TIDMIAG
RNS Number : 4857H
International Cons Airlines Group
27 July 2023
IAG half year results 2023
Record first half profit driven by continuing strong performance
across the Group
Highlights
-- Record first half operating profit before exceptional items
of EUR1,260 million (first half 2022: EUR446 million loss), an
increase of EUR1,706 million, with sustained strong demand across
our network and particular outperformance from our Spanish
businesses
-- Quarter 2 2023 operating profit before exceptional items of
EUR1,251 million (quarter 2 2022: EUR295 million), including a
record operating profit before exceptional items for any quarter at
Iberia of EUR307 million
-- Net debt has reduced to EUR7.6 billion at June 30, 2023
(December 31, 2022: EUR10.4 billion) due to the increase in profit
and seasonal working capital inflows; net debt to EBITDA before
exceptional items of 1.5 times (2022: 3.1 times)
-- We are particularly focused on delivering resilient
operations over the summer, reflecting a challenging operating
environment in the UK and parts of Europe
-- Encouraging outlook for the summer with around 80% of expected quarter 3 revenue now booked
-- IAG is well-positioned to benefit from its attractive
customer base and strong network in large and growing markets
Luis Gallego, International Airlines Group's CEO, said:
"Our strong profits since the start of the year are helping to
fund investment for our customers, and to improve our balance sheet
by reducing debt. We are aiming to be back to pre-pandemic capacity
at the end of this year.
"These results are thanks to a strong performance from all
companies across the Group, and we would like to thank our teams
for their hard work during the year so far.
"Customer demand remains strong across the Group, particularly
for leisure travel, with around 80% of passenger revenue for the
third quarter already booked. And our airlines have put in place
plans to support operations during the busy summer period."
Financial summary:
Six months to June 30 Three months to June 30
----------------------- -------------------------
Reported results (EUR million) 2023 2022(1) 2023 2022(1)
Total revenue 13,583 9,351 7,694 5,916
Operating profit/(loss) 1,260 (417) 1,251 301
Profit/(loss) after tax 921 (654) 1,008 133
Basic earnings/(loss) per share (EUR cents) 18.6 (13.2)
--------------------------------------------------------- ---------- ----------- ---------- -------------
Cash, cash equivalents and interest-bearing deposits (2) 12,010 9,599
Borrowings (2) 19,623 19,984
--------------------------------------------------------- ---------- -----------
Alternative performance measures (EUR million) 2023 2022(1) 2023 2022(1)
Total revenue before exceptional items 13,583 9,351 7,694 5,916
Operating profit/(loss) before exceptional items 1,260 (446) 1,251 295
Operating margin before exceptional items 9.3% (4.8)% 16.3% 5.0%
Profit/(loss) after tax before exceptional items 921 (683) 1,008 127
Adjusted earnings/(loss) per share (EUR cents) 17.6 (13.8)
-------------------------------------------------------------------- -------- -------- ------ --------
Net debt(2) 7,613 10,385
Net debt to EBITDA before exceptional items (times)(2) 1.5 3.1
Total liquidity(2,3) 15,552 13,999
-------------------------------------------------------------------- -------- --------
For definitions of Alternative performance measures, refer to the IAG Annual report and accounts
2022.
(1) The 2022 results include a reclassification to conform with the current period presentation
for the Net gain on sale of property, plant and equipment. There is no impact on the Loss
after tax.
(2) The prior period comparative is December 31, 2022.
(3) Total liquidity includes Cash, cash equivalents and interest-bearing deposits, plus committed
and undrawn general and overdraft facilities and aircraft specific financing facilities.
Financial highlights for first half of 2023
-- Restored 94% of 2019 capacity, measured in available seat kilometres (ASKs)
-- Passenger unit revenue for the first six months was 18.4%
higher than the same period in 2022, with strong leisure traffic
recovery and business traffic recovering more slowly. The premium
leisure segment continued to perform very well.
-- Non-fuel unit costs reduced by 7.3% versus the first six
months of 2022, driven by a passenger capacity increase of 30.9%
and transformation initiatives, net of supplier cost increases,
mainly linked to inflation.
-- Fuel unit cost was up 5.7% versus 2022, linked to higher
effective average fuel prices net of hedging in the first six
months of 2023 versus 2022 and the benefits of IAG's more efficient
aircraft deliveries over the last few years
-- Operating margin before exceptional items was 9.3% for the
first half and 16.3% for the second quarter
-- Profit after tax for the first six months of 2023 of EUR921
million (first six months of 2022: loss after tax of EUR654
million)
Trading outlook
-- Customer demand remains strong across the Group, particularly
for leisure customers, with around 80% of the third quarter's
passenger revenue already booked
-- We expect full year 2023 capacity to be around 97% of
pre-COVID-19 levels, subject to disruption
-- Whilst there is no sign of weakness in forward bookings, we
continue to be mindful of wider uncertainties that might affect the
full year. This includes the potential impact of geopolitical and
macroeconomic volatility on the price of fuel and consumer
confidence, as well as the impact of external factors on the
operating environment, such as strikes. Our Cargo business
continues to be impacted by a weak market
-- We are currently c.30% booked for the fourth quarter, which is typical for this time of year
-- We continue to expect non-fuel unit costs for the year to be
in the range of 6% to 10% better compared to full year 2022
-- We expect to generate sustainable free cash flow this year
and for our net debt at December 31, 2023 to reduce compared to
December 31, 2022, in line with our profit outperformance
Strategic highlights
IAG's airlines are well-positioned in large and growing
markets
-- Both the North and South Atlantic markets are seeing strong
customer demand and are expected to reach pre-COVID-19 capacity by
the end of this year
-- We are seeing very strong leisure demand this year, across
all our airlines and across all our cabins, as customers prioritise
holidays and visiting friends and relatives
-- This is compensating for slower recovery in the corporate market
Trading and network
-- We are focusing our capacity restoration in our strongest markets
o Aer Lingus is focused on its US markets, targeting new cities
(e.g. Cleveland) and reopening previous destinations (e.g.
Hartford), as well as consolidating its Manchester base
o British Airways is continuing to focus on its traditionally
strong North Atlantic markets, as well as reopening its key Asian
routes
o Iberia is building its capacity from Madrid to reflect strong
demand in both the South and North Atlantic
o Vueling continues to strengthen its presence in its core
European markets and slot-constrained bases
-- Strong demand for our attractive network and frequencies driving strong yields
o Aer Lingus driven by US markets and recovery in the shorthaul
European leisure destinations
o British Airways seeing strong leisure demand in all cabins but
lower levels of corporate travel
o Iberia revenue is strong across the network due to
exceptionally high demand
o Vueling's high leisure demand and revenue strategy is
delivering very high ancillary revenue growth
Fleet
-- Disciplined capacity restoration, with a focus on reinstating
British Airways' widebody capacity and supporting strategic
opportunity for Iberia
o 11 new deliveries in first half of 2023 to British Airways,
Iberia and Vueling;
o We are now expecting 30 aircraft in total to be delivered in
2023 including an additional leased aircraft for LEVEL
-- 11 widebodies (six to British Airways, four to Iberia and one
to LEVEL); 19 narrowbodies (across all airlines)
o 43% (243 aircraft) of both our longhaul and shorthaul fleet
are now more efficient and quieter next generation aircraft
o Better aircraft utilisation at Iberia and Vueling supporting
capacity growth without the need for new aircraft
o British Airways to return to pre-pandemic levels of
non-premium capacity in 2024; longhaul capacity by 2025; and
premium capacity by 2026
-- Continuing to order more efficient, sustainable aircraft to
support group commercial and sustainability objectives
o Converted 10 A320neo options to firm deliveries from 2028 as
replacement aircraft for our shorthaul network
o New order for six Boeing 787-10 aircraft to be delivered to
British Airways in 2025 and 2026 to accelerate its premium widebody
capacity recovery; one new Airbus A350-900 aircraft for Iberia
Investing in our customer proposition
We recognise that we need to continue to drive investment in our
propositions at all of our airlines to improve the customer
experience. We are investing in our premium propositions to ensure
we are competitive and remain attractive to our loyal customers
-- We are continuing to roll out our new business class seats at
British Airways and Iberia; 55% of British Airways' Heathrow
longhaul fleet now embodied with the new Club Suite
-- Both Iberia and British Airways are also investing in new and
upgraded lounges, as well as developing a premium ground-based
service at Madrid airport
-- All of our network airlines are offering improved onboard catering in their premium cabins
We are also continuing to invest in customers across all parts
of our airlines
-- We continue to invest in our IT and digital capability:
o Cloud-based systems and data centres for greater future
reliability and flexibility
o Commercial re-platforming at British Airways is underway which
will deliver better customer experience and a greater range of
commercial opportunities
o Self-service capabilities and disruption management at
Vueling
-- British Airways recently opened a larger, more modern call
centre in Delhi, with better IT and data capability
Building resilience in our operations
-- Some of our operations are not where we would want them to be
and this is affecting our overall customer service
-- We are working in a challenging environment: French ATC
strikes are affecting most of our airlines and global supply chain
issues are reducing aircraft availability
-- British Airways is being particularly affected due to its
London exposure (at both Heathrow and Gatwick) and complex
schedule. We are addressing this by:
o Recruited 4,000 people in the first half, with a particular
focus on ground operations
o Taking on a number of wet lease aircraft to supplement
availability: four Finnair A320s, one Air Belgium A330 and three
Avion Express A320s at Gatwick
-- Iberia still one of the world's leading airlines for punctuality
Loyalty
-- Our Loyalty business continues to deliver strong growth in
its operating profit, up 11% versus the first half of 2022 at
GBP141 million (EUR160 million) - and 64% higher than the first
half of 2019
-- This included record remuneration from American Express of
GBP286 million (EUR326 million), 76% higher than 2019, driven by
more users of the branded card, which was relaunched in 2021
-- During the first half of the year we issued 66.4 billion
Avios, a 14% increase from the first half of 2022. We continue to
add new ways for members to collect points:
o 55% more members using our shopping portal; "Avios Balance
Booster" leading to half a billion Avios issued in the first few
weeks
o In July we announced an update to how British Airways
Executive Club members earn Avios, based on spend instead of the
distance they fly, making it simpler and more transparent
-- We are also helping our members to redeem points, with a
total of 50.9 billion redeemed in the first six months:
o Launch of 7 dedicated Avios-only flights to in-demand
destinations including Geneva, Sharm El Sheikh and Tenerife;
continued growth in BA Holidays redemptions with almost 20% of
bookings using Avios
-- Continuing to develop third party partnerships for both
airline and non-airline earnings and redemptions
People
-- We continue to make good progress recruiting people across
the Group, in particular to support operations this summer
o Over 7,000 employees recruited in the first half of 2023
o British Airways and Iberia have also recently announced cadet
schemes to provide a continued source of pilots
-- We continue to be in negotiations with a number of employee representatives around the Group
-- With respect to improving our gender diversity we are
implementing resourcing, talent and succession strategies across
the Group in order to achieve our target of 40% of women in senior
leadership roles by 2025
Sustainability
-- We continue to state the case for the positive social impact
of aviation, including commissioning a report by PwC that concluded
that IAG contributes directly and indirectly around EUR70 billion
to the EU and UK economies, as well as supporting more than 600,000
jobs
-- We are also taking an active role in EU and UK discussions on
Sustainable Aviation Fuel (SAF), in particular around mandate
design and potential pricing mechanisms
-- Specifically we are making further progress in our
initiatives to deliver our sustainability targets:
o adding 11 new, more efficient aircraft which reduce our
emissions by 20% compared to previous generation aircraft
o we have just signed an agreement with Nova Pangea to provide
funding for its project to convert waste to ethanol, the first
stage in 2(nd) Generation SAF production.
Other
-- We continue to focus on securing the required approvals for
our acquisition of Air Europa, which is still expected to take
between 18 to 24 months since our announcement of the transaction
in February 2023
LEI: 959800TZHQRUSH1ESL13
Forward-looking statements:
Certain statements included in this announcement are
forward-looking. These statements can be identified by the fact
that they do not relate only to historical or current facts. By
their nature, they involve risk and uncertainties because they
relate to events and depend on circumstances that will occur in the
future. Actual results could differ materially from those expressed
or implied by such forward-looking statements.
Forward-looking statements often use words such as "expects",
"may", "will", "could", "should", "intends", "plans", "predicts",
"envisages" or "anticipates" or other words of similar meaning.
They include, without limitation, any and all projections relating
to the results of operations and financial conditions of
International Consolidated Airlines Group, S.A. and its subsidiary
undertakings from time to time (the 'Group'), as well as plans and
objectives for future operations, expected future revenues,
financing plans, expected expenditure, acquisitions and divestments
relating to the Group and discussions of the Group's business
plans. All forward-looking statements in this announcement are
based upon information known to the Group on the date of this
announcement and speak as of the date of this announcement. Other
than in accordance with its legal or regulatory obligations, the
Group does not undertake to update or revise any forward-looking
statement to reflect any changes in events, conditions or
circumstances on which any such statement is based.
Actual results may differ from those expressed or implied in the
forward-looking statements in this announcement as a result of any
number of known and unknown risks, uncertainties and other factors,
including, but not limited to, the current economic and
geopolitical environment and ongoing recovery from the COVID-19
pandemic and uncertainties about its future impact and duration,
many of which are difficult to predict and are generally beyond the
control of the Group, and it is not reasonably possible to itemise
each item. Accordingly, readers of this announcement are cautioned
against relying on forward-looking statements. Further information
on the primary risks of the business and the Group's risk
management process is set out in the Risk management and principal
risk factors section in the Annual report and accounts 2022; this
document is available on www.iairgroup.com. All forward-looking
statements made on or after the date of this announcement and
attributable to IAG are expressly qualified in their entirety by
the primary risks set out in that section. Many of these risks are,
and will be, exacerbated by the ongoing recovery from the COVID-19
pandemic and uncertainties about its future impact and duration and
any further disruption to the global airline industry as well as
the current economic and geopolitical environment.
Alternative Performance Measures:
This announcement contains, in addition to the financial
information prepared in accordance with International Financial
Reporting Standards ('IFRS') and derived from the Group's financial
statements, alternative performance measures ('APMs') as defined in
the Guidelines on alternative performance measures issued by the
European Securities and Markets Authority (ESMA) on October 5,
2015. The performance of the Group is assessed using a number of
APMs. These measures are not defined under IFRS, should be
considered in addition to IFRS measurements, may differ to
definitions given by regulatory bodies relevant to the Group and
may differ to similarly titled measures presented by other
companies. They are used to measure the outcome of the Group's
strategy based on 'Unrivalled customer proposition', 'Value
accretive and sustainable growth' and 'Efficiency and
innovation'.
