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INTERNATIONAL CONSOLIDATED AIRLINES GROUP, S.A.

(IAG)
  Report
Delayed London Stock Exchange  -  11:35 2022-10-03 am EDT
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International Consolidated Airlines S A : IAG Q2 2022 Financial Results

07/29/2022 | 02:04am EDT

SIX MONTHS RESULTS ANNOUNCEMENT

International Consolidated Airlines Group (IAG) today (July 29, 2022) presents its Group consolidated results for the six months to June 30, 2022.

IAG returns to profit in the second quarter following strong recovery in demand across all airlines

IAG financial results highlights for the period:

  • Operating profit for the second quarter €293 million (2021: operating loss €967 million), and operating profit before
    exceptional items €287 million (2021: operating loss before exceptional items €1,045 million)
  • Operating loss for the half year €438 million (2021: operating loss €2,035 million), and operating loss before exceptional
    items €467 million (2021: operating loss before exceptional items €2,180 million)
  • Profit after tax and exceptional items for the second quarter €133 million (2021: loss €981 million) and profit after tax
    before exceptional items €127 million (2021: loss €1,045 million)
  • Loss after tax and exceptional items for the half year €654 million (2021: loss €2,048 million) and loss after tax before
    exceptional items €683 million (2021: loss €2,169 million)
  • Strong liquidity at June 30, 2022:
    • Total liquidity increased to €13,489 million (December 31, 2021: €11,986 million)
    • Cash1 of €9,190 million, up €1,247 million on December 31, 2021, with significantly positive working capital, driven principally by bookings for travel in the second half of the year
    • Committed and undrawn general and aircraft financing facilities of €4,299 million (December 31, 2021: €4,043 million), including an additional €200 million loan facility for Aer Lingus from the Ireland Strategic Investment Fund
  • Net debt at June 30, 2022 was down €688 million since December 31, 2021 to €10,979 million, reflecting the seasonal benefit on cash of bookings for travel in the second half of the year

Customer demand continues to recover strongly

  • Passenger capacity in quarter 2 was 78% of 2019 (Q1 guidance: c80%), up from 65% in quarter 1, driven primarily by IAG's key regions of European shorthaul (capacity 89% of 2019), North America (84%) and Latin America & Caribbean (81%)
  • Passenger unit revenue in quarter 2 increased by 6.4% compared to 2019, helping to offset lower capacity and higher fuel costs, driven by passenger revenue yield 10.6% higher than in 2019
  • Load factor of 81.8% (3.2 points lower than in 2019, but higher than 72.2% in quarter 1)
  • By the end of quarter 2, premium leisure revenue had almost fully recovered to 2019's level, despite capacity being significantly lower. Business channel revenue had recovered to c.60% of 2019's level
  • In response to the challenging operational environment at Heathrow, British Airways' capacity was limited to 69.1% in quarter 2 (compared to 57.4% in quarter 1) and plans to increase to c.75% in quarter 3
  • IAG's overall passenger capacity plans for the remainder of 2022 are c.80% in quarter 3 and c.85% in quarter 4, a reduction of 5% for the second half of the year compared to previous guidance, mainly due to the challenges at Heathrow; full-year capacity is expected to be c.78% of 2019 (compared to c.80% previously), with North America close to 2019 capacity by the end of the year
  • SAF (Sustainable Aviation Fuel) purchase commitments increased to $865 million (from $400 million previously) for the next 20 years, including a quarter of IAG's SAF target for 2030 (10% of total fuel needs)

Performance summary:

Six months to June 30

Higher /

Reported results (€ million)

2022

2021

(lower)

Passenger revenue

7,604

1,141

nm

Total revenue

9,351

2,212

nm

Operating loss

(438)

(2,035)

(78.5)%

Loss after tax

(654)

(2,048)

(68.1)%

Basic loss per share (€ cents)

(13.2)

(41.2)

(68.0)%

Cash, cash equivalents and interest-bearing deposits2

9,190

7,943

15.7 %

Borrowings2

20,169

19,610

2.9 %

Higher /

Alternative performance measures3 (€ million)

2022

2021

(lower)

Passenger revenue before exceptional items

7,604

1,136

nm

Total revenue before exceptional items

9,351

2,207

nm

Operating loss before exceptional items

(467)

(2,180)

(78.6)%

Loss after tax before exceptional items

(683)

(2,169)

(68.5)%

Adjusted loss per share (€ cents)

(13.8)

(43.7)

(68.4)%

Net debt2

10,979

11,667

(5.9)%

Available seat kilometres (ASK million)

117,710

34,041

nm

Passenger revenue per ASK (€ cents)

6.46

3.34

93.6 %

Non-fuel costs per ASK (€ cents)

6.16

11.02

(44.1)%

1Cash comprises cash, cash equivalents and interest-bearing deposits. 2The prior year comparative is December 31, 2021.

