purposes. British Airways and Aer Lingus operated regular flights to New York,
Boston, Washington and Chicago. Iberia operated flights to Miami and New York
and LEVEL resumed operations to San Francisco and New York. Passenger load
factor for the region was down 34.7 points versus 2019 to 49.4 per cent,
reflecting the US government's strict border restrictions.
Latin America and Caribbean (LACAR)
IAG's capacity in LACAR was still down significantly on 2019, but increased
33.7 per cent on 2020, as routes re-opened and benefitted from significant
visiting friends and relatives (VFR) and leisure demand. British Airways
operated regular flights to Caribbean destinations, benefitting from leisure
travel demand during holiday periods. Routes to Sao Paulo and Buenos Aires
only resumed in December. Iberia benefitted from significant VFR travel during
2021 and load factors reached over 80 per cent from September onwards. Aer
Lingus launched operations from Manchester in October 2021, with flights to
Barbados starting in October. Passenger load factor for the region was down
16.6 points on 2019 at 69.8 per cent.
Africa, Middle East and South Asia (AMESA)
British Airways operated to multiple destinations including Dubai, India,
South Africa and Pakistan. Capacity and demand were impacted by the emergence
of new COVID-19 variants, including the Delta variant, which resulted in
additional travel restrictions on certain destinations. Iberia operated
regularly to Dakar and restarted operations to Israel and Morocco when travel
restrictions were eased. Vueling also re-opened routes as restrictions eased,
restarting routes to Morocco and Tunisia whilst continuing regular operations
to Senegal and Algeria. Passenger load factor for the region was down 15.6
points versus 2019 at 67.4 per cent.
Asia Pacific
The Asia Pacific region was the most capacity-constrained region in 2021, as
strict travel restrictions in the region continued to severely impact demand.
British Airways operated routes to Hong Kong, Singapore and Tokyo regularly,
mainly for cargo purposes. Iberia operated charter flights to China and Tokyo.
Passenger load factor for the region was the lowest for the Group, down 46.4
points versus 2019 at 39.4 per cent.
Basis of Preparation
Based on the extensive modelling the Group has undertaken in light of the
COVID-19 pandemic, including considering plausible but severe downside
scenarios, the Directors have a reasonable expectation that the Group has
sufficient liquidity for the going concern assessment period to June 30, 2023
and accordingly the Directors have adopted the going concern basis in
preparing the consolidated financial statements.
There are a number of significant factors related to the status and impact of
COVID-19 worldwide that are outside of the control of the Group. These include
the emergence of new variants of the virus and potential resurgence of
existing strains of the virus; the speed at which vaccines are deployed
worldwide; the efficacy of those vaccines; the availability of medicines to
combat the impact of the virus and the restrictions imposed by national
governments in respect of the freedom of movement and travel. Due to the
uncertainty that these factors create, the Directors are not able to provide
certainty that there could not be more severe downside scenarios than those
that have been considered in the modelling, including the sensitivities the
Group has considered in relation to factors such as the impact on yield,
capacity operated, cost mitigations achieved and the availability of aircraft
financing to offset capital expenditure. In the event that such a scenario
were to occur, the Group may need to secure sufficient additional funding over
and above that which is contractually committed as at February 24, 2022.
The Group has been successful in raising financing since the outbreak of
COVID-19, having financed all aircraft deliveries in 2020 and 2021 and secured
an additional €5.5 billion of non-aircraft related debt, in addition to a
fully subscribed equity raise of €2.7 billion in 2020. The Group has
negotiated and executed €2.8 billion of committed general facilities during
2021; these facilities were undrawn as at February 24, 2022 and would be
available over the going concern period. However, the Directors cannot provide
certainty that the Group will be able to secure additional funding, if
required, in the event that a more severe downside scenario than those they
have considered were to occur and accordingly this represents a material
uncertainty that could cast doubts upon the Group's ability to continue as a
going concern. Refer to note 2 of the consolidated financial statements for
further information.
Summary
The COVID-19 pandemic continued to have a significant impact on the Group's
results, although there were meaningful signs of recovery in the second half
of the year, as travel restrictions were eased and the US lifted its severe
restrictions (imposed in March 2020). Passenger capacity and passenger revenue
were 7.7 per cent and 5.9 per cent higher than 2020 respectively, with cargo
revenue 28.1 per cent higher. Passenger capacity rose from 19.6 per cent of
2019 in first quarter of 2021 to 58.3 per cent in the final quarter of the
year. The Group continued to take action to mitigate the impact of COVID-19 by
reducing costs and benefitted from the full-year impact of restructuring
programmes implemented in the second half of 2020.
The net result was an operating loss for the year of €2,765 million, versus
an operating loss of €7,451 million in 2020. The loss after tax for the year
was €2,933 million, versus a loss of €6,935 million in 2020.
Loss for the year
Statutory results 2021 2020(1) Higher/
€ million
(lower) vly
Operating loss (2,765) (7,451) 4,686
Loss before tax (3,507) (7,827) 4,320
Loss after tax (2,933) (6,935) 4,002
(1) The 2020 comparative figures have been restated for the treatment of
administration costs associated with the Group's defined benefit pension
schemes. See note 2 to the financial statements for further information.
The Group uses Alternative Performance Measures (APMs) to analyse the
underlying results of the business excluding exceptional items, which are
those that in management's view need to be separately disclosed by virtue of
their size or incidence in understanding the entity's financial performance.
In 2020, the Group recorded a number of exceptional items arising as a direct
result of COVID-19. During the course of 2021, the Group continued to record
the fair value movements on derivatives de-designated from hedge accounting in
2020 as exceptional. In addition, new exceptional items arose in 2021,
including the reversal of the impairment of certain aircraft stood back up in
2021, following the Vueling successful slot allocation at Paris Orly, together
with adjustments to previously recorded restructuring provisions.
A summary of the exceptional items relating to 2020 and 2021 is given below,
with more detail in the Alternative Performance Measures section, including a
breakdown of the exceptional items by operating company.
Summary of exceptional items
Credit/(charge) to the
Income statement
€ million
Income statement line Exceptional item description 2021 2020
Passenger revenue Discontinuation of hedge accounting for foreign currency derivatives for 5 (62)
revenue
Employee costs Restructuring costs 18 (313)
Fuel, oil and emissions costs Discontinuation of hedge accounting for fuel and associated foreign exchange 154 (1,694)
derivatives
Engineering and other aircraft costs Inventory write-down and charge in relation to contractual lease provisions 7 (108)
Property, IT and other costs Legal costs associated with employee restructuring programmes - (6)
Property, IT and other costs Settlement provision in relation to the theft of customer data at British - (22)
Airways in 2018
Depreciation, amortisation and impairment Impairment of fleet and associated assets 21 (856)
Non-operating costs Payment to Globalia related to termination of Air Europa acquisition (75) -
Tax Tax on exceptional items (25) 463
In 2020 all items were associated with the impact of COVID-19, except the
settlement provision in relation to the theft of customer data at British
Airways in 2018.
In 2021 all the exceptional items, apart from the termination payment to
Globalia, relate to adjustments made to the COVID-19 related exceptional
charges in 2020, reflecting movements in fuel prices and foreign exchange
rates, changes to fleet plans and adjustments to provisions. See the
Alternative Performance Measures section for further information.
Excluding the impact of the exceptional items shown above, the operating loss
for 2021 was €2,970 million, €1,420 million lower than 2020, reflecting
the recovery in capacity, particularly in the second half of 2021, when travel
restrictions were eased, notably for travel to the US from November 8, 2021.
The loss after tax and before exceptional items was €3,038 million, €1,299
million lower than 2020.
Alternative 2021 2020(1) Higher/
Performance Measures
(lower) vly
(before exceptional items),
€ million
Operating loss (2,970) (4,390) 1,420
Loss before tax (3,637) (4,766) 1,129
Loss after tax (3,038) (4,337) 1,299
(1 ) 2020 comparative figures have been restated for the
treatment of administration costs associated with the Group's defined benefit
pension schemes. See note 2 to the financial statements for further
information.
Revenue
Statutory results 2021 Higher/ Higher/
€ million
(lower) vly
(lower) vly
Passenger revenue(1) 5,835 323 5.9%
Cargo revenue 1,673 367 28.1%
Other revenue 947 (41) (4.1)%
Total revenue 8,455 649 8.3%
(1 ) Includes an exceptional credit of €5 million (2020:
exceptional charge of €62 million related to discontinued hedge accounting
of revenue foreign currency derivatives). Further information is given in the
Alternative Performance Measures section.
Passenger revenue
Passenger revenue increased by 5.9 per cent on 2020, driven by an increase in
the second half of the year, in which 80 per cent of passenger revenue was
generated, as travel restrictions reduced and passenger capacity increased.
Passenger unit revenue, measured as passenger revenue before exceptional items
per available seat kilometre (PRASK), was down 2.9 per cent versus 2020 (in
which the main impact of COVID-19 was only seen from March). PRASK rose
significantly in the second half of 2021, with an increase in the passenger
load factor. Passenger revenue for the year was 74.1 per cent lower than in
2019, with PRASK down 28.1 per cent versus 2019.
Cargo revenue
2021 was a record year for cargo revenue, for the second consecutive year, as
additional flights were operated in the absence of passenger capacity and
available aircraft were used for additional cargo-only flying. During the year
3,788 additional cargo-driven flights were operated. The overall impact of the
cargo operation, including the additional cargo-driven flights, was an
increase in Cargo revenue of €367 million, or 28.1 per cent higher versus
2020. Cargo revenue for the year was 49.8 per cent higher than in 2019.
Other revenue
The largest Other revenue streams for the Group in normal times are Iberia's
Maintenance, Repair and Overhaul (MRO) and Handling businesses, together with
BA Holidays. Revenue from these activities was also significantly reduced by
the continued impact of COVID-19. In the case of MRO and Handling, these
revenues were affected by lower demand following reduced flight schedules and
significant fleet reductions across the airline industry and hence lower
maintenance requirements, although the reductions were less than the reduction
in the level of passenger capacity. The BA Holidays business is closely linked
to the passenger business and was therefore impacted by the significantly
reduced passenger operation, although there was an increase in the second half
of the year as operations increased. Overall, for the year, Other revenue was
down €41 million, or 4.1 per cent, versus 2020 and was 50.7 per cent lower
than in 2019.
Operating costs
Due to the continued impact of COVID-19 on the Group's flying programme, with
significantly reduced revenues versus 2019, the Group continued to take action
to offset the financial impact by reducing costs, together with measures to
increase the variability and flexibility in its cost base. The Group
benefitted from the full-year impact of restructuring and other cost-saving
programmes implemented during 2020.
Total expenditure on operations fell from €15,257 million in 2020 to
€11,220 million in 2021. Excluding the impact of exceptional items, Total
expenditure on operations fell by €838 million, or 6.8 per cent versus 2020,
despite a 7.7 per cent rise in passenger capacity.
Employee costs
Statutory results 2021 Higher/ Higher/
(lower) vly
€ million (lower) vly
Employee costs(1 2) 3,013 (572) (16.0)%
(1 ) Includes an exceptional credit of €18 million related to
the release of restructuring provisions (2020: exceptional charge of €313
million related to the restructuring programmes in British Airways, Aer
Lingus, Iberia and LEVEL, undertaken to resize the Group as a consequence of
COVID-19.) Further information is given in the Alternative Performance
Measures section.
(2 ) 2020 comparative figures have been restated for the
treatment of administration costs associated with the Group's defined benefit
pension schemes. See note 2 to the consolidated statements for further
information.
Employee costs fell by €572 million versus 2020. In 2020 the Group recorded
a €313 million exceptional charge relating to Group-wide restructuring
programmes, which resulted in reductions at British Airways of approximately
10,000 employees (or one quarter of the workforce as at June 2020) and 500 at
Aer Lingus (or approximately 10 per cent of the workforce at June 2020).
Excluding the impact of exceptional credits in 2021 and exceptional charges in
2020, Employee costs reduced €241 million, or 7.4 per cent, versus 2020,
despite the 7.7 per cent increase in passenger capacity.
National governments continued to provide wage or job support mechanisms in
each of IAG's main home markets and the operating companies used these
facilities to reduce employee numbers and costs, although the UK's support
ended in September 2021. The direct impact of these mechanisms was to reduce
employee costs by approximately €555 million.
Fuel, oil and emissions costs
Statutory results 2021 Higher/ Higher/
€ million
(lower) vly
(lower) vly
Fuel, oil costs and emissions charges(1) 1,781 (1,954) (52.3)%
(1 ) Includes an exceptional credit of €154 million (2020:
exceptional charge of €1,694 million) related to the discontinuation of
hedge accounting for fuel derivatives and fuel foreign currency derivatives as
a result of the impact of COVID-19. Further information is given in the
Alternative Performance Measures section.
Fuel, oil and emissions charges were down €1,954 million, or 52.3 per cent
versus 2020; excluding the exceptional net overhedging credit in 2021 and
overhedging charge in 2020, Fuel, oil and emissions charges were down €106
million, or 5.2 per cent versus 2020 and down €4,086 million or 67.9 per
cent on 2019.
Commodity prices
Commodity fuel prices rose steadily over the course of 2021, having seen a
dramatic fall in March 2020 as COVID-19 spread worldwide and a partial
recovery by December 2020. Prices at the end of 2021 were 60 per cent higher
than at the start of the year.
Jet fuel price trend ($/mt)
Fuel hedging
The Group seeks to reduce the impact of volatile commodity prices by hedging
prices in advance. In May 2021, the Board approved a revised fuel hedging
policy, which 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 revised policy allows for
differentiation within the Group, to match the nature of each operating
company, and a greater use of call options. The revised policy operates on a
two-year rolling basis, with hedging up to 60 per cent of anticipated
requirements in the first twelve months and up to 30 per cent in the following
twelve months and with flexibility for low-cost airlines within the Group to
adopt hedging up to 75 per cent in the first twelve months. For all Group
airlines, hedging between 25 and 36 months ahead will only be undertaken in
exceptional circumstances.
Exceptional items
In 2020, due to the rapid fall in the commodity fuel price, the Group
experienced losses on its fuel hedging derivatives. These hedging losses would
have normally been offset against the reduced cost of physical fuel purchased.
However, the impact of COVID-19 led to a significant reduction in the
requirement to purchase jet fuel, due to the significantly reduced flying
programme. As a consequence, the Group had derivative contracts for which
there was no corresponding purchase of jet fuel, leading to discontinuance of
hedge accounting for these derivatives, with a mark-to-market loss of €1,781
million recognised as an exceptional charge in the Income statement. There was
also a related mark-to-market gain recognised in the Income statement related
to foreign exchange hedging of €87 million, bringing the net exceptional
charge to €1,694 million for the year. These values were calculated based on
the fuel curve and foreign exchange rates as at December 31, 2020 and the
anticipated capacity to be operated for 2021 and 2022. During 2021, there was
limited further de-designation necessary, as capacity operated was broadly
consistent with the volume of fuel hedged. However, due to the increase in the
commodity fuel price, the losses on the remaining contracts were lower than
anticipated and the Group recognised an exceptional credit of €154 million.
Fuel consumption
The Group continued to benefit from reduced fuel consumption associated with
the investment in new fleet, together with the early retirement of older
aircraft, including the full-year impact of the retirement of 15 Airbus
A340-600 and 32 Boeing 747-400 aircraft in quarter 2 of 2020.
Supplier costs
Statutory results 2021 Higher/ (lower) vly Higher/
€ million
(lower) vly
Handling, catering and other operating costs 1,308 (32) (2.4)%
Landing fees and en-route charges 923 5 0.5%
Engineering and other aircraft costs(1) 1,085 (371) (25.5)%
Property, IT and other costs(2) 758 (24) (3.1)%
Selling costs 434 29 7.2%
Currency differences (14) (95) nm
(1 ) Includes an exceptional credit of €7 million (2020:
exceptional charge of €108 million) related to an inventory write-down and a
charge relating to contractual lease provisions, with a related credit in 2021
due to adjusted fleet plans. Further information is given in the Alternative
Performance Measures section.
(2 ) For 2020 includes a settlement provision in relation to the
theft of customer data at British Airways in 2018 of €22 million and an
exceptional charge of €6 million related to legal costs of the Group-wide
restructuring programme undertaken in the year. Further information is given
in the Alternative Performance Measures section.
Handling, catering and other operating costs were down €32 million on 2020,
or 2.4 per cent, despite the higher volume of flying in 2021, as the Group
continued to focus on reducing its cost-base and benefitted from the full-year
impact of savings made in 2020 and ground handing contract negotiations in
2021.
Landing fees and en-route charges were up €5 million on 2020, or 0.5 per
cent, reflecting the impact of increased flying.
Engineering and other aircraft costs reduced primarily due to the reduction in
fleet since quarter 2, 2020 and the exceptional charges in 2020. Savings were
negotiated for various maintenance contracts, including a new joint venture in
Barcelona. Excluding the exceptional credit in 2021 and exceptional charge in
2020, Engineering and other aircraft costs were lower than 2020 by €256
million, or 19.0 per cent.
Property, IT and other costs were down €24 million, or 3.1 per cent, on
2020, which included exceptional charges for a settlement provision in
relation to the theft of customer data at British Airways in 2018 and for
legal costs relating to restructuring programmes undertaken in 2020. Excluding
these exceptional charges in 2020, Property, IT and other costs were up €4
million or 0.5 per cent versus 2020.
Selling costs increased by €29 million or 7.2 per cent versus 2020,
reflecting increased booking activity for future travel, particularly in the
second half of the year as travel restrictions eased. Cost increases were
contained by negotiated savings for third party selling systems and
commissions.
Overall, Supplier costs (excluding fuel costs) were €488 million, or 9.8 per
cent, lower than 2020. Excluding exceptional charges and credits, Supplier
costs (excluding fuel costs) were €4,626 million, or 50.7 per cent, lower
than in 2019.
Ownership costs
Ownership costs include depreciation, amortisation and impairment of tangible
and intangible assets, including right of use assets.
Statutory results 2021 Higher/ (lower) vly Higher/
€ million
(lower) vly
Ownership costs(1) 1,932 (1,023) (34.6)%
(1 ) Includes an exceptional credit of €21 million related to
the partial reversal of an impairment of fleet assets and other assets in
2020. (2020: exceptional charge of €856 million related to the impairment of
fleet assets and other assets.) Further information is given in the
Alternative Performance Measures section.
The reduction in ownership costs is mainly driven by the exceptional
impairment charge made as a result of the fleet reductions brought about as a
result of COVID-19 during 2020, when 82 aircraft were retired early, which led
to an impairment charge of €856 million. For aircraft that were stood down
temporarily as a result of COVID-19, depreciation costs continued to be
charged. During 2021, Vueling was the successful bidder in a competition for
additional take-off and landing slots at Paris Orly airport, which led to the
requirement to return to service four Airbus A320 aircraft that were
previously assumed surplus to requirements. The return of these four aircraft
led to a €14 million reversal of the exceptional impairment charge recorded
in 2020. There was also a €7 million reversal of an exceptional engine
impairment charge recorded in 2020. Excluding the exceptional credit in 2021
and exceptional charge in 2020, Ownership costs were down €146 million, or
7.0 per cent.
Aircraft fleet
In 2021, the in-service fleet reduced by two aircraft, with 11 aircraft
delivered and 13 aircraft removed from service for disposal or lease return.
Number of fleet
Number of fleet in-service 2021 2020 Higher/ (lower) vly
Shorthaul 363 367 (1.1)%
Longhaul 168 166 1.2%
531 533 (0.4)%
Of the 531 "in-service" fleet at the end of the year, 55 were temporarily
grounded. In addition to the in-service fleet, there were a further 29
aircraft held by the Group pending disposal or lease return.
Exchange rate impact
Exchange rate impacts are calculated by retranslating current year results at
prior year exchange rates. The reported revenues and expenditures are impacted
by the translation of currencies other than euro to the Group's reporting
currency of euro, primarily British Airways and IAG Loyalty. From a
transaction perspective, the Group performance is impacted by the fluctuation
of exchange rates, primarily exposure to the pound sterling, euro and US
dollar. The Group typically generates a surplus in most currencies in which it
does business, except the US dollar, for which capital expenditure, debt
repayments and fuel purchases typically create a deficit which is managed and
partially hedged. The Group hedges its economic exposure from transacting in
foreign currencies but does not hedge the translation impact of reporting in
euro.
Overall, in 2021 the Group operating loss before exceptional items was reduced
by €98 million due to favourable exchange rate impacts.
Exchange impact before exceptional items
2021
€ million Translation impact Transaction impact Total exchange impact
Favourable/(adverse)
Total exchange impact on revenue 220 (163) 57
Total exchange impact on operating expenditures (251) 292 41
Total exchange impact on operating loss (31) 129 98
2020
€ million Translation impact Transaction impact Total exchange impact
Favourable/(adverse)
Total exchange impact on revenue 84 33 117
Total exchange impact on operating expenditures (31) (91) (122)
Total exchange impact on operating profit 53 (58) (5)
The exchange rates for the Group were as follows:
2021 2020 Higher/ (lower) vly
Translation - Balance sheet 1.18 1.10 7.3%
£ to €
Translation - Profit & Loss (weighted average) 1.15 1.13 1.8%
£ to €
Transaction (weighted average)
£ to € 1.15 1.13 1.8%
€ to $ 1.20 1.13 6.2%
£ to $ 1.38 1.27 8.7%
Total net non-operating costs
Total net non-operating costs for the year were €742 million, versus €376
million in 2020. The main driver of the increase was the net currency
retranslation charge of €82 million compared with a €245 million credit in
2020. Finance costs were up €160 million (23.9 per cent), related to
interest on new debt and arrangement costs, including the IAG unsecured and
convertible bonds issued in 2021. Non-operating costs also include a €89
million non-cash credit relating to movements in the fair value of the €825
million IAG convertible bond issued in the year.
The Group incurred an exceptional non-operating charge of €75 million in
December 2021, relating to a settlement agreement reached with Globalia to
terminate the agreements signed on November 4, 2019 and January 20, 2021 under
which Iberia had agreed to acquire the issued share capital of Air Europa.
Tax
The tax credit on the loss for the year was €574 million (2020: €892
million), and the effective tax rate was 16 per cent (2020: 11 per cent). The
substantial majority of the Group's activities are taxed where the main
operations are based, in the UK, Spain and Ireland, with corporation tax rates
during 2021 of 19 per cent, 25 per cent and 12.5 per cent respectively, which
result in an expected effective tax rate of 20 per cent. The difference
between the actual effective tax rate of 16 per cent and the expected
effective tax rate of 20 per cent is primarily due to certain current and
prior period losses in Iberia and Vueling not being recognised and the effect
of the rate change in the UK.
On March 3, 2021 the UK Chancellor announced that legislation would be
introduced in the Finance Bill 2021 to set the main rate of corporation tax at
25 per cent from April 2023. On May 24, 2021 the increase in the rate of
corporation tax in the UK was substantially enacted, which led to the
remeasurement of deferred tax balances during the year and will increase the
Group's future current tax charge accordingly.
On October 8, 2021 the Irish government announced that it would increase the
rate of corporation tax for certain multinational businesses to 15 per cent
with effect from 2023. This expected tax rate change has not been reflected in
these results because it has not yet been substantively enacted.
Operating profit and loss performance of operating companies
British Airways Aer Lingus Iberia Vueling
€ million
€ million
€ million
£ million
Post-exceptional items(1) 2021 Higher/ Higher/ 2021 Higher/ Higher/ 2021 Higher/ Higher/ 2021 Higher/ Higher/
(lower)
(lower)
(lower)
(lower)
(lower)
(lower)
(lower)
(lower)
Passenger revenue 2,321 (519) (18)% 307 (72) (19)% 1,724 564 49% 1,011 442 78%
Cargo revenue 1,097 207 23% 65 (23) (26)% 394 154 64% - - -
Other revenue 281 64 29% 4 4 nm 666 (193) (22)% 5 - -
Total revenue 3,699 (248) (6)% 376 (91) (20)% 2,784 525 23% 1,016 442 77%
Fuel, oil costs and emissions charges 830 (1,166) (58)% 89 (197) (69)% 519 (197) (27)% 198 (116) (37)%
Employee costs 1,471 (467) (24)% 180 (37) (17)% 723 (75) (9)% 200 4 2%
Supplier costs 2,188 (252) (10)% 305 (65) (18)% 1,412 (132) (9)% 624 30 5%
Ownership costs(2) 979 (496) (34)% 140 (17) (11)% 350 (262) (43)% 227 (118) (34)%
Operating loss (1,769) 2,133 (55)% (338) 225 (40)% (220) 1,191 (84)% (233) 642 (73)%
Operating margin (47.8)% 51.1 pts (90.0)% 30.4 pts (7.9)% 54.6 pts (23.0)% nm
Alternative Performance Measures(3)
Passenger revenue 2,316 (578) (20)% 308 (74) (19)% 1,724 564 49% 1,011 442 78%
Cargo revenue 1,097 207 23% 65 (23) (26)% 394 154 64% - - -
Other revenue 281 64 29% 4 4 nm 666 (193) (22)% 5 - -
Total revenue before exceptional items 3,694 (307) (8)% 377 (93) (20)% 2,784 525 23% 1,016 442 77%
Fuel, oil costs and emissions charges 939 (220) (19)% 99 (43) (30)% 528 156 42% 207 47 30%
Employee costs 1,482 (235) (14)% 180 (13) (7)% 728 (56) (7)% 200 4 2%
Supplier costs 2,188 (210) (9)% 305 (58) (16)% 1,412 (80) (5)% 631 67 12%
Ownership costs(2) 985 (91) (8)% 140 7 5% 350 (20) (5)% 240 (37) (13)%
Operating loss before exceptional items (1,900) 449 (19)% (347) 14 (4)% (234) 525 (69)% (262) 361 (58)%
Operating margin before exceptional items (51.4)% 7.3 pts (92.1)% (15.3) pts (8.4)% 25.2 pts (25.8)% 82.7 pts
(1 ) 2020 comparative figures have been restated for the
treatment of administration costs associated with the Group's defined benefit
pension schemes. See note 2 to the financial statements for further
information.
(2 ) Ownership costs reflects Depreciation, amortisation and
impairment.
(3 ) Further detail is provided in the Alternative performance
measures section.
Review by operating company
The results for all operating companies continued to be impacted by COVID-19
in 2021, with the divergence in the relative operating results of each of the
airlines reflecting the travel restrictions imposed in their markets. Aer
Lingus operated the lowest passenger capacity relative to 2019, with ASKs at
24.4 per cent of 2019, British Airways operated at 28.3 per cent, Vueling at
53.0 per cent and Iberia at 55.4 per cent.
Operating (loss)/profit before exceptional items
2021 2020 2019
British Airways (£ million)(1) (1,900) (2,349) 1,890
Aer Lingus (€ million) (347) (361) 276
Iberia (€ million) (234) (759) 497
Vueling (€ million) (262) (623) 240
(1 ) 2020 and 2019 comparative figures have been restated for the
treatment of administration costs associated with the Group's defined benefit
pension schemes. See note 2 to the financial statements for further
information.
Employee costs fell versus 2020, due to the use of wage support or similar
schemes in all the operating companies' home countries, in which the
substantial portion of employees are based. Support applied across the year in
Ireland and Spain, although reduced as the year progressed in Spain, with the
operation increasing. In the UK the furlough arrangements ended in September
of 2021. Restructuring programmes were implemented in 2020, including at
British Airways and Aer Lingus, with Iberia also making reductions in
management numbers and reductions outside of Spain. The full-year impact of
these 2020 restructuring programmes was seen in 2021, as most of the affected
employees had left by the end of 2020.
The operating companies all operate similar hedging programmes, under a Group
policy, which resulted in overhedging of jet fuel purchases and related
currency transactions in 2020. Excluding the impact of overhedging, fuel costs
fell in line with the capacity reductions, with an additional benefit from the
efficiency of new-generation aircraft versus the aircraft they replace,
together with a reduced effective price net of hedging.
Supplier costs continued to benefit from initiatives in all the operating
companies to reduce expenditure in light of the impact of the pandemic,
including the full-year impact of actions taken during 2020.
Ownership costs were impacted by the reduction in the Group's fleet of
aircraft in 2020, leading to the impairment of aircraft and related assets in
each operating company, with 2021 seeing a full-year benefit of the reduced
fleet in depreciation costs.
Operating margins are much less meaningful than in previous years, given the
significant impact of COVID-19, but are included for completeness; the margins
reflect the size of operation each operating company was able to fulfil in
2021.
Capital expenditure
In November 2019, at its Capital Markets Day, the Group announced its
anticipated capital expenditure for the period 2020-2022 was €14.2 billion.
In response to COVID-19, in 2020 the Group agreed to defer 68 aircraft
scheduled for delivery over the period 2020-2022 and to re-schedule certain
pre-delivery payments to aircraft manufacturers. The result of these changes
was a significant reduction in expected capital expenditure over the period
2020-2022, with capital expenditure over that period expected to be below €7
billion. In February 2021 the Group expected capital expenditure in 2021 to be
€1.7 billion.
During 2021, four Airbus A350 aircraft and three Boeing 787 aircraft were not
delivered as anticipated and are now expected in 2022. As a response to the
continued impact of COVID-19 and related travel restrictions, the Group
continued to take actions to preserve liquidity by reducing certain
project-related expenditure, whilst continuing to invest in key projects,
including cyber-related investments. As a result, capital expenditure for 2021
reduced to €0.7 billion.
The Group did not enter into any new agreements to acquire additional aircraft
in 2021, either from aircraft manufacturers or lessors.
In 2021 the Group took delivery of 11 aircraft, with six for British Airways,
one for Iberia and four for Aer Lingus. Of these deliveries, five were
aircraft acquired directly from manufacturers and six were leased from
aircraft lessors. The liquidity impact of the aircraft deliveries in the year
was cash-positive, as the value of financing raised exceeded the final
delivery payments made to the aircraft manufacturers, due to pre-delivery
payments for those aircraft made in previous years.
Aircraft deliveries 2021 2020
Airbus A320 family 8 15
Airbus A330 1 2
Airbus A350 - 7
Boeing 777-300 - 4
Boeing 787-10 - 2
Embraer E190 2 4
Total 11 34
Capital commitments
Capital expenditure authorised and contracted for at December 31, 2021
amounted to €10,911 million (2020: €10,545 million). Most of this
commitment is denominated in US dollars and includes commitments until 2027
for 110 aircraft including 56 aircraft from the Airbus A320 family, 10 Boeing
787s, 18 Boeing 777s and 26 Airbus A350s.
The Group has certain rights to cancel commitments in the event of significant
delays to aircraft deliveries caused by the aircraft manufacturers. No such
rights had been exercised as at December 31, 2021.
Aircraft future deliveries at December 31 2021 2020
Airbus A320 family 56 64
Airbus A330 - 1
Airbus A350 26 26
Boeing 777-9 18 18
Boeing 787-10 10 10
Embraer E190 - 2
Total 110 121
Working capital and other initiatives
In 2020, as a response to COVID-19, the Group negotiated deferrals to supplier
payments and lease payments, rolled over fuel derivatives, monetised EU
Emissions Trading Scheme credits and foreign currency derivatives. These
initiatives reduced cash outflow in 2020 by approximately €625 million, with
deferrals to future years accounting for approximately €375 million, with
the majority due in 2021. In quarter 3 of 2020 a multi-year renewal was signed
with American Express, including an upfront payment of approximately €830
million (£754 million), with a significant amount being for the pre-purchase
of Avios for future years. Despite the partial unwinding of these initiatives
in 2021, the working capital cash inflow for 2021 was €473 million higher
than in 2020 at €1,634 million, principally driven by a significant increase
in bookings for future travel in the second half of the year and an increase
in trade payables as the flying programme increased.
Deferred revenue on ticket sales, which includes loyalty points (Avios), rose
€1,422 million to €6,552 million at December 31, 2021; €6,161 million is
included in current liabilities and €391 million within non-current
liabilities, associated with the renewal of the IAG Loyalty contract with
American Express. The value of loyalty points (Avios) issued and yet to be
recognised in revenue was up €95 million versus 2020 at €2,820 million,
reflecting the net impact of a partial unwind of the American Express
pre-payment in 2020 and the balance of Avios issued versus redeemed in 2021.
Sales in advance of carriage, related to passenger ticket sales, were up
€1,327 million versus 2020 at €3,732 million. At constant currency, Sales
in advance of carriage were at the same level as December 2019. The cash
impact of cancelled flights continued to be partially mitigated by customers
accepting vouchers for future travel in lieu of a cash refund, with the
outstanding value of vouchers as at December 31, 2021 at approximately the
same level as December 2020 and representing one third of Sales in advance of
carriage.
Trade receivables rose by €178 million, related to the significantly
increased bookings for future travel versus those taken in the final months of
2020.
Trade and other payables rose by €902 million, related mainly to the
significantly increased flying schedule and related costs in the final quarter
of 2021, in which the Group operated 58.3 per cent of 2019 passenger capacity,
versus only 26.6 per cent operated in quarter 4 of 2020.
British Airways deferred monthly UK pension deficit contributions that would
otherwise have been due in quarter 4, 2020 to the value of €125 million,
together with contributions of €390 million relating to the first three
quarters of 2021, with the resultant amounts deferred due for payment in the
12 months ending March 2024. British Airways granted security over certain
property assets to the Trustee of NAPS in respect of these deferred payments.
British Airways has also agreed that it will not make dividend payments to IAG
before the end of 2023 and that from 2024 dividends will be matched by a
contribution to NAPS of 50 per cent of the dividend paid until the deferred
contributions have been paid. In October 2021, the funding level of NAPS for
the purposes of an overfunding protection mechanism, agreed in 2019, meant
that British Airways made no contributions from October to December 2021.
Should the funding level fall, contributions will resume at an accelerated
rate to recover the contributions not made during the period the overfunding
trigger applied. The triennial valuation of the scheme, based on conditions as
at March 31, 2021, is expected to be completed in 2022 and will measure the
latest funding position of the scheme, which may lead to a new schedule of
deficit contributions.
Funding and debt
IAG's long-term 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 sustainable returns to
shareholders. In November 2018, S&P and Moody's assigned IAG with a
long-term investment-grade credit rating with a stable outlook; these ratings
remained unchanged up until the outbreak of COVID-19. The Group's current
ratings (as at February 24, 2022) are: S&P: BB (3-notch decline), Moody's:
Ba2 (2-notch decline), based on the impact of COVID-19 on the Group and the
airline industry, together with the expected timing of the recovery of global
air traffic.
Debt and capital
The Group monitors leverage using net debt to EBITDA, in addition to closely
following measures used by the credit ratings agencies, including those based
on gross debt.
The Group had previously set a target of net debt to EBITDA below 1.8 times.
In 2021, due to the significant impact of COVID-19, EBITDA was negative,
rendering the net debt to EBITDA ratio not meaningful; the calculation for
2021 results in net debt to EBITDA of minus 11.5 times.
Net debt
€ million 2021 2020 Higher / (lower)
Debt 15,679 14,254 1,425
Cash and cash equivalents and interest-bearing deposits (5,917) (6,683) (766)
Net debt at January 1 9,762 7,571 2,191
(Increase)/decrease in cash net of exchange (2,026) 766 (2,792)
Net cash outflow from repayments of borrowings and lease liabilities (2,265) (2,514) 249
Net cash inflow from new borrowings 4,817 3,567 1,250
Non-cash impact from new leases 518 1,179 (661)
Increase in net debt from financing 3,070 2,232 838
Exchange and other non-cash movements 861 (807) 1,668
Net debt at December 31 11,667 9,762 1,905
Gross debt increased by €3,931 million, principally driven by non-aircraft
debt raised by: British Airways (£2.0 billion), Aer Lingus (€75 million)
and by IAG €1.2 billion of unsecured bonds and an €825 million IAG
convertible bond. British Airways repaid £300 million of debt raised under
the UK's CCFF mechanism in 2020. 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 2021 the euro weakened against
the US dollar and the pound sterling and as a consequence €820 million of
the increase gross debt was due to adverse foreign exchange translation. Cash
increased by €2,026 million, leading to net debt €1,905 million higher at
€11,667 million.
Cash
Cash and interest-bearing deposits
The cash balances at December 31, 2021 in IAG and other Group companies
include the impact of additional non-aircraft related debt raised in the year
and the translation of British Airways' and IAG Loyalty's cash balances, which
are mainly held in pound sterling. The pound sterling ended the year 6.9 per
cent stronger against the euro than at the start of 2021.