For definitions and explanations of APMs, refer to the APMs
section in the most recent published financial report and in the
IAG Annual report and accounts; these documents are available on
www.iairgroup.com.
IAG Investor Relations
Waterside (HAA2),
PO Box 365,
Harmondsworth,
Middlesex,
UB7 0GB
Investor.relations@iairgroup.com
CONSOLIDATED INCOME STATEMENT
Six months to June 30 Three months to June 30
----------------------------- ---------------------------
Higher/ Higher/
EUR million 2023 2022 (1) (lower) 2023 2022 (1) (lower)
Passenger revenue 11,784 7,604 55.0 % 6,743 4,949 36.2 %
Cargo revenue 603 843 (28.5)% 280 411 (31.9)%
Other revenue 1,196 904 32.3 % 671 556 20.7 %
------------------------------------------------------- ------- --------- --------- ------ --------- --------
Total revenue 13,583 9,351 45.3 % 7,694 5,916 30.1 %
------------------------------------------------------- ------- --------- --------- ------ --------- --------
Employee costs 2,610 2,167 20.4 % 1,353 1,122 20.6 %
Fuel, oil costs and emissions charges 3,550 2,566 38.3 % 1,792 1,648 8.7 %
Handling, catering and other operating costs 1,796 1,322 35.9 % 1,020 780 30.8 %
Landing fees and en-route charges 1,104 847 30.3 % 620 489 26.8 %
Engineering and other aircraft costs 1,208 928 30.2 % 621 553 12.3 %
Property, IT and other costs 515 435 18.4 % 266 231 15.2 %
Selling costs 578 442 30.8 % 298 241 23.7 %
Depreciation, amortisation and impairment 983 1,015 (3.2)% 497 484 2.7 %
Net gain on sale of property, plant and equipment (17) (21) (19.0)% (7) (8) (12.5)%
Currency differences (4) 67 nm (17) 75 nm
------------------------------------------------------- ------- --------- --------- ------ --------- --------
Total expenditure on operations 12,323 9,768 26.2 % 6,443 5,615 14.7 %
------------------------------------------------------- ------- --------- --------- ------ --------- --------
Operating profit/(loss) 1,260 (417) nm 1,251 301 nm
Finance costs (565) (480) 17.7 % (291) (247) 17.8 %
Finance income 167 3 nm 99 2 nm
Net change in fair value of financial instruments (13) 130 nm (12) 70 nm
Net financing credit relating to pensions 51 13 nm 26 6 nm
Net currency retranslation credits/(charges) 149 (197) nm 89 (136) nm
Other non-operating (charges)/credits (12) 105 nm (4) 77 nm
------------------------------------------------------- ------- --------- --------- ------ --------- --------
Total net non-operating costs (223) (426) (47.7)% (93) (228) (59.2)%
------------------------------------------------------- ------- --------- --------- ------ --------- --------
Profit/(loss) before tax 1,037 (843) nm 1,158 73 nm
Tax (116) 189 nm (150) 60 nm
------------------------------------------------------- ------- --------- --------- ------ --------- --------
Profit/(loss) after tax for the period 921 (654) nm 1,008 133 nm
------------------------------------------------------- ------- --------- --------- ------ --------- --------
(1) The 2022 results include a reclassification to conform with the current period presentation
for the Net gain on sale of property, plant and equipment within Operating profit/(loss).
Accordingly, for the six month and three month periods to June 30, 2022, the Group has reclassified
EUR21 million and EUR8 million, respectively, of gains from Other non-operating (charges)/credits
to Expenditure on operations. There is no impact on the Loss after tax.
ALTERNATIVE PERFORMANCE MEASURES
All figures in the tables below are before exceptional items.
Refer to Alternative performance measures section for more detail
.
Six months to June 30 Three months to June 30
------------------------------ ----------------------------
Before exceptional items Before exceptional items
------------------------------ ----------------------------
Higher/ Higher/
EUR million 2023 2022 (1) (lower) 2023 2022 (1) (lower)
Passenger revenue 11,784 7,604 55.0 % 6,743 4,949 36.2 %
Cargo revenue 603 843 (28.5)% 280 411 (31.9)%
Other revenue 1,196 904 32.3 % 671 556 20.7 %
---------------------------------------------------- ---------- -------- -------- -------- -------- --------
Total revenue 13,583 9,351 45.3 % 7,694 5,916 30.1 %
---------------------------------------------------- ---------- -------- -------- -------- -------- --------
Employee costs 2,610 2,167 20.4 % 1,353 1,122 20.6 %
Fuel, oil costs and emissions charges 3,550 2,566 38.3 % 1,792 1,648 8.7 %
Handling, catering and other operating costs 1,796 1,322 35.9 % 1,020 780 30.8 %
Landing fees and en-route charges 1,104 847 30.3 % 620 489 26.8 %
Engineering and other aircraft costs 1,208 928 30.2 % 621 553 12.3 %
Property, IT and other costs 515 458 12.4 % 266 231 15.2 %
Selling costs 578 442 30.8 % 298 241 23.7 %
Depreciation, amortisation and impairment 983 1,021 (3.7)% 497 490 1.4 %
Net gain on sale of property, plant and equipment (17) (21) (19.0)% (7) (8) (12.5)%
Currency differences (4) 67 nm (17) 75 nm
---------------------------------------------------- ---------- -------- -------- -------- -------- --------
Total expenditure on operations 12,323 9,797 25.8 % 6,443 5,621 14.6 %
---------------------------------------------------- ---------- -------- -------- -------- -------- --------
Operating profit/(loss) 1,260 (446) nm 1,251 295 nm
Finance costs (565) (480) 17.7 % (291) (247) 17.8 %
Finance income 167 3 nm 99 2 nm
Net change in fair value of financial instruments (13) 130 nm (12) 70 nm
Net financing credit relating to pensions 51 13 nm 26 6 nm
Net currency retranslation credits/(charges) 149 (197) nm 89 (136) nm
Other non-operating (charges)/credits (12) 105 nm (4) 77 nm
---------------------------------------------------- ---------- -------- -------- -------- -------- --------
Total net non-operating costs (223) (426) (47.7)% (93) (228) (59.2)%
---------------------------------------------------- ---------- -------- -------- -------- -------- --------
Profit/(loss) before tax 1,037 (872) nm 1,158 67 nm
Tax (116) 189 nm (150) 60 nm
---------------------------------------------------- ---------- -------- -------- -------- -------- --------
Profit/(loss) after tax for the period 921 (683) nm 1,008 127 nm
---------------------------------------------------- ---------- -------- -------- -------- -------- --------
Higher/ Higher/
Operating figures 2023 2022 (1) (lower) 2023 2022 (1) (lower)
Available seat kilometres (ASK million) 154,034 117,710 30.9 % 82,371 68,630 20.0 %
Revenue passenger kilometres (RPK million) 129,585 91,546 41.6 % 71,162 56,114 26.8 %
Seat factor (per cent) 84.1 77.8 6.3pts 86.4 81.8 4.6pts
Passenger numbers (thousands) 54,307 39,969 35.9 % 30,028 25,592 17.3 %
Cargo tonne kilometres (CTK million) 2,224 1,939 14.7 % 1,099 949 15.8 %
Sold cargo tonnes (thousands) 294 276 6.5 % 142 137 3.6 %
Sectors 342,036 277,368 23.3 % 184,536 169,668 8.8 %
Block hours (hours) 1,018,110 796,719 27.8 % 549,484 474,636 15.8 %
---------------------------------------------------- ---------- -------- -------- -------- -------- --------
Average headcount 68,477 59,491 15.1% n/a n/a n/a
Aircraft in service 565 549 2.9 % n/a n/a n/a
---------------------------------------------------- ---------- -------- -------- -------- -------- --------
Passenger revenue per RPK (EUR cents) 9.09 8.31 9.5 % 9.48 8.82 7.4 %
Passenger revenue per ASK (EUR cents) 7.65 6.46 18.4 % 8.19 7.21 13.5 %
Cargo revenue per CTK (EUR cents) 27.11 43.48 (37.6)% 25.48 43.31 (41.2)%
Fuel cost per ASK (EUR cents) 2.30 2.18 5.7 % 2.18 2.40 (9.4)%
Non-fuel costs per ASK (EUR cents) 5.70 6.14 (7.3)% 5.65 5.79 (2.5)%
Total cost per ASK (EUR cents) 8.00 8.32 (3.9)% 7.82 8.19 (4.5)%
---------------------------------------------------- ---------- -------- -------- -------- -------- --------
(1) The 2022 results include a reclassification to conform with the current period presentation
for the Net gain on sale of property, plant and equipment within Operating profit/(loss).
Accordingly, for the six month and three month periods to June 30, 2022, the Group has reclassified
EUR21 million and EUR8 million, respectively, of gains from Other non-operating (charges)/credits
to Expenditure on operations. There is no impact on the Loss after tax.
FINANCIAL REVIEW FOR THE SIX MONTHS TO JUNE 30, 2023
Developments since the last report (May 5, 2023)
On June 30, 2023, the Group announced that it had converted 10
A320neo options into firm orders, with the option to convert
certain aircraft into A321neos. The aircraft will be delivered in
2028 and will be used by any of the Group's current airlines to
replace A320ceo family aircraft.
On July 27, 2023, the Group announced that it had converted six
Boeing 787-10 options held by British Airways into firm orders and
at the same time is adding a further six 787-10 options to its
longhaul order book. The Group is also converting one Airbus
A350-900 option held by Iberia into a firm order. The firm aircraft
will be delivered in 2025 and 2026 and will be used by British
Airways and Iberia to restore capacity in the airlines' longhaul
fleets.
Basis of preparation
At June 30, 2023, the Group had total liquidity of EUR15,552
million, comprising cash, cash equivalents and interest-bearing
deposits of EUR12,010 million, EUR3,308 million of committed and
undrawn general and overdraft facilities, and a further EUR234
million of committed and undrawn aircraft specific facilities.
In its assessment of going concern over the period of at least
12 months from the date of approval of this report (the 'going
concern period'), the Group has prepared extensive modelling,
including considering a plausible but severe downside scenario.
Having reviewed these scenarios, 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, 2023.
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 in the Risk management
and principal risk factors section of the 2022 Annual report and
accounts, remain relevant at the date of this report. The Group
continues to monitor risks as the risk landscape evolves,
particularly considering how risks combine to create increased
threats and how to re-assess the potential severity and likelihood
accordingly. The Group's exposure and ability to directly manage
the external risk environment remains a challenge, given the
fundamental weaknesses in the resilience of the aviation sector's
supply chain, inflationary impacts in both supplier costs and
salaries, and policy measures taken by governments to address
economic threats. Management remains focused on mitigating risks at
all levels in the business and investing to increase
resilience.
The Board reviews and challenges management on the risk
landscape in the light of changes that influence the Group and the
aviation industry. Where further action has been required, the
Board has considered potential mitigations and, where appropriate
or feasible, the Group has implemented or confirmed plans that
would address those risks or retain them within the Board's
determined Group risk appetite.
In assessing its principal risks, the Group has considered
operational resilience, supply chain risk, the status of the
financial markets, the industrial relations landscape and people
engagement and cultural change across the Group. No new principal
risks were identified through the risk management discussions and
assessments across the business in the year to date. From the risks
identified in the 2022 Annual report and accounts, given the
current environment, the main risks that continue to be a key area
of focus, due to their potential implications for the Group, are
outlined below.
-- Brand and customer trust. Operational resilience and customer
satisfaction underpin customer trust. Reliability, including
on-time performance, service and product delivery, are key elements
of brand value and of each customer's experience. The Group
continues to improve its disruption management capabilities to
support customers through disruption and improve its service
propositions to help ensure that our customers choose to fly with
the Group's airlines.
-- Critical third parties in the supply chain. The aviation
sector continues to be affected by global supply chain disruption
which has impacted aircraft deliveries, component availability,
resource availability and/or threat of employee industrial action
in critical third parties and airport services, airports'
resilience weaknesses, particularly Heathrow and air traffic
control (ATC) restrictions and strikes. The Group proactively
assesses its schedules for operability and continues to work with
all critical suppliers to understand any potential disruption
within their supply chains from either a shortage of available
resource, strike action or production delays which could impact the
availability of new fleet, engines or critical goods or
services.
-- Cyber attack and data security. The threat of sophisticated ransomware attacks on critical infrastructure and services remains high with the Group exposed to threat actors targeting both the Group's operating companies and its suppliers. In the half year, some of the Group's businesses were impacted by an attack on a third-party services provider holding employee data. The Group is focused on improving its cyber security posture and better understanding the risk presented by its suppliers.
-- Debt funding. Interest rates increases implemented by central
banks to address inflation increase the cost for the Group for
existing floating rate debt, as well as for new financing. The
Group continues to successfully secure aircraft financing.
-- Economic, political and regulatory environment. The economic
impact of increases in commodity and wage costs has driven
significant inflation and impacted on interest rates as governments
seek to moderate inflation, which may result in demand softening.
If interest rate increases have not yet materially passed through
to customers for their personal debt, they may need to reduce their
spend on travel to accommodate the increase in their cost of
borrowing.
-- IT systems and IT infrastructure. The Group is reliant upon
the resilience of its systems for key customer and business
processes and is exposed to risks that relate to poor performance,
obsolescence or failure of these systems. The Group continues with
major programmes and upgrades to modernise, including new
commercial capabilities and customer centric enhancements using
agile based models, as well as replacing core IT infrastructure and
improving network connectivity. Mitigating actions that prioritise
operational stability and resilience have been built into all
cutover plans for the go-live of IT systems related changes.
-- Operational resilience. Ongoing labour shortages, industrial
unrest and strike action in the aviation sector, shortages in the
supply chain and airspace and ATC restrictions can all impact the
operational environment of the Group's airlines as well as the
operations of the businesses on which the Group relies. The Group
continues with its ambitious IT infrastructure transformation
agenda to modernise and digitalise its IT estates. The Group is
focused on minimising any unplanned outages or disruption to
customers with additional resilience built into the airlines'
networks.
-- People, culture and employee relations. Our people, their
engagement and cultural appetite and mindset for change are
critical to the Group's current performance and future success. Our
leadership recognises the efforts of our staff and their commitment
through the continued operational challenges facing our airlines.
Resource shortages in crew have been addressed and our businesses
are building the knowledge and experience of their new starters and
managing the cultural impacts of onboarding at scale to ensure they
have the right capabilities to operate. Shortages in engineers
across the aviation sector and in the Group's airlines may impact
maintenance delivery timelines unless resource levels can be
secured. Across the Group, collective bargaining is in place with
various unions. Where agreements are open, our operating companies
continue to engage in discussions with unions to secure sustainable
agreements and address concerns arising within the
negotiations.