3For definitions refer to the IAG 2021 Annual Report and Accounts.

1

Luis Gallego, IAG Chief Executive Officer, said:

"In the second quarter we returned to profit for the first time since the start of the pandemic following a strong recovery in demand across all our airlines. This result supports our outlook for a full year operating profit.

"Our performance reflected a significant increase in capacity, load factor and yield compared to the first quarter.

"Premium leisure remains strong while business travel continues a steady recovery in all airlines.

"Iberia and Vueling were the best performing carriers within the Group. The Spanish domestic market and routes to Latin America continued to lead the recovery with demand exceeding 2019 levels last month.

"Forward bookings show sustained strength and North Atlantic demand continues to grow following the lifting of the US COVID testing requirements in June.

"Although bookings into the fourth quarter are seasonally low at this time of year, we are seeing no signs of any weakness in demand.

"Our industry continues to face historic challenges due to the unprecedented scaling up in operations, especially in the UK where the operational challenges of Heathrow airport have been acute. Our airline teams remain focused on enhancing operational resilience and improving customer experience. I would like to thank those customers affected for their loyalty and patience and our colleagues for their hard work and commitment. We will continue working with the industry to address these issues as aviation emerges from its biggest crisis ever.

"In line with our net zero commitment by 2050, we have announced the addition of 50 new Boeing 737s and 59 Airbus A320 Neo family aircraft subject to shareholder approval. These modern, fuel-efficient planes will see us over 60 per cent through our shorthaul fleet replacement by 2028.

"As we build back operational resilience, our strong portfolio of brands, ability to deliver efficiencies through our Group scale, strong capital discipline and our leadership position in sustainability will generate long term shareholder value."

Trading outlook

IAG expects pre-exceptional operating profit to be significantly improved for quarter 3 2022 compared to quarter 2 and to be positive for full year 2022. Net cash flow from operating activities is expected to be significantly positive for the year. This assumes no further setbacks related to COVID-19 and government-imposed restrictions or material impacts from geopolitical developments. Net debt is expected to increase by year end compared with the end of 2021.

Forward-looking statements:

Certain statements included in this announcement are forward-looking. These statements can be identified by the fact that they do not relate only to historical or current facts. By their nature, they involve risk and uncertainties because they relate to events and depend on circumstances that will occur in the future. Actual results could differ materially from those expressed or implied by such forward-looking statements.

Forward-looking statements often use words such as "expects", "may", "will", "could", "should", "intends", "plans", "predicts", "envisages" or "anticipates" or other words of similar meaning. They include, without limitation, any and all projections relating to the results of operations and financial conditions of International Consolidated Airlines Group, S.A. and its subsidiary undertakings from time to time (the 'Group'), as well as plans and objectives for future operations, expected future revenues, financing plans, expected expenditure and divestments relating to the Group and discussions of the Group's business plan. All forward-looking statements in this announcement are based upon information known to the Group on the date of this announcement and speak as of the date of this announcement. Other than in accordance with its legal or regulatory obligations, the Group does not undertake to update or revise any forward-looking statement to reflect any changes in events, conditions or circumstances on which any such statement is based.

Actual results may differ from those expressed or implied in the forward-looking statements in this announcement as a result of any number of known and unknown risks, uncertainties and other factors, including, but not limited to, the current economic and geopolitical environment and ongoing recovery from the COVID-19 pandemic and uncertainties about its impact and duration, many of which are difficult to predict and are generally beyond the control of the Group, and it is not reasonably possible to itemise each item. Accordingly, readers of this announcement are cautioned against relying on forward-looking statements. Further information on the primary risks of the business and the Group's risk management process is set out in the Risk management and principal risk factors section in the 2021 Annual Report and Accounts; this document is available on www.iairgroup.com. All forward-looking statements made on or after the date of this announcement and attributable to IAG are expressly qualified in their entirety by the primary risks set out in that section. Many of these risks are, and will be, exacerbated by the ongoing uncertainty from the recovery from the COVID- 19 pandemic and any further disruption to the global airline industry as well as the current economic and geopolitical environment.