€ million 2021 2020 Higher / (lower)
British Airways 1,986 1,389 597
Iberia 761 822 (61)
Vueling 441 590 (149)
Aer Lingus 228 266 (38)
IAG and other Group companies 4,527 2,850 1,677
Cash and deposits 7,943 5,917 2,026
Debt
The Group has been able to continue to obtain efficient funding secured
against aircraft deliveries. Of the 11 aircraft delivered in 2021, four for
British Airways were financed using asset financing lease arrangements,
including three financed through a new sustainability-linked Enhanced
Equipment Trust Certificate (EETC) financing agreed in July 2021. As at
December 31, 2021 the remaining undrawn balance of this facility was $635
million. One Iberia aircraft delivered in 2021 and two delivered in late 2020
were financed through sale and leaseback transactions. An additional six
aircraft were introduced through leasing arrangements direct from lessors. The
Group also raised additional financing against aircraft delivered in previous
years and spare engines
In 2021, the Group drew non-aircraft debt facilities agreed in 2020, namely a
£2.0 billion Export Development Guarantee (EDG) term loan for British Airways
from UK Export Finance and €75 million for Aer Lingus from the Ireland
Strategic Investment Fund. IAG closed a dual-tranche senior unsecured bond
issuance in March, raising €1.2 billion, with €500 million maturing in
2025 and €700 million maturing in 2029. In May, IAG raised €825 million by
issuing a convertible bond, maturing in 2028.
The debt actions above resulted in total 'Proceeds from borrowings' for the
year of €4,817 million. Repayments of borrowings during the year included
the repayment of British Airways' commercial paper issuance from the UK's
Coronavirus Corporate Finance Facility (CCFF), which raised £300 million
(€329 million) in March 2020.
Equity
No equity was raised during the year. In quarter 4, 2020, the Group
successfully completed a capital increase, with gross proceeds of €2.7
billion.
Liquidity facilities
During the year, the Group signed a committed secured Revolving Credit
Facility (RCF) with a syndicate of banks for $1.755 billion, available for
three years, plus two consecutive one-year extension periods, at the
discretion of the lenders. The facility is available to Aer Lingus, British
Airways and Iberia, each of whom has a separate borrower limit within the
overall facility. Any drawings under the facility would be secured against
eligible unencumbered aircraft assets and take-off and landing rights at both
London Heathrow and London Gatwick airports. No drawings against this facility
were made in 2021 and the facility remained undrawn at February 24, 2022.
Simultaneous with entering into this new RCF, British Airways cancelled its US
dollar revolving credit facility that was due to expire in June 2021 and which
had $786 million undrawn and available at December 31, 2020.
On November 1, 2021, the Group agreed and executed a £1.0 billion committed
credit facility for British Airways, partially guaranteed by UK Export
Finance, which was not drawn in 2021 and remained undrawn at February 24,
2022.
The Group also has certain other committed and undrawn general facilities,
bringing total committed and undrawn general facilities at December 31, 2021
to €2,917 million.
The Group also holds €1,126 million of committed and undrawn aircraft
financing facilities, including the $635 million remaining undrawn from
British Airways' 2021 sustainability-linked EETC financing and backstop
financing arrangements, which can be used against certain future aircraft
deliveries.
In total, the Group had €4,043 million of committed and undrawn general and
aircraft facilities as at December 31, 2021.
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 in 2021; in 2020 a proposal to pay a final dividend
in respect of 2019, announced with the 2019 financial results in February of
2020, was withdrawn in April 2020.
Liquidity and cashflow
Total liquidity, measured as cash and interest-bearing deposits of €7,943
million and committed and undrawn general and aircraft facilities of €4,043
million, was €11,986 million at December 31, 2021. This represented an
increase of €1,730 million versus pro forma liquidity of €10,256 million
at the end of 2020, which included a £2.0 billion UK EF facility agreed in
December 2020 and drawn as debt in March 2021.
Cash flow
€ million 2021 2020(1,2) Movement
Operating loss (2,765) (7,451) 4,686
Depreciation, amortisation and impairment 1,932 2,955 (1,023)
Movement in working capital 1,634 1,161 473
Payment related to restructuring (161) (383) 222
Pension contributions net of service costs (15) (288) 273
Provisions and other non-cash movements 305 486 (181)
(Realised)/unrealised net loss on discontinuance of fuel and foreign exchange (497) 569 (1,066)
hedge accounting
Interest paid (640) (548) (92)
Interest received 3 22 (19)
Tax received 63 45 18
Net cash outflows from operating activities (141) (3,432) 3,291
Acquisition of PPE and intangible assets (744) (1,939) 1,195
Sale of PPE, intangible assets and investments 544 1,133 (589)
Decrease in current interest-bearing deposits 91 2,366 (2,275)
Other investing movements (72) 2 (74)
Net cash flows from investing activities (181) 1,562 (1,743)
Proceeds from borrowings 4,817 3,567 1,250
Repayments of borrowings (784) (978) 194
Repayment of lease liabilities (1,481) (1,536) 55
Dividend paid - (53) 53
Proceeds from rights issue - 2,674 (2,674)
Settlement of derivative financial instruments (268) 136 (404)
Acquisition of Treasury shares and other financing movements (49) - (49)
Net cash flows from financing activities 2,235 3,810 (1,575)
Net increase in cash and cash equivalents 1,913 1,940 (27)
Net foreign exchange differences 205 (228) 433
Cash and cash equivalents at January 1 5,774 4,062 1,712
Cash and cash equivalents at year end 7,892 5,774 2,118
Interest-bearing deposits maturing after more than three months 51 143 (92)
Cash, cash equivalents and interest-bearing deposits 7,943 5,917 2,026
(1 ) 2020 comparative figures have been restated for the
treatment of administration costs associated with the Group's defined benefit
pension schemes. See note 2 to the financial statements for further
information.
(2 ) The 2020 results include a reclassification to conform with
the current period of presentation regarding settlement of derivative
financial instruments. See note 2 to the financial statements for further
information.
Many of the significant cashflow items are already explained above, including
in the sections on operating costs, non-operating costs, capital expenditure,
working capital and other initiatives and funding.
Restructuring payments principally include payments in Spain relating to
redundancy programmes agreed prior to 2020.
Pension payments in 2020 included nine months of contributions to the main
British Airways pension fund, NAPS. Deferrals of deficit contributions were
agreed with the NAPS Trustee from October 2020 to September 2021 and from
October 2021 to December 2021 no deficit contributions were required, as the
scheme had reached pre-agreed trigger levels for an overfunding protection
mechanism to apply; this mechanism was agreed in 2019. Deficit contributions
could resume should the funding level fall, or if the ongoing triennial
valuation of the scheme, based on the funding position at March 31, 2021 and
updated assumptions, determines there is a deficit.
Of the exceptional charges for discontinuance of hedge accounting in respect
of passenger revenue of €62 million and fuel, oil and emissions costs of
€1,694 million in 2020, €1,187 million had been paid, leaving €569
million to be paid in future years, with the majority due in 2021. As the fuel
price rose in 2021 the required payments were lower than when measured at the
end of 2020.
Sale of property, plant and equipment and intangibles, in addition to the
aircraft sale and leaseback transactions discussed under 'Funding' above,
includes the disposal of aircraft financed on sale and leaseback transactions,
spare engines and other disposals.
Other investing movements includes the €75 million payment to Globalia, due
to the settlement agreement to terminate the agreements under which Iberia had
agreed to acquire the issued share capital of Air Europa.
Repayments of borrowings and lease liabilities includes the principal element
of ongoing lease payments. Based on the share price at December 31, 2021, the
remaining €500 million IAG convertible bond issued in 2015 will be due for
repayment in November 2022.
The €53 million of cash outflow for dividends in 2020 relates to the Spanish
withholding tax in respect of the 2019 interim dividend. No dividends were
declared in respect of either 2020 or 2021.
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 2021 is partly due to gains
that would otherwise have been received in 2021 being accelerated into 2020,
as part of the initiatives to preserve liquidity after the spread of COVID-19
in 2020.
STRATEGIC FRAMEWORK
IAG's vision is to be the leading international airline group.
Our role in the world is to connect people, businesses and countries. We do
this and 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.
We retain the distinct cultures and brands of our individual airlines. We hold
ambition, teamwork, innovation, pragmatism, efficiency and responsibility as
key values that enable us to fulfil our purpose.
IAG's strategic priorities are:
• Strengthening a portfolio of world-class brands and operations;
• Growing global leadership positions; and
• Enhancing the common integrated platform.
These strategic priorities are achieved through:
• An unrivalled customer proposition;
• Value-accretive and sustainable growth; and
• Efficiency and innovation
The Group's strategy is underpinned by its target to be the leading airline
group on sustainability and its commitment to reaching its goal of net zero
CO2 emissions for the Group and its supply chain by 2050, as well as to
continue to prioritise other key sustainability issues, including waste
management, stakeholder engagement and welfare.
PRINCIPAL RISKS AND UNCERTAINTIES
The Group has continued to maintain its framework and processes to identify,
assess and manage risks. The Board continues to meet frequently and review
updates, including risk related, from management.
In 2021, the risk management framework has remained responsive to the needs of
the business and stakeholders by: continuing to develop the Group's assessment
of the interdependencies of risks; further building on scenario planning to
quantify risk impact under different assumptions; and considering the risks
within the Group's risk landscape that have increased either as a result of
the external factors or as a result of decisions made by the business in
response to the pace of the transformation agenda. Potential emerging risks
and longer-term threats have been evaluated to identify new trends and risks
that have increased in speed of potential impact. This includes starting to
quantify the implications of environmental risks and considerations for the
business plan. Where further action has been required, the Board has assessed
potential mitigations and, where appropriate or feasible, the Group has
implemented or confirmed plans that would address any significant risks.
The principal risks and uncertainties affecting the Group, detailed on pages
78 to 88 of the 2020 Annual Report and Accounts, remain relevant, at the date
of this report. The ongoing impacts of the COVID-19 pandemic (considered as an
"Event causing significant network disruption" risk) continue to negatively
impact the external risk environment for the Group and change the risk profile
of a number of the Group's other principal risks. The Group continues to
carefully review its principal risks, implement necessary mitigations to adapt
to the risk landscape and assess how the severity or likelihood of occurrence
of certain risks has changed. During 2021, this has been particularly relevant
in respect of, competitive and market risk, talent and skills retention risk,
acceleration of the digital landscape and customer trends and sentiment to
travel. One new principal risk of 'Transformation and change' has been
identified as part of this exercise. It reflects the significance of the
Group's transformation agenda (in terms of scale and importance) and pace
required to deliver the plan.
From the risks identified in the 2020 Annual Report and Accounts, the main
risks that have been impacted by the COVID-19 pandemic and ongoing recovery
are highlighted below. Business responses implemented by management and that
effectively mitigate or reduce the risk are reflected in the Group's latest
business plan and scenarios.
• Competitive landscape. The scale of governmental support and aviation
specific state-aid measures during 2020 and 2021 and the potential impact to
the competitive landscape is under continuous assessment.
• Critical third parties in the supply chain. Restrictions at hubs and
airports have required capacity adjustments, including fleet adjustments and
new operating procedures as markets and regions re-open. Key suppliers exiting
the market due to financial stress or other issues and significant cost
inflation may impact the Group's operations. Operational bottlenecks such as
immigration resource at airports and the potential for Air Traffic Control
(ATC) disruption in the summer remain outside of the Group's control, although
management continues to liaise with the relevant providers to identify
potential solutions.
• Cyber attack and data security. The Group has maintained its planned
investment in cyber security controls. The heightened threat of ransomware
attacks on critical infrastructure and services persists and the Group
continues to focus its efforts on further mitigating cyber risks through a
Group-wide cyber programme.
• Economic, political and regulatory environment. National governments'
imposition of varying and complex testing and vaccine status requirements, in
addition to travel restrictions in certain markets, continues to impact Group
operations and dampen demand, as customers choose not to fly given the
uncertainty and increased cost. Government responses and restrictions are
being actively monitored and near-term capacity plans are refreshed
dynamically, according to the latest status. The global economic impact of the
COVID-19 pandemic, especially with the focus on potential future variants
driving further uncertainty, is expected to be significant and the Group
retains its flexibility to adapt as required.
• Financial risk and debt funding. Financial markets have been volatile
since the beginning of the COVID-19 pandemic, although the Group has been able
to secure new funding and facilities as needed. The Group has an established
process to monitor financial and counterparty risk on an ongoing basis. The
Group implemented a revised fuel hedging policy in 2021, providing greater
flexibility over fuel hedging.
• 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 nature and pace of transformational change required by the
Group's airlines may result in disruption to operations as the legacy
environment is addressed. The Group is currently engaged in a number of
initiatives to modernise its IT systems, whilst also delivering an ongoing
efficiency programme and upgrading its digital capability, and customer
propositions.
• People, culture and employee relations. The Group is focussed on staff
wellbeing morale and motivation, particularly as our people return to their
offices and the Group businesses adapt and implement hybrid working models.
Welfare support schemes are in place to support the Group's staff and
initiatives to build trust and engagement continue across the Group's
businesses. The Group has identified the skills and capabilities that are
required to manage its transformation, which include enhancing its leadership
capability and delivering on the Group's diversity and inclusion plans. The
Group's airlines will need to respond to the demand environment and ensure
that wider recruitment challenges across sectors of the economy do not result
in manpower shortages impacting operational capabilities. The Group recognises
the critical role that our employees will play in the recovery and delivery of
transformation plans.
• Sustainable aviation. Increasing global concern about climate change and
the impact of carbon in aviation is a key area of focus for the Group. New
taxes and an increasing price of carbon offsets could impact demand for air
travel. The airline industry is also subject to increased regulatory
requirements, driving increases in costs and operational complexity.
Environmental considerations are integrated into the business strategy and the
Group uses its influence to drive progress across the industry.
• Transformation and change. The Group recognises the need to transform to
effectively compete in the post pandemic environment. The impact on our people
of the wide-ranging change agenda if poorly managed or uncoordinated could
lead to logistical and engagement challenges with the potential to negatively
impact the delivery of change. The Chief Transformation Officer has clear
oversight of all programmes to assess performance against plan. The Group
transformation agenda is subject to Board approval and progress is regularly
monitored by the Board.
The Board and its sub-committees have been appraised of regulatory, competitor
and governmental responses on an ongoing basis.
INTERNATIONAL CONSOLIDATED AIRLINES GROUP S.A.
Full year Unaudited Consolidated Financial Statements
January 1, 2021 - December 31, 2021
CONSOLIDATED INCOME STATEMENT
Year to December 31
€ million Note 2021 2020(1)
Passenger revenue 5,835 5,512
Cargo revenue 1,673 1,306
Other revenue 947 988
Total revenue 5 8,455 7,806
Employee costs 8 3,013 3,585
Fuel, oil costs and emissions charges 1,781 3,735
Handling, catering and other operating costs 1,308 1,340
Landing fees and en-route charges 923 918
Engineering and other aircraft costs 1,085 1,456
Property, IT and other costs 758 782
Selling costs 434 405
Depreciation, amortisation and impairment 6 1,932 2,955
Currency differences (14) 81
Total expenditure on operations 11,220 15,257
Operating loss (2,765) (7,451)
Finance costs 9 (830) (670)
Finance income 9 13 41
Net change in fair value of convertible bond 89 -
Net financing (charge)/credit relating to pensions 9 (2) 12
Net currency retranslation (charges)/credits (82) 245
Other non-operating credits/(charges) 9 70 (4)
Total net non-operating costs (742) (376)
Loss before tax (3,507) (7,827)
Tax 10 574 892
Loss after tax for the year (2,933) (6,935)
Attributable to:
Equity holders of the parent (2,933) (6,935)
Non-controlling interest - -
(2,933) (6,935)
Basic loss per share (€ cents) 11 (59.1) (196.6)
Diluted loss per share (€ cents) 11 (59.1) (196.6)
(1 ) The 2020 results have been restated for the treatment of
administration costs associated with the Group's defined benefit pension
schemes. Further information is given in note 2.
CONSOLIDATED STATEMENT OF OTHER COMPREHENSIVE INCOME
Year to December 31
€ million Note 2021 2020(1)
Items that may be reclassified subsequently to net profit
Cash flow hedges:
Fair value movements in equity 794 (2,171)
Reclassified and reported in net profit (81) 1,871
Fair value movements on cost of hedging 10 (16)
Cost of hedging reclassified and reported in net profit (12) (19)
Currency translation differences 31 (12) (213)
Items that will not be reclassified to net profit
Fair value movements on other equity investments - (53)
Fair value movements on cash flow hedges 54 (45)
Fair value movements on cost of hedging - 26
Fair value movements on liabilities attributable to credit risk changes (15) -
Remeasurements of post-employment benefit obligations 1,400 (587)
Remeasurements of long-term employee-related provisions 25 (9)
Total other comprehensive loss for the year, net of tax 2,163 (1,216)
Loss after tax for the year (2,933) (6,935)
Total comprehensive loss for the year (770) (8,151)
Total comprehensive loss is attributable to:
Equity holders of the parent (770) (8,151)
Non-controlling interest 31 - -
(770) (8,151)
(1 ) The 2020 results have been restated for the treatment of
administration costs associated with the Group's defined benefit pension
schemes. 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 December 31, December 31, December 31,
2021 2020(1) 2019(1)
Non-current assets
Property, plant and equipment 13 17,161 17,531 19,168
Intangible assets 17 3,239 3,208 3,442
Investments accounted for using the equity method 18 40 29 31
Other equity investments 19 31 29 82
Employee benefit assets 32 1,775 334 531
Derivative financial instruments 28 77 42 268
Deferred tax assets 10 1,282 1,075 546
Other non-current assets 20 250 228 273
23,855 22,476 24,341
Current assets
Non-current assets held for sale 16 20 - -
Inventories 334 351 565
Trade receivables 20 735 557 2,255
Other current assets 20 960 792 1,314
Current tax receivable 10 16 101 186
Derivative financial instruments 28 543 122 324
Current interest-bearing deposits 21 51 143 2,621
Cash and cash equivalents 21 7,892 5,774 4,062
10,551 7,840 11,327
Total assets 34,406 30,316 35,668
Shareholders' equity
Issued share capital 29 497 497 996
Share premium 29 7,770 7,770 5,327
Treasury shares (24) (40) (60)
Other reserves (7,403) (6,623) 851
Total shareholders' equity 840 1,604 7,114
Non-controlling interest 31 6 6 6
Total equity 846 1,610 7,120
Non-current liabilities
Borrowings 25 17,084 13,464 12,411
Employee benefit obligations 32 285 477 326
Deferred tax liability 10 - 40 290
Provisions 26 2,267 2,286 2,416
Deferred revenue on ticket sales 23 391 473 -
Derivative financial instruments 28 47 310 286
Other long-term liabilities 24 208 140 71
20,282 17,190 15,800
Current liabilities
Borrowings 25 2,526 2,215 1,843
Trade and other payables 22 3,712 2,810 4,344
Deferred revenue on ticket sales 23 6,161 4,657 5,486
Derivative financial instruments 28 126 1,160 252
Current tax payable 10 21 48 192
Provisions 26 732 626 631
13,278 11,516 12,748
Total liabilities 33,560 28,706 28,548
Total equity and liabilities 34,406 30,316 35,668
(1 ) The 2020 and 2019 results have been restated for the
treatment of administration costs associated with the Group's defined benefit
pension schemes. Further information is given in note 2.
CONSOLIDATED CASH FLOW STATEMENT
Year to December 31
€ million Note 2021 2020(1, 2)
Cash flows from operating activities
Operating loss (2,765) (7,451)
Depreciation, amortisation and impairment 6 1,932 2,955
Movement in working capital 1,634 1,161
(Increase)/decrease in trade receivables, inventories and other current assets (351) 2,281
Increase/(decrease) in trade and other payables and deferred revenue on ticket 1,985 (1,120)
sales
Payments related to restructuring 26 (161) (383)
Employer contributions to pension schemes (41) (318)
Pension scheme service costs 32 26 30
Provision and other non-cash movements 305 486
Settlement of derivatives where hedge accounting has been discontinued (497) 569
Interest paid (640) (548)
Interest received 3 22
Tax received 63 45
Net cash flows from operating activities (141) (3,432)
Cash flows from investing activities
Acquisition of property, plant and equipment and intangible assets (744) (1,939)
Sale of property, plant and equipment and intangible assets and investments 544 1,133
Decrease in other current interest-bearing deposits 91 2,366
Other investing movements(3) (72) 2
Net cash flows from investing activities (181) 1,562
Cash flows from financing activities
Proceeds from borrowings 4,817 3,567
Repayment of borrowings (784) (978)
Repayment of lease liabilities (1,481) (1,536)
Dividend paid 12 - (53)
Acquisition of treasury shares (24) -
Settlement of derivative financial instruments (268) 136
Proceeds from rights issue - 2,674
Other financing movements (25) -
Net cash flows from financing activities 2,235 3,810
Net increase in cash and cash equivalents 1,913 1,940
Net foreign exchange differences 205 (228)
Cash and cash equivalents at 1 January 5,774 4,062
Cash and cash equivalents at year end 21 7,892 5,774
Interest-bearing deposits maturing after more than three months 21 51 143
Cash, cash equivalents and interest-bearing deposits 21 7,943 5,917
(1 )The 2020 results have been restated for the treatment of
administration costs associated with the Group's defined benefit pension
schemes. Further information is given in note 2.
(2 )The 2020 results include a reclassification to conform with
the current year presentation regarding settlement of derivative financial
instruments. Further information is given in note 2.
(3 )Other investing movements include the Air Europa settlement
payment. Refer to note 3i for further information.
For details on restricted cash balances refer to note 21 Cash, cash
equivalents and current interest-bearing deposits.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the year to December 31, 2021
€ million Issued share Share premium (note 29) Treasury shares Other reserves (note 31) Retained earnings Total shareholders' equity Non-controlling interest Total equity
capital (note 29) (note 31)
(note 29)
January 1, 2021 (restated)(1) 497 7,770 (40) (2,420) (4,203) 1,604 6 1,610
Loss for the year - - - - (2,933) (2,933) - (2,933)
Other comprehensive loss for the year
Cash flow hedges reclassified and reported in net profit:
Passenger revenue - - - 18 - 18 - 18
Fuel and oil costs - - - (45) - (45) - (45)
Currency differences - - - (15) - (15) - (15)
Finance costs - - - 23 - 23 - 23
Discontinuance of hedge accounting - - - (62) - (62) - (62)
Net change in fair value of cash flow hedges - - - 848 - 848 - 848
Net change in fair value of cost of hedging - - - 10 - 10 - 10
Cost of hedging reclassified and reported in net profit - - - (12) - (12) - (12)
Fair value movements on liabilities attributable to credit risk changes - - - (15) - (15) - (15)
Currency translation differences - - - (12) - (12) - (12)
Remeasurements of post-employment benefit obligations - - - - 1,400 1,400 - 1,400
Remeasurements of long-term employee-related provisions - - - - 25 25 - 25
Total comprehensive loss for the year - - - 738 (1,508) (770) - (770)
Hedges reclassified and reported in property, plant and equipment - - - 9 - 9 - 9
Cost of share-based payments - - - - 23 23 - 23
Vesting of share-based payment schemes - - 40 - (42) (2) - (2)
Acquisition of treasury shares - - (24) - - (24) - (24)
December 31, 2021 497 7,770 (24) (1,673) (5,730) 840 6 846
(1 ) The 2020 results have been restated for the treatment of
administration costs associated with the Group's defined benefit pension
schemes. Further information is given in note 2.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the year to December 31, 2020
€ million Issued share Share premium (note 29) Treasury shares Other reserves (note 31) Retained earnings Total shareholders' equity Non-controlling interest Total equity
capital (note 29) (note 31)
(note 29)
January 1, 2020 (reported)(1) 996 5,327 (60) (2,579) 3,139 6,823 6 6,829
Change in accounting policy(1) - - - - 291 291 - 291
January 1, 2020 (restated) 996 5,327 (60) (2,579) 3,430 7,114 6 7,120
Loss for the year - - - - (6,935) (6,935) - (6,935)
Other comprehensive income for the year
Cash flow hedges reclassified and reported in net profit:
Passenger revenue - - - 50 - 50 - 50
Fuel and oil costs - - - 356 - 356 - 356
Currency differences - - - 18 - 18 - 18
Finance costs - - - 12 - 12 - 12
Discontinuance of hedge accounting - - - 1,435 - 1,435 - 1,435
Net change in fair value of cash flow hedges - - - (2,216) - (2,216) - (2,216)
Net change in fair value of equity investments - - - (53) - (53) - (53)
Net change in fair value of cost of hedging - - - 10 - 10 - 10
Cost of hedging reclassified and reported in net profit - - - (19) - (19) - (19)
Currency translation differences(1) - - - (213) - (213) - (213)
Remeasurements of post-employment benefit obligations(1) - - - - (587) (587) - (587)
Remeasurements of long-term employee-related provisions - - - - (9) (9) - (9)
Total comprehensive income for the year - - - (620) (7,531) (8,151) - (8,151)
Capex hedging reclassified and reported in property, plant and equipment - - - (18) - (18) - (18)
Cost of share-based payments - - - - (10) (10) - (10)
Vesting of share-based payment schemes - - 20 - (22) (2) - (2)
Share capital reduction (797) - - 797 - - - -
Rights issue 298 2,443 - - (70) 2,671 - 2,671
December 31, 2020 restated(1) 497 7,770 (40) (2,420) (4,203) 1,604 6 1,610
(1 ) The 2020 results have been restated for the treatment of
administration costs associated with the Group's defined benefit pension
schemes. Further information is given in note 2.
NOTES TO THE ACCOUNTS
For the year to December 31, 2021
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 is a
Spanish company registered in Madrid and was incorporated on December 17,
2009. On January 21, 2011 British Airways Plc and Iberia Líneas Aéreas de
España S.A. Operadora (hereinafter 'British Airways' and 'Iberia'
respectively) completed a merger transaction becoming the first two airlines
of the Group. Vueling Airlines S.A. ('Vueling') was acquired on April 26,
2013, and Aer Lingus Group Plc ('Aer Lingus') on August 18, 2015. A list of
the subsidiaries of the Group is included in the Group investments section.
IAG shares are traded on the London Stock Exchange's main market for listed
securities and also on the stock exchanges of Madrid, Barcelona, Bilbao and
Valencia (the 'Spanish Stock Exchanges'), through the Spanish Stock Exchanges
Interconnection System (Mercado Continuo Español).
2 Significant accounting policies
Basis of preparation
The consolidated financial statements of the Group have been prepared in
accordance with the International Financial Reporting Standards as endorsed by
the European Union (IFRSs as endorsed by the EU). The consolidated financial
statements herein are not the Group's statutory accounts and are unaudited.
The consolidated financial statements are rounded to the nearest million
unless otherwise stated. These financial statements have been prepared on a
historical cost convention except for certain financial assets and
liabilities, including derivative financial instruments and other equity
investments that are measured at fair value. The carrying value of recognised
assets and liabilities that are subject to fair value hedges are adjusted to
record changes in the fair values attributable to the risks that are being
hedged. The financial statements for the prior year include reclassifications
that were made to conform to the current year presentation.
The Group's financial statements for the year to December 31, 2021 were
authorised for issue, and approved by the Board of Directors on February 24,
2022.
Presentation of results
The prior period Cash flow statement includes a reclassification to conform
with the current period of presentation regarding the settlement of foreign
currency derivative financial instruments not designated in a hedge
relationship, but entered into to mitigate foreign exchange movements on
long-term financial liabilities in currencies other than the functional
currencies of the operating companies holding the liabilities. Accordingly,
the Group has reclassified the results for the year ended December 31, 2020 to
recognise €136 million of derivative settlement cash inflows as Settlement
of derivative financial instruments within cash flows from financing
activities with a corresponding increase in cash outflows within cash flows
from operating activities.
Change in accounting policy
During 2021, the Group has changed its accounting policy with regard to the
treatment of administration costs associated with British Airways' Airways
Pension Scheme (APS) and the New Airways Pension Scheme (NAPS) defined benefit
schemes, while remaining in compliance with IAS 19. The change in policy has
been adopted to better reflect the underlying management and operation of
these schemes. This change in accounting policy has been applied
retrospectively to the consolidated financial statements.
Previously a discounted estimate of future administration costs was included
as part of the APS and NAPS defined benefit obligations. These administration
costs were recognised as a service cost in the year in which such costs arose
and recorded within Other comprehensive income. Under the updated accounting
policy, administration costs are now recognised as incurred and included
within Employee costs in the Income statement. This change has had the effect
of reducing the defined benefit obligation and increasing retained earnings at
both December 31, 2020 and January 1, 2020. It has in addition increased the
charge to Employee costs and the Financing credit relating to pensions in the
Income statement, as well as increased the Remeasurements of post-employment
benefit obligations and Currency translation differences in the Statement of
other comprehensive income for the year ended December 31, 2020.
Further details of the accounting policy change are given in note 36.
Going concern
The economic uncertainty of the COVID-19 pandemic and the fragmented and
varied responses from governments have had a significant impact on the Group's
results and cash flows. At December 31, 2021, the Group had total liquidity of
€11,986 million (December 31, 2020: total liquidity of €8,054 million),
comprising cash and interest-bearing deposits of €7,943 million, €2,917
million of committed and undrawn general facilities and a further €1,126
million of committed and undrawn aircraft specific facilities.
The increase in liquidity during the year to December 31, 2021 was
attributable to, amongst other actions, accessing €2.3 billion (£2.0
billion) of the UK Export Finance (UKEF) Credit Facility, the issuance of
fixed rate bonds of €1.2 billion, the issuance of a convertible bond of
€0.8 billion, securing a multi-entity three-year Revolving Credit Facility
(RCF) of €1.5 billion ($1.8 billion), securing a €0.7 billion aircraft
specific facility achieved as part of an Enhanced Equipment Trust Certificate
(EETC) financing structure and securing an additional UKEF Credit Facility of
€1.2 billion (£1.0 billion). These actions raised an additional €7.6
billion of liquidity. Of facilities in place at December 31, 2021, €0.7
billion matures by the end of the going concern period. A loan from the
Ireland Strategic Investment Fund (ISIF) of €150 million has limited
financial covenants, but otherwise the Group's facilities do not have
financial covenants. There are a number of non-financial covenants to protect
the position of the lenders, including restrictions on the upstreaming of cash
to the Company or lending to other Group companies.
Despite the uncertainty of the COVID-19 pandemic, the Group has continued to
successfully secure financing arrangements for all aircraft delivered in 2021.
In its assessment of going concern over the period to June 30, 2023 (the
'going concern period'), the Group has modelled three scenarios referred to
below as the Base Case, the Downside Case and the Downside Lockdown Case. The
Group's three-year business plan, prepared and approved by the Board in
December 2021, was subsequently refreshed with the latest available internal
and external information in February 2022. This refreshed business plan
supports the Base Case, which takes into account the Board's and management's
views on the anticipated impact of and recovery from the COVID-19 pandemic on
the Group's businesses across the going concern period. The key inputs and
assumptions underlying the Base Case include:
• As part of the recovery, the Group has assumed a gradual easing of
travel restrictions, by geographical region, based on deployment of vaccines
during the year. Travel restrictions, including testing and quarantine
requirements, between countries are assumed to continue to be scaled back and
removed;
• Capacity recovery modelled by geographical region (and in certain
regions, by key destinations) with capacity gradually increasing from a
reduction of 34 per cent in quarter 1 2022 (compared to the equivalent period
in 2019) to pre-pandemic levels by the end of the going concern period with
the average over the going concern period being 11 per cent down versus 2019;
• Passenger unit revenue per ASK, although forecast to continue to
recover, is assumed to still remain below levels of 2019 by the end of the
going concern period, which is based on, amongst other assumptions, a greater
weighting of shorthaul versus longhaul, leisure versus business and economy
versus premium compared to 2019. Specifically, the Group's assumption is that
traffic related to domestic and leisure will recover faster than longhaul and
business;
• The Group has assumed that the committed and undrawn general facilities
of €2.9 billion will not be drawn over the going concern period. The
availability of certain of these facilities reduces over time, with €2.7
billion being available to the Group at the end of the going concern period;
• The Group has assumed that of the committed and undrawn aircraft
specific facilities of €1.1 billion, €0.9 billion would be available to be
drawn over the going concern period if required, but is not expected to be
drawn;
• Of the capital commitments detailed in note 15, €4.3 billion is due to
be paid over the going concern period of which the Group has committed
aircraft financing of €0.6 billion, under the EETC financing structure, and
the Group has further forecast securing 80 per cent, or €2.7 billion, of the
aircraft financing required that is currently uncommitted, to align with the
timing and payments for these aircraft deliveries. This loan to value
assumption is below the level of financing the Group has been able to achieve
recently, including over the course of the COVID-19 pandemic to date;
• The Group has assumed that the €0.5 billion convertible bond that
matures in November 2022 will be refinanced.
The Downside Case applies stress to the Base Case to model a more prolonged
downturn, with a more gradual recovery relative to the Base Case. The Downside
Case is representative of existing travel restrictions remaining in place and
the gradual recovery of capacity being delayed longer than in the Base Case.
The Downside Case also models a more acute impact on the longhaul sector, with
the domestic sector and European shorthaul sectors recovering faster than
longhaul. The result of which is that the levels of capacity assumed under the
Base Case are delayed by a quarter under the Downside Case and would reach
those of the Base Case at the end of the Going Concern period. In the Downside
Case, over the going concern period capacity would be 17 per cent down on
2019. The Downside Case assumes that there would be no drawing on either of
the RCF and the UKEF credit facility. The Directors consider the Downside Case
to be a severe but plausible scenario.
In addition, the Group has sensitised the Downside Case to incorporate the
occurrence of a two-month lockdown, and associated travel restrictions, during
the second quarter of 2022, a scenario referred to as the Downside Lockdown
Case. The Downside Lockdown Case is representative of the emergence of more
virulent strains of COVID-19 and/or strains for which the efficacy of existing
vaccines is reduced. The Downside Lockdown Case assumes that there would be
full drawing on both the RCF and the UKEF credit facility. Subsequent to this
lockdown, capacity is assumed to recover gradually over the going concern
period and to only recover to the Base Case by the end of 2023. In this
scenario, over the going concern period capacity would be 35 per cent down on
2019. Consistent with the Downside Case, the Directors consider the Downside
Lockdown Case to be an alternative severe but plausible scenario.
Under all three scenarios modelled, the Group's limited financial covenants
are forecast to be met.
The Group has modelled the impact of further deteriorations in capacity
operated and yield, but also considered further mitigating actions, such as
reducing operating and capital expenditure. The Group expects to be able to
continue to secure financing for future aircraft deliveries and in addition
has further potential mitigating actions, including asset disposals, it would
pursue in the event of adverse liquidity experience.
Having reviewed the Base Case, Downside Case, Downside Lockdown Case and
additional sensitivities, the Directors have a reasonable expectation that the
Group has sufficient liquidity to continue in operational existence over the
going concern period and hence continue to adopt the going concern basis in
preparing the consolidated financial statements for the year to December 31,
2021.
However, due to the uncertainty created by COVID-19, there are a number of
significant factors that are outside of the control of the Group, including:
the status and impact of the pandemic worldwide; the emergence of new variants
of the virus and potential resurgence of existing strains of the virus; the
speed at which vaccines are deployed worldwide; the efficacy of those
vaccines; the availability of medicines to combat the impact of the virus and
the restrictions imposed by national governments in respect of the freedom of
movement and travel. The Directors, therefore, are not able to provide
certainty that there could not be a more severe downside scenario than those
they have considered, including the sensitivities in relation to the timing of
recovery from the COVID-19 pandemic, capacity operated, impact on yield, cost
mitigations achieved and the availability of aircraft financing to offset
capital expenditure. In the event that a more severe scenario were to occur,
the Group may need to secure sufficient additional funding. Sources of
additional funding are expected to include securing additional long-term
financial facilities. However, the Group's ability to obtain this additional
funding in the event of a more severe downside scenario represents a material
uncertainty at February 24, 2022 that could cast significant doubt upon the
Group's ability to continue as a going concern and therefore, to continue to
realise its assets and discharge its liabilities in the normal course of
business.
The consolidated financial statements for the year to December 31, 2021 do not
include the adjustments that would result if the Group was unable to continue
as a going concern.
Consolidation
The Group financial statements include the financial statements of the Company
and its subsidiaries, each made up to December 31, together with the
attributable share of results and reserves of associates and joint ventures,
adjusted where appropriate to conform to the Group's accounting policies.