-- Sustainable aviation. The plan to decarbonise aviation has
resulted in fragmentation of policy measures and support offered by
governments for green initiatives across the different regions in
which the Group airlines operate. As Sustainable Aviation Fuel
(SAF) infrastructure and availability still lags demand for SAF,
mandates and other tax-based measures may disproportionately impact
the Group's airlines versus their competitors.
The Board and its sub committees have been apprised of
regulatory, competitor and governmental responses on an ongoing
basis.
Operating and market environment
The average jet fuel spot price for the six months was $834 per
metric tonne, 25 per cent lower than the average spot price in the
first six months of 2022 of $1,120 per metric tonne. Prices fell
over the course of the six months, from a peak of $1,142 per metric
tonne in January and ended the six months at $769 per metric tonne.
The shape of price movements within the first six months of 2023
was markedly different from that in the first six months of 2022,
which saw a significant rise in fuel prices from late February,
following the outbreak of the war in Ukraine, with the commodity
price of jet fuel rising from $708 per metric tonne at the start of
January to $1,235 per metric tonne at the end of June 2022. Jet
fuel supply contracts are typically based on pricing up to one
month in arrears, which results in the reduction in the average
price paid for jet fuel supply in the first six months of 2023
compared with the first six months of 2022 being lower than the
movement in spot jet fuel prices, with a reduction in the average
commodity price paid of approximately 13 per cent for the six
months.
The average foreign exchange rates for the first six months of
2023 resulted in the US dollar strengthening by three per cent
against the euro and seven per cent against the pound sterling,
compared with the average of the first six months of 2022. The
closing foreign exchange rates, applied for balance sheet
translations, represented a weakening of the US dollar of three per
cent against the euro and five per cent against the pound sterling
since December 31, 2022.
The net impact of transaction and translation exchange for the
Group for the six months of 2023 was EUR15 million favourable
versus the first six months of 2022, with the net impact EUR54
million adverse in quarter 1 and EUR69 million favourable in
quarter 2.
From a transactional perspective, the Group's financial
performance is impacted by fluctuations in exchange rates,
primarily from the US dollar, euro and pound sterling. The Group
generates a surplus in most currencies in which it does business,
except for the US dollar, as capital expenditure, debt repayments
and fuel purchases typically create a deficit. The Group hedges a
portion of its transaction exposures. The net transaction impact on
the operating result was favourable by EUR45 million for the first
six months, increasing revenues by EUR222 million and costs by
EUR177 million, with the impact EUR48 million adverse in quarter 1
and EUR93 million favourable in quarter 2.
IAG's results are impacted by exchange rates used for the
translation of British Airways' and IAG Loyalty's financial results
from pound sterling to the Group's reporting currency of euro. For
the six months, the net impact of translation was EUR30 million
adverse versus the first six months of 2022, with the impact EUR6
million adverse in quarter 1 and EUR24 million adverse in quarter
2.
Unless stated otherwise, all variances quoted below compare the
first six months of 2023 with the first six months of 2022 on a
reported basis (including exceptional items). Results for 2022
include a reclassification to conform with the 2023 presentation
for Net gain on sale of property, plant and equipment within
Operating profit/(loss), with EUR21 million of gains in 2022
reclassified from Other non-operating (charges)/credits to
Expenditure on operations.
Capacity and passenger traffic
The Group continued to restore its passenger capacity, following
the significant reductions due to COVID-19, with passenger capacity
now close to pre-pandemic levels. In the first six months of 2023,
IAG capacity, measured in available seat kilometres (ASKs), was
30.9 per cent higher than in the first six months of 2022, which
was impacted by the Omicron variant of COVID-19, particularly in
January and February. Passenger capacity was only 5.7 per cent
lower than in the first six months of 2019. Passenger load factor
for the six months was 84.1 per cent, up 6.3 points on the previous
year and 1.1 points higher than in the first six months of 2019
(quarter 1: 0.8 points higher, quarter 2: 1.4 points higher).
Summary of passenger capacity and load factor by region
Passenger load Passenger load
ASKs ASKs Passenger load factor factor
Six months to June higher/(lower) higher/(lower) factor higher/(lower) higher/(lower)
30, 2023 v2022 v2019 (%) v2022 v2019
-------------------- --------------- --------------- -------------------- ------------------- -------------------
Domestic 12.8% 10.8% 88.0 6.6 pts 1.9 pts
Europe 25.4% (5.0%) 84.6 7.1 pts 3.3 pts
North America 36.6% 1.5% 81.7 7.3 pts (0.5) pts
Latin America and
Caribbean 14.1% (2.4%) 87.0 5.3 pts 1.5 pts
Africa, Middle East
and South Asia 47.1% 1.2% 81.8 4.4 pts (0.4) pts
Asia Pacific 366.0% (63.9%) 88.4 11.8 pts 4.2 pts
-------------------- --------------- --------------- -------------------- ------------------- -------------------
Total network 30.9% (5.7%) 84.1 6.3 pts 1.1 pts
-------------------- --------------- --------------- -------------------- ------------------- -------------------
As can be seen in the table above, the remaining capacity
shortfall to 2019 is principally attributable to the pace of
capacity restoration in the Asia Pacific region, linked to the late
lifting of COVID-19 restrictions. The Group is increasing its
schedule to the region during 2023. British Airways services to
Shanghai and Beijing resumed in the summer travel season and the
airline has increased frequencies to Hong Kong and Tokyo
Haneda.
Revenue
Passenger revenue rose EUR4,180 million from the first six
months of 2022 to EUR11,784 million, reflecting the 30.9 per cent
increase in capacity operated, together with the positive impact of
the 6.3 percentage point increase in the passenger load factor and
passenger yields per revenue passenger kilometre (RPK) up 9.5 per
cent. The resulting passenger unit revenue (passenger revenue per
ASK) was 18.4 per cent higher than the previous year and 18.1 per
cent higher than the first six months of 2019 (quarter 1: up 14.8
per cent versus 2019, quarter 2: up 20.8 per cent). Leisure traffic
performed particularly strongly, with corporate traffic recovering
more slowly.
Cargo revenue was down EUR240 million versus the previous year
to EUR603 million. Cargo carried, measured in cargo tonne
kilometres (CTKs), rose by 14.7 per cent. Yields were 37.6 per cent
lower than in the previous year, reflecting the increase in global
passenger airline capacity across the industry and the recovery
from the global supply chain and sea freight disruption seen in the
first half of 2022. Cargo revenue was up EUR47 million, or 8.5 per
cent, versus the same period in 2019, with cargo yields up 36.6 per
cent versus 2019 despite challenging air cargo market
conditions.
Other revenue increased by EUR292 million to EUR1,196 million,
reflecting the recovery in the Group's non-airline businesses,
including Iberia's third-party maintenance business, BA Holidays,
and the growth of IAG Loyalty. Other revenue was 35.3 per cent
higher than in the first six months of 2019.
Costs
Costs were impacted by the 30.9 increase in capacity versus
2022, with Total expenditure on operations 26.2 per cent higher
than the previous year and non-fuel costs per ASK down 7.3 per
cent.
Employee costs increased by EUR443 million versus the first six
months of 2022 to EUR2,610 million, reflecting the increase in
airline operations and the related increase in employee numbers,
together with pay increases. On a unit basis per ASK, Employee
costs were down 8.0 per cent.
Fuel, oil costs and emissions charges increased by EUR984
million to EUR3,550 million, principally reflecting the impact of
the higher capacity operated. On a unit basis per ASK, Fuel, oil
costs and emissions charges were up 5.7 per cent, principally
reflecting the increase in the effective fuel price net of hedging.
The significant increase in commodity fuel prices in the first half
of 2022 was mitigated by hedging gains from hedging placed when the
fuel prices were lower in 2021 and previously, whereas in 2023
there was a small net cost of hedging, due to the sustained
increase in fuel prices since the start of 2022. Fuel costs
continue to benefit from the Group's investment in new, more
fuel-efficient aircraft.
Supplier costs increased by EUR1,156 million to EUR5,197
million, mainly linked to the increase in capacity operated,
together with inflationary increases and disruption costs, partly
offset by the Group's procurement initiatives. On a unit basis per
ASK, Supplier costs were down 2.3 per cent.
Depreciation, amortisation and impairment costs for the first
six months were EUR983 million and the Net gain from the sale of
property, plant and equipment was EUR17 million, representing the
disposal of assets, mainly connected with the disposal of aircraft
and related spare parts. On a unit basis per ASK, Ownership costs
(which include Depreciation, amortisation and impairment costs, and
the Net gain from the sale of property, plant and equipment) were
down 26.2 per cent.
Operating result
The Group's operating profit for the period was EUR1,260
million, an improvement of EUR1,677 million versus the operating
loss of EUR417 million for the first half of 2022. Excluding
exceptional items, the operating result improved EUR1,706 million
versus the previous year.
The breakdown of the operating result between the Group's main
operating companies is shown below.
% of 2019
Six months Six months Six months 2023 higher 2023 higher capacity
Operating profit/(loss) before to June to June to June / (lower) / (lower) (ASKs)
exceptional items, EUR million 30, 2023 30, 2022(1) 30, 2019(2) v2022 v2019 operated
-------------------------------- ---------- ------------ ------------ ----------- ----------- ---------
British Airways 602 (436) 857 1,038 (255) 88.1
Iberia 372 2 117 370 255 102.1
Vueling 96 (58) 5 154 91 109.0
Aer Lingus 40 (83) 78 123 (38) 103.5
IAG Loyalty 160 152 98 8 62 n/a
Other Group companies (10) (23) (67) 13 57 n/a
-------------------------------- ---------- ------------ ------------ ----------- ----------- ---------
Total Group (including other
companies) 1,260 (446) 1,088 1,706 172 94.3
-------------------------------- ---------- ------------ ------------ ----------- ----------- ---------
(1) Figures for 2022 restated for change in classification of Net gain on
sale of property, plant and equipment within Operating profit/(loss) to conform
with the 2023 presentation.
(2) Figures for 2019 adjusted for impact of change to accounting for pension
administration costs for British Airways in 2021 and the change in classification
of Net gain on sale of property, plant and equipment within Operating profit/(loss)
to conform with the 2023 presentation.
Restoration of capacity in British Airways has been lower than
in the other operating companies, reflecting the retirement of
British Airways' Boeing 747-400 fleet in its response to the
COVID-19 pandemic and the slower restoration of capacity in the
Asia Pacific region. Both Iberia and Vueling have performed
strongly in the first six months of 2023, with operating profit
before exceptional items exceeding that achieved in 2019. IAG
Loyalty continues to increase its base of collectors of the Group's
loyalty currency, Avios, with its operating profit for the first
six months significantly increased versus the same period in
2019.
For further information, see note 4 'Segment information'.
Exceptional items
There were no exceptional items in the first six months of 2023.
In the first six months of 2022, the Group recorded an exceptional
credit of EUR23 million, relating to the partial reversal of a fine
previously issued by the European Commission, in 2010, to British
Airways, and an exceptional credit of EUR6 million reflecting the
reversal of an aircraft impairment made in 2020. See Reconciliation
of Alternative performance measures for further information.
Net non-operating costs, taxation and loss after tax
The Group's net non-operating costs for the first six months of
2023 were EUR223 million, compared with EUR426 million in the first
six months of 2022, mainly reflecting: net finance costs of EUR398
million, down EUR79 million, driven by the significant increase in
interest received on deposits, linked to rising interest rates;
EUR149 million of Net currency retranslation credits in 2023,
versus charges of EUR197 million in 2022; a charge of EUR13 million
for the net changes in the fair value of financial instruments
versus a credit of EUR130 million in 2022, principally due to
changes in the mark-to-market of the IAG EUR825 million convertible
bond, which is held at fair value; and other non-operating charges
of EUR12 million in 2023 versus a credit of EUR105 million in
2022.
The tax charge on the profit for the period was EUR116 million
(2022: tax credit of EUR189 million), and the effective tax rate
was 11 per cent (2022: 22 per cent).
The substantial majority of the Group's activities are taxed
where the main operations are based: in the UK, Spain and Ireland,
which have corporation tax rates during 2023 of 23.5 per cent, 25
per cent and 12.5 per cent, respectively. The expected tax rate for
the Group is determined by applying the relevant corporation tax
rate to the profits or losses of each jurisdiction. The
geographical distribution of profits and losses in the Group
results in the expected tax rate being 24 per cent for the six
months to June 30, 2023. The difference between the actual
effective tax rate of 11 per cent and the expected tax rate of 24
per cent is primarily due to the partial recognition of previously
unrecognised tax assets in the Group's Spanish companies.
The profit after tax for the first six months of 2023 was EUR921
million (2022: loss after tax of EUR654 million).
Cash, debt and liquidity
The Group's cash balance (defined as cash, cash equivalents and
current interest-bearing deposits) of EUR12,010 million at June 30,
2023 was up EUR2,411 million on December 31, 2022, in line with the
normal seasonal pattern of working capital movements and the
trading performance. The Group's airlines typically experience a
rise in deferred revenue in the first half of the year, linked to
bookings for future travel, particularly leisure bookings for
summer travel; deferred revenue then usually falls in the second
half of the year.
During the six months, the Group took delivery of 11 aircraft
and drew financing for 11 aircraft as set down below.
Aircraft delivered in 2022
Delivered in the six months Of which financed in the six and financed in the six
Number of aircraft to June 30, 2023 months to June 30, 2023 months to June 30, 2023
----------------------------- ---------------------------- ---------------------------- ---------------------------
Airbus A320neo (British
Airways) 1 1 2
Airbus A320neo (Iberia) 1 - -
Airbus A321neo (Vueling) 4 4 -
Airbus A350-900 (Iberia) 2 1 -
Airbus A350-1000 (British
Airways) 1 - 3
Boeing 787-10 (British
Airways) 2 - -
----------------------------- ---------------------------- ---------------------------- ---------------------------
Total 11 6 5
----------------------------- ---------------------------- ---------------------------- ---------------------------
The five aircraft for British Airways delivered in 2022 and
financed in 2023 had financing secured at December 31, 2022, which
was reported within committed and undrawn aircraft financing
facilities. The Group has a number of options available to it to
finance aircraft during the remainder of the year.
The Group's total borrowings at June 30, 2023 were EUR19,623
million, down EUR361 million from December 31, 2022. The reduction
was mainly due to foreign exchange movements, linked to the
weakening of the US dollar, in which a substantial portion of the
Group's aircraft-related debt is denominated, together with the
value of repayments of existing debt exceeding the value of new
debt raised in the six months. Debt maturities in 2023, aside from
regular aircraft lease payments, include the repayment of a EUR500
million senior unsecured IAG bond, which was redeemed at its
maturity on July 4, 2023 and has not been refinanced.