IAG Investor Relations

Waterside (HAA2),

PO Box 365,

Harmondsworth,

Middlesex,

UB7 0GB

Investor.relations@iairgroup.com

2

CONSOLIDATED INCOME STATEMENT

Six months to June 30

Three months to June 30

Higher/

Higher/

€ million

2022

20211

(lower)

2022

20211

(lower)

Passenger revenue

7,604

1,141

nm

4,949

682

nm

Cargo revenue

843

769

9.6 %

411

419

(1.9)%

Other revenue

904

302

nm

556

143

nm

Total revenue

9,351

2,212

nm

5,916

1,244

nm

Employee costs

2,167

1,288

68.2 %

Fuel, oil costs and emissions charges

2,566

497

nm

Handling, catering and other operating costs

1,322

367

nm

Landing fees and en-route charges

847

287

nm

Engineering and other aircraft costs

928

419

nm

Property, IT and other costs

435

353

23.2 %

Selling costs

442

159

nm

Depreciation, amortisation and impairment

1,015

920

10.3 %

Currency differences

67

(43)

nm

Total expenditure on operations

9,789

4,247

nm

Operating (loss)/profit

(438)

(2,035)

(78.5)%

Finance costs

(480)

(401)

19.7 %

Finance income

3

4

(25.0)%

Net change in fair value of financial instruments

130

38

nm

Net financing credit relating to pensions

13

1

nm

Net currency retranslation charges

(197)

(13)

nm

Other non-operating credits

126

70

80.0 %

Total net non-operating costs

(405)

(301)

34.6 %

(Loss)/profit before tax

(843)

(2,336)

(63.9)%

Tax

189

288

(34.4)%

(Loss)/profit after tax for the period

(654)

(2,048)

(68.1)%

1,122

666

68.5 %

1,648

271

nm

780

194

nm

489

160

nm

553

212

nm

231 169 36.7 %

241

89

nm

484

450

7.6 %

75

-

-

5,623

2,211

nm

293

(967)

nm

(247)

(224)

10.3 %

2

1

nm

70

38

84.2 %

6

2

nm

(136)

-

-

85

30

nm

(220)

(153)

43.8 %

73

(1,120)

nm

60

139

(56.8)%

133

(981)

nm

1The 2021 results include a reclassification to conform with the presentation adopted in the 2021 Annual Report and Accounts regarding the fair value movements of the convertible bond. Further information is given in note 1.

3

ALTERNATIVE PERFORMANCE MEASURES

All figures in the tables below are before exceptional items. Refer to Alternative performance measures section for more detail.

Six months to June 30

Three months to June 30

Before exceptional items

Before exceptional items

Higher/

Higher/

€ million

2022

20211

(lower)

2022

20211

(lower)

Passenger revenue

7,604

1,136

nm

4,949

682

nm

Cargo revenue

843

769

9.6 %

411

419

(1.9)%

Other revenue

904

302

nm

556

143

nm

Total revenue

9,351

2,207

nm

5,916

1,244

nm

Employee costs

2,167

1,288

68.2 %

Fuel, oil costs and emissions charges

2,566

637

nm

Handling, catering and other operating costs

1,322

367

nm

Landing fees and en-route charges

847

287

nm

Engineering and other aircraft costs

928

419

nm

Property, IT and other costs

458

353

29.7 %

Selling costs

442

159

nm

Depreciation, amortisation and impairment

1,021

920

11.0 %

Currency differences

67

(43)

nm

Total expenditure on operations

9,818

4,387

nm

Operating (loss)/profit

(467)

(2,180)

(78.6)%

Finance costs

(480)

(401)

19.7 %

Finance income

3

4

(25.0)%

Net change in fair value of financial instruments

130

38

nm

Net financing credit relating to pensions

13

1

nm

Net currency retranslation charges

(197)

(13)

nm

Other non-operating credits

126

70

80.0 %

Total net non-operating costs

(405)