Subsidiaries are consolidated from the date of their acquisition, which is the
date on which the Group obtains control and continue to be consolidated until
the date that such control ceases. Control exists when the Group is exposed
to, or has rights to, variable returns from its involvement with the entity
and has the ability to affect those returns through its power over the entity.
The Group applies the acquisition method to account for business combinations.
The consideration paid is the fair value of the assets transferred, the
liabilities incurred and the equity interests issued by the Group.
Identifiable assets acquired and liabilities assumed in a business combination
are measured initially at their fair values at the acquisition date.
Non-controlling interests represent the portion of profit or loss and net
assets in subsidiaries that are not held by the Group and are presented
separately within equity in the Consolidated balance sheet.
Acquisition-related costs are expensed as incurred.
If the business combination is achieved in stages, the acquisition date fair
value of 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 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 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.
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 Avios have a functional currency of pound sterling. The Group's
consolidated financial statements are presented in euros, which is the Group's
presentation currency.
b Transactions and balances
Transactions in foreign currencies are initially recorded in the functional
currency using the rate of exchange prevailing on the date of the transaction.
Monetary foreign currency balances are translated into the functional currency
at the rates ruling at the balance sheet date. Foreign exchange gains and
losses resulting from the settlement of such transactions and from the
translation at balance sheet exchange rates of monetary assets and liabilities
denominated in foreign currencies are recognised in the Income statement,
except where hedge accounting is applied. Foreign exchange gains and losses
arising on the retranslation of monetary assets and liabilities classified as
non-current on the Balance sheet are recognised within Net currency
retranslation (charges)/credits in the Income statement. All other gains and
losses arising on the retranslation of monetary assets and liabilities are
recognised in operating profit.
c Group companies
The net assets of foreign operations are translated into euros at the rate of
exchange ruling at the balance sheet date. Profits and losses of such
operations are translated into euros at average rates of exchange during the
year. The resulting exchange differences are taken directly to a separate
component of equity (Currency translation reserve) until all or part of the
interest is sold, when the relevant portion of the cumulative exchange
difference is recognised in the Income statement.
Property, plant and equipment
Property, plant and equipment is 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 Capitalisation of interest on progress payments
Interest 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.
b Fleet
All aircraft are stated at the fair value of the consideration given after
taking account of manufacturers' credits. Fleet assets owned or right of use
('ROU') assets are disaggregated into separate components and depreciated at
rates calculated to write down the cost of each component to the estimated
residual value at the end of their planned operational lives (which is the
shorter of their useful life or lease term) on a straight-line basis.
Depreciation rates are specific to aircraft type, based on the Group's fleet
plans, within overall parameters of 23 years and up to 5 per cent residual
value for shorthaul aircraft and between 23 and 29 years (depending on
aircraft) and up to 5 per cent residual value for longhaul aircraft. Right of
use assets are depreciated over the shorter of the lease term and the
aforementioned depreciation rates.
Cabin interior modifications, including those required for brand changes and
relaunches, are depreciated over the lower of five years and the remaining
economic life of the aircraft.
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.
Certain major overhaul expenditure, including replacement spares and labour
costs, is capitalised and amortised over the average expected life between
major overhauls. All other replacement spares and other costs relating to
maintenance of fleet assets (including maintenance provided under
'pay-as-you-go' contracts) are charged to the Income statement on consumption
or as incurred respectively.
c 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 4 to
20 years.
d 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 of
time in exchange for consideration. The Group has elected not to apply such
consideration where the contract relates to an intangible asset, 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
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.
The 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.
The Group has elected not to recognise ROU assets and lease liabilities for
short-term leases that have a lease term of 12 months or less and those leases
of low-value assets. Payments associated with short-term leases and leases of
low-value assets are recognised on a straight-line basis as an expense in the
Income statement. Short-term leases are leases with a lease term of 12 months
or less, that do not contain a purchase option. Low-value assets comprise IT
equipment and small items of office furniture.
The Group is exposed to potential future increases in variable lease payments
based on an index or rate, which are not included in the lease liability until
they take effect. When adjustments to lease payments based on an index or rate
take effect, the lease liability is re-assessed and adjusted against the ROU
asset. Extension options are included in a number of aircraft, property and
equipment leases across the Group and are reflected in the lease payments
where the Group is reasonably certain that it will exercise the option. The
Group is also exposed to variable lease payments based on usage or revenue
generated over a defined period. Such variable lease payments are expensed to
the Income statement as incurred.
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. If a sale has occurred, then the associated asset is
de-recognised and a ROU asset and lease liability are recognised. The ROU
asset recognised is based on the proportion of the previous carrying amount of
the asset that is retained. Any gain or loss is restricted to the amount that
relates to the rights that have been transferred to the counter-party to the
transaction. Where a sale has 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. The principal criteria
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.
Cash flow presentation
Lease payments are presented as follows in the Consolidated cash flow
statement: the proceeds received from sale and leaseback transactions are
presented within cash flows from investing 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.
COVID-19 related rent concessions
On May 28, 2020, the IASB issued 'COVID-19 Related Rent Concessions -
amendments to IFRS 16 Leases'. The EU subsequently adopted the amendment on
October 9, 2020. The amendment provides a practical expedient for lessees, up
to June 30, 2021, not to assess whether a COVID-19 related rent concession is
a lease modification. On March 31, 2021, the IASB extended the period for the
application of these concessions through to June 30, 2022. The EU subsequently
adopted the amendment on August 31, 2021. The extended amendment is effective
for annual reporting periods commencing on or after April 1, 2021 and the
Group has elected to adopt this amendment for the year to December 31, 2021.
Lessor accounting
From time to time the Group will lease, to third parties, specific assets,
including certain property, plant and equipment. On inception of the lease,
the Group determines whether each lease is a finance lease or an operating
lease.
In order to make this determination, the Group assesses whether the lease
transfers substantially all of the risks and rewards of ownership to the
lessee. Factors in making this assessment include, but are not limited to,
whether the lease term is for the major part of the economic life of the
underlying asset and whether the underlying asset transfers to the lessee or
the lessee has the option to purchase the underlying asset at the end of the
lease. Where substantially all of the risks and rewards of ownership have been
transferred, then the lease is recorded as a finance lease, otherwise it is
recorded as an operating lease.
Intangible assets
a Goodwill
Goodwill arises on the acquisition of subsidiaries, associates and joint
ventures and represents the excess of the consideration paid over the net fair
value of the identifiable assets and liabilities of the acquiree. Where the
net fair value of the identifiable assets and liabilities of the acquiree is
in excess of the consideration paid, a gain on bargain purchase is recognised
immediately in the Income statement.
For the purpose of assessing impairment, goodwill is grouped at the lowest
levels for which there are separately identifiable cash flows (cash generating
units). Goodwill is tested for impairment annually and whenever indicators
exist that the carrying value may not be recoverable.
b Brands
Brands arising on the acquisition of subsidiaries are initially recognised at
fair value at the acquisition date. Long-established brands that are expected
to be used indefinitely are not amortised but assessed annually for
impairment.
c Customer loyalty programmes
Customer loyalty programmes arising on the acquisition of subsidiaries are
initially recognised at fair value at the acquisition date. A customer loyalty
programme with an expected useful life is amortised over the expected
remaining useful life. Established customer loyalty programmes that are
expected to be used indefinitely are not amortised but assessed annually for
impairment.
d Landing rights
Landing rights acquired in a business combination are recognised at fair value
at the acquisition date. Landing rights acquired from other airlines are
capitalised at cost.
Capitalised landing rights based outside of the United Kingdom and the EU are
amortised on a straight-line basis over a period not exceeding 20 years.
Capitalised landing rights based within the United Kingdom and the EU are not
amortised, as regulations provide that these landing rights are perpetual.
e Contract-based intangibles
Contract-based intangibles acquired in a business combination are recognised
initially at fair value at the acquisition date and amortised over the
remaining life of the contract.
f Software
The cost to purchase or develop computer software that is separable from an
item of related hardware is capitalised separately and amortised on a
straight-line basis generally over a period not exceeding five years, with
certain specific software developments amortised over a period of up to ten
years.
g Emissions allowances
Where an operating company purchases emissions allowances, such that it has a
surplus of allowances when compared to the amount required to discharge its
obligations to the relevant authorities, these amounts are recognised at cost
and recorded within Other intangible assets. Emissions allowances recorded
within Other intangible assets are not revalued or amortised but are tested
for impairment whenever indicators exist that the carrying value may not be
recoverable. Where an operating company has a deficit of allowances compared
to the amount required to discharge its obligations to the relevant
authorities, the Group recognises a provision for the outstanding amount,
measured at the market price of such an allowance at the reporting date.
From time to time the Group enters into sale and repurchase transactions for
specified emission allowances. Such transactions do not meet the recognition
criteria of a sale under IFRS 15 and accordingly the asset is retained on the
balance sheet within Intangible assets and an Other financing liability
recognised equal to the proceeds received.
Impairment of non-financial assets
Assets that have an indefinite useful life are not subject to amortisation and
are tested annually for impairment. Assets that are subject to amortisation
are reviewed for impairment whenever events or changes in circumstances
indicate that the carrying amount may not be recoverable. An impairment loss
is recognised for the value by which the asset's carrying value exceeds its
recoverable amount. The recoverable amount is the higher of an asset's fair
value less cost to sell and value-in-use. Non-financial assets other than
goodwill that were subject to an impairment are reviewed for possible reversal
of the impairment at each reporting date.
a Property, plant and equipment, including Right of use assets
The carrying value is reviewed for impairment when events or changes in
circumstances indicate the carrying value may not be recoverable and the
cumulative impairment losses are shown as a reduction in the carrying value of
property, plant and equipment.
b Intangible assets
Intangible assets are held at cost and are either amortised on a straight-line
basis over their economic life, or they are deemed to have an indefinite
economic life and are not amortised. Indefinite life intangible assets are
tested annually for impairment or more frequently if events or changes in
circumstances indicate the carrying value may not be recoverable.
Investments in associates and joint ventures
An associate is an undertaking in which the Group has a long-term equity
interest and over which it has the power to exercise significant influence.
Where the Group cannot exercise control over an entity in which it has a
shareholding greater than 51 per cent, the equity interest is treated as an
associated undertaking.
A joint venture is a type of joint arrangement whereby the parties that have
joint control of the arrangement have rights to the net assets of the joint
venture. Joint control is the contractually agreed sharing of control of an
arrangement, which exists only when decisions about the relevant activities
require unanimous consent of the parties sharing control. The considerations
made in determining significant influence or joint control are similar to
those necessary to determine control over subsidiaries.
Investments in associates and joint ventures are accounted for using the
equity method, and initially recognised at cost. The Group's interest in the
net assets of associates and joint ventures is included in Investments
accounted for using the equity method in the Balance sheet and its interest in
their results is included in the Income statement, below operating result. The
attributable results of those companies acquired or disposed of during the
year are included for the periods of ownership.
Financial instruments
a 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. 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.
b Interest-bearing deposits
Interest-bearing deposits, principally comprising funds held with banks and
other financial institutions with contractual cash flows that are solely
payments of principal and interest, and held in order to collect contractual
cash flows, are carried at amortised cost using the effective interest method.
c Derivative and non-derivative financial instruments and
hedging activities
Derivative financial instruments, comprising interest rate swap derivatives,
foreign exchange derivatives and fuel hedging derivatives (including options,
swaps and forward contracts) are initially recognised at fair value on the
date a derivative contract is entered into and are subsequently remeasured at
their fair value. They are classified as financial instruments through the
Income statement. The method of recognising the resulting gain or loss arising
from remeasurement depends on whether the derivative is designated as a
hedging instrument, and if so, the nature of the item being hedged (as
detailed below under cash flow hedges). The time value of options is excluded
from the designated hedging instrument and accounted for as a cost of hedging.
Movements in the time value of options are recognised in Other comprehensive
income until the underlying transaction affects the Income statement.
When forward contracts are used to hedge forecast transactions, the Group
generally designates only the spot component of the forward contract as the
hedging instrument within a hedge relationship. Gains or losses arising on the
change in fair value of the spot component are recognised within Other
comprehensive income in the cash flow hedge reserve within equity. The forward
component of a forward contract is not designated within a hedge relationship,
with the associated gains and losses on the forward component recorded within
Other comprehensive income in the Cost of hedging reserve within equity until
the underlying transaction affects the Income statement.
To manage foreign exchange movements on foreign currency revenues (denominated
in US dollars, euros, Japanese yen and Chinese yuan), certain non-derivative
repayment instalments on foreign currency-denominated interest-bearing
liabilities are designated as hedging instruments within a hedge relationship.
Revaluations arising from movements in foreign exchange rates are recorded
within Other comprehensive income in the cash flow hedge reserve. Accumulated
gains or losses within the cash flow hedge reserve are reclassified to
Passenger revenue 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.
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.
The Group 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 the Group, 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)/credits.
Exchange gains and losses on monetary investments are taken to the Income
statement unless the item has been designated and is assessed as an effective
hedging instrument. Exchange gains and losses on non-monetary investments are
reflected in equity.
d Cash flow hedges
Changes in the fair value of derivative financial instruments designated as in
a hedge relationship of a highly probable expected future transaction are
assessed for effectiveness and accordingly recorded in the Cash flow hedge
reserve within equity.
Hedge effectiveness
Hedge effectiveness is determined at the inception of the hedge relationship,
and through periodic prospective effectiveness assessments, to ensure that an
economic relationship exists between the hedged item and hedging instrument. A
hedging relationship qualifies for
hedge accounting if it meets all of the following effectiveness requirements:
(i) there is 'an economic relationship' between the hedged item and the
hedging instrument; (ii) the effect of credit risk does not dominate the value
changes that result from that economic relationship; and (iii) the hedge ratio
is aligned with the requirements of the Group's risk management strategy and
in all instances is maintained at a ratio of 1:1.
Sources of ineffectiveness include the following:
• In hedges of fuel purchases, ineffectiveness may arise if the timing of
the forecast transaction changes from what was originally estimated, or if
there are changes in the credit risk of the Group or the derivative
counterparty;
• In hedges of foreign currency purchases, ineffectiveness may arise if
the timing of the forecast transaction changes from what was originally
estimated, or if there are changes in the credit risk of the Group or the
derivative counterparty; and
• In hedges of interest rate payments, ineffectiveness may arise if there
are differences in the critical terms between the interest rate derivative
instrument and the underlying hedged item, or if there are changes in the
credit risk of the Group or the derivative counterparty.
Ineffectiveness is recorded within the Income statement as Realised/unrealised
(losses)/gains on derivatives not qualifying for hedge accounting and
presented within Other non-operating charges.
Reclassification adjustments
Gains and losses accumulated in the Cash flow hedge reserve within equity are
reclassified from the Cash flow hedge reserve when the hedged item affects the
Income statement as follows:
• Where the forecast hedged item results in the recognition of revenue or
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;
• 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), the
accumulated gains and losses recorded within both the cash flow hedge reserve
and the cost of hedging reserve are included in the initial cost of the asset.
These gains or losses are recorded in the Income statement as the
non-financial asset affects the Income statement (which for aircraft is
through Depreciation over the expected life of the aircraft); and
• Where the forecast hedged items results in the recognition of a
financial asset or liability (such as variable rate debt for which interest
rate swaps are designated as the hedging instrument), the accumulated gains
and losses recorded within the cash flow hedge reserve are reclassified to
Interest expense within the Income statement at the same time as the interest
expense arises on the hedged item.
Further information on the risk management activities of the Group are given
in note 28d.
e 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.
f 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
at an amortised cost basis using the effective interest method until
extinguished on conversion or maturity of the bonds, and is recognised within
Long-term borrowings. The difference between the proceeds of issue of the
convertible bond and the fair value assigned to the liability component,
representing the embedded option to convert the liability into equity of the
Group, is included in the equity portion of the convertible bond in Other
reserves and is not subsequently remeasured. The interest expense on the
liability component is calculated by applying the effective interest rate for
similar non-convertible debt to the liability component of the instrument. The
difference between this value and the interest paid is added to the carrying
amount of the liability.
Convertible bonds that are classified as hybrid financial instruments consist
only of a liability component recognised within Long-term borrowings. At the
date of issue, the entirety of the convertible bonds is accounted for at fair
value with subsequent fair value gains or losses recorded within Long-term
borrowings. The fair value of such financial instruments is obtained from
their respective quoted prices in active markets, with the portion of the
change in fair value attributable to changes in the credit risk of the
convertible bonds recognised in Other comprehensive income and the portion of
the change in fair value attributable to market conditions recognised in the
Income statement within Finance costs.
Issue costs associated with compound financial instruments are apportioned
between the liability and equity components of the convertible bonds where
appropriate based on their relative carrying values at the date of issue. The
portion relating to the equity component is charged directly against equity.
Issue costs associated with hybrid financial instruments are expensed
immediately to the Income statement.
g 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
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.
h 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 has
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 IBOR
reform. The reliefs have the effect that IBOR reform does not cause hedge
accounting to terminate prior to contracts being amended. Where transition to
an alternative benchmark rate has taken place, the Group ceases to apply the
Phase 1 amendments and instead applies the Phase 2 amendments.
Hedge accounting
Where the Group continues to apply the Phase 1 amendments, the following
reliefs are applied:
• when considering the highly probable requirement, the Group has assumed
that those benchmark rates that need to be transitioned to an alternative
benchmark rate, on which the Group's hedged long-term borrowings are based, do
not change as a result of IBOR reform;
• in assessing whether the hedge is expected to be highly effective on a
forward-looking basis the Group has assumed that those benchmark rates that
need to be transitioned to an alternative benchmark rate, on which the cash
flows of the hedged long-term borrowings and the interest rate swaps that
hedge them are based, are not altered by IBOR reform; and
• the Group has not recycled the cash flow hedge reserve relating to the
period after the IBOR reform is expected to take effect.
When the Group ceases to apply the Phase 1 amendments, the Group amends its
hedge designation to reflect changes which are required by IBOR reform, but
only to make one or more of the following changes:
• designating an alternative benchmark rate (contractually or
non-contractually specified) as the hedged risk;
• amending the description of the hedged item, including the description
of the designated portion of the cash flows being hedged; or
• amending the description of the hedging instrument.
The associated hedge documentation is updated to reflect these changes in
designation by the end of the reporting period in which the changes are made.
Such amendments do not give rise to the hedge relationship being discontinued.
When the Group transitions to an alternative benchmark rate, the accumulated
amounts within the cash flow hedge reserve are determined to be based on the
alternative benchmark rate and no reclassification adjustments are made from
the cash flow hedge reserve to the Income statement.
Long-term borrowings and lease liabilities
Phase 2 of the amendments requires that, for financial instruments measured
using amortised cost measurement, changes to the basis for determining the
contractual cash flows required by interest rate benchmark reform are
reflected by adjusting their effective interest rate prospectively. No gain or
loss is recognised upon transition to the new benchmark. The expedient is only
applicable to direct changes that are required by interest rate benchmark
reform.
For lease liabilities where there is a change to the basis for determining the
contractual cash flows, as a practical expedient the lease liability is
remeasured by discounting the revised lease payments using a discount rate
that reflects the change in the interest rate where the change is required by
IBOR reform.
Further information on the management of and uncertainty arising from interest
rate reform is given in note 27i. No amounts have been recorded in the current
or prior periods as a result of these amendments.
Employee benefit plans
a Pension obligations
The Group has both defined benefit and defined contribution plans. A defined
contribution plan is a pension plan under which the Group pays fixed
contributions into a separate entity. The Group has no legal or constructive
obligations to pay further contributions if the fund does not hold sufficient
assets to pay all employees the benefits relating to employee service in the
current and prior years.
Typically defined benefit plans define an amount of pension benefit that an
employee will receive on retirement, usually dependent on one or more factors
such as age, years of service and compensation.
The Group's net obligation in respect of defined benefit pension plans is
calculated separately for each plan by estimating the amount of future benefit
that employees have earned in return for their service in the current and
prior years. The benefit is discounted to determine its present value, and the
fair value of any plan assets are deducted. The discount rate is the yield at
the balance sheet date on AA-rated corporate bonds of the appropriate currency
that have durations approximating those of the Group's obligations. The
calculation is performed by a qualified actuary using the projected unit
credit method. When the net obligation calculation results in an asset for the
Group, the recognition of an asset is limited to the present value of any
future refunds, net of the relevant taxes, from the plan or reductions in
future contributions to the plan ('the asset ceiling'). The fair value of the
plan assets is based on market price information and, in the case of quoted
securities, is the published bid price. The fair value of insurance policies
which exactly match the amount and timing of some or all benefits payable
under the scheme are deemed to be the present value of the related
obligations. Longevity swaps are measured at their fair value.
Current service costs are recognised within employee costs in the year in
which they arise. Past service costs are recognised in the event of a plan
amendment or curtailment, or when the Group recognises related restructuring
costs or severance obligations. The net interest is calculated by applying the
discount rate used to measure the defined benefit obligation at the beginning
of the period to the net defined benefit liability or asset, taking into
account any changes in the net defined benefit liability or asset during the
period as a result of contributions and benefit payments. Net interest and
other expenses related to the defined benefit plans are recognised in the
Income statement. Remeasurements, comprising IAS 19 gains and losses, the
effect of the asset ceiling (excluding interest) and the return on plan assets
(excluding interest), are recognised immediately in Other comprehensive
income. Remeasurements are not reclassified to the Income statement in
subsequent periods.
b Severance obligations
Severance obligations are recognised when employment is terminated by the
Group before the normal retirement date, or whenever an employee accepts
voluntary redundancy in exchange for these benefits. The Group recognises a
provision for severance payments when it is demonstrably committed to either
terminating the employment of current employees according to a detailed formal
plan without realistic possibility of withdrawal, or providing severance
payments as a result of an offer made to encourage voluntary redundancy.
Other employee benefits are recognised when there is deemed to be a present
obligation.
Taxation
Current income tax assets and liabilities are measured at the amount expected
to be recovered from or paid to the taxation authorities, based on tax rates
and laws that are enacted or substantively enacted at the balance sheet date.
Deferred income tax is recognised on all temporary differences arising between
the tax bases of assets and liabilities and their carrying amounts in the
financial statements, with the following exceptions:
• Where the temporary difference arises from the initial recognition of
goodwill or of an asset or liability in a transaction that is not a business
combination that at the time of the transaction affects neither accounting nor
taxable profit or loss;
• In respect of taxable temporary differences associated with investments
in subsidiaries or associates, where the timing of the reversal of the
temporary differences can be controlled and it is probable that the temporary
differences will not reverse in the foreseeable future; and
• Deferred income tax assets are recognised only to the extent that it is
probable that taxable profit will be available against which the deductible
temporary differences, carried forward tax credits or tax losses can be
utilised.
Deferred income tax assets and liabilities are measured on an undiscounted
basis at the tax rates that are expected to apply when the related asset is
realised or liability is settled, based on tax rates and laws enacted or
substantively enacted at the balance sheet date.
Income tax is charged or credited directly to equity if it relates to items
that are credited or charged to equity. Otherwise income tax is recognised in
the Income statement.
Inventories
Inventories are valued at the lower of cost and net realisable value. Such
cost is determined by the weighted average cost method. Inventories include
mainly aircraft spare parts, repairable aircraft engine parts and fuel.
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.
Share-based payments
The Group operates a number of equity-settled, share-based payment plans,
under which the Group awards equity instruments of the Group for services
rendered by employees. The fair value of the share-based payment plans is
measured at the date of grant using a valuation model provided by external
specialists. The resulting cost, as adjusted for the expected and actual level
of vesting of the plan, is charged to the Income statement over the period in
which the options vest. At each balance sheet date before vesting, the
cumulative expense is calculated, representing the extent to which the vesting
period has expired and management's best estimate of the achievement or
otherwise of non-market conditions, and accordingly the number of equity
instruments that will ultimately vest. The movement in the cumulative expense
since the previous balance sheet date is recognised in the Income statement
with a corresponding entry in equity.
Provisions
Provisions are made when an obligation exists for a present liability in
respect of a past event and where the amount of the obligation can be reliably
estimated and where it is considered probable that an outflow of economic
resources will be required to settle the obligation. Where it is not
considered probable that there will be an outflow of economic resources
required to settle the obligation, the Group does not recognise a provision,
but discloses the matter as a contingent liability. The Group assesses whether
each matter is probable of there being an outflow of economic resources to
settle the obligation at each reporting date.
Employee leaving indemnities and other employee provisions are recorded for
flight crew who, meeting certain conditions, have the option of being placed
on reserve or of taking early retirement. The Group is obligated to remunerate
these employees until they reach the statutory retirement age. The calculation
is performed by independent actuaries using the projected unit credit method.
Other employee-related provisions are recognised for direct expenditures of
business reorganisation such as severance payments (restructuring provisions)
where plans are sufficiently detailed and well advanced, and where appropriate
communication to those affected has been undertaken at the balance sheet date.
Restoration and handback provisions arising on inception of a lease are
recognised as a provision with a corresponding amount recognised as part of
the ROU asset. Any subsequent change in estimation relating to such costs are
reflected in the ROU asset. Maintenance and handback provisions that occur
through usage or through the passage of time are recognised as such activity
occurs, with a corresponding expense recorded in the Income statement. Any
subsequent change in estimation are recognised in the Income statement.
The method for determining legal claims provisions is determined on a
claim-by-claim basis. Where a claim includes a significant population of
items, the weighted average provision is estimated by determining all
potential outcomes and the probability of their occurrence. Where a claim
relates to a single item, then the Group determines the associated provision
by applying the most likely outcome giving consideration to alternative
outcomes. Where an individual claim is significant, the disclosure of
quantitative information is restricted to the extent that it does not
prejudice the outcome of the claim. If the effect is material, expected future
cash flows are discounted using a rate that reflects, where appropriate, the
risks specific to the provision. Where discounting is used, the effect of
unwinding the discount rate is recognised as a finance cost in the Income
statement.
Revenue recognition
Passenger revenue
The Group's revenue primarily derives from transportation services for both
passengers and cargo. Revenue is recognised when the transportation service
has been provided.
Passenger tickets are generally paid for in advance of transportation and are
recognised, net of discounts, as Deferred revenue on ticket sales in current
liabilities until either the customer has flown or, for flexible tickets, when
unused ticket revenue is recognised or the ticket expires unused.
At the time of expected travel, revenue is recognised in relation to flexible
tickets where a customer can reschedule the date of intended travel, that are
not expected to be used, a term referred to as 'unused tickets'. This revenue
is recognised based on the terms and conditions of the ticket and analysis of
historical experience. For these unused flexible tickets, revenue is
recognised only when the risk
of a significant reversal of revenue is remote based on the terms and
conditions of the ticket and analysis of historical experience. The estimation
regarding historical experience is updated at each reporting date.
Where a flight is cancelled, the passenger is entitled to either compensation,
a refund, changing to an alternative flight or the receipt of a voucher. Where
compensation is issued to the customer, such payments are presented net within
Passenger revenue against the original ticket purchased. Where the Group
provides a refund to a customer, Deferred revenue on ticket sales is reduced
and no amount is recorded within revenue. Where a voucher is issued it is
retained within Deferred revenue on ticket sales until such time as it is
redeemed for a flight or it expires, at which time it is recorded within
Passenger revenue. The Group also recognises revenue by estimating the amount
of vouchers that are not expected to be redeemed prior to expiry using
analysis of historical experience. The estimation regarding historical
experience is updated at each reporting date. The amount of such revenue
recognised is constrained, where necessary, such that the risk of a
significant reversal of revenue in the future is remote.
Payments received in relation to certain ancillary services regarding
passenger transportation, such as change fees, are not considered to be
distinct from the performance obligation to provide the passenger flight.
Payments relating to these ancillary services are recognised in Deferred
revenue on ticket sales in current liabilities until the customer has flown.
The Group considers whether it is an agent or a principal in relation to
passenger transportation services by considering whether it has a performance
obligation to provide services to the customer or whether the obligation is to
arrange for the services to be provided by a third party. The Group acts as an
agent where (i) it collects various taxes, duties and fees assessed on the
sale of tickets to passengers and remits these to the relevant taxing
authorities; and (ii) where it provides interline services to airline partners
outside of the Group. Commissions earned in relation to agency services are
recognised as revenue when the underlying goods or services have been
transferred to the customer. In all other instances, the Group considers it
acts as the principal in relation to passenger transportation services.
Cargo revenue
The Group has identified a single performance obligation in relation to cargo
services and the associated revenue is measured at its standalone selling
price and recognised on satisfaction of the performance obligation, which
occurs on the fulfilment of the transportation service.
Other revenue
The Group has identified several performance obligations in relation to
services that give rise to revenue being recognised within Other revenue.
These services, their performance obligations and associated revenue
recognition include:
• the provision of maintenance services and overhaul services for engines
and airframes, where the Group is engaged to enhance an asset while the
customer retains control of the asset. Accordingly, the performance
obligations are satisfied, and revenue recognised, over time. The Group
estimates the proportion of the contract completed at the reporting date and
recognises revenue based on the percentage of completion of the contract;
• the provision of ground handling services, where the performance
obligations are fulfilled when the services are provided, which occurs upon
the provision of the service; and
• the provision of holiday and hotel services, where the performance
obligations are satisfied over time as the customer receives the benefit of
the service.
Customer loyalty programmes
The Group operates four loyalty programmes: the British Airways Executive
Club, Iberia Plus, Vueling Club and the Aer Lingus Aer Club.
The customer loyalty programmes award travellers Avios to redeem for various
rewards, primarily redemption travel, including flights, hotels and car hire.
Avios are also sold to commercial partners to use in loyalty activity.
Avios issuance
When issued, the standalone selling price of an Avios is recorded within
Deferred revenue on ticket sales in current liabilities until the customer
redeems the Avios. The standalone selling price of Avios is based on the value
of the awards for which the points could be redeemed. The Group also
recognises revenue associated with the proportion of Avios which are not
expected to be redeemed, referred
to as 'breakage', based on the results of modelling using historical
experiences 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 using 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:
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 both the provision of brand and
marketing services, the partner receives benefits incremental to the issuance
of Avios. The Group estimates the standalone selling price of the brand and
marketing performance obligations, using valuation techniques, by reference to
the amount that a third party would be prepared to pay in an arm's length
transaction for access to comparable brands for the period over which they use
the brand. For brand services, as the Group considers
that the partner has the right to use the brand, revenue is recognised as the
brand service is provided and not over time. For marketing performance
obligations, revenue is recognised as the marketing activities occur based on
when the partner receives the benefit of
those services.
Upfront payments
Where a partner makes an upfront payment to the Group which does not relate to
any specific performance obligation, then the Group considers such payments as
advance payments for future goods and services and the associated revenue is
recognised as those goods
and services are provided, as detailed above. In such instances the payment is
allocated across all of the performance obligations over the contract term.
The Group estimates the expected level of Avios to be issued over the contract
term using experience, historical and expected future trends, and allocates
the payments to the relevant performance obligations accordingly. At each
reporting date, the Group updates its estimate of the number of Avios expected
to be issued over the total contract term and recognises a cumulative catch-up
adjustment where necessary.
When a partner makes an upfront payment to the Group, the Group assesses
whether such a payment is representative of a significant financing event.
Where a significant financing component is identified, the Group estimates a
market rate of interest that an arm's length financial liability of similar
size and tenor would yield. The Group recognises the imputed interest as a
Finance expense in the Income statement.
Other considerations
The Group considers whether it is an agent or a principal in relation to the
loyalty services by considering whether it has a performance obligation to
provide services to the customer or whether the obligation is to arrange for
the services to be provided by a third party. In particular, the Group acts as
an agent where customers redeem their Avios on interline partner flights
outside of the Group, where the fees payable to interline partner are
presented net against the associated release of the Deferred revenue from
ticket sales.
Exceptional items
Exceptional items are those that in management's view need to be separately
disclosed by virtue of their size or nature and where such presentation is
relevant to an understanding of the Group's financial performance. While
management has a defined 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 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, but 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; individual
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. While certain exceptional items may cover more than a single
reporting period, such as significant restructuring events, they are
non-recurring in nature.
Further information is given in the Alternative performance measures section.
Government grants
Government grants are recognised where there is reasonable assurance that the
grant will be received. Loans provided and/or guaranteed by governments that
represent market rates of interest are recorded at the amount of the proceeds
received and recognised within Borrowings. Those loans provided and/or
guaranteed by governments that represent below-market rates of interest are
measured at inception at their fair value and recognised within Borrowings,
with the differential to the proceeds received recorded within Deferred income
and released to the relevant financial statement caption in the Income
statement on a systematic basis. Grants that compensate the Group for expenses
incurred are recognised in the Income statement in the relevant financial
statement caption on a systematic basis in the periods in which the expenses
are recognised.
Critical accounting estimates, assumptions and judgements
The preparation of financial statements requires management to make
judgements, estimates and assumptions that affect the application of policies
and reported amounts of assets and liabilities, income and expenses. These
judgements, estimates and associated assumptions are based on historical
experience and various other factors believed to be reasonable under the
circumstances. Actual results in the future may differ from judgements and
estimates upon which financial information has been prepared. These
underlying assumptions are reviewed on an ongoing basis. Revisions to
accounting estimates are recognised prospectively.
Estimates
The estimates and assumptions that have a significant risk of causing a
material adjustment to the carrying amounts of assets and liabilities within
the next financial year are as follows:
a Employee benefit obligations, employee leaving indemnities,
other employee-related restructuring
At December 31, 2021 the Group recognised €1,775 million in respect of
employee benefit assets (2020 restated: €334 million) and €285 million in
respect of employee benefit obligations (2020 restated: €477 million).
Further information on employee benefit obligations is disclosed in note 32.
The cost of employee benefit obligations, employee leaving indemnities and
other employee-related provisions is determined using the valuation
requirements of IAS 19. These valuations involve making assumptions about
discount rates, expected rates of return on assets, future salary increases,
mortality rates and future pension increases. Due to the long-term nature of
these schemes, such assumptions are subject to significant uncertainty. The
assumptions relating to these schemes are disclosed in note 32. The Group
determines the assumptions to be adopted in discussion with qualified
actuaries. Any difference between these assumptions and the actual outcome
will impact future net assets and total comprehensive income. The sensitivity
to changes in pension assumptions is disclosed in note 32.
Under the Group's APS and 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 February 2019, following the UK House of Lords Economic Affairs Committee
report on measuring inflation, the National Statistician concluded that the
existing methodology was unsatisfactory and proposed a number of options to
the UK Statistics Authority (UKSA).
In March 2019, the UKSA recommended to the UK Chancellor of the Exchequer that
the publication of the RPI cease at a point to be determined in the future and
in the intervening period, the RPI be addressed by bringing in the methods of
the CPIH (a proposed variant to CPI). In September 2019, the UK Chancellor of
the Exchequer announced his intention to consult with the Bank of England and
the UKSA on whether to implement these proposed changes to RPI in the period
of 2025 to 2030. Following consultation during 2020, on November 25, 2020 the
UK Chancellor of the Exchequer and the UKSA confirmed that from February 2030
onwards CPIH will replace RPI with no compensation to holders of index-linked
gilts.
Following the Chancellor of the Exchequer's announcement in September 2019 and
through to December 31, 2021, market-implied breakeven RPI inflation forward
rates for periods after 2030 have reduced in the investment market. Therefore,
in assessing RPI and CPI from investment market data, allowance has been made
for partial alignment between RPI and CPI from 2030 onwards.
b Revenue recognition
At December 31, 2021 the Group recognised €6,552 million (2020: €5,130
million) in respect of deferred revenue on ticket sales of which €2,820
million (2020: €2,725 million) related to customer loyalty programmes.
Passenger revenue is recognised when the transportation service is provided.
At the time of transportation, revenue is also recognised in respect of unused
tickets and is estimated based on the terms and conditions of the tickets and
historical experience. The Group considers that there is no reasonably
possible change to unused ticket assumptions that would have a material impact
on Passenger revenue recorded in the year.
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 the points is based on the value of the Avios for which the points
can be redeemed and is reduced to take account of the proportion of Avios that
are not expected to be redeemed by customers.
The Group estimates the number of Avios not expected to be redeemed using
modelling and historical experience. A five percentage point increase in the
assumption of Avios outstanding and not expected to be redeemed would result
in an adjustment to Deferred revenue from ticket sales of €100 million, with
an offsetting adjustment to increase revenue and operating profit recognised
in the year.
c Income taxes
At December 31, 2021 the Group recognised €1,282 million in respect of
deferred tax assets (2020: €1,075 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 income tax assets only to the extent that it is
probable that the taxable profit will be available against which the
deductible temporary differences, carried forward tax credits or tax losses
can be utilised. Management uses judgement, including the consideration of
past and current operating performance and the future projections of
performance laid out in the approved business plan in order to assess the
probability of recoverability.