Net debt (total borrowings less cash, cash equivalents and
current interest-bearing deposits) was EUR7,613 million at June 30,
2023, a reduction of EUR2,772 million since December 31, 2022,
mainly due to the increase in cash outlined above, driven by the
profitability in the first six months, inflows of forward bookings
for future travel, partially offset by capital expenditure and net
interest, with the direct impact of foreign exchange movements
reducing Net debt by EUR332 million.
The Group's EBITDA before exceptional items for the rolling four
quarters to June 30, 2023 was EUR4,993 million. Net debt to EBITDA
before exceptional items was 1.5 times at June 30, 2023. The
seasonal pattern of airline bookings typically results in Net debt
and Net debt to EBITDA before exceptional items being lower at the
end of June than at the end of December. See Reconciliation of
Alternative performance measures and Alternative performance
measures section of IAG's 2022 Annual report and accounts for
further information.
Total liquidity at June 30, 2023 was EUR15,552 million, up
EUR1,553 million from EUR13,999 million at December 31, 2022.
Committed and undrawn general and overdraft facilities were
EUR3,308 million (December 31, 2022: EUR3,284 million) and
committed and undrawn aircraft specific facilities were EUR234
million (December 31, 2022: EUR1,116 million).
INTERNATIONAL CONSOLIDATED AIRLINES GROUP S.A.
Unaudited Condensed Consolidated Interim Financial
Statements
January 1, 2023 - June 30, 2023
CONSOLIDATED INCOME STATEMENT
Six months to June 30
-----------------------
Total Total
EUR million 2023 2022(1)
--------------------------------------------------------------------------- --------- ------------
Passenger revenue 11,784 7,604
Cargo revenue 603 843
Other revenue 1,196 904
--------------------------------------------------------------------------- --------- ------------
Total revenue 13,583 9,351
--------------------------------------------------------------------------- --------- ------------
Employee costs 2,610 2,167
Fuel, oil costs and emissions charges 3,550 2,566
Handling, catering and other operating costs 1,796 1,322
Landing fees and en-route charges 1,104 847
Engineering and other aircraft costs 1,208 928
Property, IT and other costs 515 435
Selling costs 578 442
Depreciation, amortisation and impairment 983 1,015
Net gain on sale of property, plant and equipment (17) (21)
Currency differences (4) 67
--------------------------------------------------------------------------- --------- ------------
Total expenditure on operations 12,323 9,768
--------------------------------------------------------------------------- --------- ------------
Operating profit/(loss) 1,260 (417)
Finance costs (565) (480)
Finance income 167 3
Net change in fair value of financial instruments (13) 130
Net financing credit relating to pensions 51 13
Net currency retranslation credits/(charges) 149 (197)
Other non-operating (charges)/credits (12) 105
--------------------------------------------------------------------------- --------- ------------
Total net non-operating costs (223) (426)
--------------------------------------------------------------------------- --------- ------------
Profit/(loss) before tax 1,037 (843)
Tax (116) 189
--------------------------------------------------------------------------- --------- ------------
Profit/(loss) after tax for the period 921 (654)
--------------------------------------------------------------------------- --------- ------------
Attributable to:
Equity holders of the parent 921 (654)
Non-controlling interest - -
--------------------------------------------------------------------------- --------- ------------
921 (654)
--------------------------------------------------------------------------- --------- ------------
Basic earnings/(loss) per share (EUR cents) 18.6 (13.2)
--------------------------------------------------------------------------- --------- ------------
Diluted earnings/(loss) per share (EUR cents) 17.6 (13.2)
--------------------------------------------------------------------------- --------- ------------
(1) The 2022 results include a reclassification to conform with the current period presentation
for the Net gain on sale of property, plant and equipment. There is no impact on the Loss
after tax. Further information is given in note 1.
CONSOLIDATED STATEMENT OF OTHER COMPREHENSIVE INCOME
Six months to June 30
-----------------------
EUR million 2023 2022(1)
---------------------------------------------------------------------------------- ---------- -----------
Items that may be reclassified subsequently to net profit
Cash flow hedges:
Fair value movements in equity(1) (287) 1,502
Reclassified and reported in net profit (43) (373)
Fair value movements on cost of hedging(1) (114) (63)
Cost of hedging reclassified and reported in net profit 36 4
Currency translation differences 33 (15)
Items that will not be reclassified to net profit
Fair value movement on other equity investments 62 -
Fair value movements on liabilities attributable to credit risk changes (83) 19
Remeasurements of post-employment benefit obligations (476) 547
Total other comprehensive (loss)/income for the period, net of tax (872) 1,621
---------------------------------------------------------------------------------- ---------- -----------
Profit/(loss) after tax for the period 921 (654)
Total comprehensive income for the period 49 967
---------------------------------------------------------------------------------- ---------- -----------
Total comprehensive income is attributable to:
Equity holders of the parent 49 967
Non-controlling interest - -
---------------------------------------------------------------------------------- ---------- -----------
49 967
---------------------------------------------------------------------------------- ---------- -----------
(1) The 2022 results include a reclassification of losses and gains associated with the fair
value movements on cash flow hedge and fair value movements on cost of hedging, respectively.
There is no impact on Total other comprehensive income for the period, net of tax. Further
information is given in note 1.
Items in the consolidated Statement of other comprehensive income above are disclosed net
of tax.
CONSOLIDATED BALANCE SHEET
June 30, December 31,
EUR million 2023 2022
-------------------------------------------------- -------- ------------
Non-current assets
Property, plant and equipment 18,928 18,346
Intangible assets 3,757 3,556
Investments accounted for using the equity method 42 43
Other equity investments 117 55
Employee benefit assets 1,951 2,334
Derivative financial instruments 59 81
Deferred tax assets 1,428 1,282
Other non-current assets 404 362
-------------------------------------------------- -------- ------------
26,686 26,059
-------------------------------------------------- -------- ------------
Current assets
Non-current assets held for sale - 19
Inventories 408 353
Trade receivables 1,731 1,330
Other current assets 1,474 1,226
Current tax receivable 44 72
Derivative financial instruments 173 645
Current interest-bearing deposits 1,282 403
Cash and cash equivalents 10,728 9,196
-------------------------------------------------- -------- ------------
15,840 13,244
-------------------------------------------------- -------- ------------
Total assets 42,526 39,303
-------------------------------------------------- -------- ------------
Shareholders' equity
Issued share capital 497 497
Share premium 7,770 7,770
Treasury shares (89) (28)
Other reserves (6,107) (6,223)
-------------------------------------------------- -------- ------------
Total shareholders' equity 2,071 2,016
-------------------------------------------------- -------- ------------
Non-controlling interest 6 6
-------------------------------------------------- -------- ------------
Total equity 2,077 2,022
-------------------------------------------------- -------- ------------
Non-current liabilities
Borrowings 16,284 17,141
Employee benefit obligations 210 217
Provisions 2,652 2,652
Deferred revenue 293 326
Derivative financial instruments 106 84
Other long-term liabilities 189 200
-------------------------------------------------- -------- ------------
19,734 20,620
-------------------------------------------------- -------- ------------
Current liabilities
Borrowings 3,339 2,843
Trade and other payables 5,813 5,209
Deferred revenue 9,979 7,318
Derivative financial instruments 638 387
Current tax payable 58 8
Provisions 888 896
-------------------------------------------------- -------- ------------
20,715 16,661
-------------------------------------------------- -------- ------------
Total liabilities 40,449 37,281
-------------------------------------------------- -------- ------------
Total equity and liabilities 42,526 39,303
-------------------------------------------------- -------- ------------
CONSOLIDATED CASH FLOW STATEMENT
Six months to June 30
-----------------------
EUR million 2023 2022(1)
------------------------------------------------------------------------------ ----------- ----------
Cash flows from operating activities
Operating profit/(loss) 1,260 (417)
Depreciation, amortisation and impairment 983 1,015
Net gain on disposal of property, plant and equipment (17) (21)
Employer contributions to pension schemes (20) (10)
Pension scheme service costs 11 1
Increase in provisions 123 291
Unrealised currency differences (44) 38
Other movements 11 17
Interest paid (486) (403)
Interest received 160 3
Tax paid (53) (2)
------------------------------------------------------------------------------ ----------- ----------
Net cash flows from operating activities before movements in working capital 1,928 512
------------------------------------------------------------------------------ ----------- ----------
Increase in trade receivables (406) (811)
(Increase)/decrease in inventories (54) 4
Increase in other receivables and current assets (248) (85)
Increase in trade payables 54 733
Increase in deferred revenue 2,382 2,370
Increase in other payables and current liabilities 563 527
------------------------------------------------------------------------------ ----------- ----------
Net movement in working capital 2,291 2,738
------------------------------------------------------------------------------ ----------- ----------
Net cash flows from operating activities 4,219 3,250
------------------------------------------------------------------------------ ----------- ----------
Cash flows from investing activities
Acquisition of property, plant and equipment and intangible assets (1,509) (2,100)
Sale of property, plant and equipment and intangible assets 242 173
Proceeds from sale of investments 11 20
Increase in other current interest-bearing deposits (869) (134)
Payment to Globalia for convertible loan - (100)
Other investing movements 9 41
------------------------------------------------------------------------------ ----------- ----------
Net cash flows from investing activities (2,116) (2,100)
------------------------------------------------------------------------------ ----------- ----------
Cash flows from financing activities
Proceeds from borrowings 614 641
Repayment of borrowings (360) (275)
Repayment of lease liabilities (839) (726)
Settlement of derivative financial instruments (66) 364
Acquisition of treasury shares (65) (23)
Net cash flows from financing activities (716) (19)
------------------------------------------------------------------------------ ----------- ----------
Net increase in cash and cash equivalents 1,387 1,131
Net foreign exchange differences 145 (19)
Cash and cash equivalents at 1 January 9,196 7,892
------------------------------------------------------------------------------ ----------- ----------
Cash and cash equivalents at period end 10,728 9,004
------------------------------------------------------------------------------ ----------- ----------
Interest-bearing deposits maturing after more than three months 1,282 186
------------------------------------------------------------------------------ ----------- ----------
Cash, cash equivalents and other interest-bearing deposits 12,010 9,190
------------------------------------------------------------------------------ ----------- ----------
(1) The 2022 results have been represented. Further information is given in note 1 and note
19.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the six months to June 30, 2023
Total
Issued share Treasury Other shareholders' Non-controlling
EUR million capital Share premium shares reserves equity interest Total equity
-------------- ------------ ------------- ------------ ------------- ------------- --------------- ------------
January 1,
2023 497 7,770 (28) (6,223) 2,016 6 2,022
Total
comprehensive
income for
the period
(net of tax) - - - 49 49 - 49
Hedges
transferred
and reported
in the
Balance sheet - - - 44 44 - 44
Cost of
share-based
payments - - - 28 28 - 28
Vesting of
share-based
payment
schemes - - 4 (5) (1) - (1)
Acquisition of
treasury
shares - - (65) - (65) - (65)
-------------- ------------ ------------- ------------ ------------- ------------- --------------- ------------
June 30, 2023 497 7,770 (89) (6,107) 2,071 6 2,077
-------------- ------------ ------------- ------------ ------------- ------------- --------------- ------------
For the six months to June 30, 2022
Total
Issued share Treasury Other shareholders' Non-controlling
EUR million capital Share premium shares reserves equity interest Total equity
-------------- ------------ ------------- ------------ ------------- ------------- --------------- ------------
At January 1,
2022 497 7,770 (24) (7,403) 840 6 846
Total
comprehensive
income for
the period
(net of tax) - - - 967 967 - 967
Hedges
transferred
and reported
in the
Balance sheet - - - (10) (10) - (10)
Cost of
share-based
payments - - - 18 18 - 18
Vesting of
share-based
payment
schemes - - 17 (20) (3) - (3)
Acquisition of
treasury
shares - - (23) - (23) - (23)
-------------- ------------ ------------- ------------ ------------- ------------- --------------- ------------
June 30, 2022 497 7,770 (30) (6,448) 1,789 6 1,795
-------------- ------------ ------------- ------------ ------------- ------------- --------------- ------------
NOTES TO THE ACCOUNTS
For the six months to June 30, 2023
1. CORPORATE INFORMATION AND BASIS OF PREPARATION
International Consolidated Airlines Group S.A. (hereinafter
'International Airlines Group', 'IAG' or the 'Group') is a leading
European airline group, formed to hold the interests of airline and
ancillary operations. IAG (hereinafter the 'Company') is a Spanish
company registered in Madrid and was incorporated on December 17,
2009 . 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.
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).
The condensed consolidated interim financial statements were
prepared in accordance with IAS 34 (as adopted by the EU) and
authorised for issue by the Board of Directors on July 27, 2023.
The condensed consolidated interim financial statements herein are
not the Company's statutory accounts and are unaudited.
The same basis of preparation and accounting policies set out in
the IAG Annual report and accounts for the year to December 31,
2022 have been applied in the preparation of these condensed
consolidated interim financial statements, other than those matters
described below. IAG's financial statements for the year to
December 31, 2022, have been filed with the Registro Mercantil de
Madrid, and are in accordance with the International Financial
Reporting Standards as adopted by the European Union (IFRSs as
adopted by the EU) and with those of the Standing Interpretations
issued by the IFRS Interpretations Committee of the International
Accounting Standards Board (IASB). The report of the auditors on
those financial statements was unqualified.
Change in presentation of results
Net gain on sale of property, plant and equipment
The prior period Income statement includes a reclassification to
conform with the current period presentation for the Net gain on
the sale of property, plant and equipment within Operating
profit/(loss). Accordingly, for the six months to June 30, 2022,
the Group has reclassified EUR21 million of gains from Other
non-operating (charges)/credits to Expenditure on operations. There
is no impact on the Loss after tax. The segmental operating
profit/(loss) has been updated to reflect the reclassification.
Statement of other comprehensive income
The prior period Statement of other comprehensive income
includes a reclassification of EUR150 million of gains associated
with the fair value movements on cash flow hedges and of EUR15
million of losses associated with the fair value movements on cost
of hedging, which had been previously presented under the
sub-heading Items that will not be reclassified to net profit, to
the sub-heading Items that may be reclassified subsequently to net
profit as these may recycle to net profit in future periods. There
is no impact on Total other comprehensive income for the period,
net of tax.
Cash flow statement
The prior period Cash flow statement has been represented and
further detailed in note 19. Accordingly, the Group has
reclassified the results for the six months to June 30, 2022 .