(301)

34.6 %

(Loss)/profit before tax

(872)

(2,481)

(64.9)%

Tax

189

312

(39.4)%

(Loss)/profit after tax for the period

(683)

(2,169)

(68.5)%

1,122

666

68.5 %

1,648

349

nm

780

194

nm

489

160

nm

553

212

nm

231 169 36.7 %

241

89

nm

490

450

8.9 %

75

-

-

5,629

2,289

nm

287

(1,045)

nm

(247)

(224)

10.3 %

2

1

nm

70

38

84.2 %

6

2

nm

(136)

-

-

85

30

nm

(220)

(153)

43.8 %

67

(1,198)

nm

60

153

(60.8)%

127

(1,045)

nm

Higher/

Operating figures2

2022

20211

(lower)

Available seat kilometres (ASK million)

117,710

34,041

nm

Revenue passenger kilometres (RPK million)

91,546

16,748

nm

Seat factor (per cent)

77.8

49.2

28.6pts

Passenger numbers (thousands)

39,969

8,080

nm

Cargo tonne kilometres (CTK million)

1,939

1,853

4.6 %

Sold cargo tonnes (thousands)

276

248

11.3 %

Sectors

277,368

77,956

nm

Block hours (hours)

796,719

260,094

nm

Average manpower equivalent3

55,658

50,813

9.5 %

Aircraft in service

549

529

3.8 %

Passenger revenue per RPK (€ cents)

8.31

6.78

22.5 %

Passenger revenue per ASK (€ cents)

6.46

3.34

93.6 %

Cargo revenue per CTK (€ cents)

43.48

41.50

4.8 %

Fuel cost per ASK (€ cents)

2.18

1.87

16.5 %

Non-fuel costs per ASK (€ cents)

6.16

11.02

(44.1)%

Total cost per ASK (€ cents)

8.34

12.89

(35.3)%

Higher/

2022

20211

(lower)

68,630

19,245

nm

56,114

9,969

nm

81.8

51.8

30.0pts

25,592

5,468

nm

949

999

(5.0)%

137

131

4.6 %

169,668

50,256

nm

474,636

151,186

nm

58,746

50,692

15.9 %

n/a

n/a

-

8.82 6.84 28.9 %

7.21

3.54

nm

43.31

41.94

3.3 %

2.40 1.81 32.4 %

5.80

10.08

(42.5)%

8.20

11.89

(31.0)%

1The 2021 results include a reclassification to conform with the presentation adopted in the 2021 Annual Report and Accounts regarding the fair value movements of the convertible bond. Further information is given in note 1.

2Financial ratios are before exceptional items. Refer to Alternative performance measures section for detail.

3Included in the average manpower equivalent are staff on furlough, wage support and equivalent schemes, including the Temporary Redundancy Plan arrangements in Spain. Further information is given in note 19.

4

FINANCIAL REVIEW

Developments since last report (May 6, 2022)

In line with the Group's strategy to return fleet capacity to 2019 levels and replace end of life aircraft, a number of new aircraft orders have been announced in the period. These orders for modern, more fuel-efficient aircraft can be used for any airline in the Group and will bring both cost efficiencies and environmental benefits to IAG's airlines.

On May 19, the Group announced it had reached agreement with Boeing to order 25 737-8200 and 25 737-10 aircraft, plus 100 options. The aircraft will be delivered between 2023 and 2027 and will be used for shorthaul fleet renewal. The fleet order is subject to approval by IAG shareholders.

On June 30, the Group announced that it had converted 22 Airbus A320 Neo family options into firm orders for 17 A320 Neos and 5 A321 Neos for delivery in 2024 and 2025. The aircraft will be used to replace A320 Ceo family aircraft in the Group's shorthaul fleet.

On July 28, the Group announced that it is converting 12 A320 Neo family options into firm orders and is ordering a further 25 A320 Neo family aircraft, with the option to purchase 50 additional aircraft. The firm orders will replace existing Airbus A320 Ceo family aircraft and are for delivery between 2025 and 2028; the split between A320 Neos and A321 Neos will be determined nearer to delivery. The order is subject to approval by IAG shareholders.