In exercising this judgement, while there are no time restrictions on the
utilisation of historic tax losses in the principal jurisdictions in which the
Group operates, future cash flow projections are forecast for a period of up
to ten years from the balance sheet date, which represents the period over
which it is probable that future taxable profits will be available.
At December 31, 2021, the Group had unrecognised deferred tax assets of
€2,458 million relating to tax losses the Group does not reasonably expect
to utilise. In applying the aforementioned judgement, had the Group extended
the period of future cash flow projections indefinitely, then the amount of
unrecognised deferred tax assets would have reduced by €2,068 million.
d Impairment of non-financial assets
At December 31, 2021 the Group recognised €2,439 million (2020: €2,390
million) in respect of intangible assets with an indefinite life, including
goodwill. Further information on these assets is included in note 17.
Goodwill and intangible assets with indefinite economic lives are tested, as
part of the cash generating units to which they relate, for impairment
annually and at other times when such indicators exist. The recoverable
amounts of cash generating units have been determined based on value-in-use
calculations, which use a weighted average multi-scenario discounted cash flow
model, which are then compared to the carrying amount of the associated cash
generating unit.
In determining the carrying value of each cash generating unit, the Group
allocates all associated operating tangible and intangible assets, including
ROU assets. In addition the Group has allocated certain liabilities to the
carrying value of each CGU where those liabilities are critical to the
underlying operations of the cash generating unit and in the event of a
disposal of the cash generating unit would be required to be transferred to
the purchaser. Such liabilities include lease liabilities.
The Group has applied judgement in the weighting of each scenario in the
discounted cash flow model and these calculations require the use of estimates
in the determination of key assumptions and sensitivities as disclosed in note
17.
The Group assesses whether there are any indicators of impairment for all
non-financial assets at each reporting date. When such indicators are
identified, then non-financial assets are tested for impairment.
e Engineering and other aircraft costs
At December 31, 2021, the Group recognised €1,832 million in respect of
maintenance, restoration and handback provisions (2020: €1,588 million).
Information on movements on the provision is disclosed in note 26.
The Group has a number of contracts with service providers to replace or
repair engine parts and for other maintenance checks. These agreements are
complex and generally cover a number of years. Provisions for maintenance,
restoration and handback are made based on the best estimate of the likely
committed cash outflow. In determining this best estimate, the Group applies
significant judgement as to the level of forecast costs expected to be
incurred when the aircraft is returned to the lessor. The assumptions of this
significant judgement include aircraft utilisation, expected maintenance
intervals, future maintenance costs and the aircraft's condition. The
associated forecast costs are discounted to their present value, the effect of
which is not considered to be material. The Group considers that there is no
reasonably possible change to a single assumption that would have a material
impact on the provisions, however a combination of changes in multiple
assumptions may.
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.
New standards, amendments and interpretations
The following amendments and interpretations apply for the first time in 2021,
but do not have a material impact on the consolidated financial statements of
the Group:
• COVID-19 related rent concessions beyond June 30, 2021 - Amendments to
IFRS 16 Leases; and
• Interest rate benchmark reform - Phase 2 - amendments to IFRS 9, IAS 39,
IFRS 7, IFRS 4 and IFRS 16 effective for periods beginning
on or after January 1, 2021.
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 of 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:
• Property, plant and equipment: proceeds before intended use - amendments
to IAS 16 effective for periods beginning on or after
January 1, 2022;
• Reference to the Conceptual Framework - amendments to IFRS 3 effective
for periods beginning on or after January 1, 2022;
• Onerous contracts - cost of fulfilling a contract - amendments to IAS 37
effective for periods beginning on or after January 1, 2022;
• Annual improvements to IFRS standards 2018-2020 - effective for periods
beginning on or after January 1, 2022;
• Classification of liabilities as current or non-current - amendments to
IAS 1 effective for periods beginning on or after January 1, 2023;
• Definition of accounting estimate - amendments to IAS 8 effective for
periods beginning on or after January 1, 2023;
• Disclosure of accounting policies - Amendments to IAS 1 and IFRS
Practice statement 2 effective for periods beginning on or after January 1,
2023; and
• Deferred tax related to assets and liabilities arising from a single
transaction - Amendments to IAS 12 effective for periods beginning
on or after January 1, 2023.
3 Impact of COVID-19 on financial reporting
Significant transactions and accounting estimates, assumptions and judgements
in the determination of the impact of COVID-19
As a result of COVID-19 the Group has experienced a significant decline in the
level of flight activity and does not expect to return to the level of 2019
activity until at least 2023. Accordingly, the Group has applied estimation
and judgement in the evaluation of the impact of COVID-19 regarding the
recognition and measurement of assets and liabilities within the Consolidated
financial statements.
Accounting estimates, assumptions and judgements - cash flow forecast
estimation
The Group has applied estimation and judgement in the evaluation of the impact
of COVID-19 on the estimation uncertainty of determining cash flow forecasts
as part of the approved business plans. The details regarding the inputs and
assumptions used in the determination of these cash flow forecasts are given
in the going concern basis of preparation.
The following critical accounting estimates, assumptions and judgements
utilise these cash flow forecasts consistently, which are in some instances
significantly different from judgements applied in periods prior to the
COVID-19 pandemic:
a Discontinuance of hedge accounting
In determining whether hedge accounting is required to be discontinued or to
remain in a hedge relationship, judgement is required as to whether a forecast
transaction that was previously highly probable continues to be expected to
occur or is no longer expected to occur. The Group applied the capacity output
from the cash flow forecasts as part of the approved business plans in order
to determine the forecast level of revenue generation and fuel consumption
over the periods in which hedge accounting has been applied.
In the year to December 31, 2021, the Group recognised a credit of €159
million (2020: expense of €1,756 million) arising from a combination of the
discontinuance of hedge accounting in the year to December 31, 2021 and the
fair value movement on those relationships where hedge accounting was
discontinued in the year to December 31, 2020, but for which the underlying
hedging instrument had not matured at January 1, 2021. This was represented by
a credit of €162 million (2020: expense of €1,781 million) relating to
fuel derivatives and an expense of €8 million (2020: credit of €87
million) related to the associated fuel foreign currency derivatives. The
credit to Passenger revenue of
€5 million (2020: charge of €62 million) relates to the discontinuation of
hedge accounting of the associated foreign currency derivatives on forecast
revenue.
The Group's risk management strategy has been to build up these hedges
gradually over a three-year period when the level of forecast passenger
revenue and fuel consumption were higher than current expectations.
Accordingly, the hedge accounting for these transactions has been discontinued
and the credit recognised in the Income statement. The credit relating to
revenue derivatives and fuel derivatives has been recorded in the Income
statement within Passenger revenue and Fuel, oil and emission charges,
respectively.
Further information is given in the Alternative performance measures section.
b Long-term fleet plans and associated impairment
The Group derives long-term fleet plans from the cash flow forecasts arising
from the approved business plans. In deriving the long-term fleet plans, the
Group applies judgement with respect to consideration of the period of
temporary and permanent grounding of fleet assets, the deferral of the
delivery of certain aircraft and the assumptions around specific provisions
relating to leased fleet assets.
During the year to December 31, 2021, the Group recognised impairment
reversals of €21 million, represented by an amount of €14 million relating
to the reversal of aircraft impairment and an amount of €7 million relating
to the reversal of engine impairment. The aircraft impairment reversal relates
to four Airbus A320 aircraft in Vueling, previously permanently stood down in
the fourth quarter of 2020, being stood up in the third quarter of 2021
following the successful slot allocation at Paris Orly and the resultant
increased capacity. The engine impairment reversal relates to certain engines
which had been fully impaired during 2020 having been leased to a third party
in the fourth quarter of 2021. Of the impairment reversal, €9 million was
recorded within Property, plant and equipment relating to owned aircraft and
€12 million was recorded within Right of use assets relating to leased
aircraft.
In the year to December 31, 2020 the Group recognised an impairment charge of
€856 million, represented by an impairment of fleet assets of €837 million
and an impairment of other assets of €19 million. The fleet impairment
related to 82 aircraft, their associated engines and rotable inventories that
were stood down permanently and 2 further aircraft which were impaired down to
their recoverable value at December 31, 2020, which includes 32 Boeing 747
aircraft, 23 Airbus A320 aircraft, 15 Airbus A340 aircraft, 4 Airbus A330-200
aircraft,
2 Airbus A318 aircraft, 1 Airbus A321 aircraft, 1 Airbus A319 aircraft, 2
Boeing 777-200 aircraft and 4 Embraer E170 aircraft. Of the fleet impairment,
€676 million was recorded within Property, plant and equipment relating to
owned aircraft and €161 million was recorded within Right of use assets
relating to leased aircraft.
Further information is given in the Alternative performance measures section,
note 13 and note 14.
c Impairment testing of the Group's cash generating units
Due to the estimation uncertainty of the timing and duration of the recovery
from COVID-19, the Group has adopted a weighted average multi-scenario
discounted cash flow model derived from the cash flow forecasts from the
approved business plans. The Group exercises judgement in determining the
weighting between these scenarios in the value-in-use model.
Having undertaken this impairment testing, in the year to December 31, 2021,
the Group has not recognised any impairment charge
(2020: €nil). While no impairment charge is arising, the headroom in the
impairment test of the British Airways, Iberia and Aer Lingus cash generating
units are particularly sensitive to changes in key assumptions. Further
information is given in note 17.
d Recoverability of deferred tax assets
In determining the recoverable amounts of the Group's deferred tax assets, the
Group applied the future cash flow projections from the approved business
plans. Given the estimation uncertainty of the timing and duration of the
recovery from COVID-19, the Group exercises judgement in the determination of
cash flows during this recovery and subsequent periods.
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.
Accounting estimates, assumptions and judgements - other transactions
In addition to the estimation uncertainty relating to cash flow forecasts, the
Group has applied the following accounting estimates, assumptions and
judgements that impact the consolidated financial statements:
e Revenue recognition
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. Due to the significant level of flight cancellations
arising from COVID-19 there remains insufficient historical data by which to
reliably estimate the amount of these vouchers that will not be used prior to
expiry and accordingly, the Group is unable to estimate with a sufficiently
high degree of probability that there will not be a significant reversal of
revenue in the future. As such, consistent with the approach taken at December
31, 2020, the Group does not recognise revenue arising from those vouchers
issued due to COVID-19 related cancellations until either the voucher is
redeemed or it expires.
Revenue associated with the issuance of Avios under customer loyalty
programmes is determined using estimation techniques, with the transaction
price based on the value for which the Avios can be redeemed and is reduced
taking into consideration breakage. The Group estimates breakage using
modelling and historical experience. Due to the significant restrictions
imposed on the ability of customers to redeem Avios coupled with the
disruption in the patterns of redemption caused by COVID-19, the Group
considers that the trends experienced since the start of the COVID-19 pandemic
are not reflective of the long-term expected patterns of redemption, which the
Group considers will return to pre-COVID-19 levels in the future. Accordingly,
consistent with the approach taken at December 31, 2020,
the Group has maintained breakage at the pre-COVID-19 levels.
Significant transactions as a result of COVID-19
The Group has recorded the following additional significant transactions as a
result of management actions in response to COVID-19:
f Loans and borrowings
To enhance liquidity due to the impact of COVID-19, the Group has entered into
a number of financing arrangements during 2021, which have been fully drawn
unless otherwise stated, including:
• On February 22, 2021, British Airways entered into a 5-year term loan
Export Development Guarantee Facility of €2.3 billion (£2.0 billion)
underwritten by a syndicate of banks, with 80 per cent of the principal
guaranteed by UKEF. On November 1, 2021, British Airways entered into a
further 5-year Export Development Guarantee Facility credit facility of €1.2
billion (£1.0 billion) underwritten by a syndicate of banks, with 80 per cent
of the principal guaranteed by UKEF. At December 31, 2021 no amounts had been
drawn under the facility;
• On March 23, 2021, the Group entered into a three-year US dollar secured
Revolving Credit Facility accessible by British Airways, Iberia and Aer
Lingus. The amount available under the facility is $1.755 billion. As at
December 31, 2021 no amounts had been drawn under the facility. Concurrent to
entering into the facility, British Airways extinguished its US dollar secured
Revolving Credit Facility due to mature in June 2021;
• On March 25, 2021, two senior unsecured bonds were issued by the Group
for an aggregate principal amount of €1.2 billion; €500 million fixed rate
2.75 per cent due in 2025, and €700 million fixed rate 3.75 per cent due in
2029;
• On December 23, 2020, Aer Lingus entered into a financing arrangement
with the Ireland Strategic Investment Fund for €75 million.
On March 27, 2021, Aer Lingus entered into a further financing arrangement to
extend the total amount to €150 million. The facility is repayable in 2023;
• On May 18, 2021, the Group issued an €825 million senior unsecured
convertible bond due 2028 and bearing a fixed rate of 1.125 per cent; and
• In April 2021, British Airways fully repaid the Coronavirus Corporate
Finance Facility of €350 million (£300 million), which was entered into in
April 2020.
Further information is given in note 25.
g Government assistance
Given the significant reduction in operations that have occurred during the
COVID-19 pandemic, the Group has availed itself of the various employee
support mechanisms in the jurisdictions in which it operates. This has led to
an amount of €424 million being received directly from governments
(classified as government grants) and savings of €135 million (classified as
government assistance) where employees have been paid directly by their
respective governments. Those amounts received in the form of government
assistance have been recorded net within Employee costs. Further information
is given in note 34.
h Defined benefit pension scheme contributions
On December 18, 2020 British Airways reached agreement with the Trustee of
NAPS to defer deficit contributions on an interim basis for the period between
October 1, 2020 and January 31, 2021. The deferral of such contributions
amounted to €165 million. On February 19, 2021 British Airways reached
further agreement with the Trustee of NAPS to defer deficit contributions
through to September 30, 2021.
The deferral of such contributions amounted to €330 million. Further
information is given in note 32 on the deferral of contributions.
i Renegotiation of Air Europa acquisition and subsequent
termination
On November 4, 2019, the Group entered into an agreement to acquire the entire
share capital of Air Europa for €1 billion, subject to receipt of the
approval by the European Commission. As a result of the impact COVID-19 has
had on both the Group and Air Europa during 2020, on January 19, 2021, the
Group announced the execution of an amended agreement to acquire the entire
share capital of Air Europa, which resulted in the reduction of the purchase
price to €500 million and deferred this payment until the sixth anniversary
of the date of completion of the acquisition conditional on the satisfactory
negotiation between Iberia and Sociedad Estatal de Participaciones
Industriales or 'SEPI' (the Spanish state holding company that has a direct
participation in Air Europa) regarding the non-financial terms associated with
the financial support provided by SEPI to Air Europa.
On December 16, 2021, the Group announced that Iberia and Globalia had
terminated the agreement regarding the acquisition of the share capital of Air
Europa, with the Group paying €75 million. This payment is recorded in Other
non-operating charges in the Income statement and was settled prior to
December 31, 2021 and recorded within Other investing movements within the
Statement of cash flows.
Further information is given in the Alternative performance measures section.
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 to ten per cent by 2030 and to fifty 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 Sustainable Aviation
Fuel production facilities;
• Investment and improvements in air traffic management;
• The price of carbon through the EU and UK Emissions Trading Schemes
(ETS) and the UN Carbon Offsetting and Reduction Scheme for International
Aviation (CORSIA); and
• Effective market-based policy measures in addition to the EU and UK ETS
and CORSIA.
The level of uncertainty regarding the impact of these factors increases over
time. Accordingly, the Group has applied critical estimation and judgement in
the evaluation of the impact of climate change regarding the recognition and
measurement of assets and liabilities within the financial statements.
Critical accounting estimates, assumptions and judgements - cash flow forecast
estimation
With the Flightpath Net Zero climate strategy assessing the impact over a
long-term horizon to 2050, the level of estimation uncertainty in the
determination of cash flow forecasts increases over time. For those assets and
liabilities, where their recoverability is dependent on long-term cash flows,
the following critical accounting estimates, assumptions and judgements, to
the extent they can be reliably measured, have been applied:
a Long-term fleet plans and useful economic lives
The Group's Flightpath Net Zero climate strategy has been developed in
conjunction with the long-term fleet plans of each operating company. This
includes the annual assessment of useful lives and the residual values of each
aircraft type.
During the course of 2020 as a result of the impact of COVID-19, the Group
permanently stood down 82 aircraft, their associated engines and rotable
inventories. These permanently stood-down aircraft were older-generation
aircraft, that were less fuel efficient, more carbon intensive and more
expensive to operate than more modern models.
With the permanent standing down of these aircraft, coupled with the future
delivery of 110 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 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 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 of the three-year business plan 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 at the reporting date and have been excluded from
these adjustments. These adjustments incorporate the increased utilisation of
sustainable aviation fuel as well as price assumptions relating to sustainable
aviation fuels and the price of carbon (both ETS and CORSIA), which are
derived from externally sourced prices. Where the Group considers such costs
will be recovered through increased passenger ticket fares, then a
corresponding adjustment is made to increase passenger revenue.
As detailed in note 17, the Group applies a long-term growth rate to this
adjusted three-year business plan, 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 impact arising from climate change.
This demand impact is derived with reference to external market data.
Further, 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, assets not currently in use by the Group and expected
technological advancements in aircraft and other technologies not available at
the reporting date. The Group excludes potential future legislation/regulation
regarding carbon pricing and/or alternative schemes not currently enacted,
such as the implementation of kerosene taxes.
Given the inherent uncertainty associated with the impact of climate change,
the Group has applied additional sensitivities in note 17 to reflect a more
adverse impact of climate change than currently expected. This has been
captured through both the downward sensitivities of the long-term growth
rates, ASKs, operating margins and the increased fuel price sensitivity.
c Valuation of employee benefit scheme assets
The Group's employee benefit schemes are principally represented by the
British Airways APS and NAPS schemes in the UK. The schemes are structured to
make post-employment payments to members over the long term, with the Trustees
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 impacts on both revenue and costs to the
Group.
5 Segment information
a Business segments
The chief operating decision-maker is responsible for allocating resources and
assessing performance of the operating segments, and has been identified as
the IAG Management Committee (IAG MC).
The Group has a number of entities which are managed as individual operating
companies including airline and platform functions. Each airline operates its
network operations as a single business unit and the IAG MC assesses
performance based on measures including operating profit, and makes resource
allocation decisions for the airlines based on network profitability,
primarily by reference to the passenger markets in which the companies
operate. The objective in making resource allocation decisions is to optimise
consolidated financial results.
The Group has determined its operating segments based on the way that it
treats its businesses and the manner in which resource allocation decisions
are made. British Airways, Iberia, Vueling and Aer Lingus have been identified
for financial reporting purposes as reportable operating segments. IAG Loyalty
and LEVEL are also operating segments but do not exceed the quantitative
thresholds to be reportable and management has concluded that there are
currently no other reasons why they should be separately disclosed.
The platform functions of the business primarily support the airline
operations. These activities are not considered to be reportable operating
segments as they either earn revenues incidental to the activities of the
Group and resource allocation decisions are made based on the passenger
business or are not reviewed regularly by the IAG MC and are included within
Other Group companies.
For the year to December 31, 2021
2021
€ million British Airways Iberia Vueling Aer Other Group companies(1) Total
Lingus
Revenue
Passenger revenue 2,607 1,707 1,011 302 208 5,835
Cargo revenue 1,268 333 - 65 7 1,673
Other revenue 314 443 5 4 181 947
External revenue 4,189 2,483 1,016 371 396 8,455
Inter-segment revenue 129 301 - 5 370 805
Segment revenue 4,318 2,784 1,016 376 766 9,260
Depreciation and amortisation charge (1,104) (350) (240) (140) (81) (1,915)
Impairment (charge)/reversal (30) - 13 - - (17)
Operating (loss)/profit (2,041) (220) (233) (338) 67 (2,765)
Exceptional items(2) 151 14 29 9 2 205
Operating (loss)/profit before exceptional items (2,192) (234) (262) (347) 65 (2,970)
Net non-operating costs(4) (742)
Loss before tax (3,507)
Total assets(3) 20,891 6,919 2,671 1,820 2,105 34,406
Total liabilities (18,795) (7,062) (3,364) (1,806) (2,533) (33,560)
(1 ) Includes eliminations on total assets of €16,023 million
and total liabilities of €5,833 million.
(2 ) For details on exceptional items refer to the Alternative
performance measures section.
(3 ) Included within total assets associated with Other Group
companies is €4,527 million of Cash and cash equivalents.
(4 ) Includes €75 million of exceptional items relating to the
Air Europa termination settlement payment. Refer to note 3i for further
information.
For the year to December 31, 2020
2020(1)
€ million British Airways Iberia Vueling Aer Lingus Other Group companies(1) Total
Revenue
Passenger revenue 3,242 1,148 577 376 169 5,512
Cargo revenue 994 224 - 88 - 1,306
Other revenue 232 605 5 - 146 988
External revenue 4,468 1,977 582 464 315 7,806
Inter-segment revenue 90 282 (8) 3 343 710
Segment revenue 4,558 2,259 574 467 658 8,516
Depreciation and amortisation charge (1,214) (370) (277) (133) (84) (2,078)
Impairment charge (445) (242) (68) (24) (98) (877)
Operating loss (4,403) (1,411) (875) (563) (199) (7,451)
Exceptional items (2) (1,778) (652) (252) (202) (177) (3,061)
Operating loss before exceptional items (2,625) (759) (623) (361) (22) (4,390)
Net non-operating costs (376)
Loss before tax (7,827)
Total assets(3) 17,759 7,009 2,850 1,814 884 30,316
Total liabilities(3) (15,737) (7,014) (3,299) (1,495) (1,161) (28,706)
(1 )Segment information for 2020 has been restated for the
treatment of administration costs associated with the Group's defined benefit
pension schemes. Further information is given in note 2 and 36.
(2 )For details on exceptional items refer to the Alternative
performance measures section.
(3 )Includes eliminations on total assets of €14,998 million
and total liabilities of €5,100 million.
b Geographical analysis
Revenue by area of original sale
Year to December 31
€ million 2021 2020
UK 2,435 2,390
Spain 2,189 1,845
USA 931 933
Rest of world 2,900 2,638
8,455 7,806
Assets by area
December 31, 2021
€ million Property, plant Intangible
and equipment assets
UK 11,544 1,317
Spain 4,404 1,333
USA 76 13
Rest of world 1,137 576
17,161 3,239
December 31, 2020
€ million Property, plant Intangible
and equipment assets
UK 11,313 1,251
Spain 4,850 1,353
USA 122 15
Rest of world 1,246 589
17,531 3,208
6 Expenses by nature
Operating result is arrived at after charging
Depreciation, amortisation and impairment of non-current assets:
€ million 2021 2020
Depreciation charge on right of use assets 1,058 1,153
Depreciation charge on owned assets 638 720
Impairment (reversal)/charge on owned property, plant and equipment (4) 681
Amortisation and impairment of intangible assets 178 196
Impairment charge on right of use assets 20 161
Depreciation charge on other leasehold assets 42 44
1,932 2,955
Cost of inventories:
€ million 2021 2020
Cost of inventories recognised as an expense, principally fuel 1,038 1,405
Impairment charge on inventories(1) - 71
1,038 1,476
(1 ) For details regarding the impairment charge on inventories
refer to note 3b.
7 Auditor's remuneration
The fees for the year ended December 31, 2021, 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 S.L. (2020: Ernst & Young S.L.), and by companies
belonging to KPMG's network (2020: Ernst & Young's network), were as
follows:
€'000 2021 2020
Fees payable for the audit of the Group and individual accounts 4,860 4,180
Fees payable for other services:
Audit of the Group's subsidiaries pursuant to legislation 532 696
Other services pursuant to legislation 431 532
Other services relating to taxation - 30
Other audit and assurance services 569 350
Services relating to working capital review 776 1,036
Services relating to corporate finance transactions - 370
All other services - 55
7,168 7,249
The fees payable to the Group's auditor for the audit of the Group's pension
scheme during the year totalled €182 thousand.
8 Employee costs and numbers
€ million 2021 2020
Wages and salaries 2,135 2,236
Social security costs 307 385
Costs related to pension scheme benefits (1) 232 272
Share-based payment charge/(credit) 23 (8)
Other employee costs(2) 316 700
Total employee costs 3,013 3,585
(1 ) Refer to notes 2 and 36 for the change in accounting policy
relating to pension administration costs.
(2 ) Other employee costs include allowances and accommodation
for crew.
The number of employees during the year and at December 31 was as follows:
2021 2020
December 31, 2021 December 31, 2020
Average number of employees(1) Number of employees Percentage Average number of employees Number of employees Percentage
of women of women
In the air:
Cabin crew 9,304 17,865 70% 7,689 17,946 71%
Pilots 3,879 7,607 6% 4,787 7,794 6%
On the ground:
Airports 6,728 12,842 37% 8,841 14,339 39%
Corporate 8,612 10,709 52% 7,954 11,246 48%
Maintenance 6,345 7,448 8% 5,153 6,410 7%
Senior executives 167 187 34% 196 193 30%
35,035 56,658 42% 34,620 57,928
(1 ) The average number of employees excludes those employees on
furlough, wage support and equivalent schemes, including the Temporary
Redundancy Plan arrangements in Spain. For further details see note 34. The
total average number of employees including these schemes is 56,618.
The number of employees is based on actual headcount. The average manpower
equivalent for 2021 was 50,222 (2020: 60,612), which includes employees on
furlough, wage support and equivalent schemes, including Temporary Redundancy
Plan arrangements in Spain.
9 Finance costs, income and other non-operating (charges)/credits
a Finance costs
€ million 2021 2020
Interest expense on:
Bank borrowings (133) (45)
Asset financed liabilities (65) (41)
Lease liabilities (408) (442)
Provisions unwinding of discount (12) (14)
Other borrowings (153) (103)
Capitalised interest on progress payments 3 8
Other finance costs (62) (33)
(830) (670)
b Finance income
€ million 2021 2020
Interest on other interest-bearing deposits 5 21
Other finance income 8 20
13 41
c Net financing (charge)/credit relating to pensions
€ million 2021 2020(1)
Net financing (charge)/credit relating to pensions (2) 12
(1 ) Refer to notes 2 and 36 for the change in accounting policy
relating to pension administration costs.
d Other non-operating charges
€ million 2021 2020
Gains on sale of property, plant and equipment and investments(2) 59 38
Credit related to equity investments (note 19) - 1
Share of profits in investments accounted for using the equity method (note 2 1
18)
Realised gains/(losses) on derivatives not qualifying for hedge accounting 37 (13)
Unrealised gains/(losses) on derivatives not qualifying for hedge accounting 47 (31)
Air Europa termination settlement payment(1) (75) -
70 (4)
(1 )Refer to note 3i for further information in relation to the
Air Europa termination settlement expense.
(2 )Includes a gain of €24 million arising from the disposal
of Compañía Auxiliar al Cargo Exprés, S.A. and Auxiliar Logística
Aeroportuaria, S.A. The Group previously owned 75 per cent of the share
capital of these companies and disposed of them during the fourth quarter of
2021. The disposal led to the de-recognition of €12 million of net assets
from the consolidated financial statements of the Group.
10 Tax
a Tax credits/(charges)
Tax credits/(charges) recognised in the Income statement, Other comprehensive
income and directly in equity:
2021 2020(1)
€ million Income Other Recognised directly in equity Total Income Other Recognised directly in equity Total
statement comprehensive statement comprehensive
income income
Current tax
Movement in respect of prior years 10 - (1) 9 6 - - 6
Movement in respect of current year (9) 5 - (4) 273 (17) - 256
Total current tax 1 5 (1) 5 279 (17) - 262
Deferred tax
Movement in respect of prior years (23) - - (23) (8) - - (8)
Movement in respect of current year 518 (420) - 98 695 124 (2) 817
Rate change / rate differences 78 61 - 139 (74) 44 - (30)
Total deferred tax 573 (359) - 214 613 168 (2) 779
Total tax 574 (354) (1) 219 892 151 (2) 1,041
(1 ) Refer to notes 2 and 36 for the change in accounting policy
relating to pension administration costs.
The current tax credit in Other comprehensive income relates to the fair value
movements on the convertible bond of €5 million (2020: €nil) and cash flow
hedges of €nil (2020: €17 million).
Tax recognised directly in equity relates to share-based payment schemes of
€1 million (2020: €2 million).
Within tax in Other comprehensive income is a tax charge of €123 million
(2020: tax credit of €92 million) that may be reclassified to the Income
statement and a tax charge of €231 million (2020: tax credit of €59
million) that will not.
b Current tax (liability)/asset
€ million 2021 2020
Balance at January 1 53 (6)
Income statement 1 279
Other comprehensive income 5 (17)
Recognised directly in equity (1) -
Cash (63) (45)
Offset against other taxes(1) - (152)
Exchange movements and other - (6)
Balance at December 31 (5) 53
Current tax asset 16 101
Current tax liability (21) (48)
Balance at December 31 (5) 53
(1 )During 2020 the Group elected, in the UK, to carry back
losses and apply them to the 2019 taxable profits. This led to a €152
million corporate tax overpayment in relation to 2019, which HMRC offset
against deferred liabilities arising in relation to other taxes. No such
offset arose in 2021.
c Deferred tax asset/(liability)
€ million Fixed assets Right of use assets Lease liabilities Employee leaving indemnities and others Employee benefit plans(1) Fair value gains/ Share-based payment schemes Tax loss carried forward and tax credits Other temporary differences Total
losses(2)
Balance at January 1, 2021 (589) (248) 21 194 298 195 10 1,090 64 1,035
Income statement(1) 106 67 (3) 9 (11) (14) 1 408 10 573
Other comprehensive income(1, 3) - - - (9) (237) (133) - 20 - (359)
Recognised directly in equity - - - - - - - - - -
Exchange movements and other 6 (39) 1 2 12 9 - 55 (13) 33
Balance at December 31, 2021 (477) (220) 19 196 62 57 11 1,573 61 1,282
Balance at January 1, 2020 (732) (195) 24 312 323 70 19 401 34 256
Income statement 116 (76) (2) (120) 8 - (6) 643 50 613
Other comprehensive income(2) - - - 3 (9) 118 - 56 - 168
Recognised directly in equity - - - - - - (2) - - (2)
Exchange movements and other 27 23 (1) (1) (24) 7 (1) (10) (20) -
Balance at December 31, 2020 (589) (248) 21 194 298 195 10 1,090 64 1,035
(1 )Refer to notes 2 and 36 for the change in accounting policy
relating to pension administration costs.
(2 ) 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 2021
was €142 million (refer to note 28d).
(3 ) Movements in Other comprehensive income relating to
post-employment benefit obligations increase the Group's tax losses by €20
million (tax value) at December 31, 2021 and have therefore been disclosed as
tax loss carried forward and tax credits in the above table.
€ million 2021 2020
Deferred tax asset 1,282 1,075
Deferred tax liability - (40)
Balance at December 31 1,282 1,035
The deferred tax assets mainly arise in Spain and the UK and are expected to
reverse 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 tax
credit on the loss for the year to December 31, 2021 (2020: loss) is lower
(2020: lower) than the notional tax credit (2020: credit). The differences are
explained below:
€ million 2021 2020(2)
Accounting loss before tax (3,507) (7,827)
Weighted average tax credit of the Group(1) 683 1,619
Unrecognised losses and deductible temporary differences arising in the year (193) (342)
Disposal and write down of investments 8 (83)
Effect of tax rate changes 78 (74)
Prior year tax assets recognised/(derecognised) 44 (176)
Effect of lower tax rate in the Canary Islands (23) (40)
Movement in respect of prior years (13) (2)
Non-deductible expenses (15) (21)
Other items 5 11
Tax credit in the Income statement 574 892
(1 ) The expected tax credit is calculated by aggregating the
expected tax credits/(charges) arising in each company in the Group and
changes each year as tax rates and profit mix change. The corporate tax rates
for the Group's main countries of operation are Spain 25% (2020: 25%), the UK
19% (2020: 19%) and Ireland 12.5% (2020:
12.5%).
(2 ) Refer to notes 2 and 36 for the change in accounting policy
relating to pension administration costs.
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 2021 2020
Payroll-related taxes 310 400
UK Air Passenger Duty 204 307
514 707
f Factors that may affect future tax charges
Unrecognised deductible temporary differences and losses
€ million 2021 2020
Income tax losses
Spanish corporate income tax losses 1,993 848
Openskies SASU trading losses 390 450
UK trading losses 72 39
Other tax losses 3 -
2,458 1,337
Other losses and temporary differences
Spanish deductible temporary differences 648 1,287
UK capital losses 361 350
Irish capital losses 17 25
1,026 1,662
None of the unrecognised temporary differences have an expiry date. Further
information with regard to the sensitivity of the recoverability of deferred
tax assets is given in note 2.
Unrecognised temporary differences - investment in subsidiaries and associates
No deferred tax liability has been recognised in respect of €617 million
(2020: €547 million) of temporary differences relating to subsidiaries and
associates. The Group either controls the reversal of these temporary
differences and it is probable that they will not reverse in the foreseeable
future or no tax consequences would arise from their reversal to a material
extent.
Tax rate changes
On March 3, 2021 the UK Chancellor announced that legislation would be
introduced in the Finance Bill 2021 to set the main rate of corporation tax at
25 per cent from April 2023. On May 24, 2021 the Finance Bill was
substantively enacted, which has led to the remeasurement of deferred tax
balances and will increase the Group's future current tax charge accordingly.
As a result of the remeasurement of deferred tax balances in UK entities, a
credit of €78 million is recorded in the Income statement and a credit of
€61 million is recorded in Other comprehensive income.
On October 8, 2021 Ireland announced that it would increase the rate of
corporation tax for certain multinational businesses to 15 per cent with
effect from 2023. This expected tax rate change has not been reflected in
these results because it has not yet been substantively enacted. The effect of
the proposed rate change is not expected to be material over the period of the
management approved business plan.
Tax policy developments
The Group is monitoring the OECD's proposed two-pillar solution to address the
tax challenges arising from the digitalisation of the economy. This proposed
reform to the international tax system addresses the geographical allocation
of profits for the purposes of taxation, and is designed to ensure that
multinational enterprises will be subject to a minimum 15 per cent effective
tax rate. The new framework is expected to be enacted in 2022, and effective
from 2023. The implications for the Group will be determined when the relevant
legislation is available.
g Tax-related contingent liabilities
The Group has certain contingent liabilities, across all taxes, which at
December 31, 2021 amounted to €106 million (December 31, 2020: €166
million). No material losses are likely to arise from such contingent
liabilities. As such the Group does not consider it appropriate to make a
provision for these amounts. Included in the tax related contingent
liabilities is the following:
Merger gain
Following tax audits covering the period 2011 to 2014, the Spanish Tax
Authorities issued a corporate income tax assessment to the Company regarding
the merger in 2011 between British Airways and Iberia. The maximum exposure in
this case is €95 million (December 31, 2020: €92 million), being the
amount in the tax assessment with an estimate of the interest accrued on that
assessment through to December 31, 2021.
The Company appealed the assessment to the Tribunal Económico-Administrativo
Central or 'TEAC' (Central Administrative Tax Tribunal). On October 23, 2019
the TEAC ruled in favour of the Spanish Tax Authorities. The Company
subsequently appealed this ruling to the Audiencia Nacional (National High
Court) on December 20, 2019, and on July 24, 2020 filed submissions in support
of its case. The Company does not expect a hearing at the National High Court
until the second half of 2022 at the earliest.
The Company disputes the technical merits of the assessment and ruling of the
TEAC, both in terms of whether a gain arose and in terms of the quantum of any
gain. The Company believes that it has strong arguments to support its
appeals. The Company does not consider it appropriate to make a provision for
these amounts and accordingly has classified this matter as a contingent
liability.
11 Earnings per share
€ million 2021 2020(1)
Losses attributable to equity holders of the parent for basic losses (2,933) (6,935)
Diluted losses attributable to equity holders of the parent and diluted losses (2,933) (6,935)
per share
2021 2020
Number Number
'000 '000(1)
Weighted average number of ordinary shares in issue(2) 4,963,945 3,528,052
Weighted average number for diluted loss per share 4,963,945 3,528,052
€ cents 2021 2020(1)
Basic loss per share (59.1) (196.6)
Diluted loss per share (59.1) (196.6)
(1 ) Earnings per share information has been restated for the
comparative period presented for the effects of the change in accounting
policy in respect to pension administration costs (note 2).