Going concern
At June 30, 2023, the Group had total liquidity of EUR15,552
million (December 31, 2022: total liquidity of EUR13,999 million),
comprising cash, cash equivalents and interest-bearing deposits of
EUR12,010 million, EUR3,308 million of committed and undrawn
general and overdraft facilities and a further EUR234 million of
committed and undrawn aircraft specific facilities. At June 30,
2023, the Group has no financial covenants associated with its
loans and borrowings.
In its assessment of going concern, the Group has modelled two
scenarios referred to below as the Base Case and the Downside Case
over the period of at least twelve months from the date of the
approval of these condensed consolidated interim financial
statements (the 'going concern period'). The Group's three-year
business plan, used in the creation of the Base Case, prepared for
and approved by the Board in December 2022, was subsequently
refreshed with the latest available internal and external
information in June and July 2023. The refreshed business plan
takes into account the Board's and management's views on the
anticipated continued recovery from the COVID-19 pandemic and the
wider economic and geopolitical environments on the Group's
businesses across the going concern period. The key inputs and
assumptions underlying the Base Case through to July 31, 2024,
include:
-- capacity recovery modelled by geographical region with total
capacity increasing from 97 per cent in quarter 3 2023 (compared to
the equivalent period in 2019) to above 2019 levels by the end of
the going concern period;
-- passenger unit revenue per ASK is forecast to continue to
remain above the levels obtained in 2019 throughout the going
concern period;
-- the Group has assumed that the committed and undrawn general
and aircraft facilities of EUR3,542 million will not be drawn over
the going concern period. The availability of certain of these
facilities reduces over time, with EUR3,042 million being available
to the Group at July 31, 2024;
-- the Group has assumed that the EUR500 million bond that
matured and was repaid on July 4, 2023 will not be refinanced;
-- of the capital commitments detailed in note 9, EUR2.8 billion
is due to be paid over the period to July 31, 2024;
-- the Group has forecast securing approximately 100 per cent,
or EUR2.9 billion, of the aircraft financing required that is
currently uncommitted, to align with the timing and payments for
these aircraft deliveries, including aircraft delivered in the
first half of 2023 that have not yet been financed; and
-- the Group has assumed that the relevant approvals required in
relation to the acquisition of Air Europa Holdings are obtained by
July 31, 2024, and that cash outflows of EUR150 million will be
incurred, comprising EUR100 million of the cash consideration and
EUR50 million for the purchase of ordinary shares in the Company
that have not already been purchased at the Balance sheet date.
The Downside Case applies stress to the Base Case to model
adverse commercial and operational impacts over the going concern
period, represented by: reduced levels of capacity operated in each
month, including reductions of 25 per cent for three months in 2023
and 2024; reduced passenger unit revenue per ASK; increases in the
price of jet fuel by 20 per cent; and increased operational costs.
In the Downside Case, over the going concern period capacity would
be ten per cent down when compared to the Base Case. The Downside
Case assumes that none of available general and aircraft facilities
are required to be drawn. The Downside Case also assumes that upon
completion of the Air Europa Holdings acquisition that a further
EUR200 million of working capital needs are paid by the Group. The
Directors consider the Downside Case to be a severe but plausible
scenario.
Having reviewed the Base Case and the Downside Case, the
Directors have a reasonable expectation that the Group has
sufficient liquidity to continue in operational existence for a
period of at least twelve months from the date of approval of these
condensed consolidated interim financial statements and hence
continue to adopt the going concern basis in preparing the
condensed consolidated interim financial statements for the six
months to June 30, 2023.
2. ACCOUNTING POLICIES
Critical judgement and estimates
Except as described below, the accounting policies adopted in
the presentation of the condensed consolidated interim financial
statements for the six months to June 30, 2023, are consistent with
those followed in the preparation of the Group's annual
consolidated financial statements for the year to December 31,
2022.
In preparing the condensed consolidated interim financial
statements for the six months to June 30, 2023, except as described
below, management has made judgements and estimates that affect the
application of accounting policies and the reported amounts of
assets, liabilities, income and expenses consistent with those
disclosed in the Group's annual consolidated financial statements
for the year to December 31, 2022.
Significant changes in estimates due to the macroeconomic and
geopolitical environment
During the six months to June 30, 2023, the macroeconomic and
geopolitical environment has affected the assumptions and
estimation uncertainty associated with the measurement of certain
of the Group's assets and liabilities. In particular high
inflation, rising interest rates and the volatility of commodity
prices have led to the remeasurement of the Group's assets and
liabilities in accordance with the Group's accounting policies as
detailed in the Group's annual consolidated financial statements
for the year to December 31, 2022. In doing so, the Group has
updated for the following, amongst others, where material: (i) its
long term provisions for the impact of inflation and discounting;
(ii) employee benefit assets and obligations for both the expected
impact of inflation and the impact of interest rates on discount
rates; (iii) the determination of the fair value of equity
investments, for the effects of interest rates on discount rates
applied; (iv) the valuation of derivative assets and liabilities
for changes in interest rates and commodity prices; (v) the
recoverability of deferred tax assets for the long-term effects of
inflation, interest rates and commodity prices, and; (vi) the going
concern scenario modelling for the effects of inflation, interest
rates and commodity prices.
Revenue recognition from customer loyalty schemes
For the year ended December 31, 2022, in regard to the Group's
customer loyalty schemes, given the uncertainty as to whether
recent redemption data was representative of long-term behavioural
trends, the Group estimated the level of redemption activity based
on pre-COVID-19 customer behaviour. In the six month period ended
June 30, 2023, the Group now considers historical redemption
activity, including more recent customers' behaviours following
COVID-19, to predict the long-term trends and accordingly the Group
has updated the estimated level of redemption activity to
incorporate current customer behaviour.
Impairment indicator assessment of non-financial assets
At June 30, 2023, the Group recognised EUR2,441 million in
respect of intangible assets with an indefinite life, including
goodwill.
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
are 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.
At June 30, 2023, the Group has applied judgement in the
consideration as to whether either external or internal sources of
information would indicate that one or more of the cash generating
units may be impaired. Such significant judgement included the
increase, since the last impairment test date, in interest rates
and other market rates of return that influence the pre-tax
discount rate used in the value-in-use modelling as well as broader
changes and expected changes in the short, medium and long-term
economic environment.
The Group considers that the impact of increases in interest
rates, while maintaining other assumptions constant, would lead to
increases in the pre-tax discount rate applied to the value-in-use
of each cash generating units. However, the level of headroom for
each cash generating unit at the last testing date was of such a
magnitude that the increase in the pre-tax discount rates would not
lead to the recognition of an impairment charge. In addition, a
reasonable possible further increase in the pre-tax discount rate
of 2.5 percentage points would not lead to the recognition of an
impairment charge.
In addition, the Group has not identified any adverse external
or internal source of information when compared to impairment
analysis performed at the last testing date. Such analysis has
considered, but not limited to, internal updated forecasts (as
detailed above in relation to going concern), external short term
macro-economic forecasts, external long-term GDP forecasts and
external jet fuel forward price curves.
Accordingly, at June 30, 2023, no impairment test has been
undertaken.
Pillar Two minimum effective tax rate reform
In 2021 the OECD released the Two Pillar solution to address the
tax challenges arising from the digitalisation of the economy. This
reform to the international tax system addresses the geographical
allocation of profits for the purposes of taxation, and is designed
to ensure that multinational enterprises will be subject to a
minimum 15 per cent effective tax rate.
On December 15, 2022, the Council of the European Union formally
adopted the EU Pillar Two Directive. Member States are expected to
transpose the Directive into national law by the end of 2023. On
April 3, 2023, the UK Government issued the Spring Finance Bill,
which included legislation that implements the OECD Pillar Two
reforms, which was substantively enacted on June 20, 2023, and
received Royal Assent on July 11, 2023. At June 30, 2023 and
through to the date of the report, EU Member States have not
substantively enacted these reforms, however, when enacted, such
legislation shall apply prospectively for accounting periods
beginning on or after December 31, 2023.
On May 23, 2023, the IASB issued the amendments to IAS 12 -
international tax reform: Pillar Two model reforms, effective for
periods beginning on or after January 1, 2023. The amendments to
IAS 12 provide temporary mandatory relief from the recognition of
deferred tax balances arising from the implementation of the Pillar
Two legislation. At June 30, 2023, the amendments to IAS 12 have
not been endorsed by the EU.
Subject to the substantive enactment of the Pillar Two
legislation and the endorsement of the amendments to IAS 12, the
Group has developed an accounting policy consistent with the
amendments to IAS 12, whereby, the Group does not recognise
adjustments to deferred tax assets and liabilities that arise from
the introduction of the minimum 15 per cent effective tax rate. In
developing this accounting policy, the Group has also adopted the
relief given in paragraph 98M of the amendments of IAS 12 not to
provide the disclosure requirements of the amendments for interim
periods beginning on or after January 1, 2023.
This accounting policy shall continue to be monitored as
legislation are substantively enacted and the amendments to IAS 12
are endorsed.
At June 30, 2023, the Group is continuing to assess the
implications of these Two Pillar reforms, including quantification
of the impact of substantive enactment on current tax.
New standards, interpretations and amendments adopted by the
Group
The following amendments and interpretations apply for the first
time in the six months to June 30, 2023, but do not have a material
impact on the condensed consolidated interim financial statements
of the Group:
-- IFRS 17 Insurance contracts - effective for periods beginning on or after January 1, 2023;
-- definition of accounting estimate - amendments to IAS 8
effective for periods beginning on or after January 1, 2023;
-- disclosure of accounting policies - amendments to IAS 1 and
IFRS Practice statement 2 effective for periods beginning on or
after January 1, 2023; and
-- deferred tax related to assets and liabilities arising from a
single transaction - amendments to IAS 12 effective for periods
beginning on or after January 1, 2023.
The IASB and IFRIC have issued the following standards,
amendments and interpretations with an effective date after the
period end of these financial statements which management believe
could impact the Group in future periods. The Group has assessed
the impact of these standards, amendments and interpretations and
it is not expected that these will have a material effect on the
reported income or net assets of the Group. Unless otherwise
stated, the Group plans to adopt the following standards,
interpretations and amendments on the date they become
mandatory:
-- lease liability in a sale and leaseback - amendments to IFRS
16 effective for periods beginning on or after January 1, 2024.
On October 31, 2022, the IASB issued the amendments to IAS 1 -
classification of liabilities as current or non-current (the
'Amendments'), effective for periods beginning on or after January
1, 2024. The Amendments will require the EUR825 million convertible
bond that matures in 2028, which as at June 30, 2023, had a
carrying value of EUR 701 million, to be reclassified from a
non-current liability to a current liability with the comparative
presentation as at December 31, 2023 also reclassified. The
Amendments require that where the conversion feature of a
convertible instrument does not meet the recognition criteria for
separate presentation within equity and where the associated bond
holders have the irrevocable right to exercise the conversion
feature within twelve months of the balance sheet date, that such
convertible instruments be presented as current. Other than this
reclassification, the Amendments will not have a material effect on
the reported results or net assets of the Group.
Significant changes and transactions in the current reporting
period
The financial performance and position of the Group was affected
by the following significant events and transactions in the
six-month period to June 30, 2023:
-- On February 23, 2023, the Group entered into an agreement to
acquire the remaining 80 per cent of the share capital of Air
Europa Holdings that it had not previously owned. On successful
completion of the transaction, 54,064,575 ordinary shares of the
Company (which represented EUR100 million at the date of the
agreement) will be transferred to and EUR100 million in cash will
be paid to Globalia, with a further EUR100 million paid on both the
first and second anniversary of completion.
-- In addition, the Group has agreed to pay a break-fee to
Globalia of EUR50 million should: (i) the relevant approvals,
detailed below, not be forthcoming within 24 months of entering
into the agreement; or (ii) the Group terminates the agreement at
any time prior to completion. Under the agreement, this 24-month
period can be extended, by mutual consent. The acquisition is
conditional on Globalia receiving approval from the syndicated
banks that provide the loan agreements that are partially
guaranteed by the Instituto de Crédito Oficial (ICO) and Sociedad
Estatal de Participaciones Industriales (SEPI) in Spain. The
acquisition is also subject to approval by relevant competition
authorities. Until the completion of these approvals, the
acquisition does not meet the recognition criteria under IFRS 3
Business combinations, and no accounting has been made for the
transaction in these condensed consolidated interim financial
statements.
-- In May 2023, the Group announced its intention to carry out a
share purchase programme in order to acquire approximately 50 per
cent of the aforementioned ordinary shares required as part of the
acquisition of Air Europa Holdings. The programme completed during
the period to June 30, 2023, with the Group having purchased 27
million shares amounting to EUR49 million.
-- On March 3, 2023, Aer Lingus repaid in full the EUR50 million
of the financial arrangement with the Ireland Strategic Investment
Fund (ISIF). At June 30, 2023, EUR350 million of undrawn facilities
remain available for draw down; and
-- On June 30, 2023, the Group converted 10 Airbus A320neo
options into firm orders. The aircraft will be delivered in 2028
and will be used by any of the Group's current airlines to replace
A320ceo family aircraft.
3. Seasonality
Except for the impact of COVID-19, the Group's business is
highly seasonal with demand strongest during the summer months.
Accordingly higher revenues and operating profits are usually
expected in the latter six months of the financial year than in the
first six months.
4. SEGMENT INFORMATION
a Business segments
The chief operating decision-maker is responsible for allocating
resources and assessing performance of the operating segments, and
has been identified as the IAG Management Committee (IAG MC).
The Group has a number of entities which are managed as
individual operating companies, including airline, loyalty and
platform functions. Each airline operates its network operations as
a single business unit and the IAG MC assesses performance based on
measures including operating profit, and makes resource allocation
decisions for the airlines based on network profitability,
primarily by reference to the passenger markets in which the
companies operate. The objective in making resource allocation
decisions is to optimise consolidated financial results.
The Group has determined its operating segments based on the way
that it treats its businesses and the manner in which resource
allocation decisions are made. British Airways, Iberia, Vueling,
Aer Lingus and IAG Loyalty have been identified for financial
reporting purposes as reportable operating segments. LEVEL is also
an operating segment but does not exceed the quantitative
thresholds to be reportable and management has concluded that there
are currently no other reasons why LEVEL should be separately
disclosed.
The platform functions of the business primarily support the
airline operations. These activities are not considered to be
reportable operating segments as they either earn revenues
incidental to the activities of the Group and resource allocation
decisions are made based on the passenger business or are not
reviewed regularly by the IAG MC and are included within Other
Group companies.