Basis of preparation

At June 30, 2022, the Group had total liquidity of €13,489 million, comprising cash and interest-bearing deposits of €9,190 million, €3,171 million of committed and undrawn general facilities and a further €1,128 million of committed and undrawn aircraft specific facilities. The Group has been successful in raising financing since the outbreak of COVID-19, having financed all aircraft deliveries in 2020 and 2021 and all those it has sought to finance in the six months to June 30, 2022; the Group continues to secure aircraft financing on long-term arrangements.

In its assessment of going concern over the period to December 31, 2023 (the 'going concern period'), the Group has prepared extensive modelling, including considering a plausible but severe downside scenario and further sensitivities to the downside scenario. Having reviewed these scenarios and sensitivities, the Directors have a reasonable expectation that the Group has sufficient liquidity to continue in operational existence over the going concern period and hence continue to adopt the going concern basis in preparing the condensed consolidated interim financial statements for the six months to June 30, 2022. In adopting the going concern basis of accounting, the condensed consolidated interim financial statements have been prepared without the inclusion of a material uncertainty, which has been removed since the 2021 Annual Report and Accounts. The removal of the material uncertainty arises from the reduction in uncertainty over the going concern period due to both the continued recovery subsequent to the COVID-19 pandemic and the strength of the Group's liquidity at June 30, 2022.

Principal risks and uncertainties

The Group has continued to maintain its framework and processes to identify, assess and manage risks. The principal risks and uncertainties affecting the Group, detailed on pages 100 to 121 of the 2021 Annual Report and Accounts, remain relevant. The Board has continued to monitor and assess risks across the Group in the light of changes that influence the Group and the aviation industry.

As the sector and markets more widely come out of pandemic restrictions, the Group continues to carefully assess how its principal risks have evolved and how the severity or likelihood of occurrence of certain risks has changed, as well as identifying emerging risks related to competitive and market risk changes, particularly those that could impact operational resilience. 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 those risks.

From the risks identified in the 2021 Annual Report and Accounts, the main risks that continue to be a key area of focus are outlined below. Business responses implemented by management that effectively mitigate or reduce the risk are reflected in the Group's latest business plan and scenarios. No new principal risks were identified through the risk management assessment discussions across the business in the six months to June 30, 2022.

  • Brand and customer trust. The challenging operational environment for the Group's airlines and its reliance on the resilience of third parties has significantly impacted on our customers and their journeys. The Group is pro-actively addressing its customer service processes and systems to help build customer trust in our brands and to help ensure that our customers choose to fly with the Group's airlines.
  • Critical third parties in the supply chain. Operational staffing shortages at hubs and airports have required capacity adjustments, including managing the impact on British Airways' customers and operations of the decision by Heathrow airport to cap passenger numbers from mid-July until the end of October. The Group has pro-actively assessed its schedules to ensure that our customers have sufficient notice of any changes to their flight plans wherever possible and within our control. Operational bottlenecks such as immigration and security resource at airports remain outside of the Group's control although management continues to liaise with the relevant providers to identify potential solutions. The Group continues to work with all critical suppliers to understand any potential disruption within their supply chains from either a shortage of available resource or production delays which could delay the availability of new fleet, engines or critical goods or services.
  • Cyber attack and data security. The threat of ransomware attacks on critical infrastructure and services has increased as a result of the war in Ukraine and the potential for state sponsored cyber attacks. The Group continues to focus its efforts on appropriate monitoring to mitigate the risk.

5

This is an excerpt of the original content. To continue reading it, access the original document here.

Disclaimer

IAG - International Consolidated Airlines Group SA published this content on 29 July 2022 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 29 July 2022 06:03:08 UTC.


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Financials
Sales 2022 21 579 M 21 160 M 21 160 M
Net income 2022 -311 M -305 M -305 M
Net Debt 2022 13 113 M 12 858 M 12 858 M
P/E ratio 2022 -23,4x
Yield 2022 -
Capitalization 5 330 M 5 302 M 5 226 M
EV / Sales 2022 0,85x
EV / Sales 2023 0,72x
Nbr of Employees 55 658
Free-Float 74,3%
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Managers and Directors
Luís Gallego Martín Chief Executive Officer & Executive Director
Nicholas Theodore Cadbury Chief Financial Officer
Javier Ferrán Larraz Chairman
John Gibbs Chief Information Officer
Emilio Saracho Rodríguez de Torres Independent Non-Executive Director
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