(2 ) In 2020, includes 734,657 thousand shares as the weighted
average impact for 2,979,443 thousand new ordinary shares issued through the
rights issue (note 29).
The effect of the assumed conversion of the IAG €500 million convertible
bond 2022, the IAG €825 million convertible bond 2028 and outstanding
employee share schemes is antidilutive for the year to December 31, 2021, and
therefore has not been included in the diluted loss per share calculation.
The calculation of basic and diluted loss per share before exceptional items
is included in the Alternative performance measures section.
12 Dividends
The Directors propose that no dividend be paid for the year to December 31,
2021 (2020: €nil). The dividend paid in the year to December 31, 2020 of
€53 million relates to the withholding tax on the 2019 interim dividend,
which was proposed in October 2019.
The future dividend capacity of the Group is dependent on the liquidity
requirements and the distributable reserves of the Group's main operating
companies and their capacity to pay dividends to the Company, together with
the Company's distributable reserves and liquidity.
Certain debt obligations place restrictions or conditions on the payment of
dividends from the Group's main operating companies to the Company, including
a loan to British Airways partially guaranteed by UKEF and loans to Iberia and
Vueling partially guaranteed by the Instituto de Crédito Oficial (ICO) in
Spain; these loans can be repaid early without penalty at the election of each
company. In Spain, Iberia and Vueling are not permitted to make dividend
payments in the reporting period in which they are in receipt of Expedientes
de Regulación Temporal de Empleo or 'ERTE' (Temporary Employment Regulation
Records). British Airways agreed with the Trustee of its main UK defined
benefit pension scheme (NAPS) as part of an agreement to defer £450 million
of contributions that no dividends will be paid to IAG before 2024 and that
any dividends paid to IAG from 2024 will trigger a pension contribution of 50
per cent of the amount of the dividend, until the deferred pension
contributions have been paid.
13 Property, plant and equipment
€ million Fleet Property Equipment Total
Cost
Balance at January 1, 2020 29,382 3,162 1,605 34,149
Additions 2,854 84 32 2,970
Modification of leases 21 16 (1) 36
Disposals (3,878) (95) (50) (4,023)
Reclassifications (4) 8 (4) -
Exchange movements (1,439) (193) (81) (1,713)
Balance at December 31, 2020 26,936 2,982 1,501 31,419
Additions 709 38 37 784
Modification of leases 236 (2) (26) 208
Disposals (3,035) (74) (135) (3,244)
Reclassifications (4) - (1) (5)
Transfers to Non-current assets held for sale (note 16) (111) - - (111)
Exchange movements 1,265 181 74 1,520
December 31, 2021 25,996 3,125 1,450 30,571
Depreciation and impairment
Balance at January 1, 2020 12,707 1,249 1,025 14,981
Depreciation charge for the year(1) 1,659 165 93 1,917
Impairment charge for the year(1) 820 - 22 842
Disposals (2,886) (52) (44) (2,982)
Exchange movements (729) (80) (61) (870)
Balance at December 31, 2020 11,571 1,282 1,035 13,888
Depreciation charge for the year 1,500 154 84 1,738
Impairment (reversal)/charge for the year(1) (3) 19 - 16
Disposals (2,699) (63) (105) (2,867)
Modification of leases - - (14) (14)
Transfers to Non-current assets held for sale (note 16) (91) - - (91)
Exchange movements 602 81 57 740
December 31, 2021 10,880 1,473 1,057 13,410
(1 ) For details regarding the impairment reversal on fleet
assets refer to note 3 and the Alternative performance measures section. For
details regarding the operating segment in which the impairment charges arose,
refer to note 5. In 2021, certain of the impairments recorded in 2020, that
arose from the permanent grounding of specific fleet assets, were reversed. In
addition, certain fleet assets in 2020 were impaired down to their fair value,
which was determined based on independent appraisals of their market value.
Net book values
December 31, 2021 15,116 1,652 393 17,161
December 31, 2020 15,365 1,700 466 17,531
Analysis at December 31, 2021
Owned 5,736 916 330 6,982
Right of use assets (note 14) 8,626 640 37 9,303
Progress payments 748 96 26 870
Assets not in current use 6 - - 6
Property, plant and equipment 15,116 1,652 393 17,161
Analysis at December 31, 2020
Owned 5,457 920 382 6,759
Right of use assets (note 14) 9,124 695 56 9,875
Progress payments 710 85 28 823
Assets not in current use 74 - - 74
Property, plant and equipment 15,365 1,700 466 17,531
The net book value of property comprises:
€ million 2021 2020
Freehold 495 485
Right of use assets (note 14) 640 695
Long leasehold improvements >50 years 311 297
Short leasehold improvements <50 years 206 223
Property 1,652 1,700
At December 31, 2021, bank and other loans of the Group are secured on owned
fleet assets with a net book value of €3,081 million
(2020: €2,794 million).
14 Leases
a Amounts recognised in the Consolidated balance sheet
Property, plant and equipment includes the following amounts relating to right
of use assets:
€ million Fleet Property Equipment Total
Cost
Balance at January 1, 2020 13,854 882 123 14,859
Additions 1,194 58 1 1,253
Modifications of leases 21 16 (1) 36
Disposals (77) (6) (22) (105)
Reclassifications(1) (389) - 3 (386)
Exchange movements (595) (57) (5) (657)
December 31, 2020 14,008 893 99 15,000
Additions 240 15 - 255
Modification of leases 236 (2) (26) 208
Disposals (72) (12) (1) (85)
Reclassifications(1) (759) - - (759)
Exchange movements 565 55 2 622
December 31, 2021 14,218 949 74 15,241
Depreciation and impairment
Balance at January 1, 2020 4,108 108 55 4,271
Depreciation charge for the year 1,035 103 15 1,153
Impairment charge for the year(2) 161 - - 161
Disposals (53) (5) (22) (80)
Reclassifications(1) (166) - (3) (169)
Exchange movements (201) (8) (2) (211)
December 31, 2020 4,884 198 43 5,125
Depreciation charge for the year 963 87 8 1,058
Impairment charge for the year(2) 4 16 - 20
Disposals (71) (4) (1) (76)
Modification of leases - - (14) (14)
Reclassifications(1) (394) - - (394)
Exchange movements 206 12 1 219
December 31, 2021 5,592 309 37 5,938
Net book value
December 31, 2021 8,626 640 37 9,303
December 31, 2020 9,124 695 56 9,875
(1 )Amounts with a net book value of €365 million (2020:
€217 million) were reclassified from ROU assets to Owned Property, plant and
equipment at the cessation of the respective leases. The assets reclassified
relate to leases with purchase options that were grandfathered as ROU assets
upon transition to IFRS 16, for which the Group had been depreciating over the
expected useful life of the aircraft, incorporating the purchase option.
(2 )For details regarding the impairment charge on fleet assets
refer to the Alternative performance measures section.
Interest-bearing long-term borrowings includes the following amount relating
to lease liabilities:
€ million 2021 2020
January 1 10,024 11,046
Additions 310 1,179
Modifications of leases 208 20
Repayments (1,855) (1,919)
Interest expense 400 442
Disposals (8) -
Exchange movements 558 (744)
December 31 9,637 10,024
Current 1,521 1,560
Non-current 8,116 8,464
b Amounts recognised in the Consolidated income statement
€ million 2021 2020
Amounts not included in the measurement of lease liabilities
Variable lease payments 1 1
Expenses relating to short-term leases 26 42
Expenses relating to leases of low-value assets, excluding short-term leases - -
of low-value assets
Amounts expensed as a result of the recognition of ROU assets and lease
liabilities
Interest expense on lease liabilities 400 442
Gain arising from sale and leaseback transactions (6) (10)
Depreciation charge for the year 1,058 1,153
Impairment charge for the year 20 161
During 2020 the IASB issued 'COVID-19 related rent concessions - amendment to
IFRS 16 Leases' to provide a practical expedient to lessees from applying IFRS
16 guidance on lease modification accounting for rent concessions for those
lease modifications arising as a direct result of COVID-19. During 2021, the
IASB extended the period for the application of the practical expedient.
The Group has applied this practical expedient to all such modifications in
the preparation of the consolidated financial statements. The net impact on
the Income statement for 2021 has been a credit of €8 million (2020: credit
of €2 million) reflecting the changes to lease payments that arose from such
concessions.
c Amounts recognised in the Consolidated cash flow statement
The Group had total cash outflows for leases of €1,912 million in 2021
(2020: €1,997 million).
The Group had total cash inflows associated with sale and leaseback
transactions of €213 million in 2021 (2020: €898 million).
The Group is exposed to future cash outflows (on an undiscounted basis) as at
December 31, 2021, for which no amount has been recognised in relation to
leases not yet commenced to which the Group is committed, of €nil (2020:
€183 million).
d Maturity profile of the lease liabilities
The maturity profile of the lease liabilities is disclosed in note 27f.
e Extension options
The Group has certain leases which contain extension options exercisable by
the Group prior to the non-cancellable contract period. Where practicable, the
Group seeks to include extension options in new leases to provide operational
flexibility. The Group assesses at lease commencement whether it is reasonably
certain to exercise the extension options.
The Group is exposed to future cash outflows (on an undiscounted basis) as at
December 31, 2021, for which no amount has been recognised, for potential
extension options of €795 million (2020: €998 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.
Operating leases
Rental income from operating leases recognised by the Group in 2021 was €nil
(2020: €nil). Rental income is recorded within Property, IT and other within
the Income statement.
The following table sets out a maturity analysis of operating lease receipts,
showing the undiscounted lease receipts to be received after the reporting
date:
€ million 2021 2020
Within one year 4 -
One to two years 5 -
Two to five years 2 -
More than five years - -
Total 11 -
15 Capital expenditure commitments
Capital expenditure authorised and contracted for but not provided for in the
accounts amounts to €10,911 million (December 31, 2020: €10,545 million).
The majority of capital expenditure commitments are denominated in US dollars,
and as such are subject to changes in exchange rates.
The outstanding commitments include €10,813 million for the acquisition of
22 Airbus A320s (from 2022 to 2025), 34 Airbus A321s (from 2022 to 2024), 26
Airbus A350s (from 2022 to 2025), 18 Boeing 777-9s (from 2025 to 2027) and 10
Boeing 787s (from 2022 to 2024). The Group has certain rights to cancel
commitments in the event of significant delays to aircraft deliveries caused
by the aircraft manufacturers. No such rights had been exercised as at
December 31, 2021.
16 Non-current assets held for sale
The non-current assets held for sale of €20 million represent three Airbus
A321-200 aircraft. No gain or loss was recognised on classification as
non-current assets held for sale. These aircraft are presented within the Aer
Lingus segment and will exit the business within 12 months of December 31,
2021.
17 Intangible assets and impairment review
a Intangible assets
€ million Goodwill Brand Customer loyalty programmes Landing rights(1) Software Other Total
Cost
Balance at January 1, 2020 598 451 253 1,616 1,376 282 4,576
Additions - - - - 141 51 192
Disposals - - - - (18) (121) (139)
Reclassifications - - - - 43 (46) (3)
Exchange movements (5) - - (61) (68) (5) (139)
Balance at December 31, 2020 593 451 253 1,555 1,474 161 4,487
Additions - - - - 149 34 183
Disposals - - - (6) (19) (49) (74)
Exchange movements 3 - - 56 70 3 132
December 31, 2021 596 451 253 1,605 1,674 149 4,728
Amortisation and impairment
Balance at January 1, 2020 249 - - 115 710 60 1,134
Amortisation charge for the year - - - 6 151 4 161
Impairment charge for the year - - - 15 20 - 35
Disposals - - - - (7) - (7)
Exchange movements - - - (4) (38) (2) (44)
Balance at December 31, 2020 249 - - 132 836 62 1,279
Amortisation charge for the year - - - 6 167 5 178
Disposals - - - - (13) - (13)
Exchange movements - - - 4 42 (1) 45
December 31, 2021 249 - - 142 1,032 66 1,489
Net book values
December 31, 2021 347 451 253 1,463 642 83 3,239
December 31, 2020 344 451 253 1,423 638 99 3,208
(1 )The net book value includes non-UK and non-EU based landing
rights of €75 million (2020: €81 million) that have a definite life. The
remaining average life of these landing rights is 14 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 Landing rights Brand Customer loyalty programmes Total
2021
Iberia
January 1 and December 31, 2021 - 423 306 - 729
British Airways
January 1, 2021 44 763 - - 807
Disposals - (6) - - (6)
Exchange movements 3 52 - - 55
December 31, 2021 47 809 - - 856
Vueling
January 1 and December 31, 2021 28 94 35 - 157
Aer Lingus
January 1 and December 31, 2021 272 62 110 - 444
IAG Loyalty
January 1 and December 31, 2021 - - - 253 253
December 31, 2021 347 1,388 451 253 2,439
€ million Goodwill Landing rights Brand Customer loyalty programmes Total
2020
Iberia
January 1 and December 31, 2020 - 423 306 - 729
British Airways
January 1, 2020 49 816 - - 865
Exchange movements (5) (53) - - (58)
December 31, 2020 44 763 - - 807
Vueling
January 1 and December 31, 2020 28 94 35 - 157
Aer Lingus
January 1 and December 31, 2020 272 62 110 - 444
IAG Loyalty
January 1 and December 31, 2020 - - - 253 253
Other CGUs
January 1, 2020 - 12 - - 12
Impairment charge for the year - (12) - - (12)
January 1 and December 31, 2020 - - - - -
December 31, 2020 344 1,342 451 253 2,390
Basis for calculating recoverable amount
The recoverable amounts of 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, 20 per
cent to the downside case and 10 per cent to the downside lockdown case. Cash
flow projections are based on the business plans approved by the relevant
operating companies covering a three-year period. Cash flows extrapolated
beyond the three-year period are projected to increase based on long-term
growth rates. Cash flow projections are discounted using each CGU's pre-tax
discount rate.
Annually the relevant operating companies prepare and approve three-year
business plans, and the Board approved the Group three-year business plan in
the fourth quarter of the year. Adjustments have been made to the terminal
year of the business plan cash flows to incorporate the impacts of climate
change that the Group can reliably estimate at the reporting date. However,
given the long-term nature of the Group's sustainability commitments, there
are other aspects of these commitments that cannot be reliably estimated and
accordingly have been excluded from the value-in-use calculations (refer to
note 4). The business plan cash flows used in the value-in-use calculations
also reflect all restructuring of the business where relevant that has been
approved by the Board and which can be executed by management under existing
agreements.
Key assumptions
The value-in-use calculations for each CGU reflected the increased risks
arising from COVID-19, including updated projected cash flows for the
decreased activity from 2022 through to the end of 2024 and an increase in the
pre-tax discount rates to incorporate increased equity market volatility. For
each of the Group's CGUs the key assumptions used in the value-in-use
calculations are as follows:
2021
Per cent British Airways Iberia Vueling Aer Lingus IAG Loyalty
Operating margin(1) 3-13 2-12 2-11 0-14 22-24
ASKs as a proportion of 2019(1,2) 75-103 77-100 97-119 84-115 n/a
Long-term growth rate 1.9 1.7 1.6 1.7 1.6
Pre-tax discount rate 11.8 11.4 11.1 10.1 12.0
2020
Per cent British Airways Iberia Vueling Aer Lingus IAG Loyalty
Operating margin(1) (20)-16 (12)-11 (22)-12 (14) -13 25-27
ASKs as a proportion of 2019(1,2) 45-95 49-98 46-107 40-100 n/a
Long-term growth rate 2.1 2.0 1.8 1.9 2.0
Pre-tax discount rate 11.2 11.6 11.5 10.4 10.3
(1 ) Operating margin and ASKs as a proportion of 2019 are both
stated as the weighted average derived from the multi-scenario discounted cash
flow model.
(2 ) In prior periods the Group applied the average ASK growth
per annum as a key assumption. Given the impact of COVID-19, the Group has
presented ASKs as a proportion of the level of ASKs achieved in 2019, prior to
the application of the terminal value calculation.
Jet fuel price ($ per MT) Within 12 months 1-2 years 2-3 years 3 years and thereafter
2021 690 673 659 659
2020 373 420 449 449
Forecast ASKs reflect the range of ASKs as a percentage of the 2019 actual
ASKs over the forecast period, based on planned network growth and taking into
account management's expectation of the market.
The long-term growth rate is calculated for each CGU based on the forecast
weighted average exposure in each primary market using gross domestic product
(GDP) (source: Oxford Economics). The terminal value cash flows and long term
growth rate incorporate the impacts of climate change insofar as they can be
determined (note 4). The airlines' network plans are reviewed annually as part
of the Business plan and reflect management's plans in response to specific
market risk or opportunity.
Pre-tax discount rates represent the current market assessment of the risks
specific to each CGU, taking into consideration the time value of money and
underlying risks of its primary market. The discount rate calculation is based
on the circumstances of the airline industry, the Group and the CGU. It is
derived from the weighted average cost of capital (WACC). The WACC takes into
consideration both debt and equity available to airlines. The cost of equity
is derived from the expected return on investment by airline investors and the
cost of debt is derived from both market data and the Group's existing debt
structure. CGU-specific risk is incorporated by applying individual beta
factors which are evaluated annually based on available market data. The
pre-tax discount rate reflects the timing of future tax flows.
Jet fuel price assumptions are derived from forward price curves in the fourth
quarter of each year and sourced externally. The cash flow forecasts reflect
these price increases after taking into consideration of level of fuel
derivatives and their associated prices that the Group has in place.
Summary of results
At December 31, 2021 management reviewed the recoverable amount of each of the
CGUs and concluded the recoverable amounts exceeded the carrying values.
Reasonable possible changes in key assumptions, both individually and in
combination, have been considered for each CGU, where applicable, which
include reducing the operating margin by 2 percentage points in each year,
ASKs by 5 per cent in each year, long-term growth rates in the terminal value
calculation to zero, increasing pre-tax discount rates by 2.5 percentage
points, changing the weighting of the base case and the downside case to be
100 per cent weighted towards the downside lockdown case, and increasing the
fuel price by 40 per cent with no assumed cost recovery. Given the inherent
uncertainty associated with the impact of climate change, these sensitivities
represent a reasonably possible greater impact of climate change on the CGUs
than that included in the impairment models.
For the British Airways, Iberia, Vueling and Aer Lingus CGUs, while the
recoverable amounts are estimated to exceed the carrying amounts by €3,402
million, €2,166 million, €2,271 million and €1,614 million,
respectively, the recoverable amounts would be below the carrying amounts when
applying reasonable possible changes in assumptions in each of the following
scenarios:
• British Airways: (i) if ASKs had been five per cent lower combined with
a fuel price increase of 4 per cent; (ii) if ASKs had been five per cent lower
combined with a reduction of the long-term growth rate to 1.3 per cent; (iii)
if operating margin had been two percentage points lower; and (iv) if the fuel
price had been 11 per cent higher;
• Iberia: (i) if ASKs had been five per cent lower combined with a fuel
price increase of 15 per cent; and (ii) if the fuel price had been
21 per cent higher;
• Vueling: (i) if ASKs had been five per cent lower combined with a fuel
price increase of 32 per cent; and (ii) if the fuel price had been
39 per cent higher; and
• Aer Lingus: (i) if ASKs had been five per cent lower combined with a
fuel price increase of 23 per cent; and (ii) if the fuel price had been
31 per cent higher.
For the remainder of the reasonable possible changes in key assumptions
applied to the British Airways, Iberia and Aer Lingus CGUs and for all the
reasonable possible changes in key assumptions applied to the remaining CGUs,
no impairment arises.
For impairment charges, and impairment reversals, recognised in relation to
landing rights and fleet assets stood down permanently at December 31, 2021
and December 31, 2020, refer to note 3 and the Alternative performance
measures section.
18 Investments
a Investments in subsidiaries
The Group's subsidiaries at December 31, 2021 are listed in the Group
investments section.
All subsidiary undertakings are included in the consolidation. The proportion
of the voting rights in the subsidiary undertakings held directly do not
differ from the proportion of ordinary shares held. There have been no
significant changes in ownership interests of subsidiaries during the year.
The total non-controlling interest at December 31, 2021 is €6 million (2020:
€6 million).
British Airways Employee Benefit Trustee (Jersey) Limited, a wholly-owned
subsidiary of British Airways, governs the British Airways Plc Employee Share
Ownership Trust (the Trust). The Trust is not a legal subsidiary of IAG;
however, it is consolidated within the Group results.
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 2021 2020
Total assets 115 73
Total liabilities (85) (50)
Revenue 64 22
Profit for the year 2 1
The detail of the movement in Investment in associates and joint ventures is
shown as follows:
€ million 2021 2020
At beginning of year 29 31
Additions 9 -
Share of retained profits 2 1
Dividends received (1) (3)
Exchange movements 1 -
40 29
At December 31, 2021 there are no restrictions on the ability of associates or
joint ventures to transfer funds to the parent and there are no related
contingent liabilities.
At both December 31, 2021 and December 31, 2020 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 2021 2020
Unlisted securities 31 29
31 29
The credit relating to other equity investments was €nil (2020: €1
million).
20 Trade and other receivables
€ million 2021 2020
Amounts falling due within one year
Trade receivables 850 682
Provision for expected credit loss (115) (125)
Net trade receivables 735 557
Prepayments and accrued income 764 596
Other non-trade receivables 196 196
1,695 1,349
Amounts falling due after one year
Prepayments and accrued income 248 226
Other non-trade receivables 2 2
250 228
Movements in the provision for expected credit loss were as follows:
€ million 2021 2020
At beginning of year 125 113
Provided during the year 8 18
Released during the year (11) (2)
Receivables written off during the year (10) (1)
Exchange movements 3 (3)
115 125
Trade receivables are generally non-interest-bearing and on 30 days terms
(2020: 30 days).
The credit risk exposure on the Group's trade receivables is set out below:
December 31, 2021
€ million Current <30 days 30-180 days 180-365 days > 365 days
Trade receivables 498 132 94 10 116
Expected credit loss rate 0.2% 0.1% 1.1% 20.0% 95.7%
Provision for expected credit loss 1 - 1 2 111
December 31, 2020
€ million Current <30 days 30-180 days 180-365 days > 365 days
Trade receivables 345 114 88 11 124
Expected credit loss rate 0.9% 0.2% 1.1% 72.7% 91.1%
Provision for expected credit loss 3 - 1 8 113
21 Cash, cash equivalents and other current interest-bearing deposits
€ million 2021 2020
Cash at bank and in hand 2,569 1,882
Short-term deposits maturing within three months 5,323 3,892
Cash and cash equivalents 7,892 5,774
Current interest-bearing deposits maturing after three months 51 143
Cash, cash equivalents and other interest-bearing deposits 7,943 5,917
Cash at bank is primarily held in AAA money market funds and bank deposits.
Short-term deposits are for periods up to three months and earn interest based
on the floating deposit rates.
At December 31, 2021 the Group had no outstanding bank overdrafts (2020: nil).
Current interest-bearing deposits have maturities in excess of three months
and typically within 12 months of the reporting date and earn interest based
on the market rates available at the time the deposit was made.
At December 31, 2021 Aer Lingus held €35 million of restricted cash (2020:
€38 million) within interest-bearing deposits maturing after more than three
months to be used for employee-related obligations.
a Net debt
Movements in net debt were as follows:
€ million Balance at January 1, 2021 Cash flows Exchange movements New leases and modifications Other items Balance at December 31, 2021
Bank, other loans, asset financed liabilities and other financing liabilities 5,655 4,033 261 - 24 9,973
Lease liabilities 10,024 (1,481) 559 518 17 9,637
Cash and cash equivalents (5,774) (1,913) (205) - - (7,892)
Current interest-bearing deposits (143) 91 1 - - (51)
9,762 730 616 518 41 11,667
€ million Balance at January 1, 2020 Cash flows Exchange movements New leases and modifications Other items Balance at December 31, 2020
Bank, other loans and asset financed liabilities 3,208 2,589 (227) - 85 5,655
Lease liabilities 11,046 (1,536) (726) 1,179 61 10,024
Cash and cash equivalents (4,062) (1,940) 228 - - (5,774)
Current interest-bearing deposits (2,621) 2,366 112 - - (143)
7,571 1,479 (613) 1,179 146 9,762
22 Trade and other payables
€ million 2021 2020
Trade creditors(1) 2,068 1,609
Other creditors 898 679
Other taxation and social security 176 149
Accruals and deferred income 570 373
3,712 2,810
(1 )Trade creditors includes €89 million (2020: €55 million)
due to suppliers that have signed up to supply chain financing programmes
offered by a number of partner financial institutions. Under these programmes
either or both: (i) the suppliers can elect on an invoice-by-invoice basis to
receive a discounted early payment from the partner financial institutions
rather than being paid in line with the agreed payment terms; and/or (ii) the
Group elects on an invoice-by-invoice basis for the partner financial
institution to pay the supplier in line with the agreed payment terms and the
Group enters into payment terms with the partner financial institution of up
to 150 days with interest incurred at rates between 1.5 per cent and 3.0 per
cent.
The Group assesses the arrangement against indicators to assess if liabilities
which suppliers have transferred to the partner financial institutions under
the supplier financing programmes continue to meet the definition of trade
creditors or should be classified as borrowings. The cash flows arising from
such arrangements are reported within cash flows from operating activities or
within cash flows from financing activities, in the Consolidated cash flow
statement, depending on whether the associated liabilities meet the definition
of trade creditors or as borrowings.
At December 31, 2021 these liabilities met these criteria of Trade creditors
and are excluded from the Net debt table in note 21a.
Average payment days to suppliers - Spanish Group companies
Days 2021 2020
Average payment days for payment to suppliers 34 43
Ratio of transactions paid 32 36
Ratio of transactions outstanding for payment 78 135
€ million 2021 2020
Total payments made 3,945 3,694
Total payments outstanding 147 293
23 Deferred revenue on ticket sales
€ million Customer loyalty programmes Sales in advance of carriage Total
Balance at January 1, 2021 2,725 2,405 5,130
Revenue recognised in the Income statement(1, 2) (524) (6,518) (7,042)
Financing charge recognised in the Income statement 37 - 37
Loyalty points issued to customers 407 40 447
Cash received from customers(3, 4) - 7,689 7,689
Exchange movements 175 116 291
Balance at December 31, 2021 2,820 3,732 6,552
Analysis:
Current 2,429 3,732 6,161
Non-current 391 - 391
2,820 3,732 6,552
€ million Customer loyalty programmes Sales in advance of carriage Total
Balance at January 1, 2020 1,917 3,569 5,486
Changes in estimates - 291 291
Revenue recognised in the Income statement(1, 2) (260) (6,032) (6,292)
Loyalty points issued to customers 361 8 369
Cash received from customers(3, 4) 850 4,714 5,564
Exchange movements (143) (145) (288)
Balance at December 31, 2020 2,725 2,405 5,130
Analysis:
Current 2,252 2,405 4,657
Non-current 473 - 473
2,725 2,405 5,130
(1 )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.
(2 )Included within revenue recognised in the Income statement
during 2021 is an amount of €780 million previously held as deferred revenue
at January 1, 2021 (recognised during 2020 previously held as deferred revenue
at January 1, 2020: €2,006 million).
(3 )Included within cash received from customers at December 31,
2021 is an amount of €nil (December 31, 2020: €830 million) received from
American Express upon signing of the multi-year commercial partnership renewal
with IAG Loyalty and which unwinds over the duration of the contract term as
the associated performance obligations are fulfilled.
(4 )Cash received from customers is net of refunds.
The unsatisfied performance obligation under the Group's customer loyalty
programmes that is classified as non-current was €391 million at December
31, 2021. Of this amount, €279 million is expected to be recognised as
revenue in 1 to 5 years from the reporting date and €112 million thereafter.
Deferred revenue relating to customer loyalty programmes consists primarily of
revenue allocated to performance obligations associated with Avios. Avios are
issued by the Group's airlines through their loyalty programmes, or are sold
to third parties such as credit card providers, who issue them as part of
their loyalty programme. Avios do not have an expiry date and can be redeemed
at any time in the future. Revenue may therefore be recognised at any time in
the future.
Deferred revenue in respect of sales in advance of carriage consists of
revenue allocated to airline tickets to be used for future travel. Typically
these tickets expire within 12 months after the planned travel date, if they
are not used within that time period, however, with the significant disruption
caused by the COVID-19 pandemic, the Group has extended the expiry period up
to 24 months after the planned travel date, depending on the operating
company. In addition, the significant disruption caused by the COVID-19
pandemic led to a number of flight cancellations during both 2020 and 2021,
which entitled the customer to either a refund or the issuance of a voucher
for future redemption. Vouchers are presented within sales in advance of
carriage.
24 Other long-term liabilities
€ million 2021 2020
Non-current trade creditors 121 49
Accruals and deferred income 87 91
208 140
25 Long-term borrowings
a Total borrowings
2021 2020
€ million Current Non-current Total Current Non-current Total
Bank and other loans 761 6,724 7,485 90 2,950 3,040
Bank and other loans less than 12 months(1) - - - 329 - 329
Asset financed liabilities 171 2,244 2,415 139 2,050 2,189
Other financing liabilities(2) 73 - 73 97 - 97
Lease liabilities 1,521 8,116 9,637 1,560 8,464 10,024
Interest-bearing borrowings 2,526 17,084 19,610 2,215 13,464 15,679
(1 )Bank and other loans less than 12 months represents
borrowings with a term on inception of less than 12 months in duration.
(2 )Other financing liabilities include sale and repurchase
agreements entered into during the course of 2020 and 2021 with regard to
emission allowances and represents the amount the Group expects to repurchase
during the course of 2021 and 2022, respectively.
Long-term borrowings of the Group amounting to €2,434 million (December 31,
2020: €2,412 million) are secured on owned fleet assets with a net book
value of €2,938 million (December 31, 2020: €2,794 million). Asset
financed liabilities are all secured on the associated aircraft or other
property, plant and equipment.
b Bank and other loans
€ million 2021 2020
Floating rate GBP term loan guaranteed by UKEF(1) 2,358 -
Floating rate ICO guaranteed loans(2) 1,095 1,009
€825 million fixed rate 1.125 per cent convertible bond 2028(3) 757 -
€700 million fixed rate 3.75 per cent unsecured bond 2029(4) 710 -
€500 million fixed rate 2.75 per cent unsecured bond 2025(4) 508 -
€500 million fixed rate 0.50 per cent bond 2023(5) 499 498
€500 million fixed rate 1.50 per cent bond 2027(5) 498 497
€500 million fixed rate 0.625 per cent convertible bond 2022(6) 491 480
Floating rate euro mortgage loans secured on aircraft(7) 171 198
ISIF facility(8) 149 75
Fixed rate unsecured bonds(9) 138 137
Fixed rate unsecured US dollar mortgage loan(10) 85 97
Fixed rate Chinese yuan mortgage loans secured on aircraft(11) 11 25
Fixed rate unsecured euro loans with the Spanish State (Department of 15 24
Industry)(12)
CCFF pound sterling commercial paper(13) - 329
7,485 3,369
Less current instalments due on bank and other loans (761) (419)
6,724 2,950
1. On February 22, 2021, British Airways entered into a five-year term
loan Export Development Guarantee Facility of €2.3 billion (£2.0 billion)
underwritten by a syndicate of banks, with 80 per cent of the principal
guaranteed by UKEF. On November 1, 2021, British Airways entered into a
further 5-year term loan Export Development Guarantee Facility of €1.2
million (£1.0 billion) unwritten by a syndicate of banks, with 80 per cent of
the principal guaranteed by UKEF. The further facility had not been drawn as
at December 31, 2021. The annual rate of interest associated with the UKEF is
consistent with the prevailing market rate of interest at the time of
executing the term loan.
2. On April 30, 2020, Iberia and Vueling entered into floating rate
syndicated financing agreements of €750 million and €260 million
respectively. The loans are repayable between 2023 and 2025. The ICO in Spain
guarantees 70 per cent of the value of loans. The loans contain a number of
non-financial covenants to protect the position of the banks involved,
including restrictions on the upstreaming of cash to the rest of the IAG
companies.
3. Senior unsecured bond convertible into ordinary shares of IAG was
issued by the Group on May 11, 2021; €825 million fixed rate 1.125 per cent
raising net proceeds of €818 million and due in 2028. The Group holds an
option to redeem the convertible bond at its principal amount, together with
accrued interest, no earlier than two years prior to the final maturity date.
The bond contains dividend protection and a total of 244,850,715 options at
inception and at December 31, 2021 to convert into ordinary shares of IAG. The
Group also holds an option to redeem the convertible bond, in full or in part,
in cash in the event that bondholders exercise their right to convert the bond
into ordinary shares of IAG.
4. On March 25, 2021, the Group issued two tranches of senior unsecured
bonds for an aggregate principal amount of €1.2 billion, €500 million due
March 25, 2025 and €700 million due March 25, 2029. The bonds bear a fixed
rate of interest of 2.75 per cent and 3.75 per cent per annum, payable in
arrears, respectively. The bonds were issued at 100 per cent of their
principal amount, respectively, and, unless previously redeemed or purchased
and cancelled, will be redeemed at 100 per cent of their principal amount on
their respective maturity dates.
5. In July 2019, the Group issued two tranches of senior unsecured bonds
for an aggregate principal amount of €1 billion, €500 million due July 4,
2023 and €500 million due July 4, 2027. The bonds bear a fixed rate of
interest of 0.5 per cent and 1.5 per cent per annum annually payable in
arrears, respectively. The bonds were issued at 99.417 per cent and 98.803 per
cent of their principal amount, respectively, and, unless previously redeemed
or purchased and cancelled, will be redeemed at 100 per cent of their
principal amount on their respective maturity dates.
6. Senior unsecured bond convertible into ordinary shares of IAG was
issued by the Group in November 2015; €500 million fixed rate 0.625 per cent
raising net proceeds of €494 million and due in 2022. The Group holds an
option to redeem the convertible bond at its principal amount, together with
accrued interest, no earlier than two years prior to the final maturity date.
The bond contains dividend protection and a total of 40,306,653 options
related to the bond were outstanding at December 31, 2021.
7. Floating rate euro mortgage loans are secured on specific aircraft
assets of the Group and bear interest of between 0.04 and 1.01 per cent. The
loans are repayable between 2024 and 2027.
8. On December 23, 2020, Aer Lingus entered into a floating rate financing
agreement with the Ireland Strategic Investment Fund (ISIF) for €75 million.
On March 27, 2021, Aer Lingus entered into a further floating rate financing
agreement with the ISIF for an additional €75 million. The facility is
repayable in 2023.
9. Total of €200 million fixed rate unsecured bonds between 3.5 to 3.75
per cent coupon repayable between 2022 and 2027.
10. Fixed rate unsecured US dollar mortgage
loan bearing interest between 1.38 to 2.86 per cent. The loan is repayable
between 2023 and 2026.
11. Fixed rate Chinese yuan mortgage loans are
secured on specific aircraft assets of the Group and bear interest of 5.20 per
cent. The loans are repayable in 2022.
12. Fixed rate unsecured euro loans with the
Spanish State (Department of Industry) bear interest of between nil and 5.68
per cent and are repayable between 2021 and 2028.
13. On April 12, 2020, British Airways availed
itself of the Coronavirus Corporate Finance Facility (CCFF) implemented by the
Government of the United Kingdom. Under the CCFF, British Airways issued
commercial paper to the Government of the United Kingdom of €350 million
(£300 million). This loan was repaid in April 2021.
In addition, on March 23, 2021, the Group entered into a three-year US dollar
secured Revolving Credit Facility accessible by British Airways, Iberia and
Aer Lingus. The amount available under the facility is $1.755 billion. As at
December 31, 2021 no amounts had been drawn under the facility. Concurrent to
entering into the facility, British Airways extinguished its US dollar secured
Revolving Credit Facility due to mature in June 2021, and which had $786
million undrawn and available at December 31, 2020. While the Group does not
forecast drawing down on the Revolving Credit Facility, should it do so, the
resultant debt would be securitised against specific landing rights and
aircraft in the respective operating companies.
Details of the 2028 convertible bond
The convertible bond provides bondholders with dividend protection and
includes a total of 244,850,715 options at inception and at December 31, 2021
to convert into ordinary shares of IAG. The Group holds an option to redeem
the convertible bond at its principal amount, together with accrued interest,
no earlier than two years prior to the final maturity date. The Group also
holds an option to redeem the convertible bond, in full or in part, in cash in
the event that bondholders exercise their right to convert the bond into
ordinary shares of IAG.