For the six months to
June 30, 2023
2023
-------------------------------------------------------------------------------------------
Aer
EUR million British Airways Iberia Vueling Lingus IAG Loyalty Other Group companies(1) Total
------------------------- --------------- ------- ------- ------- ----------- ------------------------ --------
Revenue
Passenger revenue 6,613 2,368 1,418 976 260 149 11,784
Cargo revenue 448 120 - 31 - 4 603
Other revenue 410 521 8 5 252 - 1,196
------------------------- --------------- ------- ------- ------- ----------- ------------------------ --------
External revenue 7,471 3,009 1,426 1,012 512 153 13,583
Inter-segment revenue 185 237 - 7 139 198 766
------------------------- --------------- ------- ------- ------- ----------- ------------------------ --------
Segment revenue 7,656 3,246 1,426 1,019 651 351 14,349
------------------------- --------------- ------- ------- ------- ----------- ------------------------ --------
Depreciation and
amortisation charge (550) (196) (127) (72) (5) (33) (983)
Operating profit/(loss) 602 372 96 40 160 (10) 1,260
------------------------- --------------- ------- ------- ------- ----------- ------------------------ --------
Exceptional items - - - - - - -
Operating profit/(loss)
before exceptional items 602 372 96 40 160 (10) 1,260
------------------------- --------------- ------- ------- ------- ----------- ------------------------ --------
Net non-operating costs (223)
------------------------- --------------- ------- ------- ------- ----------- ------------------------ --------
Profit before tax 1,037
------------------------- --------------- ------- ------- ------- ----------- ------------------------ --------
Total assets 25,781 9,933 3,534 2,166 3,642 (2,530) 42,526
Total liabilities (23,097) (9,458) (4,106) (2,193) (3,115) 1,520 (40,449)
------------------------- --------------- ------- ------- ------- ----------- ------------------------ --------
(1) Includes eliminations on total assets of EUR16,420 million and total liabilities of EUR5,805
million.
For the six months to June 30, 2022
2022(2)
----------------------------------------------------------------------------------------------
Other Group
EUR million British Airways Iberia Vueling Aer Lingus IAG Loyalty(1) companies(1,2,3) Total
---------------------- --------------- ------- ------- ---------- -------------- --------------------- --------
Revenue
Passenger revenue 4,137 1,601 973 610 204 79 7,604
Cargo revenue 654 144 - 40 - 5 843
Other revenue 378 364 4 7 150 1 904
---------------------- --------------- ------- ------- ---------- -------------- --------------------- --------
External revenue 5,169 2,109 977 657 354 85 9,351
Inter-segment revenue 128 188 - 9 102 185 612
---------------------- --------------- ------- ------- ---------- -------------- --------------------- --------
Segment revenue 5,297 2,297 977 666 456 270 9,963
---------------------- --------------- ------- ------- ---------- -------------- --------------------- --------
Depreciation and
amortisation charge (644) (178) (97) (70) (3) (29) (1,021)
Impairment reversal - - 6 - - - 6
Operating
(loss)/profit(2) (413) 2 (52) (83) 152 (23) (417)
---------------------- --------------- ------- ------- ---------- -------------- --------------------- --------
Exceptional items 23 - 6 - - - 29
Operating
(loss)/profit before
exceptional items (436) 2 (58) (83) 152 (23) (446)
---------------------- --------------- ------- ------- ---------- -------------- --------------------- --------
Net non-operating
costs(2) (426)
---------------------- --------------- ------- ------- ---------- -------------- --------------------- --------
Loss before tax (843)
---------------------- --------------- ------- ------- ---------- -------------- --------------------- --------
Total assets 23,956 8,698 3,290 2,161 3,260 (1,534) 39,831
Total liabilities (21,114) (8,778) (3,944) (2,150) (2,973) 923 (38,036)
---------------------- --------------- ------- ------- ---------- -------------- --------------------- --------
(1) In the 2022 Annual report and accounts, based on size thresholds the Group determined
that IAG Loyalty was a reportable segment and accordingly presented the financial information
of the segment separately. The prior period segment note has been re-presented to align with
the current year presentation.
(2) Segment information for 2022 has been restated for the reclassification to conform with
the current period presentation for the Net gain on sale of property, plant and equipment.
Further information is given in note 1.
(3) Includes eliminations on total assets of EUR16,189 million and total liabilities of EUR5,902
million.
b Other revenue
Six months to June 30
-----------------------
EUR million 2023 2022
---------------------------------- ------------ ---------
Holiday and hotel services 443 391
Maintenance and overhaul services 368 210
Brand and marketing 168 130
Ground handling and services 62 82
Other 155 91
---------------------------------- ------------ ---------
1,196 904
---------------------------------- ------------ ---------
c Geographical analysis
Revenue by area of original sale
Six months to June 30
-----------------------
EUR million 2023 2022
-------------- ------------ ---------
UK 4,668 3,390
Spain 2,461 1,779
USA 2,372 1,383
Rest of world 4,082 2,799
-------------- ------------ ---------
13,583 9,351
-------------- ------------ ---------
Assets by area
June 30, 2023
Property, plant Intangible
EUR million and equipment assets
------------------ --------------- ----------
UK 12,506 1,615
Spain 5,167 1,530
USA 63 10
Rest of world 1,192 602
------------------ --------------- ----------
18,928 3,757
------------------ --------------- ----------
December 31, 2022
Property, plant Intangible
EUR million and equipment assets
------------------ --------------- ----------
UK 12,026 1,490
Spain 5,082 1,462
USA 47 9
Rest of world 1,191 595
------------------ --------------- ----------
18,346 3,556
------------------ --------------- ----------
5. FINANCE COSTS, INCOME AND OTHER NON-OPERATING CREDITS
Six months to June 30
-----------------------
EUR million 2023 2022
--------------------------------------------------------------------------------------- ------------ ---------
Finance costs
Interest expense on:
Bank borrowings (130) (94)
Asset financed liabilities (82) (46)
Lease liabilities (250) (217)
Bonds (32) (45)
Provisions unwinding of discount (42) (5)
Other borrowings (32) (46)
Capitalised interest on progress payments 13 2
Other finance costs (10) (29)
--------------------------------------------------------------------------------------- ------------ ---------
(565) (480)
--------------------------------------------------------------------------------------- ------------ ---------
Finance income
Interest on other interest-bearing deposits 164 2
Other finance income 3 1
167 3
--------------------------------------------------------------------------------------- ------------ ---------
Net change in fair value of financial instruments
Net change in the fair value of convertible bond (13) 171
Net fair value losses on financial assets at fair value through profit or loss - (41)
--------------------------------------------------------------------------------------- ------------ ---------
(13) 130
--------------------------------------------------------------------------------------- ------------ ---------
Net credit relating to pensions
Net financing credit relating to pensions 51 13
--------------------------------------------------------------------------------------- ------------ ---------
51 13
--------------------------------------------------------------------------------------- ------------ ---------
Other non-operating (charges)/credits(1)
Net gain on sale of investments 10 -
Share of profits in investments accounted for using the equity method - 1
Realised (losses)/gains on derivatives not qualifying for hedge accounting (22) 83
Unrealised gains on derivatives not qualifying for hedge accounting - 21
--------------------------------------------------------------------------------------- ------------ ---------
(12) 105
--------------------------------------------------------------------------------------- ------------ ---------
(1) The 2022 Other non-operating (charges)/credits include a reclassification to conform
with the current year presentation of the Income statement. Refer to note 1 for further details.
6. TAX
The tax (charge)/credit in the Income statement was as
follows:
Six months to June 30
-----------------------
EUR million 2023 2022
------------- ------------ ---------
Current tax (134) (21)
Deferred tax 18 210
------------- ------------ ---------
Total tax (116) 189
------------- ------------ ---------
The effective tax rate for the six months to June 30, 2023, was
11 per cent (2022: 22 per cent). The substantial majority of the
Group's activities are taxed where the main operations are based,
being Spain, UK, and Ireland, with corporation tax rates during
2023 of 25 per cent, 23.5 per cent and 12.5 per cent respectively.
These result in an expected tax rate of 24 per cent.
The difference between the actual effective tax rate of 11 per
cent and the expected tax rate of 24 per cent was primarily due to
the partial recognition of previously unrecognised tax assets in
the Group's Spanish companies.
The details of the unrecognised temporary differences and losses
are given in the table below:
June 30, December 31,
EUR million 2023 2022
----------------------------------------- -------- ------------
Income tax losses
Spanish corporate income tax losses 1,399 1,596
Openskies SASU trading losses 405 405
UK trading losses 72 72
Other tax losses 11 11
----------------------------------------- -------- ------------
1,887 2,084
Other losses and temporary differences
Spanish deductible temporary differences 223 481
UK capital losses 350 343
Irish capital losses 17 17
----------------------------------------- -------- ------------
590 841
----------------------------------------- -------- ------------
None of the unrecognised temporary differences or losses have an
expiry date.
As at June 30, 2023, the Group had unrecognised tax losses and
other temporary differences of EUR1,887 million and EUR590 million
respectively that the Group does not reasonably expect to utilise.
The Group only recognises net deferred tax assets in relation
temporary differences and losses to the extent 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 utilises judgement in order to assess
the probability of recoverability. In applying the aforementioned
judgement, had the Group extended the period of future cash flow
projections indefinitely, then the amount of unrecognised tax
losses would have reduced by EUR1,410 million.
The increase in the main rate of UK corporation tax to 25 per
cent was substantively enacted on May 24, 2021. This has led to the
remeasurement of deferred tax balances at June 30, 2023 and will
increase the Group's future current tax charge accordingly. As a
result of the remeasurement of deferred tax balances in UK
entities, a charge of EUR7 million (June 30, 2022: EUR66 million
credit) was recorded in the Income statement and a charge of EURnil
million (June 30, 2022: EUR17 million charge) was 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. The Irish government is consulting
on the detail on how this will be implemented. This expected tax
rate change has not been reflected in these results because it has
not yet been substantively enacted. The effect of this proposed
rate change is not expected to be material over the period of the
management-approved business plan.
Tax related contingent liabilities
The Group has certain contingent liabilities that could be
reliably estimated, across all taxes, but excluding the IAG Loyalty
VAT matter detailed below, at June 30, 2023 amounting to EUR110
million (December 31, 2022: EUR110 million). While the Group does
not consider it more likely than not that there will be material
losses on these matters, given the inherent uncertainty associated
with tax litigation and tax audits, there can be no guarantee that
material losses will not eventuate. As the Group considers that it
is more probable than not of success in each of these matters, it
is not appropriate to make a provision for these amounts. Included
in the tax related contingent liabilities are the following:
Merger gain
Following tax audits covering the period 2011 to 2014, the
Spanish Tax Authorities issued a corporate income tax assessment to
the Company regarding the merger in 2011 between British Airways
and Iberia. The maximum exposure in this case is EUR 99 million
(December 31, 2022: EUR 98 million ), being the amount in the tax
assessment with an estimate of the interest accrued on that
assessment through to June 30, 2023.
The Company appealed the assessment to the Tribunal
Económico-Administrativo Central or 'TEAC' (Central Administrative
Tax Tribunal). On October 23, 2019, the TEAC ruled in favour of the
Spanish Tax Authorities. The Company subsequently appealed this
ruling to the Audiencia Nacional (National High Court) on December
20, 2019, and on July 24, 2020, filed submissions in support of its
case. The Company does not expect a hearing at the National High
Court until late 2023 at the earliest.
The Company disputes the technical merits of the assessment and
ruling of the TEAC, both in terms of whether a gain arose and in
terms of the quantum of any gain. Based on legal advice and an
external accounting experts' opinion, 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.
Should the Company be unsuccessful in its appeal to the
Audiencia Nacional, it would re-assess its position and the
associated accounting treatment accordingly.
IAG Loyalty VAT
At June 30, 2023, and through to the date of this report, His
Majesty's Revenue and Customs (HMRC) has issued protective notices
of VAT assessments for the 19 months ended September 2019 to Avios
Group (AGL) Limited, a controlled undertaking of the Group trading
as IAG Loyalty. At the date of this report none of these protective
notices of assessment are due for payment.
During the second quarter of 2023, and while its enquiries are
ongoing at the date of this report, HMRC shared with the Group its
emerging view on the appropriate VAT accounting, which differs to
the current approach by IAG Loyalty. HMRC's emerging view asserts
that the charges made by IAG Loyalty are for
participating/membership in the Avios scheme and the associated
charges and are subject to VAT. IAG Loyalty accounts for VAT
depending on the nature of the goods or services for which Avios
are redeemed, the vast majority of which are flights, and
zero-rated. IAG Loyalty's VAT accounting has and continues to be
based on historical rulings issued by HMRC.
As at the date of this report, this emerging view did not
consider the validity of the rulings HMRC has previously issued
with regard to IAG Loyalty's VAT accounting. Accordingly, and while
having issued the protective notices, HMRC has not confirmed
whether it considers its emerging view to be retroactive or only
prospective in nature. The Group expects further developments in
this matter during the remainder of 2023, which may include HMRC
issuing an update to its emerging view.
Given the early stages of HMRC's enquiries there remain a number
of possible scenarios that could eventuate. The Group has reviewed
HMRC's emerging view with its legal and tax advisors and considers
it has strong arguments to support its VAT accounting, including
having received rulings previously from HMRC on the matter, and
therefore does not consider it probable that an adverse ruling will
eventuate. Accordingly, the Group does not consider it appropriate
to record any provision for this case at June 30, 2023. The Group,
in conjunction with its advisors, considers the disclosure of a
potential range of exposures, associated with the aforementioned
possible scenarios that could eventuate, could prejudice seriously
the position of the Group in its ongoing engagement with HMRC.
Subsequent to the issuance of the emerging view, the Group
continues to engage with HMRC on the underlying facts,
circumstances and technical analysis of the matter. Should the
Group and HMRC be unable to reach agreement on the appropriate VAT
accounting, then the Group will have the ability to advance the
case to an independent tax tribunal. To enable the Group to advance
to an independent tax tribunal, it will need to pay, without
admission of liability, to HMRC the total amount of assessments
issued at the time of application to the independent tax tribunal,
which will be recoverable, in part or in full, should the Group be
successful in the case. Until HMRC further progresses its
enquiries, it is not possible to determine the payment required, if
any, but any potential payment may result in a material cash
outflow from to the Group.
7. EARNINGS PER SHARE AND SHARE CAPITAL
Six months to June 30
-----------------------
Millions 2023 2022
--------------------------------------------------------------------------------- ---------- -----------
Weighted average number of ordinary shares in issue 4,950 4,963
Weighted average number of ordinary shares for diluted earnings/(loss) per share 5,297 4,963
--------------------------------------------------------------------------------- ---------- -----------
Six months to June 30
-----------------------
EUR cents 2023 2022
--------------------------------------------------------------------------------- ---------- -----------
Basic earnings/(loss) per share 18.6 (13.2)
Diluted earnings/(loss) per share 17.6 (13.2)
--------------------------------------------------------------------------------- ---------- -----------
The number of ordinary shares in issue at June 30, 2023 was
4,971,476,000 (December 31, 2022: 4,971,476,000) with a par value
of EUR0.10 each.