The convertible bond is recorded at its fair value, which at December 31, 2021
was €756 million, representing a decrease of €69 million since issuance.
Of this decrease, the amount recorded in Other comprehensive income arising
from credit risk of the convertible bonds was
€20 million and a credit recorded within Finance costs in the Income
statement attributable to changes in market conditions of €89 million.
Transactions with unconsolidated entities
In July 2021, the Group entered into an asset-financing structure, under which
seven aircraft were financed. These transactions mature between 2031 and 2035.
This arrangement was transacted through an unconsolidated structured entity,
which in turn issued the British Airways Pass Through Certificates, Series
2021-1, commonly referred to as Enhanced Equipment Trust Certificates (EETCs).
In doing so the Group recognised €204 million of Asset financed liabilities.
In the fourth quarter of 2020, the Group entered into an asset-financing
structure, under which nine aircraft were financed. These transactions mature
between 2028 and 2032. This arrangement was transacted through an
unconsolidated structured entity, which in
turn issued the British Airways Pass Through Certificates, Series 2020-1. In
doing so the Group recognised €472 million of Asset financed liabilities.
In the third quarter of 2019, the Group entered into an asset-financing
structure, under which eight aircraft were financed, with the transactions
maturing between 2029 and 2034. This arrangement was transacted through an
unconsolidated structured entity, which in turn issued the British Airways
Pass Through Certificates, Series 2019-1. In doing so the Group recognised
€725 million of Asset financed liabilities.
As at December 31, 2021, Asset financed liabilities include cumulative amounts
of €1,489 million (2020: €1,312 million) associated with transactions with
unconsolidated structured entities having issued EETCs.
c Reconciliation of movements of liabilities to cash flows
arising from financing activities
€ million Bank, other loans and asset financed liabilities Lease liabilities Derivatives to mitigate volatility in financial liabilities Total
Balance at January 1, 2021 5,655 10,024 429 16,108
Proceeds from borrowings 4,817 - - 4,817
Repayment of borrowings (784) - - (784)
Repayment of lease liabilities - (1,481) - (1,481)
Settlement of derivative financial instruments - - (268) (268)
Total changes from financing cash flows 4,033 (1,481) (268) 2,284
Interest paid (212) (367) (26) (605)
Interest expense 307 393 - 700
New leases and lease modifications - 518 - 518
Fair value movements (69) - (286) (355)
Other non-cash movements (2) (9) 15 4
Effect of changes in foreign exchange rates 261 559 - 820
Balance at December 31, 2021 9,973 9,637 (136) 19,474
€ million Bank, other loans and asset financed liabilities Lease liabilities Derivatives to mitigate volatility in financial liabilities Share capital / premium Total
Balance at January 1, 2020 3,208 11,046 128 6,323 20,705
Proceeds from borrowings 3,567 - - - 3,567
Repayment of borrowings (978) - - - (978)
Repayment of lease liabilities - (1,536) - - (1,536)
Proceeds from rights issue - - - 2,674 2,674
Settlement of derivative financial instruments - - 59 - 59
Total changes from financing cash flows 2,589 (1,536) 59 2,674 3,786
Interest paid (117) (421) (15) - (553)
Interest expense 108 445 - - 553
New leases and lease modifications - 1,179 - - 1,179
Fair value movements - - 273 - 273
Other non-cash movements 94 37 (16) - 115
Effect of changes in foreign exchange rates (227) (726) - - (953)
Total financial liability-related other changes (142) 514 242 - 614
Total other related movements - - - (730) (730)
Balance at December 31, 2020 5,655 10,024 429 8,267 24,375
d Total loans, lease liabilities, other financing liabilities
and asset financed liabilities
Million 2021 2020
Loans
Bank:
US dollar $98 $121
Euro €1,430 €1,303
Pound sterling £2,003 £299
Chinese yuan CNY 78 CNY 201
€3,883 €1,756
Fixed rate bonds:
Euro €3,602 €1,613
€3,602 €1,613
Asset financed liabilities
US dollar $2,192 $2,080
Euro €408 €448
Japanese yen ¥8,226 ¥4,883
€2,415 €2,189
Other financing liabilities
Euro €73 €97
€73 €97
Lease liabilities
US dollar $7,709 $8,436
Euro €1,547 €1,858
Japanese yen ¥75,450 ¥74,734
Pound sterling £569 £608
€9,637 €10,024
Total interest-bearing borrowings €19,610 €15,679
26 Provisions
€ million Restoration and handback provisions Restructuring Employee leaving indemnities and other employee- related provisions Legal claims and contractual disputes provisions Other provisions Total
provisions
Net book value January 1, 2021 1,588 432 714 84 94 2,912
Reclassifications (2) - - (7) - (9)
Provisions recorded during the year 267 30 66 85 63 511
Utilised during the year (101) (171) (30) (57) (62) (421)
Release of unused amounts (41) (22) - (18) (16) (97)
Unwinding of discount 10 - 2 - - 12
Remeasurements - - (34) - - (34)
Exchange differences 111 5 2 3 4 125
Net book value December 31, 2021 1,832 274 720 90 83 2,999
Analysis:
Current 431 142 59 69 31 732
Non-current 1,401 132 661 21 52 2,267
1,832 274 720 90 83 2,999
Restoration and handback provisions
The provision for restoration and handback costs is maintained to meet the
contractual maintenance and return conditions on aircraft held under lease.
The provision also includes an amount relating to leased land and buildings
where restoration costs are contractually required at the end of the lease.
Such costs are capitalised within ROU assets. The provision is long-term in
nature, typically covering the leased asset term, which for aircraft is up to
12 years.
Included within the release of unused restoration and handback provisions is
an amount of €7 million relating to the reversal of contractual lease
provisions, which represent the estimation of the cost to fulfil the handback
conditions associated with the leased aircraft that had been permanently stood
down and impaired during the year ended December 31, 2020, which have
subsequently been stood back up with a resultant impairment reversal during
the year ended December 31, 2021.
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 2021, 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 0.00 per cent. The payments related to this provision
will continue over the next eight years.
At December 31, 2021, €270 million of this provision related to collective
redundancy programmes (2020: €428 million).
Employee leaving indemnities and other employee-related provisions
This provision includes employees leaving indemnities relating to staff under
various contractual arrangements.
The Group recognises a provision relating to flight crew who, having met
certain conditions, have the option of being placed on reserve and retaining
their employment relationship until reaching the statutory retirement age, or
taking early retirement. The Group is required to remunerate these employees
until they reach the statutory retirement age, and an initial provision was
recognised based on an actuarial valuation. The provision was reviewed at
December 31, 2021 with the use of independent actuaries using the projected
unit credit method, based on a discount rate consistent with the iBoxx index
of 0.91 per cent and 0.00 per cent (2020: iBoxx index of 0.37 per cent and
0.00 per cent) depending on whether the employees are currently active or not,
the PERM/F-2000P mortality tables, and assuming a 2 per cent annual increase
in the Consumer Price Index (CPI) in 2022 and 1.5 per cent in 2023. 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 €644 million at December 31, 2021 (2020: €654 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 its operations, including claims for additional holiday pay
and for age discrimination;
• amounts related to ongoing contractual disputes arising from the Group's
ongoing provisions; 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 pay the remaining claims and fines is subject to
uncertainty.
Other provisions
Other provisions include a provision for the Emissions Trading Scheme for
CO(2) emitted on flights within the United Kingdom and the EU in excess of the
relevant United Kingdom and EU Emission Allowances granted.
27 Financial risk management objectives and policies
The Group is exposed to a variety of financial risks: market risk (including
fuel price risk, foreign currency risk and interest rate risk), credit risk
and liquidity risk. The principal impact 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 (previously three years) within
the approved hedging profile.
The following table demonstrates the sensitivity of financial instruments to a
reasonable possible change in fuel prices, with all other variables held
constant, on result before tax and equity(1):
2021 2020
Increase/(decrease) Effect on result Effect on Increase/(decrease) Effect on result Effect on
in fuel price before tax equity in fuel price before tax equity
per cent € million € million per cent € million € million
30 - 834 30 189 525
(30) - (520) (30) (219) (664)
(1 )The sensitivity analysis on equity excludes the sensitivity
amounts recognised in the result before tax.
During the year to December 31, 2021, following a substantial recovery in the
global price of crude oil, the fair value of such net asset derivative
instruments was €288 million at December 31, 2021, representing an increase
of €1,066 million since January 1, 2021. Since the outbreak of COVID-19, a
significant proportion of the associated hedge relationships are no longer
expected to occur and subsequently fuel hedge accounting was discontinued,
with subsequent mark-to-market movements recorded in the Income statement.
However, as a result of the updated forecasts as detailed in note 3, a further
€72 million of the gains recognised in Other comprehensive income were
reclassified to the Income statement and recognised within Fuel, oil costs and
emission costs in the year to December 31, 2021.
The gain arising from the derecognition of fuel hedges has been recorded as an
exceptional item. Refer to Alternative performance measures section for
further details.
b Foreign currency risk
The Group is exposed to foreign currency risk on revenue, purchases and
borrowings that are denominated in a currency other than the functional
currency of the Group. The currencies in which these transactions are
denominated are primarily euro, US dollar and pound sterling. The Group has a
number of strategies to hedge foreign currency risk. The Group strategy is to
hedge 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, with all other variables held
constant on result before tax and equity(1). The sensitivity analysis has been
performed on interest-bearing liabilities, lease liabilities and derivatives
(both designated in hedge relationships and those not designated in hedge
relationships) denominated in foreign currencies, with the disclosure for 2020
updated to align with the current methodology. The methodology has been
updated to better reflect the foreign exchange exposures arising from the
Group's operations.
Strengthening/ Effect on result before tax Effect on equity Strengthening/ Effect on result before tax Effect on equity Strengthening/ Effect on result before tax Effect on equity
(weakening) in US dollar rate € million € million (weakening) in pound € million € million (weakening) in Japanese yen rate € million € million
per cent sterling rate per cent
per cent
2021 10 255 523 10 (10) 134 10 (17) (41)
(10) (260) (481) (10) 10 (134) (10) 17 41
2020 10 234 283 10 9 (167) 10 (16) (42)
(10) (273) (345) (10) (9) 157 (10) 16 42
(1 ) The sensitivity analysis on equity, excludes the sensitivity
amounts recognised in the result before tax.
At December 31, 2021, the fair value of foreign currency net asset derivative
instruments was €185 million, representing an increase of €652 million
since January 1, 2021. These comprise both derivatives designated in hedge
relationships and those derivatives that are not designated into a hedge
relationship at inception. As per the fuel price risk above, a significant
proportion of the derivatives designated in hedge relationships have no longer
been expected to occur and subsequently hedge accounting has been
discontinued, with subsequent mark-to-market movements recorded in the Income
statement. However, as a result of the updated forecasts as detailed in note
3, a further €5 million of the gains recognised in Other comprehensive
income were reclassified to the Income statement and recognised within Fuel,
oil costs and emission costs and within Passenger revenue. Those derivatives
not designated in a hedge relationship on inception have their mark-to-market
movements recorded directly in the Income statement and recognised within Net
currency retranslation (charges)/credits.
c Interest rate risk
The Group is exposed to changes in interest rates on debt and on cash
deposits. Interest rate risk on floating rate debt is managed through interest
rate swaps, cross currency swaps and interest rate collars.
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, on result before tax and equity(1):
Strengthening/ Effect on result before tax Effect on equity Strengthening/ Effect on result before tax Effect on equity Strengthening/ Effect on result before tax Effect on equity
(weakening) in € million € million (weakening) in € million € million (weakening) in sterling interest € million € million
US interest euro interest rate
rate rate Basis points
Basis points Basis points
2021 50 - - 50 3 10 50 (2) -
(50) - - (50) (3) (9) (50) 2 -
2020 50 - - 50 9 (8) 50 - -
(50) - - (50) (9) 7 (50) - -
(1 ) The sensitivity analysis on equity, excludes the sensitivity
amounts recognised in the result before tax.
For details regarding the Group's management of interest rate benchmark
reform, refer to note 27i.
d Credit risk
Credit risk is the risk that a counterparty will not meet its obligations
under a financial instrument or customer contract, leading to a financial
loss. The Group is exposed to credit risk from its financing activities,
including deposits with banks and financial institutions, foreign exchange
transactions and other financial instruments. The Group has policies and
procedures to monitor the risk by assigning limits to each counterparty by
underlying exposure and by operating company and by only entering into
transactions with counterparties with a very low credit risk.
At each period end, the Group assesses the effect of counterparties' and the
Group's own credit risk on the fair value of derivatives and any
ineffectiveness arising is immediately recognised in the Income statement
within Other non-operating expenses.
e Counterparty risk
The Group is exposed to the non-performance by its counterparties in respect
of financial assets receivable. The Group has policies and procedures to
monitor the risk by assigning limits to each counterparty by underlying
exposure and by operating company. The underlying exposures are monitored on a
daily basis and the overall exposure limit by counterparty is periodically
reviewed by using available market information.
The financial assets recognised in the financial statements, net of impairment
losses (if any), represent the Group's maximum exposure to credit risk,
without taking into account any guarantees in place or other credit
enhancements.
At December 31, 2021 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 2021 2020
United Kingdom 44% 53%
Spain - 3%
Ireland 18% 7%
Rest of Eurozone 34% 16%
Rest of world 4% 21%
f Liquidity risk
The Group invests cash in interest-bearing accounts, time deposits and money
market funds, choosing instruments with appropriate maturities or liquidity to
retain sufficient headroom to readily generate cash inflows required to manage
liquidity risk. The Group has also committed revolving credit facilities.
At December 31, 2021 the Group had undrawn overdraft facilities of €53
million (2020: €52 million). The Group held undrawn uncommitted money market
lines of €nil (2020: €nil).
The Group held undrawn general and committed aircraft financing facilities:
2021
Million Currency € equivalent
General facilities(1)
Euro facilities expiring between January and July 2022 €27 27
Euro facilities expiring March 2023 €60 60
US dollar facility expiring May 2022 $50 44
Pound sterling facility expiring November 2025 £1,000 1,177
US dollar facility expiring March 2024 $1,755 1,556
2,864
Committed aircraft facilities
US dollar facility expiring September 2022(2) $635 563
US dollar facilities expiring March 2024(3) $635 563
1,126
2020
Million Currency € equivalent
General facilities(1)
Euro facilities expiring between January and June 2021 €126 126
Euro facilities expiring between January and July 2022 €95 95
US dollar facility expiring June 2021 $786 643
US dollar facility expiring May 2022 $50 41
905
Committed aircraft facilities
US dollar facility expiring March 2021(2) $428 351
US dollar facilities expiring July 2023(3) $1,013 829
1,180
(1 )The general facilities can be drawn at any time at the
discretion of the Group subject to the provision of up to three days' notice
of the intended utilisation, depending on the facility.
(2 )The aircraft facility maturing in 2022 is available for
specific committed aircraft deliveries and further information is given in
note 25b.
(3 )The aircraft facilities maturing in 2024 (2020: maturing in
2023) are available for specific committed aircraft deliveries and require the
Group to give three months' notice to the counterparty of its intention to
utilise the facilities.
The following table analyses the Group's (outflows) and inflows in respect of
financial liabilities and derivative financial instruments into relevant
maturity groupings based on the remaining period at December 31 to the
contractual maturity date. The amounts disclosed in the table are the
contractual undiscounted cash flows and include interest.
€ million Within 6 months 6-12 1-2 2-5 More than 5 years Total
months years years 2021
Interest-bearing loans and borrowings:
Asset financing liabilities (122) (116) (230) (678) (1,714) (2,860)
Lease liabilities (920) (854) (1,814) (3,839) (5,524) (12,951)
Fixed rate borrowings (151) (529) (578) (690) (2,094) (4,042)
Floating rate borrowings (129) (285) (428) (3,368) (16) (4,226)
Other financing liabilities (73) - - - - (73)
Trade and other payables (3,712) - (208) - - (3,920)
Derivative financial instruments (assets):
Interest rate derivatives - 1 2 3 - 6
Foreign exchange contracts 227 52 46 1 - 326
Fuel derivatives 157 129 48 - - 334
Derivative financial instruments (liabilities):
Interest rate derivatives (12) (10) (7) (3) - (32)
Foreign exchange contracts (67) (38) (33) (6) - (144)
Fuel derivatives (14) (13) (18) - - (45)
December 31, 2021 (4,816) (1,663) (3,220) (8,580) (9,348) (27,627)
€ million Within 6 months 6-12 1-2 2-5 More than 5 years Total
months years years 2020
Interest-bearing loans and borrowings:
Asset financing obligations (101) (97) (193) (571) (1,673) (2,635)
Lease liabilities (901) (919) (1,500) (4,122) (5,962) (13,404)
Fixed rate borrowings (360) (37) (631) (666) (587) (2,281)
Floating rate borrowings (78) (32) (58) (1,179) (41) (1,388)
Other financing liabilities (97) - - - - (97)
Trade and other payables (2,810) - - - - (2,810)
Derivative financial instruments (assets):
Forward contracts 73 41 33 8 - 155
Fuel derivatives 6 2 1 - - 9
Derivative financial instruments (liabilities):
Interest rate swaps (13) (13) (25) (14) (2) (67)
Forward contracts (370) (91) (115) (56) - (632)
Fuel derivatives (423) (314) (108) (4) - (849)
At December 31, 2020 (5,074) (1,460) (2,596) (6,604) (8,265) (23,999)
g Offsetting financial assets and liabilities
The Group enters into derivative transactions under ISDA (International Swaps
and Derivatives Association) documentation. In general, under such agreements
the amounts owed by each counterparty on a single day in respect of all
transactions outstanding are aggregated into a single net amount that is
payable by one party to the other.
The following financial assets and liabilities are subject to offsetting,
enforceable master netting arrangements and similar agreements.
December 31, 2021
€ 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 628 (8) 620 (30) 590
Financial liabilities
Derivative financial liabilities 181 (8) 173 30 203
(1 ) The Group has pledged cash and cash equivalents as
collateral against certain of its derivative financial liabilities. As
December 31, 2021, the Group recognised €nil of collateral (2020: €66
million) offset in the balance sheet and €30 million (2020: €24 million)
not offset in the balance sheet.
December 31, 2020
€ 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 165 (1) 164 (13) 151
Financial liabilities
Derivative financial liabilities 1,537 (67) 1,470 (37) 1,433
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 ratio. For
the year to December 31, 2021, the net debt to EBITDA was minus 11.5 times
(2020: minus 4.3 times). The definition and calculation for this performance
measure is included in the Alternative performance measures section.
Further detail on liquidity and capital resources and capital risk management
is disclosed in the going concern section in note 2.
i Managing interest rate benchmark reform and associated
risks
Overview
A reform of major interest rate benchmarks is being undertaken globally,
including the replacement of certain interbank offered rates (IBORs) with
alternative nearly risk-free rates (referred to as 'IBOR reform'). The Group
has exposures to IBORs on its financial instruments that are expected to
mature subsequent to December 31, 2021, and as such will be replaced as part
of these market-wide initiatives. The Group anticipates that IBOR reform will
impact its risk management and hedge accounting.
During 2020 the Group established an IBOR transition working group and project
plan, led by Group Treasury. This project has and continues to consider the
required changes to systems, processes, risk management and valuation models,
as well as managing any accounting and tax implications. During the course of
2021, the Group, and the counterparties to the financial instruments, have
transitioned the majority of such instruments to an alternative benchmark rate
and in order to enable such transitions, changes to systems, processes and
models have been implemented. Those financial instruments that have not
transitioned at December 31, 2021 predominantly relate to those with a US
dollar LIBOR component, which is not expected to convert to an alternative
risk-free rate until mid-2023, subject to further consultation.
In addition, during 2021, the Group has enquired of the trustees of the
Group's pension schemes to understand the status of their IBOR transitions, if
any. The Group has satisfied itself that all material derivative financial and
non-derivative financial instruments with an IBOR component have been
transitioned to an alternative benchmark at December 31, 2021.
Reforms to the Euro Interbank Offered Rate (EURIBOR) methodology to enable it
to meet the criteria of a risk-free rate were completed in 2019. As such the
Group expects to continue to utilise financial instruments with a EURIBOR
component without transitioning to an alternative benchmark rate.
Derivative and non-derivative financial instruments and hedge accounting
While the Group has transitioned a number of its derivative and non-derivative
financial instruments to an alternative benchmark rate, certain interest rate
swap derivative financial instruments and non-derivative financial instruments
continue to have their floating legs indexed to US dollar LIBOR. These
derivative financial instruments continue to be recognised as hedging
instruments in hedge relationships, with the hedged item being those
non-derivative financial instruments indexed to US dollar LIBOR.
For such derivative financial instruments the Group has evaluated the extent
to which its cash flow hedging relationships are subject to uncertainty driven
by IBOR reform as at December 31, 2021. As part of this evaluation, the Group
has applied the hedging relief provided by the IFRS 9 amendments for IBOR
reform Phase 1.
There remains uncertainty about when and how replacement may occur with
respect to the relevant hedged items and hedging instruments. Such uncertainty
may impact the hedging relationship. Hedging relationships impacted by IBOR
reform may experience ineffectiveness attributable to market participant's
expectations of when the change in rates will occur, which may differ between
the hedged item and the hedging instrument.
The table below provides an overview of the IBOR-related exposures as at
December 31, 2021. Non-derivative financial instruments are presented on the
basis of their carrying values, while derivative financial instruments are
presented on the basis of their nominal amounts.
€ million Non-derivative financial instruments - carrying value(1) Derivative financial instruments - nominal amount
GBP LIBOR - -
USD LIBOR 600 782
Other LIBOR - -
(1 ) Non-derivative financial instruments include floating rate
borrowings, asset financed liabilities and lease liabilities.
The principal outstanding IBOR-related exposures relate to those lease
liabilities with a USD LIBOR component. The Group has such leases with a
limited number of counterparties for which the Group expects to transition to
an alternative benchmark by June 30, 2023.
28 Financial instruments
a Financial assets and liabilities by category
The detail of the Group's financial instruments at December 31, 2021 and
December 31, 2020 by nature and classification for measurement purposes is as
follows:
December 31, 2021
Financial assets
( )€ million Amortised cost Fair value through Other comprehensive income Fair value through Income statement Non-financial Total
assets carrying
amount by
balance sheet
item
Non-current assets
Other equity investments - 31 - - 31
Derivative financial instruments - - 77 - 77
Other non-current assets 126 10 - 114 250
( )
Current assets
Trade receivables 735 - - - 735
Other current assets 363 - - 597 960
Derivative financial instruments - - 543 - 543
Other current interest-bearing deposits 51 - - - 51
Cash and cash equivalents 7,892 - - - 7,892
( ) Financial liabilities
( )€ million Amortised cost Fair value through Other comprehensive income Fair value through Income statement Non- Total
financial carrying
liabilities amount by
balance sheet
item
Non-current liabilities
Lease liabilities 8,116 - - - 8,116
Interest-bearing long-term borrowings 8,220 - 748 - 8,968
Derivative financial instruments - - 47 - 47
Other long-term liabilities 132 - - 76 208
( )
Current liabilities
Lease liabilities 1,521 - - - 1,521
Current portion of long-term borrowings 996 - 9 - 1,005
Trade and other payables 3,506 - - 206 3,712
Derivative financial instruments - - 126 - 126
December 31, 2020
Financial assets
€ million Amortised cost Fair value through Other comprehensive income Fair value through Income statement Non-financial assets Total carrying amount by balance sheet item
Non-current assets
Other equity investments - 29 - - 29
Derivative financial instruments - - 42 - 42
Other non-current assets 119 10 - 99 228
( )
Current assets
Trade receivables 557 - - - 557
Other current assets 350 - - 442 792
Derivative financial instruments - - 122 - 122
Other current interest-bearing deposits 143 - - - 143
Cash and cash equivalents 5,774 - - - 5,774
Financial liabilities
€ million Amortised cost Fair value through Other comprehensive income Fair value through Income statement Non- Total
financial carrying
liabilities amount by
balance sheet
item
Non-current liabilities
Lease liabilities 8,464 - - - 8,464
Interest-bearing long-term borrowings 5,000 - - - 5,000
Derivative financial instruments - - 310 - 310
Other long-term liabilities 80 - - 533 613
( )
Current liabilities
Lease liabilities 1,560 - - - 1,560
Current portion of long-term borrowings 655 - - - 655
Trade and other payables 2,572 - - 238 2,810
Derivative financial instruments - - 1,160 - 1,160
b Fair value of financial assets and financial liabilities
The fair values of the Group's financial instruments are disclosed in
hierarchy levels depending on the nature of the inputs used in determining the
fair values and using the following methods and assumptions:
Level 1: Quoted prices (unadjusted) in active markets for identical assets and
liabilities. A market is regarded as active if quoted prices are readily and
regularly available from an exchange, dealer, broker, industry group, pricing
service, or regulatory agency, and those prices represent actual and regularly
occurring market transactions on an arm's length basis. Level 1 methodologies
(market values at the balance sheet date) were used to determine the fair
value of listed asset investments classified as equity investments and listed
interest-bearing borrowings. The fair value of financial liabilities and
financial assets incorporates own credit risk and counterparty credit risk,
respectively.
Level 2: Inputs other than quoted prices included within Level 1 that are
observable for the asset or liability, either directly or indirectly. The fair
value of financial instruments that are not traded in an active market is
determined by valuation techniques. These valuation techniques maximise the
use of observable market data where it is available and rely as little as
possible on entity-specific estimates.
Derivative instruments are measured based on the market value of instruments
with similar terms and conditions using forward pricing models, which include
forward exchange rates, forward interest rates, forward fuel curves and
corresponding volatility surface data at the reporting date. The fair value of
derivative financial assets and liabilities are determined as follows,
incorporating adjustments for own credit risk and counterparty credit risk:
• commodity reference contracts including swaps and options transactions,
referenced to (i) CIF NWE cargoes jet fuel; (ii) ICE Gasoil ; (iii) ICE Brent;
(iv) ICE Gasoil Brent crack; (v) Jet Differential and (vi) Jet fuel Brent
crack - the mark-to-market valuation prices are determined by reference to
current forward curve and standard option pricing valuation models, values are
discounted to the reporting date based on the corresponding interest rate;
• currency forward and option contracts - by reference to current forward
prices and standard option pricing valuation models, values are discounted to
the reporting date based on the corresponding interest rate; and
• interest rate swap contracts - by discounting the future cash flows of
the swap contracts at market interest rate valued with the current forward
curve.
The fair value of the Group's interest-bearing borrowings including leases is
determined by discounting the remaining contractual cash flows at the relevant
market interest rates at the balance sheet date. The fair value of the Group's
interest-bearing borrowings is adjusted for own credit risk.
Level 3: Inputs for the asset or liability that are not based on observable
market data. The principal method of such valuation is performed using a
valuation model that considers the present value of the dividend cash flows
expected to be generated by the associated assets.
The fair value of cash and cash equivalents, other current interest-bearing
deposits, trade receivables, other current assets and trade and other payables
approximate their carrying value largely due to the short-term maturities of
these instruments.
The carrying amounts and fair values of the Group's financial assets and
liabilities at December 31, 2021 are as follows:
Fair value Carrying
value
€ million Level 1 Level 2 Level 3 Total Total
Financial assets
Other equity investments - - 31 31 31
Derivative financial assets:
Interest rate swaps(1) - 5 - 5 5
Foreign exchange contracts(1) - 314 - 314 314
Fuel derivatives(1) - 301 - 301 301
Financial liabilities
Interest-bearing loans and borrowings:
Asset financed liabilities - 2,583 - 2,583 2,415
Fixed rate borrowings 3,492 265 - 3,757 3,863
Floating rate borrowings - 3,622 - 3,622 3,622
Other financing liabilities - 73 - 73 73
Derivative financial liabilities:
Interest rate derivatives(2) - 31 - 31 31
Foreign exchange contracts(2) - 129 - 129 129
Fuel derivatives(2) - 13 - 13 13
(1 )Current portion of derivative financial assets is €543
million.
(2 )Current portion of derivative financial liabilities is
€126 million.
The carrying amounts and fair values of the Group's financial assets and
liabilities at December 31, 2020 are set out below:
Fair value Carrying value
€ million Level 1 Level 2 Level 3 Total Total
Financial assets
Other equity investments - - 29 29 29
Derivative financial assets:
Interest rate swaps(1) - 1 - 1 1
Foreign exchange contracts(1) - 154 - 154 154
Fuel derivatives(1) - 9 - 9 9
Financial liabilities
Interest-bearing loans and borrowings:
Asset financed liabilities - 2,417 - 2,417 2,189
Fixed rate borrowings 1,510 560 - 2,070 2,163
Floating rate borrowings - 1,206 - 1,206 1,206
Other financing liabilities - 97 - 97 97
Derivative financial liabilities:
Interest rate derivatives(2) - 63 - 63 63
Foreign exchange contracts(2) - 620 - 620 620
Fuel derivatives(2) - 787 - 787 787
(1 )Current portion of derivative financial assets is €122
million.
(2 )Current portion of derivative financial liabilities is
€1,160 million.
There have been no transfers between levels of fair value hierarchy during the
year.
Financial assets, other equity instruments, financial liabilities and
derivative financial assets and liabilities are all measured at fair value in
the consolidated financial statements. Interest-bearing borrowings, with the
exception of the IAG €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 2021 2020
Opening balance for the year 29 72
Additions 2 3
Losses recognised in other comprehensive income - (44)
Exchange movements - (2)
Closing balance for the year 31 29
d Hedges
Cash flow hedges
At December 31, 2021 the Group's principal risk management activities that
were hedging future forecast transactions were:
• Foreign exchange contracts, hedging foreign currency exchange risk on
revenue cash inflows and certain operational payments. Remeasurement gains and
losses on the derivatives are (i) recognised in equity and transferred to the
Income statement, where the hedged item is recorded directly in the Income
statement, to the same caption as the underlying hedged item is classified;
(ii) recognised in equity and transferred to the Balance sheet, where the
hedged item is a non-financial asset or liability, are recorded to the Balance
sheet to the same caption as the hedged item is recognised; and (iii)
recognised in equity and transferred to the Income statement, where the hedged
item is a financial asset or liability, at the same time as the financial
asset or liability is recorded in the Income statement. Reclassification gains
and losses on derivatives, arising from the discontinuance of hedge
accounting, are recognised in the Income statement when the future transaction
is no longer expected to occur and recorded in the relevant Income statement
caption to which the hedged item is classified;
• Forward crude, gas oil and jet kerosene derivative contracts, hedging
price risk on fuel expenditure. Remeasurement gains and losses on the
derivatives are recognised in equity and transferred to the Income statement
within Fuel, oil costs and emissions charges to match against the related fuel
cash outflow. 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 Income statement within Passenger revenue
when the loan repayments are made (generally in instalments over the life of
the loan).
The amounts included in equity including the periods over which the related
cash flows are expected to occur are summarised below:
(Gains)/losses in respect of cash flow hedges included within equity 2021 2020
€ million
Loan repayments to hedge future revenue 98 220
Foreign exchange contracts to hedge future revenue and expenditure(1) 25 168
Crude, gas oil and jet kerosene derivative contracts(1) (276) 295
Derivatives used to hedge interest rates(1) 58 66
Instruments for which hedge accounting no longer applies(1, 2) 247 276
152 1,025
Related deferred tax credit (24) (168)
Total amount included within equity 128 857
(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 transaction remains expected to occur.
The notional amounts of significant financial instruments used as cash flow
hedging instruments are set out below, with the prior period presentation
amended to reflect the current presentation:
Notional principal amounts Average hedge rate Hedge range Within 1 year 1-2 years 2-5 years 5+ years Total
(€ million)
December 31, 2021
Foreign exchange contracts to hedge future revenue and expenditure from US 1.31 1.15 to 1.45 2,606 1,030 42 - 3,678
dollars to pound sterling(3)
Foreign exchange contracts to hedge future revenue and expenditure from US 1.18 1.08 to 1.32 1,632 735 26 - 2,393
dollars to euros(3)
Foreign exchange contracts to hedge future revenue and expenditure from euros 1.23 1.08 to 1.42 396 334 543 166 1,439
to pound sterling(3)
Fuel commodity price contracts to hedge future US dollar fuel expenditure(1) 649 395 to 737 2,386 826 - - 3,212
Interest rate contracts to hedge future interest expenditure(2) 1.40 (0.03) to 3.13 3,099 1,080 738 60 4,977
(1 ) Notional amounts of fuel commodity price hedging instruments
represent 5.8 million metric tonnes of jet fuel equivalent and the hedge range
is expressed as the US dollar price per metric tonne, which for those products
typically priced in barrels, has been determined using a conversion factor of
7.88.
(2 ) The hedge range for interest rate contracts is expressed as
a percentage.
(3 ) Expenditure includes both operating and capital expenditure.
Notional principal amounts Average hedge rate Hedge range Within 1-2 years 2-5 years 5+ years Total
(€ million)
1 year December 31, 2020
Foreign exchange contracts to hedge future revenue and expenditure from US 1.31 1.15 to 1.50 2,402 1,321 442 - 4,165
dollars to pound sterling(3)
Foreign exchange contracts to hedge future revenue and expenditure from US 1.18 0.74 to 1.37 1,380 989 212 - 2,581
dollars to euros(3)
Foreign exchange contracts to hedge future revenue and expenditure from euros 1.23 1.08 to 1.42 373 359 661 309 1,702
to pound sterling(3)
Fuel commodity price contracts to hedge future US dollar fuel expenditure(1) 702 363 to 941 2,350 1,081 65 - 3,496
Interest rate contracts to hedge future interest expenditure(2) 1.47 0.08 to 3.18 3,286 1,493 862 161 5,802
(1 ) Notional amounts of fuel commodity price hedging instruments
represent 9.3 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.
(2 ) The hedge range for interest rate contracts is expressed as
a percentage.
(3 ) Expenditure includes both operating and capital expenditure.
For the year to December 31, 2021 Amounts recognised in the Income statement Fair value movements recognised in Other comprehensive income(2) Amounts reclassified to the Balance sheet
(€ million)
Ineffectiveness(1) Discontinuance of hedge accounting Recycling to the Income Statement Total recognised movements
Foreign exchange contracts to hedge future revenue and expenditure - 4 39 43 (178) (24)
Crude, gas oil and jet kerosene derivative contracts (1) 73 88 160 (737) -
Derivatives used to hedge interest rates - - (29) (29) 21 -
Loan repayments to hedge future revenue - - (15) (15) (120) -
Instruments for which hedge accounting no longer applies - - (54) (54) - -
(1) 77 29 105 (1,014) (24)
Related deferred tax (24) 166 3
Total movements recorded in the cash flow hedge reserve 81 (848) (21)
(1 ) Ineffectiveness recognised in the Income statement is
presented as Realised and Unrealised gains and losses on derivatives not
qualifying for hedge accounting within non-operating items.
(2 ) Amounts recognised in Other comprehensive income represent
gains and losses on the hedging instrument.
For the year to December 31, 2020 Amounts recognised in the Income statement Fair value movements recognised in Other comprehensive income(2) Amounts reclassified to the Balance sheet
(€ million)
Ineffectiveness(1) Discontinuance of hedge accounting Recycling to the Income Statement Total recognised movements
Foreign exchange contracts to hedge future revenue and expenditure - 54 55 109 88 32
Crude, gas oil and jet kerosene derivative contracts 2 (1,757) (461) (2,216) 2,369 -
Derivatives used to hedge interest rates - - (30) (30) 59 (32)
Loan repayments to hedge future revenue - (22) (19) (41) 123 -
Instruments for which hedge accounting no longer applies - - (63) (63) - -
2 (1,725) (518) (2,241) 2,639 -
Related deferred tax 370 (468) -
Total movements recorded in the cash flow hedge reserve (1,871) 2,171 -
(1 )Ineffectiveness recognised in the Income statement is
presented as Realised and Unrealised gains and losses on derivatives not
qualifying for hedge accounting within non-operating items.
(2 )Amounts recognised in Other comprehensive income represent
gains and losses on the hedging instrument.
The losses associated with the discontinuance of hedge accounting recognised
in the Income statement and the subsequent fair value movements of those
derivative instruments recorded in the Income statement through to the earlier
of the balance sheet date and the maturity date of the derivative are set out
below:
€ million 2021 2020
(Gains)/losses associated with the discontinuance of hedge accounting (77) 1,725
recognised in the Income statement
Fair value movements subsequently recorded in the Income statement (82) 31
Total effect of discontinuance of hedge accounting in the Income statement(1) (159) 1,756
(1 ) Refer to note 3 and the Alternative performance measures
section.
The Group has no significant fair value hedges at December 31, 2021 and 2020.
29 Share capital, share premium and treasury shares
Allotted, called up and fully paid Number of shares Ordinary share capital Share premium
'000s € million € million
January 1, 2020: Ordinary shares of €0.50 each 1,992,033 996 5,327
Share capital reduction - (797) -
Rights issue 2,979,443 298 2,443
December 31, 2020: Ordinary shares of €0.10 each 4,971,476 497 7,770
December 31, 2021: Ordinary shares of €0.10 each 4,971,476 497 7,770
a Share capital reduction
On September 8, 2020, the Company undertook a share capital reduction of
€797 million, that reduced the nominal value of each ordinary share from
€0.50 per share to €0.10 per share. A corresponding amount has been
recognised within Capital reserves (note 31).
b Rights issue
On October 2, 2020, the Company raised €2,741 million (and incurred related
transaction costs of €70 million as detailed in note 31) through a rights
issue of 2,979,443,376 new ordinary shares at a price of 92 € cents per
share on the basis of 3 shares for every 2 existing shares.
c Treasury shares
A total of 5.4 million shares (2020: 2.6 million) were issued to employees
during the year as a result of vesting of employee share schemes. At December
31, 2021 the Group held 10.2 million shares (2020: 5.1 million) which
represented 0.20 per cent (2020: 0.10 per cent) of the issued share capital of
the Company.
30 Share-based payments
The Group operates share-based payment schemes as part of the total
remuneration package provided to employees. These schemes comprise both share
option schemes where employees acquire shares at an option price and share
award plans whereby shares are issued to employees at no cost, subject to the
achievement by the Group of specified performance targets.
a IAG Performance Share Plan
The IAG Performance Share Plan (PSP) is granted to senior executives and
managers of the Group who are most directly involved in shaping and delivering
business success over the medium to long term. Since 2015, awards have been
made as nil-cost options, with a two-year holding period following the
three-year performance period, before options can be exercised. All awards
since 2015 have three independent performance measures with equal weighting:
Total Shareholder Return (TSR) relative to the STOXX Europe 600 Travel and
Leisure Index (for 2020 awards) or MSCI European Transportation Index (for
prior to 2020 awards), earnings per share, and Return on Invested Capital.
In 2020, the outstanding PSP awards granted to participants other than
Executive Directors from 2018 onwards were modified, and the resulting
incremental fair value granted of £1.61 per award is recognised over the
remaining vesting period.
b IAG Restricted Share Plan
During 2021, the Group revised its approach to long-term incentives, replacing
the existing PSP with a Restricted Share Plan proposal under the new Executive
Share Plan (RSP) approved by shareholders in June 2021. The RSP was introduced
to increase the alignment of both interests and outcomes between the Group's
senior management and shareholders through the build-up and maintenance of
senior management shareholdings and an increased focus on the long-term,
sustainable performance of the Group. Awards have been made as nil-cost
options, with a two-year holding period following the three-year performance
period, before options can be exercised. There are no performance measures
associated with the awards, although approval at the end of the vesting period
will be at the discretion of the Remuneration Committee, considering the
Group's overall performance, including financial and non-financial performance
measures over the course of the vesting period, as well as any material risk
or regulatory failures identified.
c IAG Full Potential Incentive Plan
During 2021, the Group launched the new Full Potential Incentive Plan (FPIP),
which is granted to key individuals involved in the delivery of a series of
transformation projects that will enable the Group to deliver business success
over the medium to long term. The Awards have been made as nil-cost options,
vesting in 2025 and dependent on stretch performance targets for 2024 and the
approval of the Board.
d IAG Incentive Award Deferral Plan
The IAG Incentive Award Deferral Plan (IADP) is granted to qualifying
employees based on performance and service tests. It will be awarded when an
incentive award is triggered subject to the employee remaining in employment
with the Group for three years after the grant date. The relevant population
will receive 50 per cent of their incentive award up front in cash, and the
remaining 50 per cent in shares after three years through the IADP.
e Share-based payment schemes summary
Outstanding at January 1, 2021 Granted number Lapsed number Vested number Outstanding at December 31, 2021 Exercisable December 31, 2021
'000s '000s '000s '000s '000s '000s
Performance Share Plan 32,800 - 5,768 2,326 24,706 1,748
Restricted Share Plan - 16,260 62 - 16,198 -
Full Potential Incentive Plan - 28,067 188 - 27,879 -
Incentive Award Deferral Plan 8,367 - 218 2,790 5,359 6
41,167 44,327 6,236 5,116 74,142 1,754
The weighted average share price at the date of exercise of options exercised
during the year to December 31, 2021 was £1.78 (2020: £3.89).
The fair value of equity-settled share-based payment plans determined using
the Monte-Carlo valuation model last granted in 2020, taking into account the
terms and conditions upon which the plans were granted, used the following
assumptions:
December 31, December 31,
2021 2020
Expected share price volatility (per cent) - 35
Expected comparator group volatility (per cent) - 20
Expected comparator group correlation (per cent) - 70
Expected life of options (years) - 4.6
Weighted average share price at date of grant (£) - 4.59
Weighted average fair value (£) - 1.84
Volatility was calculated with reference to the Group's weekly pound sterling
share price volatility. The expected volatility reflects the assumption that
the historical volatility is indicative of future trends, which may not
necessarily be the actual outcome. The fair value of the PSP also takes into
account a market condition of TSR as compared to strategic competitors. No
other features of share-based payment plans granted were incorporated into the
measurement of fair value.
The Group recognised a share-based payment charge of €23 million for the
year to December 31, 2021 (2020: credit of €8 million).
31 Other reserves and non-controlling interests
For the year to December 31, 2021
Other reserves
€ million Unrealised gains and losses(1) Cost of hedging reserve(2) Currency translation(3) Equity portion of convertible bond(4) Merger reserve(5) Capital reserves(6) Total other reserves Non-controlling interest
January 1, 2021 restated(7) (867) 38 (53) 62 (2,467) 867 (2,420) 6
Other comprehensive loss for the year
Cash flow hedges reclassified and reported in net loss:
Passenger revenue 18 - - - - - 18 -
Fuel and oil costs (45) - - - - - (45) -
Currency differences (15) - - - - - (15) -
Finance costs 23 - - - - - 23 -
Discontinuance of hedge accounting (62) - - - - - (62) -
Net change in fair value of cash flow hedges 848 - - - - - 848 -
Net change in fair value of cost of hedging - 10 - - - - 10 -
Cost of hedging reclassified and reported in the net profit - (12) - - - - (12) -
Fair value movements on liabilities attributable to credit risk changes (15) - - - - - (15) -
Currency translation differences - - (12) - - - (12) -
Hedges reclassified and reported in property, plant and equipment 21 (12) - - - - 9 -
December 31, 2021 (94) 24 (65) 62 (2,467) 867 (1,673) 6
Other reserves
€ million Unrealised gains and losses(1) Cost of hedging reserve(2) Currency translation(3) Equity portion of convertible bond(4) Merger reserve(5) Capital reserves(6) Total other reserves Non-controlling interest
January 1, 2020 (464) 60 160 62 (2,467) 70 (2,579) 6
Other comprehensive income for the year
Cash flow hedges reclassified and reported in net profit:
Passenger revenue 50 - - - - - 50 -
Fuel and oil costs 356 - - - - - 356 -
Currency differences 18 - - - - - 18 -
Finance costs 12 - - - - - 12 -
Discontinuance of hedge accounting 1,435 - - - - - 1,435 -
Net change in fair value of cash flow hedges (2,216) - - - - - (2,216) -
Net change in fair value of other equity investments (53) - - - - - (53) -
Net change in fair value of cost of hedging - 10 - - - - 10 -
Cost of hedging reclassified and reported in the net profit - (19) - - - - (19) -
Currency translation differences(7) - - (213) - - - (213) -
Hedges reclassified and reported in property, plant and equipment (5) (13) - - - - (18) -
Share capital reduction - - - - - 797 797 -
December 31, 2020 restated(7) (867) 38 (53) 62 (2,467) 867 (2,420) 6
(1 ) The unrealised gains and losses reserve records fair value
changes on equity investments and the portion of the amounts on hedging
instruments in cash flow hedges that are determined to be effective hedges.
The amounts at December 31, 2021 that relate to the fair value changes on
equity instruments and to the cash flow hedge reserve were €9 million credit
and €128 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 ) The equity portion of convertible bond reserve represents
the equity portion of convertible bonds issued. At December 31, 2021 and 2020,
this related to the €500 million fixed rate 0.625 per cent convertible bond
maturing 2022 (note 25).
(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 (2020: €70 million) associated with the decrease in share capital
relating to cancelled shares and a Share capital reduction reserve of €797
million (2020: 797 million) associated with a reduction in the nominal value
of the Company's share capital (note 29).
(7 ) Refer to notes 2 and 36 for the change in accounting policy
relating to pension administration costs.
32 Employee benefit obligations
The Group operates a variety of post-employment benefit arrangements, covering
both defined contribution and defined benefit schemes. The Group also has a
scheme for flight crew who meet certain conditions and therefore have the
option of being placed on reserve and retaining their employment relationship
until reaching the statutory retirement age, or taking early retirement (note
26).
Defined contribution schemes
The Group operates a number of defined contribution schemes for its employees.
Costs recognised in respect of defined contribution pension plans in Spain, UK
and Ireland for the year to December 31, 2021 were €200 million (2020:
€235 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 2004 and closed to future accrual
since 2018, resulting in a reduction of the defined benefit obligation.
Following closure members' deferred pensions will now be increased annually by
inflation up to five per cent per annum (measured using the Government's
annual Pension Increase (Review) Orders, which since 2011 have been based on
CPI).
APS and NAPS are governed by separate Trustee Boards. Although APS and NAPS
have separate Trustee Boards, much of the business of the two schemes is
common. Some main Board and committee meetings are held in tandem although
each Trustee Board reaches its decisions independently. There are three 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 payments 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 deficit.
At December 31, 2021, the triennial valuations as at March 31, 2021 were not
finalised and accordingly the latest actuarial valuations of both APS and NAPS
were performed as at March 31, 2018, which resulted in a surplus of €683
million for APS and a deficit of €2,736 million for NAPS. The actuarial
valuations performed for APS and NAPS are different to the valuation performed
as at December 31, 2021 under IAS 19 'Employee Benefits' mainly due to timing
differences of the measurement dates and to the specific scheme assumptions in
the actuarial valuation compared with IAS 19 guidance used in the accounting
valuation assumptions.
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 the British Airways other plans are fully funded, but there
are also a number of unfunded plans, where 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 APS and NAPS. Total payments for the year to
December 31, 2021 net of service costs made by the Group were €38 million
(2020: €313 million) being the employer contributions of €41 million
(2020: €318 million) less the current service cost of €3 million (2020:
€5 million) (note 32b).
Future funding arrangements
Pension contributions for APS and NAPS were determined by actuarial valuations
made at March 31, 2018, 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 2022.
Deficit contributions and deferred deficit contributions
At the date of the actuarial valuation, the actuarial deficit of NAPS amounted
to €2,736 million. In order to address the deficit in the scheme, the Group
has also committed to deficit contribution payments through to the end of the
first quarter of 2023 amounting to approximately €130 million per quarter.
The deficit contribution plan includes an over-funding protection mechanism,
based on the triennial valuation methodology for measuring the deficit,
whereby deficit contributions are paid into an escrow account if the scheme
funding position reaches 97 per cent, and 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, which includes
additional contributions equivalent to those months where contributions had
been suspended, or until such point as the scheme funding level reaches 97 per
cent.
During the year ended and as at December 31, 2021, the NAPS funding position
exceeded 100 per cent and accordingly deficit contributions were suspended. At
December 31, 2021, 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 be incorporated into future triennial
actuarial valuations.
At December 31, 2021, had the over-funding protection mechanism not been
applied, then the asset ceiling adjustment (as detailed in note 32c) would
have been €289 million higher.
On December 18, 2020 British Airways reached agreement with the Trustee of
NAPS to defer deficit contributions on an interim basis for the period between
September 1, 2020 and January 31, 2021. On February 19, 2021 British Airways
reached further agreement with the Trustee of NAPS to defer deficit
contributions previously agreed in October 2019 on the March 31, 2018
valuation, through to August 31, 2021. Under this deferral agreement, the
deferred payments will be incorporated into the future deficit payment plan
and associated deficit contributions arising from the triennial valuation of
the NAPS scheme as at March 31, 2021. The deferred deficit contribution
payments do not include an over-funding protection mechanism.
At December 31, 2021, the Group is committed to the following undiscounted
deficit payments, which are deductible for tax purposes at the statutory rate
of tax:
€ million NAPS Other schemes
Within 12 months - 4
1-2 years 397 -
2-5 years 175 -
Greater than 5 years - -
Total expected deficit payments 572 4
Deficit payments in respect of local arrangements outside of the UK have been
determined in accordance with local practice.
Under the contribution deferral agreement between British Airways and the
Trustee of NAPS, in the period up to December 31, 2023, no dividend payment is
permitted from British Airways to IAG. From 2024 onwards, any dividends paid
by British Airways will be matched by contributions to NAPS of 50 per cent of
the value of dividends paid. Any such payments to NAPS will reduce the
outstanding repayment balance and are capped at that level. The requirement to
make such payments to NAPS ceases after deferred contributions have been
repaid.
b Employee benefit scheme amounts recognised in the financial
statements
i Amounts recognised on the Balance sheet
2021
€ million APS NAPS Other Total
Scheme assets at fair value 8,869 25,055 446 34,370
Present value of scheme liabilities(4) (8,333) (22,583) (706) (31,622)
Net pension asset/(liability) 536 2,472 (260) 2,748
Effect of the asset ceiling(1) (186) (1,061) - (1,247)
Other employee benefit obligations - - (11) (11)
December 31, 2021 350 1,411 (271) 1,490
Represented by:
Employee benefit asset 1,775
Employee benefit obligation (285)
Net employee benefit asset(3, 4) 1,490
2020
€ million APS NAPS Other Total
Scheme assets at fair value 8,537 22,240 408 31,185
Present value of scheme liabilities(2, 4) (8,064) (21,778) (714) (30,556)
Net pension asset/(liability)(2) 473 462 (306) 629
Effect of the asset ceiling(1, 2) (151) (610) - (761)
Other employee benefit obligations - - (11) (11)
December 31, 2020 322 (148) (317) (143)
Represented by:
Employee benefit asset(2) 334
Employee benefit obligation(2) (477)
Net employee benefit obligation(3, 4) (143)
(1 )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.
(2 )The 2020 results have been restated for the treatment of
administration costs associated with the Group's defined benefit pension
schemes. Further information is given in note 2.
(3 )The net deferred tax asset recognised on the net employee
benefit asset (2020: obligation) was €62 million at December 31, 2021 (2020:
€322 million).
The defined benefit obligation includes €25 million (2020: €24 million)
arising from unfunded plans.
(4 )Includes Additional Voluntary Contributions (AVCs), which
the Trustees hold as assets to secure additional benefits on a defined
contribution basis for those members who elect to make such AVCs. At December
31, 2021, such assets were €391 million (2020: €436 million) with a
corresponding amount recorded in the scheme liabilities.
ii Amounts recognised in the Income statement
Pension costs charged to operating result are:
€ million 2021 2020
Defined benefit plans:
Current service cost 3 5
Past service cost(1) - 7
Administrative expenses(2) 29 25
32 37
Defined contribution plans 200 235
Pension costs recorded as employee costs 232 272
(1 ) Includes a past service credit of €nil (2020: €nil)
relating to schemes other than APS and NAPS.
(2 ) The 2020 results have been restated for the treatment of
administration costs associated with the Group's defined benefit pension
schemes. Further information is given in note 2.
€ million 2021 2020
Interest income on scheme assets (432) (599)
Interest expense on scheme liabilities(1) 425 573
Interest expense on asset ceiling 9 14
Net financing charge/(credit) relating to pensions 2 (12)
(1 )The 2020 results have been restated for the treatment of
administration costs associated with the Group's defined benefit pension
schemes. Further information is given in note 2.
iii Amounts recognised in the Statement of other comprehensive
income
€ million 2021 2020
Return on plan assets excluding interest income(1) (2,495) (2,268)
Remeasurement of plan liabilities from changes in financial assumptions 46 3,633
Remeasurement of experience losses/(gains)(1) 427 (421)
Remeasurement of the APS and NAPS asset ceilings(1) 419 (308)
Exchange movements(1) (14) 11
Pension remeasurements charged to Other comprehensive income (1,617) 647
Deferred tax arising on pension remeasurements(1) 217 (60)
Pension remeasurements charged to Other comprehensive income, net of tax (1,400) 587
(1 ) The 2020 results have been restated for the treatment of
administration costs associated with the Group's defined benefit pension
schemes. Further information is given in note 2.
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.
The strategic benchmark for asset allocations differentiate between 'return
seeking assets' and 'liability matching assets' depending on the maturity of
each scheme. At December 31, 2021, the benchmark for NAPS was 37 per cent
(2020: 42 per cent) in return seeking assets and 63 per cent (2020: 58 per
cent) in liability matching investments. Bandwidths are set around these
strategic benchmarks that allow for tactical asset allocation decisions,
providing parameters for the investment committee and their investment
managers to work within. APS no longer has a 'strategic benchmark' as instead,
APS now runs off its liquidation portfolio to a liability matching portfolio
of bonds and cash. The actual asset allocation for APS at December 31, 2021
was 1 per cent (2020: 1 per cent) in return seeking assets and 99 per cent
(2020: 99 per cent) in liability matching investments.
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 2021 2020
January 1 31,185 31,681
Interest income 432 599
Administrative expenses(2) (21) (25)
Return on plan assets excluding interest income(2) 2,495 2,268
Employer contributions(1) 41 313
Employee contributions 13 14
Benefits paid(2) (1,930) (1,528)
Exchange movements 2,155 (2,137)
December 31 34,370 31,185
(1 )Includes employer contributions to APS of €1 million
(2020: €2 million) and to NAPS of €nil (2020: €303 million) of which
deficit-funding payments represented €nil for APS (2020: €nil) and €nil
for NAPS (2020: €296 million).
(2 )The 2020 results have been restated for the treatment of
administration costs associated with the Group's defined benefit pensions
schemes. Further information is given in note 2.
iii Composition of scheme assets
Scheme assets held by the Group at December 31 comprise:
2021
€ million APS NAPS Other Total 2020(1)
Return seeking investments
Listed equities - UK - 220 4 224 1,468
Listed equities - Rest of world 12 4,222 207 4,441 4,724
Private equities 39 1,604 - 1,643 1,062
Properties 4 2,475 2 2,481 1,798
Alternative investments 53 1,829 43 1,925 880
108 10,350 256 10,714 9,932
Liability matching investments
Government issued fixed bonds 733 9,824 124 10,681 6,985
Government issued index-linked bonds 1,311 7,190 10 8,511 6,524
Asset and longevity swaps 6,351 - - 6,351 4,424
Insurance contract - - 27 27 1,660
8,395 17,014 161 25,570 19,593
Other
Cash and cash equivalents 292 837 10 1,139 949
Derivative financial instruments 84 (3,219) - (3,135) (228)
Other investments (10) 73 19 82 939
366 (2,309) 29 (1,914) 1,660
Total scheme assets 8,869 25,055 446 34,370 31,185
(1 ) The scheme assets at December 31, 2020 have been
re-presented to conform with the 2021 presentation. There has been no change
in the overall fair value of the scheme assets.
The fair values of the Group's scheme assets, which are not derived from
quoted process on active markets, are determined depending on the nature of
the inputs used in determining the fair values (see note 28b for further
details) and using the following methods and assumptions:
• Private equities are valued at fair value based on the most recent
transaction price or third-party net asset, revenue or earnings-based
valuations that generally result in the use of significant unobservable
inputs.
• 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 and the reporting
date.
• Other investments predominantly includes: interest receivable on bonds;
dividends from listed and private equities that have been declared but not
received at the balance sheet date; receivables from the sale of assets for
which the proceeds have not been collected at the balance sheet date; and
payables for the purchase of assets which have not been settled at the balance
sheet date.
• Asset and longevity swaps - APS has a contract with Rothesay Life,
entered into in 2010 and extended in 2013, which covers 25 per cent (2020: 24
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, asset swaps and longevity swaps) held by the
scheme. 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 (2020: 20 per cent) of the pensioner
liabilities for the same agreed list of members as the 2010 contract. Under
the longevity swap, to reduce the risk of long-term longevity risk, APS makes
a fixed payment to Rothesay Life each month reflecting the prevailing
mortality assumptions at the inception of the contract, and Rothesay Life make
a monthly payment to APS reflecting the actual monthly benefit payments to
members. The cash flows are settled net each month. If pensioners live longer
than expected at inception of the longevity swap, Rothesay Life will make
payments to the scheme to offset the additional cost of paying pensioners and
if pensioners do not live as long as expected, then the scheme will make
payments to Rothesay Life. The Group holds the longevity swap at fair value,
determined at the estimated discounted future cash flows.
• Insurance contract - During 2018 the Trustee of APS secured a buy-in
contract with Legal & General. The buy-in contract covers all members in
receipt of pensions from APS at March 31, 2018, excluding dependent children,
receiving a pension at that date and members in receipt of equivalent
pension-only benefits, who were alive on October 1, 2018. Benefits coming into
payment for retirements after March 31, 2018 are not covered. The contract
covers benefits payable from October 1, 2018 onwards. The policy covers
approximately 60 per cent of all benefits APS expects to pay out in future.
Along with existing contracts with Rothesay Life, APS is 90 per cent protected
against all longevity risk and fully protected in relation to all pensions
that were already being paid as at March 31, 2018. It is also more than 90 per
cent protected against interest rates and inflation (on a Retail Price Index
basis).
iv Effect of the asset ceiling
In measuring the valuation of the net defined benefit asset for each scheme,
the Group limits such measurement to the lower of the surplus in each scheme
and the respective asset ceiling. The asset ceiling represents the present
value of the economic benefits available in the form of a refund or a
reduction in future contributions after they are paid into the plan. The Group
has determined that the recoverability
of such surpluses, including minimum funding requirements, will be subject to
withholding taxes in the UK, payable by the Trustee, of
35 per cent.
The future committed NAPS deficit contributions, as detailed in note 32a, are
treated as minimum funding requirements under IAS 19 and are not recognised as
part of the scheme assets or liabilities. The Group has determined that upon
the wind up of the scheme, that if the scheme is in surplus, including the
incorporation of the minimum funding requirements, then the surplus will be
available as a refund or a reduction in future contributions after they are
paid into the scheme. The recovery of such amounts are subject to UK
withholding tax payable by the Trustee. In measuring the recoverability of the
surplus for each scheme, the Group limits such measurement to the lower of the
surplus in each scheme and the respective asset ceiling. The asset ceiling
represents the present value of the economic benefits available upon wind up
of the scheme, less the application of withholding taxes in the UK, payable by
the Trustee, at 35 per cent.
A reconciliation of the effect of the asset ceiling used in calculating the
IAS 19 irrecoverable surplus in APS and NAPS is set out below:
€ million 2021 2020
January 1(1) 761 1,130
Interest expense 9 14
Remeasurements(1) 419 (307)
Exchange movements(1) 59 (76)
December 31 1,248 761
(1 ) The 2020 results have been restated for the treatment of
administration costs associated with the Group's defined benefit pension
schemes. Further information is given in note 2.
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 2021 2020
January 1(1) 30,556 30,335
Current service cost 3 5
Past service cost/(credit) - 7
Interest expense(1) 425 573
Remeasurements - financial assumptions 46 3,633
Remeasurements of experience losses/(gains)(1) 427 (421)
Benefits paid(1) (1,930) (1,528)
Employee contributions 13 14
Exchange movements(1) 2,082 (2,062)
December 31 31,622 30,556
(1 ) The 2020 results have been restated for the treatment of
administration costs associated with the Group's defined benefit pension
schemes. Further information is given in note 2.
ii Scheme liability assumptions
The principal assumptions used for the purposes of the IAS 19 valuations were
as follows:
2021 2020
Per cent per annum APS NAPS Other schemes APS NAPS Other schemes
Discount rate(1) 1.80 1.90 0.3 - 6.5 1.20 1.40 0.5 - 2.4
Rate of increase in pensionable pay(2) 3.55 - 2.0 - 6.0 2.95 - 2.5
Rate of increase of pensions in payment(3) 3.55 2.85 2.0 - 3.0 2.95 2.25 1.1 - 3.5
RPI rate of inflation 3.55 3.3 1.8 - 2.5 2.95 2.80 2.5 - 2.7
CPI rate of inflation 2.95 2.85 1.8 - 2.5 2.25 2.25 1.1 - 3.0
(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 is assumed to be in line
with increases in RPI.
(3 ) It has been assumed that the rate of increase of pensions in
payment will be in line with CPI for NAPS and APS as at December 31, 2021.
(4 ) The rate of increase in healthcare costs for schemes based
in the United States is based on medical trend rates of 6.00 per cent grading
down to 5.00 per cent over five years (2020: 6.25 per cent to 5.00 per cent
over five years).
In the UK, mortality rates for APS and NAPS are calculated using the standard
SAPS mortality tables produced by the CMI. The standard mortality tables were
selected based on the actual recent mortality experience of members and were
adjusted to allow for future mortality changes. Life expectancy assumptions do
not reflect any adjustments for the impact of COVID-19 due to the uncertainty
of the long-term effects. The current longevities underlying the values of the
scheme liabilities were as follows:
Mortality assumptions 2021 2020
Life expectancy at age 60 for a:
• male currently aged 60 28.1 28.2
• male currently aged 40 29.9 29.9
• female currently aged 60 29.5 29.3
• female currently aged 40 31.9 31.8
For schemes in the United States, mortality rates were based on the MP-2021
mortality tables.
At December 31, 2021, the weighted-average duration of the defined benefit
obligation was 12 years for APS (2020: 12 years) and 19 years for NAPS (2020:
20 years). The weighted-average duration of the defined benefit obligations
was 11 to 23 years for other schemes (2020:
11 to 24 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 10 basis points) (35) (424) (9)
Future salary growth (increase of 10 basis points) n/a n/a (3)
Future pension growth (increase of 10 basis points) (47) (400) (4)
Future mortality rate (one year increase in life expectancy) (35) (871) (34)
Although the analysis does not take into account the full distribution of cash
flows expected under the plan, it does provide an approximation of the
sensitivity of the assumptions shown.
33 Contingent liabilities and guarantees
Details of contingent liabilities are set out below. The Group does not
consider it probable that there will be an outflow of economic resources with
regard to these proceedings and accordingly no provision for these proceedings
has been recognised.
Contingent liabilities associated with income and deferred taxes are presented
in note 10.
There are a number of other legal and regulatory proceedings against the Group
in a number of jurisdictions which at December 31, 2021 amounted to €22
million (December 31, 2020: €56 million).
The Group also has guarantees and indemnities entered into as part of the
normal course of business, which at December 31, 2021 are not expected to
result in material losses for the Group.
34 Government grants and assistance
The Group has availed itself of government grants and assistance as follows:
The Coronavirus Job Retention Scheme (CJRS) - recognised net within Employee
costs
The CJRS was implemented by the Government of the United Kingdom from March 1,
2020 to August 30, 2020, where those employees designated as being 'furloughed
workers' were eligible to have 80 per cent of their wage costs paid up to a
maximum of £2,500 per month.
From September 1, 2020 to September 30, 2020, the level of eligibility reduced
to 70 per cent of wage costs and up to a maximum of £2,197.50 per month. From
October 1, 2020 to October 31, 2020, the level of eligibility reduced to 60
per cent of wage costs and up to a maximum of £1,875 per month. Following the
introduction of further lockdown restrictions in the United Kingdom in
November 2020, the CJRS was extended from November 1, 2020 to November 30,
2020 and then further to March 31, 2021 and then further again to September
30, 2021 with the level of eligibility increased to 80 per cent of wage costs
and a maximum of £2,500 per month through to the end of June 2021. From July
1, 2021 the eligibility decreased down each month to 60 per cent of wage costs
and a maximum of £1,875 per month by September 30, 2021, at which time the
CJRS ended.
Such costs were paid by the Government to the Group in arrears. The Group was
obliged to continue to pay the associated social security costs and employer
pension contributions.
The Temporary Wage Subsidy Scheme (TWSS) and the Employment Wage Subsidy
Scheme (EWSS) - recognised net within Employee costs
The TWSS was implemented by the government of Ireland from March 1, 2020 to
August 30, 2020, where those employees designated as being furloughed workers
were eligible to have 85 per cent of their wage costs paid up to a maximum of
€410 per week. This scheme was replaced with the EWSS from September 1, 2020
and is expected to run through to April, 2022. For those qualifying employees
(earning less than €1,462 per week), the government will reimburse wage
costs up to a maximum of €203 per week. Such costs are paid by the
government to the Group in arrears.
The total amount of the relief received under the CJRS, the TWSS and the EWSS
by the Group during 2021 amounted to €286 million (2020: €344 million).
Temporary Redundancy Plan (ERTE) - no recognition in the financial statements
of the Group
The ERTE was implemented by the government of Spain from March 1, 2020 and is
expected to run through to February 28, 2022. Under this plan, employment was
temporarily suspended and those designated employees were paid directly by the
government and there was no remittance made to the Group. The Group was
obliged to continue to pay the associated social security costs.
Had those designated employees not been temporarily suspended during 2021, the
Group would have incurred further employee costs of €269 million (2020:
€214 million).
The Ireland Strategic Investment Fund (ISIF) - recognised within Long-term
borrowings
On December 23, 2020, Aer Lingus entered into a financing arrangement for
€75 million. On March 27, 2021, Aer Lingus entered into a further financing
arrangement to extend the total amount to €150 million.
The UK Export Finance (UKEF) - recognised within Long-term borrowings
On February 22, 2021, British Airways entered into a 5-year term loan Export
Development Guarantee Facility of €2.3 billion (£2.0 billion) underwritten
by a syndicate of banks, with 80 per cent of the principal guaranteed by UKEF.
The facility is unsecured.
On November 1, 2021, British Airways entered into a further 5-year term loan
Export Development Guarantee Facility of €1.2 billion (£1.0 billion)
underwritten by a syndicate of banks, with 80 per cent of the principal
guaranteed by UKEF. The facility is unsecured. At December 31, 2021 the
facility remained undrawn.
35 Related party transactions
The following transactions took place with related parties for the financial
years to December 31:
€ million 2021 2020
Sales of goods and services
Sales to associates(1) 6 12
Sales to significant shareholders(2) 16 23
Purchases of goods and services
Purchases from associates(3) 49 42
Purchases from significant shareholders(2) 69 80
Receivables from related parties
Amounts owed by associates(4) 1 1
Amounts owed by significant shareholders(5) 5 1
Payables to related parties
Amounts owed to associates(6) 3 2
Amounts owed to significant shareholders(5) 2 1
(1 ) Sales to associates: Consisted primarily of sales for
airline-related services to Dunwoody Airline Services (Holding) Limited
(Dunwoody) of €5 million (2020: €9 million), €nil (2020: €1 million)
to Viajes Ame S.A. and €1 million (2020: €1 million) to Serpista, S.A. and
Multiservicios Aeroportuarios, S.A.
(2 ) Sales to and purchases from significant shareholders related
to interline services with Qatar Airways.
(3 ) Purchases from associates: Consisted primarily of €33
million of airport auxiliary services purchased from Multiservicios
Aeroportuarios, S.A. (2020: €23 million), €8 million of handling services
provided by Dunwoody (2020: €9 million) and €8 million of maintenance
services received from Serpista, S.A. (2020: €7 million).
(4 ) Amounts owed by associates: Consisted primarily of €1
million of services provided to Multiservicios Aeroportuarios, S.A., Serpista,
S.A., Dunwoody and Empresa Hispano Cubana de Mantenimiento de Aeronaves,
Ibeca, S.A. (2020: €1 million).
(5 ) Amounts owed by and to significant shareholders related to
Qatar Airways.
(6 ) Amounts owed to associates: Consisted primarily of €3
million due to Multiservicios Aeroportuarios, S.A., Empresa Hispano Cubana de
Mantenimiento de Aeronaves, Ibeca, S.A., Viajes Ame S.A, Serpista, S.A. and
Dunwoody (2020: €2 million).
During the year to December 31, 2021 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 €6 million (2020: €7 million) in relation to the costs
of the Pension Protection Fund levy.
The Group has transactions with related parties that are conducted in the
normal course of the airline business, which include the provision of airline
and related services. All such transactions are carried out on an arm's length
basis.
For the year to December 31, 2021, the Group has not made any provision for
expected credit loss arising relating to amounts owed by related parties
(2020: nil).
Significant shareholders
In this instance, significant shareholders are those parties who have the
power to participate in the financial and operating policy decisions of the
Group, as a result of their shareholdings in the Group, but who do not have
control over these policies.
At December 31, 2021 the Group had cash deposit balances with shareholders
holding a participation of between 3 to 5 per cent, of €nil (2020: €nil).
Board of Directors and Management Committee remuneration
Compensation received by the Group's Board of Directors and Management
Committee, in 2021 and 2020 is as follows:
Year to December 31
€ million 2021 2020
Base salary, fees and benefits
Board of Directors
Short-term benefits 3 3
Share based payments - -
Management Committee
Short-term benefits 11 5
Share based payments 1 -
For the year to December 31, 2021 the Board of Directors includes remuneration
for one Executive Director (December 31, 2020: three Executive Directors). The
Management Committee includes remuneration for 14 members (December 31, 2020:
14 members).
The Company provides life insurance for all executive directors and the
Management Committee. For the year to December 31, 2021 the Company's
obligation was €35,000 (2020: €38,000).
At December 31, 2021 the transfer value of accrued pensions covered under
defined benefit pension obligation schemes, relating to the current members of
the Management Committee totalled €9 million (2020: €9 million).
No loan or credit transactions were outstanding with Directors or officers of
the Group at December 31, 2021 (2020: nil).
36 Change in accounting policy
Change in accounting policy relating to employee benefits
During the course of 2021, the Group has changed its accounting policy with
regard to the treatment of administration costs associated with the APS and
NAPS Defined benefit schemes. The change in policy has been adopted to better
reflect the underlying management and operation of these schemes, while
remaining in compliance with IAS 19. This change in accounting policy has been
applied retrospectively to the consolidated financial statements and is
detailed below.
Previously a discounted estimate of future administration costs was included
as part of the APS and NAPS defined benefit obligations. Under the updated
accounting policy, administration costs are now recognised as incurred and
included within Employee costs in the Income statement. This change has had
the effect of reducing the defined benefit obligation and increasing retained
earnings at both December 31, 2020 and January 1, 2020. It has in addition
increased the charge to Employee costs and the Financing charge relating to
pensions in the Income statement, as well as increased the Remeasurements of
post-employment benefit obligations and Currency translation differences in
the Statement of other comprehensive income for the year ended December 31,
2020.
The impact of the changes in these accounting policies on the Consolidated
income statement and the Consolidated statement of comprehensive income for
2020, as well as the Consolidated balance sheet at December 1, 2020 and
January 1, 2020 are shown below:
Consolidated income statement (extract for the year to December 31, 2020)
€ million Reported Adjustment - administration costs Restated
Total revenue 7,806 - 7,806
Employee costs 3,560 25 3,585
Other expenditure on operations 11,672 - 11,672
Total expenditure on operations 15,232 25 15,257
Operating loss (7,426) (25) (7,451)
Net financing credit relating to pensions 4 8 12
Other financing items (384) - (384)
Other non-operating items (4) - (4)
Total net non-operating costs (384) 8 (376)
Loss before tax (7,810) (17) (7,827)
Tax 887 5 892
Loss after tax for the year (6,923) (12) (6,935)
Consolidated statement of other comprehensive income (extract for the year to
December 31, 2020)
€ million Reported Adjustment - administration costs Restated
Items that may be classified subsequently to net profit
Currency translation differences (192) (21) (213)
Other items that may be classified subsequently to net profit (335) - (335)
Items that will not be reclassified to net profit
Remeasurements of post-employment benefit obligations (632) 36 (596)
Other items that will not be reclassified to net profit (72) - (72)
Total other comprehensive loss for the year, net of tax (1,231) 15 (1,216)
Loss after tax for the year (6,923) (12) (6,935)
Total comprehensive loss for the year (8,154) 3 (8,151)
Consolidated balance sheet (extract at December 31, 2020 and December 31,
2019)
€ million Reported 2020 Adjustment - administration costs(1) Restated 2020 Reported 2019 Adjustment - administration costs(1) Restated 2019
Non-current assets
Employee benefit assets 282 52 334 314 217 531
Other non-current assets 22,142 - 22,142 23,810 - 23,810
22,424 52 22,476 24,124 217 24,341
Current assets 7,840 - 7,840 11,327 - 11,327
Total assets 30,264 52 30,316 35,451 217 35,668
Other equity 8,233 - 8,233 6,269 - 6,269
Other reserves (6,917) 294 (6,623) 560 291 851
Total equity 1,316 294 1,610 6,829 291 7,120
Non-current liabilities
Employee benefit obligations 719 (242) 477 400 (74) 326
Other non-current liabilities 16,713 - 16,713 15,474 - 15,474
17,432 (242) 17,190 15,874 (74) 15,800
Current liabilities 11,516 - 11,516 12,748 - 12,748
Total liabilities 28,948 (242) 28,706 28,622 (74) 28,548
Total equity and liabilities 30,264 52 30,316 35,451 217 35,668
(1 ) Adjustments made to Employee benefit assets and Employee
benefit obligations are presented net of the impact of withholding tax.