The effect of the assumed conversion of the IAG EUR825 million
convertible bond 2028 and outstanding employee share schemes has a
dilutive impact on the earnings per share for the six months to
June 30, 2023 due to the reported profit after tax for the period,
but are antidilutive for six months to June 30, 2022 due to the
reported loss after tax for the period, and therefore have not been
included in the diluted loss per share calculation for six months
to June 30, 2022.
8. Dividends
The Directors propose that no dividend be paid for the six
months to June 30, 2023 (June 30, 2022: nil).
The future dividend capacity of the Group is dependent on the
liquidity requirements and the distributable reserves of the
Group's main operating companies and their capacity to pay
dividends to the Company, together with the Company's distributable
reserves and liquidity.
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. British Airways agreed with the Trustee of its main
UK defined benefit pension scheme (NAPS) as part of the triennial
valuation as at March 31, 2021 that, subject to the over-funding
protection mechanism, no dividends will be paid to IAG before
December 31, 2023 and that any dividends paid to IAG from January
1, 2024 through to September 30, 2025, will trigger a pension
contribution of 50 per cent of the amount of the dividend. Further
information on the British Airways dividend restrictions agreed
with NAPS are given in note 32a of the 2022 Annual report and
accounts.
9. property, plant and equipment, intaNgible assets AND RIGHT OF USE ASSETS
Other Total
Property, plant Property, plant
EUR million and equipment Right of use and equipment Intangible assets
-------------------------------------- ----------------- ------------ ---------------- -----------------
Net book value at January 1, 2023 9,649 8,697 18,346 3,556
Additions 1,156 141 1,297 354
Modifications - 114 114 -
Disposals (202) - (202) (97)
Reclassifications(1) 181 (181) - -
Depreciation and amortisation charge (374) (519) (893) (90)
Exchange movements 161 105 266 34
-------------------------------------- ----------------- ------------ ---------------- -----------------
Net book value at June 30, 2023 10,571 8,357 18,928 3,757
-------------------------------------- ----------------- ------------ ---------------- -----------------
Other Total
Property, plant Property, plant
and equipment Right of use and equipment Intangible assets
-------------------------------------- ----------------- ------------ ---------------- -----------------
Net book value at January 1, 2022 7,858 9,303 17,161 3,239
Additions 1,962 109 2,071 171
Modifications - 225 225 -
Disposals (198) (1) (199) (10)
Reclassifications(1) 237 (237) - -
Depreciation and amortisation(2) (418) (538) (956) (94)
Impairment reversal - 6 6 -
Exchange movements (83) (61) (144) (18)
-------------------------------------- ----------------- ------------ ---------------- -----------------
Net book value at June 30, 2022 9,358 8,806 18,164 3,288
-------------------------------------- ----------------- ------------ ---------------- -----------------
(1) Amounts with a net book value of EUR181 million (six months to June 30, 2022: EUR237
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) Included in the prior period Depreciation, amortisation and impairment charge in the
Income statement, not included within above reconciliation, is a credit of EUR29 million relating
to the de-designation of hedge accounting that had been applied to mitigate the foreign currency
exposure on aircraft purchases.
At June 30, 2023, bank and other loans of the Group are secured
on owned fleet assets with a net book value of EUR4,611 million
(December 31, 2022: EUR3,931 million).
Capital expenditure authorised and contracted for but not
provided for in the accounts amounts to EUR13,340 million (December
31, 2022: EUR13,749 million). The majority of capital expenditure
commitments are for fleet and are denominated in US dollars, and as
such are subject to changes in exchange rates.
10. Other equity investments
Other equity investments include the following:
EUR million June 30, 2023 December 31, 2022
==================== ============= =================
Unlisted securities 117 55
==================== ============= =================
117 55
==================== ============= =================
Investment in Air Europa Holdings
Consistent with the approach at December 31, 2022, the Group has
designated its investment in Air Europa Holdings as measured at
fair value through Other comprehensive income. Changes in fair
value are recognised in Other comprehensive income. At June 30,
2023, the Group determined the fair value of the investment in Air
Europa Holdings using both the market approach and the income
approach, whereby the Group used both observable market data and
unobservable inputs. The fair value was determined on the
stand-alone basis of Air Europa Holdings without consideration of
potential synergies that could be obtained if the Group were able
to obtain control over the operations of Air Europa Holdings. The
results of these valuation approaches resulted in a fair value of
EUR88 million, representing an increase of EUR64 million since
January 1, 2023, which has been recorded within Other comprehensive
income.
11. borrowings
June 30, 2023 December 31, 2022
---------------------------- ----------------------------
EUR million Current Non-current Total Current Non-current Total
-------------------------------------- ------- ----------- ------ ------- ----------- ------
Bank and other loans 902 5,570 6,472 822 5,724 6,546
Asset financed liabilities 283 3,923 4,206 255 3,564 3,819
Lease liabilities 2,154 6,791 8,945 1,766 7,853 9,619
-------------------------------------- ------- ----------- ------ ------- ----------- ------
Interest-bearing long-term borrowings 3,339 16,284 19,623 2,843 17,141 19,984
-------------------------------------- ------- ----------- ------ ------- ----------- ------
Banks and other loans are repayable up to the year 2029.
Long-term borrowings of the Group amounting to EUR4,337 million
(December 31, 2022: EUR3,962 million) are secured on owned fleet
assets with a net book value of EUR4,611 million (December 31,
2022: EUR3,931 million). Asset financed liabilities are all secured
on the associated aircraft or other property, plant and
equipment.
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 June 30, 2023 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
June 30, 2023 was EUR701 million (December 31, 2022: EUR605
million), representing an increase of EUR96 million since January
1, 2023. Of this increase, the amount recorded in Other
comprehensive income arising from credit risk of the convertible
bonds was EUR83 million and a charge recorded as Net change in fair
value of convertible bond in the Income statement attributable to
changes in market conditions of EUR13 million.
12. FINANCIAL INSTRUMENTS
a Financial assets and liabilities by category
The detail of the Group's nancial instruments at June 30, 2023
and December 31, 2022 by nature and classi cation for measurement
purposes is as follows:
June 30, 2023
Financial assets
--------------------------------------------------------------
Total
carrying
Fair value through amount by
Other comprehensive Fair value through Non-financial balance sheet
EUR million Amortised cost income Income statement assets item
----------------------- -------------- ---------------------- ---------------------- ------------- --------------
Non-current assets
Other equity
investments - 117 - - 117
Derivative financial
instruments - - 59 - 59
Other non-current
assets 197 - - 207 404
----------------------- -------------- ---------------------- ---------------------- ------------- --------------
Current assets
Trade receivables 1,731 - - - 1,731
Other current assets 341 - - 1,133 1,474
Derivative financial
instruments - - 173 - 173
Other current
interest-bearing
deposits 1,282 - - - 1,282
Cash and cash
equivalents 10,728 - - - 10,728
----------------------- -------------- ---------------------- ---------------------- ------------- --------------
Financial liabilities
---------------------------------------------------------------
Total
carrying
Fair value through Non- amount by
Other comprehensive Fair value through financial balance sheet
EUR million Amortised cost income Income statement liabilities item
----------------------- --------------- ---------------------- ---------------------- ------------ --------------
Non-current liabilities
Lease liabilities 6,791 - - - 6,791
Interest-bearing
long-term borrowings 8,801 - 692 - 9,493
Derivative financial
instruments - - 106 - 106
Other long-term
liabilities 129 - - 60 189
----------------------- --------------- ---------------------- ---------------------- ------------ --------------
Current liabilities
Lease liabilities 2,154 - - - 2,154
Current portion of
long-term borrowings 1,176 - 9 - 1,185
Trade and other
payables 5,444 - - 369 5,813
Derivative financial
instruments - - 638 - 638
----------------------- --------------- ---------------------- ---------------------- ------------ --------------
December 31, 2022
Financial assets
-------------------------------------------------------
Fair value through
Other Total carrying
comprehensive Fair value through Non-financial amount by balance
EUR million Amortised cost income Income statement assets sheet item
-------------------- -------------- ------------------ ------------------- ------------------- ------------------
Non-current assets
Other equity
investments - 55 - - 55
Derivative financial
instruments - - 81 - 81
Other non-current
assets 180 - - 182 362
-------------------- -------------- ------------------ ------------------- ------------------- ------------------
Current assets
Trade receivables 1,330 - - - 1,330
Other current assets 308 - - 918 1,226
Derivative financial
instruments - - 645 - 645
Other current
interest-bearing
deposits 403 - - - 403
Cash and cash
equivalents 9,196 - - - 9,196
-------------------- -------------- ------------------ ------------------- ------------------- ------------------
Financial liabilities
---------------------------------------------------------------
Total
carrying
Fair value through Non- amount by
Other comprehensive Fair value through financial balance sheet
EUR million Amortised cost income Income statement liabilities item
----------------------- -------------- ---------------------- ----------------------- ------------ --------------
Non-current liabilities
Lease liabilities 7,853 - - - 7,853
Interest-bearing
long-term borrowings 8,692 - 596 - 9,288
Derivative financial
instruments - - 84 - 84
Other long-term
liabilities 131 - - 69 200
----------------------- -------------- ---------------------- ----------------------- ------------ --------------
Current liabilities
Lease liabilities 1,766 - - - 1,766
Current portion of
long-term borrowings 1,068 - 9 - 1,077
Trade and other
payables 4,898 - - 311 5,209
Derivative financial
instruments - - 387 - 387
----------------------- -------------- ---------------------- ----------------------- ------------ --------------
b Fair value of financial assets and financial liabilities
The fair values of the Group's financial instruments are
disclosed in hierarchy levels depending on the nature of the inputs
used in determining the fair values and using the following methods
and assumptions:
Level 1: Quoted prices (unadjusted) in active markets for
identical assets and liabilities. A market is regarded as active if
quoted prices are readily and regularly available from an exchange,
dealer, broker, industry group, pricing service, or regulatory
agency, and those prices represent actual and regularly occurring
market transactions on an arm's length basis. Level 1 methodologies
(market values at the balance sheet date) were used to determine
the fair value of listed asset investments classified as equity
investments and listed interest-bearing borrowings. The fair value
of financial liabilities and financial assets incorporates own
credit risk and counterparty credit risk, respectively.
Level 2: Inputs other than quoted prices included within Level 1
that are observable for the asset or liability, either directly or
indirectly. The fair value of financial instruments that are not
traded in an active market is determined by valuation techniques.
These valuation techniques maximise the use of observable market
data where it is available and rely as little as possible on
entity-specific estimates.
Derivative instruments are measured based on the market value of
instruments with similar terms and conditions using forward pricing
models, which include forward exchange rates, forward interest
rates, forward fuel curves and corresponding volatility surface
data at the reporting date. The determination of the fair value of
derivative financial assets and liabilities are detailed in the
2022 Annual report and accounts.
The fair value of the Group's interest-bearing borrowings
including leases is determined by discounting the remaining
contractual cash flows at the relevant market interest rates at the
balance sheet date. The fair value of the Group's interest-bearing
borrowings is adjusted for own credit risk.
Level 3: Inputs for the asset or liability that are not based on
observable market data. The principal method of such valuation is
performed using a valuation model that considers the present value
of the dividend cash flows expected to be generated by the
associated assets. For the methodology in the determination of the
fair value of the investment in Air Europa Holdings, refer to note
10.
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 June 30, 2023 are as follows:
Carrying
Fair value value
--------------------------------- --------
EUR million Level 1 Level 2 Level 3 Total Total
---------------------------------------- -------- ------- ------- ----- --------
Financial assets
Other equity investments - - 117 117 117
Other non-current financial assets - 18 - 18 31
Derivative financial assets(1) - 232 - 232 232
Financial liabilities
Interest-bearing loans and borrowings 2,781 7,151 - 9,932 10,678
Derivative financial liabilities(2) - 744 - 744 744
---------------------------------------- -------- ------- ------- ----- --------
(1) Current portion of derivative financial assets is EUR173 million.
(2) Current portion of derivative financial liabilities is EUR638 million.
The carrying amounts and fair values of the Group's financial
assets and liabilities at December 31, 2022 are as follows:
Fair value Carrying value
-------------------------------- --------------
EUR million Level 1 Level 2 Level 3 Total Total
-------------------------------------- ------- ------- ------- ----- --------------
Financial assets
Other equity investments - - 55 55 55
Other non-current financial assets - 20 - 20 31
Derivative financial assets(1) - 726 - 726 726
Financial liabilities
Interest-bearing loans and borrowings 2,538 6,416 - 8,954 10,365
Derivative financial liabilities(2) - 471 - 471 471
-------------------------------------- ------- ------- ------- ----- --------------
(1) Current portion of derivative financial assets is EUR645 million.
(2) Current portion of derivative financial liabilities is EUR387 million.
There have been no transfers between levels of fair value
hierarchy during the period. 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 EUR825 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:
EUR million June 30, 2023 December 31, 2022
--------------------------------------------------- ------------- -----------------
Opening balance for the period 55 31
--------------------------------------------------- ------------- -----------------
Addition of Air Europa Holdings - 22
Additions - other - 2
Losses recognised in Income statement - (2)
Net gains recognised in Other comprehensive income 62 2
--------------------------------------------------- ------------- -----------------
Closing balance for the period 117 55
--------------------------------------------------- ------------- -----------------
13. SHARE BASED PAYMENTS
During the six months to June 30, 2023, 24,323,265 awards were
made under the Group's Restricted Share Plan to key senior
executives and selected members of the wider management team. The
fair value of equity-settled share awards granted is the share
price at the date of the grant. The Group settles the employees'
tax obligations arising from the issue of the shares directly with
the relevant tax authority in cash and an equivalent number of
shares is withheld by the Group upon vesting. The fair value of
equity-settled share awards granted is the share price at the time
of the grant.
The Group also made awards under the Group's Incentive Award
Deferral Plan during the period, under which 1,007,562 conditional
shares were awarded.
14. EMPLOYEE BENEFIT OBLIGATIONS
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 British Airways schemes in
the UK and are closed to new members.
APS has been closed to new members since 1984, but remains open
to future accrual. The benefits provided under APS are based on
final average pensionable pay and, for the majority of members, are
subject to inflationary increases in payment.
NAPS has been closed to new members since 2003 and closed to
future accrual since 2018, 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).