37 Post balance sheet events
Between the reporting date and the date of this report there have been no post
balance sheet events.
ALTERNATIVE PERFORMANCE MEASURES
The performance of the Group is assessed using a number of alternative
performance measures (APMs), some of which have been identified as key
performance indicators of the Group. These measures are not defined under
International Financial Reporting Standards (IFRS), should be considered in
addition to IFRS measurements, may differ to definitions given by regulatory
bodies applicable to the Group and may differ to similarly titled measures
presented by other companies. They are used to measure the outcome of the
Group's strategy based on 'Unrivalled customer proposition', 'Value accretive
and sustainable growth' and 'Efficiency and innovation'.
During 2021, while the Group has made no changes to its pre-existing
disclosures and treatments of APMs compared to those disclosed in the Annual
Report and Accounts for the year to December 31, 2020, the Group has added an
additional APM regarding the Liquidity of the Group to reflect the increased
level of scrutiny, internally and externally, on this measure as a result of
the COVID-19 pandemic.
The impact of the COVID-19 pandemic has significantly changed the basis on
which the Management Committee and external parties monitor the performance of
the Group. In this regard measures relating to Levered free cash flow, Net
debt to EBITDA and Return on capital employed do not provide the level of
meaningful additional information that they have done in the past. However,
the Group continues to present these APMs for consistency and they will become
more prominent and relevant subsequent to the recovery from the COVID-19
pandemic.
The definition of each APM, together with a reconciliation to the nearest
measure prepared in accordance with IFRS is presented below.
a Loss after tax before exceptional items
Exceptional items are those that in management's view need to be separately
disclosed by virtue of their size or incidence to supplement the understanding
the entity's financial performance. The Management Committee of the Group uses
financial performance on a pre-exceptional basis to evaluate operating
performance and to make strategic, financial and operational decisions, and
externally because it is widely used by security analysts and investors in
evaluating the performance of the Group between reporting periods and against
other companies.
Exceptional items in the year to December 31, 2021 and 2020 include:
significant discontinuation of hedge accounting; significant restructuring;
significant changes in the long-term fleet plans that result in the impairment
of fleet assets and the recognition of associated provisions; and legal
settlements.
The table below reconciles the statutory Income statement to the Income
statement before exceptional items of the Group:
Year to December 31
€ million Statutory 2021 Exceptional items Before exceptional items Statutory 2020(1) Exceptional items Before exceptional items
2021
2020
Passenger revenue(2) 5,835 5 5,830 5,512 (62) 5,574
Cargo revenue 1,673 - 1,673 1,306 - 1,306
Other revenue 947 - 947 988 - 988
Total revenue 8,455 5 8,450 7,806 (62) 7,868
Employee costs(3) 3,013 (18) 3,031 3,585 313 3,272
Fuel, oil costs and emissions charges(2) 1,781 (154) 1,935 3,735 1,694 2,041
Handling, catering and other operating costs 1,308 - 1,308 1,340 - 1,340
Landing fees and en-route charges 923 - 923 918 - 918
Engineering and other aircraft costs(4) 1,085 (7) 1,092 1,456 108 1,348
Property, IT and other costs(5) 758 - 758 782 28 754
Selling costs 434 - 434 405 - 405
Depreciation, amortisation and impairment(6) 1,932 (21) 1,953 2,955 856 2,099
Currency differences (14) - (14) 81 - 81
Total expenditure on operations 11,220 (200) 11,420 15,257 2,999 12,258
Operating (loss)/profit (2,765) 205 (2,970) (7,451) (3,061) (4,390)
Finance costs (830) - (830) (670) - (670)
Finance income 13 - 13 41 - 41
Net change in fair value of convertible bond 89 - 89 - - -
Net financing (charge)/credit relating to pensions (2) - (2) 12 - 12
Net currency retranslation (charges)/credits (82) - (82) 245 - 245
Other non-operating (charges)/credits(7) 70 (75) 145 (4) - (4)
Total net non-operating costs (742) (75) (667) (376) - (376)
(Loss)/profit before tax (3,507) 130 (3,637) (7,827) (3,061) (4,766)
Tax 574 (25) 599 892 463 429
(Loss)/profit after tax for the year (2,933) 105 (3,038) (6,935) (2,598) (4,337)
Three months to December 31
€ million Statutory 2021 Exceptional items Before exceptional items Statutory 2020(1) Exceptional items Before exceptional items
2021
2020
Passenger revenue(2) 2,695 - 2,695 684 (2) 686
Cargo revenue 499 - 499 389 - 389
Other revenue 340 - 340 228 - 228
Total revenue 3,534 - 3,534 1,301 (2) 1,303
Employee costs(3) 914 (18) 932 698 44 654
Fuel, oil costs and emissions charges(2) 732 (1) 733 453 95 358
Handling, catering and other operating costs 520 - 520 260 - 260
Landing fees and en-route charges 325 - 325 181 - 181
Engineering and other aircraft costs(4) 383 - 383 321 25 296
Property, IT and other costs(5) 218 - 218 185 - 185
Selling costs 154 - 154 65 - 65
Depreciation, amortisation and impairment(6) 548 (8) 556 620 140 480
Currency differences 18 - 18 (6) - (6)
Total expenditure on operations 3,812 (27) 3,839 2,777 304 2,473
Operating (loss)/profit (278) 27 (305) (1,476) (306) (1,170)
Finance costs (218) - (218) (167) - (167)
Finance income 8 - 8 14 - 14
Net change in fair value of convertible bond 85 - 85 - - -
Net financing (charge)/credit relating to pensions (4) - (4) 1 - 1
Net currency retranslation (charges)/credits (19) - (19) 62 - 62
Other non-operating (charges)/credits(7) (31) (75) 44 (47) - (47)
Total net non-operating costs (179) (75) (104) (137) - (137)
Loss before tax (457) (48) (409) (1,613) (306) (1,307)
Tax 146 - 146 254 99 155
Loss after tax for the period (311) (48) (263) (1,359) (207) (1,152)
(1 ) Refer to notes 2 and 36 for the change in accounting policy
relating to pension administration costs.
The rationale for each exceptional item is given below. In 2021 and 2020 all
items were associated with the impact of COVID-19, except the settlement
provision in relation to the charge in 2020 relating to the theft of customer
data at British Airways (item 5).
(2 )Discontinuation of hedge accounting
The exceptional credit of €159 million (2020: expense of €1,756 million)
arising from a combination of the discontinuance of hedge accounting in the
year to December 31, 2021 and the fair value movement on those relationships
where hedge accounting was discontinued in the year to December 31, 2020, but
for which the underlying hedging instrument had not matured at January 1,
2021. This was represented by credit of €162 million (2020: expense of
€1,781 million) relating to fuel derivatives and an expense of €8 million
(2020: credit of €87 million) related to the associated fuel foreign
currency derivatives. The credit to Passenger revenue of €5 million (2020:
charge of €62 million) relates to the discontinuation of hedge accounting of
the associated foreign currency derivatives on forecast revenue.
The Group's risk management strategy is to build up these hedges gradually
over a three-year period when the level of forecast passenger revenue and fuel
consumption were higher than current expectations. Accordingly, the hedge
accounting for these transactions has been discontinued and the credit
recognised in the Income statement. The credit relating to revenue derivatives
and fuel derivatives has been recorded in the Income statement within
Passenger revenue and Fuel, oil and emission charges, respectively.
The cash outflow impact associated with the discontinuance of hedge accounting
was €338 million in the year to December 31, 2021 (2020: €1,187 million).
The related tax charge was €26 million (2020: credit of €273 million),
with €1 million (2020: credit of €11 million) being attributable to
Passenger revenue and €25 million (2020: credit of €262 million) being
attributable to Fuel, oil costs and emissions
charges.
(3 )Restructuring costs
The exceptional credit of €18 million (2020: charge of €319 million)
relates to the reversal of restructuring provisions that have been released
unutilised. In 2020, the exceptional charge (comprising €313 million of
employee severance pay and €6 million of associated legal costs) represented
the Group-wide restructuring programme, which right-sized the Group for the
near term. While the restructuring programme affected all of the Group's
operating companies, the exceptional charges in the year to December 31, 2020
related to British Airways, Aer Lingus, Iberia and LEVEL only, due to the
status of negotiations with employees and their representatives. The
exceptional credit (2020: charge) has been recorded within Employee costs
(2020: Employee costs and Property, IT and other costs). There has been no
cash flow impact relating to the exceptional restructuring credit in 2021.
The related tax charge was €3 million (2020: credit of €53
million).
(4 ) Engineering and other aircraft costs
The exceptional credit of €7 million (2020: charge of €108 million)
relates to the reversal of contractual lease provisions for those aircraft in
Vueling that have been stood up during 2021, where the estimated costs to
fulfil the hand back conditions will be recognised over the remaining
operating activity of the aircraft. In 2020, the exceptional charge included
an inventory write down expense of €71 million and a charge relating to
contractual lease provisions of €37 million. The inventory write down
expense represented those expendable inventories that, given the asset
impairments, were no longer expected to be utilised. The charge relating to
the recognition of contractual lease provisions represented the estimation of
the additional cost to fulfil the hand back conditions associated with the
leased aircraft that were permanently stood down and impaired. The exceptional
credit (2020: charge) is recorded within Engineering and other aircraft costs.
There has been no cash flow impact relating to the exceptional credit in 2021.
There is no tax impact on the recognition of this credit (2020: credit of
€14 million).
(5 ) Settlement provision
The exceptional charge of €22 million recognised in 2020 represented the
fine issued by the Information Commissioner's Office in the United Kingdom,
relating to the theft of customer data at British Airways in 2018. The
exceptional charge was been recorded within Property, IT and other costs in
the Income statement, with a corresponding amount recorded in Provisions.
There was no tax impact on the recognition of this charge
(6 ) Impairment of fleet and associated assets
The exceptional impairment reversal of €21 million includes an amount of
€14 million relating to the reversal of aircraft impairment and an amount of
€7 million relating to the reversal of engine impairment. The aircraft
impairment reversal relates to four Airbus A320 aircraft in Vueling,
previously permanently stood down in the fourth quarter of 2020, being stood
up in the third quarter of 2021 following the successful slot allocation at
Paris Orly and the resultant increased capacity. The engine impairment
reversal relates to certain engines which had been fully impaired during 2020
having been leased to a third party in the fourth quarter of 2021. Of the
exceptional impairment reversal, €8 million was recorded within Property,
plant and equipment relating to owned aircraft and €12 million was recorded
within Right of use assets relating to leased aircraft. The exceptional
impairment reversal is recorded within Depreciation, amortisation and
impairment in the Income statement.
The total exceptional impairment expense of €856 million recorded in 2020
was represented by an impairment of fleet assets of €837 million and an
impairment of other assets of €19 million. The fleet impairment related to
82 aircraft, their associated engines and rotable inventories that had been
stood down permanently and 2 further aircraft which were impaired down to
their recoverable value at December 31, 2020, which included 32 Boeing 747
aircraft, 23 Airbus A320 aircraft, 15 Airbus A340 aircraft, 4 Airbus A330-200
aircraft, 2 Airbus A318 aircraft, 1 Airbus A321 aircraft, 1 Airbus A319
aircraft, 2 Boeing 777-200 aircraft and 4 Embraer E170 aircraft. Of the fleet
impairment, €676 million was recorded within Property, plant and equipment
relating to owned aircraft and €161 million was recorded within Right of use
assets relating to leased aircraft.
Included within the impairment of other assets was an amount of €15 million
relating to the landing rights, classified within Intangible assets, that were
held by the operations of LEVEL in Paris. Following the decision to cease the
operations of LEVEL in Paris, these landing rights were recorded at the lower
of their carrying value and their recoverable value.
The exceptional impairment (reversals)/expenses were recorded within
Depreciation, amortisation and impairment in the Income statement. There has
been no cash flow impact relating to the exceptional impairment reversals in
2021.
The related tax charge was €1 million (2020: credit of €123
million).
(7 ) Air Europa termination agreement
The exceptional charge of €75 million represents the amount agreed with
Globalia to terminate the agreements signed on November 4, 2019 and January
20, 2021 under which Iberia had agreed to acquire the issued share capital of
Air Europa. The exceptional charge has been recorded within Other
non-operating charges in the Income statement and was settled prior to
December 31, 2021.
The related tax credit was €5 million.
The table below provides a reconciliation of the post-exceptional to
pre-exceptional condensed alternative income statement by operating segment
for the years to 31 December 2021 and 2020:
Year to December 31, 2021
British Airways (£) British Airways (€) Iberia Vueling Aer Lingus
€ million Statutory Exceptional items Before exceptional items Statutory Exceptional items Before exceptional items Statutory Exceptional items Before exceptional items Statutory Exceptional items Before exceptional items Statutory Exceptional items Before exceptional items
Passenger revenue 2,321 5 2,316 2,715 6 2,709 1,724 - 1,724 1,011 - 1,011 307 (1) 308
Cargo revenue 1,097 - 1,097 1,275 - 1,275 394 - 394 - - - 65 - 65
Other revenue 281 - 281 328 - 328 666 - 666 5 - 5 4 - 4
Total revenue 3,699 5 3,694 4,318 6 4,312 2,784 - 2,784 1,016 - 1,016 376 (1) 377
Employee costs 1,471 (11) 1,482 1,708 (13) 1,721 723 (5) 728 200 - 200 180 - 180
Fuel, oil costs and emissions charges 830 (109) 939 967 (125) 1,092 519 (9) 528 198 (9) 207 89 (10) 99
Depreciation, amortisation and impairment 979 (6) 985 1,134 (7) 1,141 350 - 350 227 (13) 240 140 - 140
Other operating costs 2,188 - 2,188 2,550 - 2,550 1,412 - 1,412 624 (7) 631 305 - 305
Total expenditure on operations 5,468 (126) 5,594 6,359 (145) 6,504 3,004 (14) 3,018 1,249 (29) 1,278 714 (10) 724
Operating loss (1,769) 131 (1,900) (2,041) 151 (2,192) (220) 14 (234) (233) 29 (262) (338) 9 (347)
Operating margin (%) (47.8)% (51.4)% (7.9)% (8.4)% (23.0)% (25.8)% (90.0)% (92.1)%
Year to December 31, 2020
British Airways (£)(1) British Airways (€)(1) Iberia Vueling Aer Lingus
€ million Statutory Exceptional items Before exceptional items Statutory Exceptional items Before exceptional items Statutory Exceptional items Before exceptional items Statutory Exceptional items Before exceptional items Statutory Exceptional items Before exceptional items
Passenger revenue 2,840 (54) 2,894 3,309 (59) 3,368 1,160 - 1,160 569 - 569 379 (3) 382
Cargo revenue 890 - 890 998 - 998 240 - 240 - - - 88 - 88
Other revenue 217 - 217 251 - 251 859 - 859 5 - 5 - - -
Total revenue 3,947 (54) 4,001 4,558 (59) 4,617 2,259 - 2,259 574 - 574 467 (3) 470
Employee costs 1,938 221 1,717 2,193 243 1,950 798 14 784 196 - 196 217 24 193
Fuel, oil costs and emissions charges 1,996 837 1,159 2,317 984 1,333 716 344 372 314 154 160 286 144 142
Depreciation, amortisation and impairment 1,475 399 1,076 1,659 445 1,214 612 242 370 345 68 277 157 24 133
Other operating costs 2,440 42 2,398 2,792 47 2,745 1,544 52 1,492 594 30 564 370 7 363
Total expenditure on operations 7,849 1,499 6,350 8,961 1,719 7,242 3,670 652 3,018 1,449 252 1,197 1,030 199 831
Operating loss (3,902) (1,553) (2,349) (4,403) (1,778) (2,625) (1,411) (652) (759) (875) (252) (623) (563) (202) (361)
Operating margin (%) (98.9)% (58.7)% (62.5)% (33.6)% (152.4)% (108.5)% (120.6)% (76.8)%
(1 ) Refer to notes 2 and 36 for the change in accounting policy
relating to pension administration costs.
b Basic loss per share before exceptional items and adjusted
earnings per share (KPI)
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 2021 2020(1)
Loss after tax attributable to equity holders of the parent a (2,933) (6,935)
Exceptional items a 105 (2,598)
Loss after tax attributable to equity holders of the parent before exceptional (3,038) (4,337)
items
Adjusted loss (3,038) (4,337)
Weighted average number of shares used for basic loss per share(2) 11 4,964 3,528
Weighted average number of shares used for diluted loss per share 11 4,964 3,528
Basic loss per share (€ cents) (61.2) (122.9)
Adjusted loss per share before exceptional items (€ cents) (61.2) (122.9)
(1 )Refer to notes 2 and 36 for the change in accounting policy
relating to pension administration costs.
(2 )In 2020, includes 734,657 thousand shares as the weighted
average impact for 2,979,443 thousand new ordinary shares issued through the
rights issue (note 29).
c Airline non-fuel costs per ASK
The Group monitors airline unit costs (per ASK, a standard airline measure of
capacity) as a means of tracking operating efficiency of the core airline
business. As fuel costs can vary with commodity prices, the Group monitors
fuel and non-fuel costs individually. Within non-fuel costs are the costs
associated with generating Other revenue, which typically do not represent the
costs of transporting passengers or cargo and instead represent the costs of
handling and maintenance for other airlines, non-flight products in BA
Holidays and costs associated with other miscellaneous non-flight revenue
streams. Airline non-fuel costs per ASK is defined as total operating
expenditure before exceptional items, less fuel, oil costs and emission
charges and less non-flight specific costs divided by total available seat
kilometres (ASKs), and is shown on a constant currency basis.
€ million Note 2021 Reported ccy adjustment 2021 ccy 2020(1)
Total expenditure on operations a 11,220 41 11,261 15,257
(Add)/less: exceptional items in operating expenditure a (200) (200) 2,999
Less: fuel, oil costs and emission charges a 1,935 59 1,994 2,041
Non-fuel costs 9,485 (18) 9,467 10,217
Less: Non-flight specific costs 815 12 827 851
Airline non-fuel costs 8,670 (30) 8,640 9,366
ASKs (millions) 121,965 121,965 113,195
Airline non-fuel unit costs per ASK (€ cents) 7.11 7.08 8.27
(1 )Refer to notes 2 and 36 for the change in accounting policy
relating to pension administration costs.
d Levered free cash flow (KPI)
Levered free cash flow represents the cash generated, and the financing
raised, by the businesses before shareholder returns and is defined as the net
increase in cash and cash equivalents taken from the Cash flow statement,
adjusting for movements in Current interest-bearing deposits, less the cash
inflows from the rights issue and adding back the cash outflows associated
with dividends paid and the acquisition of treasury shares. The Group believes
that this measure is useful to the users of the financial statements in
understanding the cash generating ability of the Group that is available to
return to shareholders, to improve leverage and/or to undertake inorganic
growth opportunities.
€ million 2021 2020
Net Increase in cash and cash equivalents 1,913 1,940
Less: Decrease in other current interest-bearing deposits (91) (2,366)
Less: Other financing movements - (2,674)
Add: Dividends paid - 53
Levered free cash flow 1,822 (3,047)
e Net debt to EBITDA (KPI)
To supplement total borrowings as presented in accordance with IFRS, the Group
reviews net debt to EBITDA 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 22).
EBITDA is defined as operating profit 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 2021 2020(1)
Interest-bearing long-term borrowings 25 19,610 15,679
Less: Cash and cash equivalents 21 (7,892) (5,774)
Less: Other current interest-bearing deposits 21 (51) (143)
Net debt 11,667 9,762
Operating loss a (2,765) (7,451)
Add: Exceptional items a (205) 3,061
Add: Depreciation, amortisation and impairment a 1,953 2,099
EBITDA (1,017) (2,291)
Net debt to EBITDA (11.5) (4.3)
(1 ) Refer to notes 2 and 36 for the change in accounting policy
relating to pension administration costs.
f Return on invested capital (KPI)
The Group monitors return on invested capital (RoIC) as it gives an indication
of the Group's capital efficiency relative to the capital invested as well as
the ability to fund growth and to pay dividends. RoIC is defined as EBITDA,
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 2021 2020(1)
EBITDA e (1,017) (2,291)
Less: Fleet depreciation multiplied by inflation adjustment (1,777) (1,921)
Less: Other property, plant and equipment depreciation (257) (258)
Less: Software intangible amortisation (167) (151)
(3,218) (4,621)
Invested capital
Average fleet value(3) 13 15,241 16,020
Less: average progress payments(4) 13 (729) (1,117)
Fleet book value less progress payments 14,512 14,903
Inflation adjustment(2) 1.16 1.18
16,893 17,520
Average net book value of other property, plant and equipment(5) 13 2,106 2,329
Average net book value of software intangible assets(6) 17 640 652
Total invested capital 19,639 20,501
Return on Invested Capital (16.4)% (22.5)%
(1 ) Refer to notes 2 and 36 for the change in accounting policy
relating to pension administration costs.
(2 ) Presented to two decimal places and calculated using a 1.5
per cent inflation (December 31, 2020: 1.5 per cent inflation) rate over the
weighted average age of the fleet December 31, 2021: 10.6 years (December 31,
2020: 9.8 years).
(3 ) The average net book value of aircraft is calculated from an
amount of €15,365 million at December 31, 2020 and €15,116 million at
December 31, 2021.
(4 ) The average net book value of progress payments is
calculated from an amount of €710 million at December 31, 2020 and €748
million at December 31, 2021.
(5 ) The average net book value of other property, plant and
equipment is calculated from an amount of €2,166 million at December 31,
2020 and €2,045 million at December 31, 2021.
(6 ) The average net book value of software intangible assets is
calculated from an amount of €638 million at December 31, 2020 and €642
million at December 31, 2021.
g Results on a constant currency (ccy) basis
Movements in foreign exchange rates impact the Group's financial results. The
Group reviews the results, including revenue and operating costs at constant
rates of exchange (abbreviated to 'ccy'). The Group calculates these financial
measures at constant rates of exchange based on a retranslation, at prior year
exchange rates, of the current year's results of the Group. Although the Group
does not believe that these measures are a substitute for IFRS measures, the
Group does believe that such results excluding the impact of currency
fluctuations year-on-year provide additional useful information to investors
regarding the Group's operating performance on a constant currency basis.
Accordingly, the financial measures at constant currency within the discussion
of the Group Financial review should be read in conjunction with the
information provided in the Group financial statements.
The following table represents the main average and closing exchange rates for
the reporting periods. Where 2021 figures are stated at a constant currency
basis, they have applied the 2020 rates stated below:
Foreign exchange rates
Weighted average Closing
2021 2020 2021 2020
Pound sterling to euro 1.15 1.13 1.18 1.10
Euro to US dollar 1.20 1.13 1.13 1.22
Pound sterling to US dollar 1.38 1.27 1.33 1.35
h Liquidity
The Management Committee monitors liquidity in order to assess the resilience
of the Group to adverse events and uncertainty and develops funding
initiatives to maintain this resilience.
Liquidity is used by analysts, investors and other users of the financial
statements as a measure to the financial health and resilience of the Group.
Liquidity is defined as Cash and cash equivalents plus Current
interest-bearing deposits, plus Committed general undrawn facilities and
committed aircraft undrawn facilities.
€ million Note 2021 2020
Cash and cash equivalents 21 7,892 5,774
Current interest-bearing deposits 21 51 143
Committed general undrawn facilities 27f 2,864 905
Committed aircraft undrawn facilities 27f 1,126 1,180
Overdrafts and other facilities 27f 53 52
Total liquidity 11,986 8,054
Group investments
Subsidiaries
British Airways
Name and address Principal activity Country of Incorporation Percentage of equity owned
Avios Group (AGL) Limited* Airline marketing England 100%
Astral Towers, Betts Way, London Road, Crawley, West Sussex, RH10 9XY
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 European Limited Holding company England 100%
Waterside, PO Box 365, Harmondsworth, UB7 0GB
BA Excepted Group Life Scheme Limited Life insurance England 100%
Waterside, PO Box 365, Harmondsworth, UB7 0GB
BA Healthcare Trust Limited Healthcare England 100%
Waterside, PO Box 365, Harmondsworth, UB7 0GB
BA Holdco Limited Holding company England 100%
Waterside, PO Box 365, Harmondsworth, UB7 0GB
BA Number One Limited Dormant England 100%
Waterside, PO Box 365, Harmondsworth, UB7 0GB
BA Number Two Limited Dormant Jersey 100%
IFC 5, St Helier, JE1 1ST
Bealine Plc Dormant England 100%
Waterside, PO Box 365, Harmondsworth, UB7 0GB
BritAir Holdings Limited* Holding company England 100%
Waterside, PO Box 365, Harmondsworth, UB7 0GB
British Airways (BA) Limited Dormant England 100%
Waterside, PO Box 365, Harmondsworth, UB7 0GB
British Airways 777 Leasing Limited* Aircraft leasing England 100%
Waterside, PO Box 365, Harmondsworth, UB7 0GB
British Airways Associated Companies Limited Holding company England 100%
Waterside, PO Box 365, Harmondsworth, UB7 0GB
British Airways Avionic Engineering Limited* Aircraft maintenance England 100%
Waterside, PO Box 365, Harmondsworth, UB7 0GB
British Airways Capital Limited Aircraft financing Jersey 100%
Queensway House, Hilgrove Street, St Helier, JE1 1ES
British Airways Holdings B.V. Holding company Netherlands 100%
Strawinskylaan 3105, Atrium, Amsterdam, 1077ZX
British Airways Holidays Limited* Tour operator England 100%
Waterside, PO Box 365, Harmondsworth, UB7 0GB
British Airways Interior Engineering Limited* Aircraft maintenance England 100%
Waterside, PO Box 365, Harmondsworth, UB7 0GB
British Airways Leasing Limited* Aircraft leasing England 100%
Waterside, PO Box 365, Harmondsworth, UB7 0GB
British Airways Maintenance Cardiff Limited* Aircraft maintenance England 100%
Waterside, PO Box 365, Harmondsworth, UB7 0GB
British Airways Pension Trustees (No 2) Limited Trustee company England 100%
Waterside, PO Box 365, Harmondsworth, UB7 0GB
British Midland Airways Limited Former airline England 100%
Waterside, PO Box 365, Harmondsworth, UB7 0GB
British Midland Limited Dormant England 100%
Waterside, PO Box 365, Harmondsworth, UB7 0GB
Flyline Tele Sales & Services GmbH Call centre Germany 100%
Hermann Koehl-Strasse 3, 28199, Bremen
Gatwick Ground Services Limited Ground services England 100%
Waterside, PO Box 365, Harmondsworth, UB7 0GB
Overseas Air Travel Limited Transport England 100%
Waterside, PO Box 365, Harmondsworth, UB7 0GB
Speedbird Insurance Company Limited* Insurance Bermuda 100%
Canon's Court, 22 Victoria Street, Hamilton, HM 12
British Mediterranean Airways Limited Former airline England 99%
Waterside, PO Box 365, Harmondsworth, UB7 0GB
BA Euroflyer Limited Airline operations England 100%
Waterside, PO Box 365, Harmondsworth, UB7 0GB
Teleflight Limited Call centre England 100%
Waterside, PO Box 365, Harmondsworth, UB7 0GB
Iberia
Name and address Principal activity Country of Incorporation Percentage of equity owned
Compañía Explotación Aviones Cargueros Cargosur, S.A. Cargo transport Spain 100%
Calle Martínez Villergas 49, Madrid, 28027
Compañía Operadora de Corto y Medio Radio Iberia Express, S.A.* Airline operations Spain 100%
Calle Alcañiz 23, Madrid, 28006
Iberia Líneas Aéreas de España, S.A. Operadora* Airline operations and maintenance Spain 100%1
Calle Martínez Villergas 49, Madrid, 28027
Iberia México, S.A.* Storage and custody services Mexico 100%
Calle Montes Urales 424, Colonia Lomas de Chapultepec V, Ciudad de México,
11000
Iberia Operadora UK Limited Dormant England 100%
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
Aer Lingus
Name and address Principal activity Country of Incorporation Percentage of equity
owned
Aer Lingus (Ireland) Limited Airline operations Republic of Ireland 100%
Dublin Airport, Dublin
Aer Lingus 2009 DCS Trustee Limited Trustee Republic of Ireland 100%
Dublin Airport, Dublin
Aer Lingus Beachey Limited Dormant Isle of Man 100%
Penthouse Suite, Analyst House, Peel Road, IM1 4LZ
Aer Lingus Group DAC* Holding company Republic of Ireland 100%2
Dublin Airport, Dublin
Aer Lingus Limited* Airline operations Republic of Ireland 100%
Dublin Airport, Dublin
Aer Lingus (UK) Limited Airline operations Northern Ireland 100%
Aer Lingus Base, Belfast City Airport, Sydenham Bypass, Belfast, Co. Antrim,
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, Bermuda, 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 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%
Plaça Pla de l'Estany 5, Parque de Negocios Mas Blau II,
El Prat de Llobregat, Barcelona, 08820
Vueling Airlines, S.A.* Airline operations Spain 99.5%
Plaça Pla de l'Estany 5, Parque de Negocios Mas Blau II,
El Prat de Llobregat, Barcelona, 08820
LEVEL
Name and address Principal activity Country of Incorporation Percentage
of equity
owned
FLYLEVEL UK Limited Airline operations England 100%
Waterside, PO Box 365, Harmondsworth, UB7 0GB
Openskies SASU Airline operations France 100%
3 Rue le Corbusier, Rungis, 94150
International Consolidated Airlines Group, S.A.
Name and address Principal activity Country of Incorporation Percentage
of equity
owned
AERL Holding Limited Holding company England 100%
Waterside, PO Box 365, Harmondsworth, UB7 0GB
British Airways Plc* Airline operations England 100%3
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%1
Calle Martínez Villergas 49, Madrid, 28027
Veloz Holdco, S.L. Holding company Spain 100%
Plaça Pla de l'Estany 5, Parque de Negocios Mas Blau II,
El Prat de Llobregat, Barcelona, 08820
Principal subsidiaries
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 both 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.
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.
The Group holds 49.9% of the total number of voting rights and 99.65% of the
total nominal share capital in British Airways Plc, such stake having almost
100% of the economic rights. The remaining nominal share capital and voting
rights, representing 0.35% and 50.1% respectively, are held by a trust
established for the purposes of implementing the British Airways nationality
structure.
Associates
Name and address Country of Incorporation Percentage
of equity
owned
Empresa Hispano Cubana de Mantenimiento de Aeronaves, Ibeca, S.A. Cuba 50%
Avenida de Vantroi y Final,
Jose Martí Airport, Havana
Empresa Logística de Carga Aérea, S.A. Cuba 50%
Carretera de Wajay km 15,
Jose Martí Airport, Havana
Multiservicios Aeroportuarios, S.A. Spain 49%
Avenida de Manoteras 46, 2ª planta, Madrid, 28050
Dunwoody Airline Services Limited England 40%
Building 552 Shoreham Road East, London Heathrow Airport, Hounslow, TW6 3UA
Serpista, S.A. Spain 39%
Calle Cardenal Marcelo Spínola 10, Madrid, 28016
Air Miles España, S.A. Spain 26.7%
Avenida de Bruselas 20, Alcobendas, Madrid, 28108
Inloyalty by Travel Club, S.L.U. Spain 26.7%
Avenida de Bruselas 20, Alcobendas, Madrid, 28108
Viajes Ame, S.A. Spain 26.7%
Avenida de Bruselas 20, Alcobendas, Madrid, 28108
DeepAir Solutions Limited England 23%
Ground Floor North, 86 Brook Street, London, W1K 5AY
LanzaJet United States 16.7%
520 Lake Cook Road, Suite 680, Deerfield, Illinois, 60015, USA
Joint ventures
Name and address Country of Incorporation Percentage
of equity
owned
Sociedad Conjunta para la Emisión y Gestión de Medios de Pago EFC, S.A. Spain 50.5%
Calle de O'Donnell 12, Madrid, 28009
Other equity investments
The Group's principal other equity investments are as follows:
Name and address Country of Incorporation Percentage of equity owned Currency Shareholder's funds (million) Profit/(loss) before tax (million)
Servicios de Instrucción de Vuelo, S.L. Spain 19.9% EUR 71 (0.6)
Camino de la Muñoza s/n, El Caserío,
Iberia Zona Industrial 2, Madrid, 28042
The Airline Group Limited England 16.7% GBP n/a n/a
5th Floor, Brettenham House South, Lancaster Place, London, WC2N 7EN
Travel Quinto Centenario, S.A. Spain 10% EUR n/a n/a
Calle Alemanes 3, Sevilla, 41004
i6 Group Limited England 7.4% GBP 4 (1)
Farnborough Airport, Ively Road, Farnborough, Hampshire, GU14 6XA
Monese Limited England 5.9% GBP (13) (25)
1 King Street, London, EC2V 8AU
NAYAKJV1, S.L. Spain 5% EUR n/a n/a
C/ d'Osona, 2, El Prat de Llobregat, 08820
Statement of directors' reponsibilities
LIABILITY STATEMENT OF DIRECTORS FOR THE PURPOSES ENVISAGED UNDER ARTICLE
11.1.b OF SPANISH ROYAL DECREE 1362/2007 OF 19 OCTOBER (REAL DECRETO
1362/2007).
At a meeting held on February 24, 2022, the directors of International
Consolidated Airlines Group, S.A. state that, to the best of their knowledge,
the consolidated financial statements for the year to December 31, 2021
prepared in accordance with the applicable international accounting standards,
offer a true and fair view of the assets, liabilities, financial position and
profit or loss of the Company and the undertakings included in the
consolidation taken as a whole, and the interim consolidated management report
includes a fair review of the required information.
February 24, 2022
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 Alberto Terol Esteban
Aircraft Fleet
Owned Right of use Total Total Changes since Future Options
December 31, December 31, December 31, deliveries
2021 2020 2020
Airbus A319 8 31 39 49 (10) - -
Airbus A320 63 177 240 232 8 22 76
Airbus A321 16 57 73 72 1 34 14
Airbus A330-200 - 18 18 19 (1) - -
Airbus A330-300 5 13 18 18 - - -
Airbus A350 10 7 17 17 - 26 52
Airbus A380 2 10 12 12 - - -
Boeing 777-200 38 5 43 43 - - -
Boeing 777-300 4 12 16 16 - - -
Boeing 777-9 - - - - - 18 24
Boeing 787-8 - 12 12 12 - - -
Boeing 787-9 1 17 18 18 - - -
Boeing 787-10 2 - 2 2 - 10 6
Embraer E170 - - - 1 (1) - -
Embraer E190 9 14 23 22 1 - -
Group total 158 373 531 533 (2) 110 172
At December 31, 2021, the Group held 29 aircraft not in service, pending
disposal.
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact
rns@lseg.com (mailto:rns@lseg.com)
or visit
www.rns.com (http://www.rns.com/)
.
RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our
Privacy Policy (https://www.lseg.com/privacy-and-cookie-policy)
. END FR EAEALAAXAEAARecent news on International Consolidated Airlines SA
See all newsREG - Intl Con Airline Grp - Director/PDMR Shareholding
AnnouncementREG - Intl Con Airline Grp - Completion of share purchase programme
AnnouncementREG - Intl Con Airline Grp - Transaction in Own Shares
AnnouncementREG - Intl Con Airline Grp - Transaction in Own Shares
AnnouncementREG - Intl Con Airline Grp - Transaction in Own Shares
Announcement