Triennially, the Trustees of APS and NAPS undertake actuarial
valuations, which are subsequently agreed with British Airways to
determine the cash contributions and any deficit payment plans
through to the next valuation date, as well as ensuring that the
schemes have sufficient funds available to meet future benefit
payments to members. These actuarial valuations are prepared using
the principles set out in UK Pension legislation. This differs from
the IAS 19 'Employee benefits' valuation, which is used for
deriving the Income statement and Balance sheet positions and uses
a best-estimate approach overall. The different purpose and
principles lead to different assumptions being used, and therefore
a different estimate for the liabilities and funding levels.
During 2022, the triennial valuations, as at March 31, 2021,
were finalised for APS and NAPS which resulted in a technical
surplus of EUR343 million (GBP295 million) for APS and a technical
deficit of EUR1,887 million (GBP1,650 million) for NAPS. The
actuarial valuations performed for APS and NAPS are different to
the valuation performed as at June 30, 2023 under IAS 19 'Employee
Benefits' mainly due to timing differences of the measurement dates
and to the specific scheme assumptions in the actuarial valuation
performed as at March 31, 2021 compared with IAS 19 requirements
used in the accounting valuation assumptions as at the reporting
date.
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 six months to June 30, 2023 net of service costs
made by the Group were EUR20 million (six months to June 30, 2022:
EUR8 million). The Group expects to pay EUR1 million in employer
contributions to APS and NAPS over the six month period to December
31, 2023.
Deficit contributions and deferred deficit contributions
At the date of the actuarial valuation, being March 31, 2021,
the actuarial deficit of NAPS amounted to EUR1,887 million. In
order to address the deficit in the scheme, the Group has also
committed to deficit contribution payments through to May 31, 2032.
The deficit contribution plan includes an over-funding protection
mechanism, based on the triennial valuation methodology for
measuring the deficit, whereby deficit contributions are suspended
if the funding position reaches 100 per cent, with a mechanism for
contributions to resume if the contribution level subsequently
falls below 100 per cent, or until such point as the scheme funding
level reaches 100 per cent.
During the six months to June 30, 2023, the NAPS funding
position exceeded 100 per cent and accordingly deficit
contributions were suspended. At June 30, 2023, the valuation of
the funding level incorporates significant forward-looking
assumptions, such that the Group currently does not expect to make
further deficit contributions. Given the long-term nature of the
NAPS scheme, these assumptions are subject to uncertainty and there
can be no guarantee that deficit contributions will not resume in
the future or that additional deficit contributions will be
incorporated into future triennial actuarial valuations.
June 30, 2023
----------------------------------
EUR million APS NAPS Other Total
---------------------------------------- ------- -------- ----- --------
Scheme assets at fair value (1, 3) 6,032 16,468 393 22,893
Present value of scheme liabilities (1) (5,929) (13,592) (572) (20,093)
---------------------------------------- ------- -------- ----- --------
Net pension asset/(liability) 103 2,876 (179) 2,800
Effect of the asset ceiling (2) (36) (1,007) (7) (1,050)
Other employee benefit obligations - - (9) (9)
---------------------------------------- ------- -------- ----- --------
June 30, 2023 67 1,869 (195) 1,741
---------------------------------------- ------- -------- ----- --------
Represented by:
Employee benefit assets 1,951
Employee benefit obligations (210)
---------------------------------------- ------- -------- ----- --------
Net employee benefit asset 1,741
---------------------------------------- ------- -------- ----- --------
December 31, 2022
----------------------------------------------
EUR million APS NAPS Other Total
--------------------------------------------------------- ----------- ----------- ------- -----------
Scheme assets at fair value(1) 6,283 17,029 356 23,668
Present value of scheme liabilities(1) (6,052) (13,692) (548) (20,292)
--------------------------------------------------------- ----------- ----------- ------- -----------
Net pension asset/(liability) 231 3,337 (192) 3,376
Effect of the asset ceiling(2) (80) (1,168) - (1,248)
Other employee benefit obligations - - (11) (11)
--------------------------------------------------------- ----------- ----------- ------- -----------
December 31, 2022 151 2,169 (203) 2,117
--------------------------------------------------------- ----------- ----------- ------- -----------
Represented by:
Employee benefit assets 2,334
Employee benefit obligations (217)
--------------------------------------------------------- ----------- ----------- ------- -----------
Net employee benefit asset 2,117
--------------------------------------------------------- ----------- ----------- ------- -----------
(1) Includes Additional Voluntary Contributions (AVCs), which the Trustees hold as assets
to secure additional benefits on a defined contribution basis for those members who elect
to make such AVCs. At June 30, 2023, such assets were EUR322 million (December 31, 2022: EUR320
million) with a corresponding amount recorded in the scheme liabilities.
(2) Both APS and NAPS are in an IAS 19 accounting surplus, which would be available to the
Group as a refund upon wind up of the scheme. This refund is restricted due to the withholding
taxes that would be payable by the Trustee arising on both the net pension asset and the future
contractual minimum funding requirements.
(3) Included within the fair value of scheme assets are EUR1.5 billion of private equities
and alternatives at June 30, 2023, where the fair value has been determined based on the most
recent third-party valuations. The dates of these valuations typically precede the reporting
date and have been adjusted for any cash movements between the date of the valuation and the
reporting date. Typically, the valuation approach and inputs for these investments are not
through to the reporting date unless there are indications of significant market movements.
Scheme liability assumptions
At June 30, 2023, the assumptions used to determine the
obligations under the APS and NAPS were reviewed and updated to
reflect the market condition at that date. Principal assumptions
were as follows:
June 30, 2023 December 31, 2022
--------------- -------------------
Per cent per annum APS NAPS APS NAPS
---------------------------------------- ------- ------ --------- --------
Discount rate 5.40 5.25 4.85 4.80
Rate of increase in pensionable pay 3.45 - 3.40 -
Rate of increase of pensions in payment 3.45 2.85 3.40 2.80
RPI rate of inflation 3.45 3.25 3.40 3.20
CPI rate of inflation 2.85 2.85 2.80 2.80
---------------------------------------- ------- ------ --------- --------
Further information on the basis of the assumptions is included
in note 32 of the Annual report and accounts for the year to
December 31, 2022.
15. pROVISIONS
Employee
leaving
indemnities
and other
Restoration employee
and handback Restructuring related Legal claims Other
EUR million provisions provisions provisions provisions ETS provisions provisions Total
------------------ ------------- ------------- ------------- -------------- -------------- -------------- -----
Net book value
January 1, 2023 2,400 194 673 89 132 60 3,548
Provisions
recorded during
the period 251 1 19 6 110 14 401
Reclassifications (40) - - (1) - (6) (47)
Utilised during
the period (135) (38) (18) (6) - (14) (211)
Extinguished
during the period - - - - (118) - (118)
Release of unused
amounts (33) (2) - (10) - - (45)
Unwinding of
discount 36 - 6 - - - 42
Remeasurements 11 - - - - - 11
Exchange
differences (44) (1) - 3 1 - (41)
------------------ ------------- ------------- ------------- -------------- -------------- -------------- -----
Net book value
June 30, 2023 2,446 154 680 81 125 54 3,540
------------------ ------------- ------------- ------------- -------------- -------------- -------------- -----
Analysis:
Current 541 94 62 58 125 8 888
Non-current 1,905 60 618 23 - 46 2,652
------------------ ------------- ------------- ------------- -------------- -------------- -------------- -----
2,446 154 680 81 125 54 3,540
------------------ ------------- ------------- ------------- -------------- -------------- -------------- -----
16. FINANCIAL RISK MANAGEMENT
The Group is exposed to a variety of financial risks: market
risk (including commodity risk, foreign currency risk and interest
rate risk), credit risk and liquidity risk. The principal impact of
these on the interim financial statements are discussed below.
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 anticipated
fuel consumption for the coming two years within the approved
hedging profile.
At June 30, 2023, the fair value of such net liability
derivative instruments was EUR254 million, representing a decrease
of EUR341 million since January 1, 2023.
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 the coming three
years.
At June 30, 2023, the fair value of foreign currency net
liability derivative instruments was EUR323 million, representing a
decrease of EUR431 million since January 1, 2023.
Interest rate risk
The Group is exposed to changes in interest rates on debt and on
cash deposits. In order to mitigate the interest rate risk, the
Group's policies allow a variety of over the counter derivative
instruments to be entered into.
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 an acceptable level of
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
recycled from Other comprehensive income to the Income statement
with Other non-operating expenses.
17. CONTINGENT LIABILITIES
There are a number of legal and regulatory proceedings against
the Group in a number of jurisdictions which at June 30, 2023,
where they could be reliably estimated, amounted to EUR57 million
(December 31, 2022: EUR11 million). The Group does not consider it
probable that there will be an outflow of economic resources with
regard to these proceedings and accordingly no provisions have been
recorded.
Contingent liabilities associated with income taxes, deferred
taxes and indirect taxes are presented in note 6.
Included in contingent liabilities is the following:
Air Europa Holdings acquisition break-fee
On February 23, 2023, the Group entered into an agreement to
acquire the remaining 80 per cent of the share capital of Air
Europa Holdings from Globalia that it had not previously owned. The
acquisition is conditional on Globalia receiving approval from the
syndicated banks that provide the loan agreements that are
partially guaranteed by the Instituto de Crédito Oficial (ICO) and
Sociedad Estatal de Participaciones Industriales (SEPI) in Spain.
The acquisition is also subject to approval by relevant competition
authorities.
In the event that the relevant approvals, detailed above, are
not forthcoming within 24 months of entering into the agreement or
the Group terminates the agreement at any time prior to completion,
then the Group is required to pay a break-fee to Globalia of EUR50
million. Under the agreement, this 24-month period can be extended,
by mutual consent.
At June 30, 2023 and through to the date of these condensed
consolidated interim financial statements, the Group considers that
it is probable that the acquisition will successfully complete and
accordingly does not consider it probable that the break-fee shall
be paid. Given the above the Group does not consider it appropriate
to record a provision for the break-fee.
18. RELATED PARTY TRANSACTIONS
The Group had the following transactions in the ordinary course
of business with related parties.
Sales and purchases of goods and services:
Six months to June 30
-----------------------
EUR million 2023 2022
---------------------------------------- ----------- ----------
Sales of goods and services
Sales to associates 3 2
Sales to significant shareholders 142 41
Purchases of goods and services
Purchases from associates 28 31
Purchases from significant shareholders 69 72
---------------------------------------- ----------- ----------
Period end balances arising from sales and purchases of goods
and services:
June 30, December 31,
EUR million 2023 2022
----------------------------------------- -------- ------------
Receivables from related parties
Amounts owed by associates 1 1
Amounts owed by significant shareholders 63 25
Payables to related parties
Amounts owed to associates 2 -
Amounts owed to significant shareholders 13 26
----------------------------------------- -------- ------------
For the six months to June 30, 2023 the Group has not made any
allowance on expected credit losses relating to amounts owed by
related parties (2022: nil).
Board of Directors and Management Committee remuneration
Compensation received by the Group's key management personnel is
as follows:
Six months to June 30
-----------------------
EUR million 2023 2022
---------------------------------- ----------- ----------
Base salary, fees and benefits
Board of Directors' remuneration 2 2
Management Committee remuneration 4 4
---------------------------------- ----------- ----------
For the six months to June 30, 2023 the remuneration for the
Board of Directors includes one Executive Director (June 30, 2022:
one Executive Director). The Management Committee includes
remuneration for 13 members (June 30, 2022: 12 members).
The Company provides life insurance for all Executive Directors
and the Management Committee. For the six months to June 30, 2023
the Company's obligation was EUR 23,000 (2022: EUR20,000).
At June 30, 2023 the transfer value of accrued pensions covered
under defined benefit pension obligation schemes, relating to the
current members of the Management Committee totalled EUR 3 million
(2022: EUR6 million).
No loan or credit transactions were outstanding with Directors
or officers of the Group at June 30, 2023 (2022: nil).
19. CHANGE IN PRESENTATION OF THE CASH FLOW STATEMENT
During the course of 2023, the Group has made a number of
changes to its Cash flow statement. These changes have been applied
retrospectively to the Cash flow statement and are detailed
below.
Net gain on disposal of property plant and equipment
Previously gains/losses on the disposal of property, plant and
equipment were recorded in the Income statement within Other
non-operating charges. Under the updated presentation, gains/losses
on the disposal of property, plant and equipment are presented
separately in the Income statement and included within Operating
profit. Accordingly, operating profit included within Net cash
flows from operating activities has been updated. See note 1 for
further information.
Unrealised currency differences
Previously all unrealised foreign currency gains/losses arising
in the Cash flow statement were recorded within Net foreign
exchange differences. Under the updated presentation, Net foreign
exchange differences has been amended to only include those
unrealised currency differences arising from the retranslation of
opening cash and cash equivalent balances, while unrealised
currency differences arising from working capital used in operating
activities are presented within Net cash flows from operating
activities.
Other cash flows from operating activities
Previously movements in working capital balances were presented
aggregated between working capital assets and working capital
liabilities. Under the updated presentation working capital
balances have been disaggregated by their nature to allow greater
visibility as to the cash flow impacts associated with these
balances. There has been no change in the overall total movement in
working capital.
In addition previously the Group presented the non-cash
movements in provisions combined with other non-cash movements.
Under the updated presentation these items have been sep arated
into individual row items within the Cash flow statement.
The following table summarises the impact of the changes in
presentation in the Cash flow statement for the six month period to
June 30, 2022:
Cash flow statement (extract for the six months to June 30,
2022)
Adjustment -
Adjustment - net gain unrealised currency Adjustment - operating
EUR million As reported on disposal of PPE differences cash flow items Restated
----------------------- ----------- ---------------------- ---------------------- ---------------------- --------
Cash flows from
operating activities
Operating loss (438) 21 (417)
Depreciation,
amortisation and
impairment 1,015 1,015
Net gain on disposal of
property, plant and
equipment - (21) (21)
Movement in working
capital 2,738 (2,738) -
Increase in trade
receivables,
inventories and
other current assets (996) 996 -
Increase in trade and
other payables and
deferred revenue on
ticket sales 3,734 (3,734) -
Employer contributions
to pension schemes (10) (10)
Pension scheme service
costs 1 1
Payments related to
restructuring (41) 41 -
Provisions and other
non-cash movements 349 (349) -
Increase in provisions - 291 291
Unrealised currency
differences - 38 38
Other movements - 17 17
Interest paid (403) (403)
Interest received 3 3
Tax paid (2) (2)
----------------------- ----------- ---------------------- ---------------------- ---------------------- --------
Net cash flows from
operating activities
before movements in
working capital 3,212 - 38 (2,738) 512
----------------------- ----------- ---------------------- ---------------------- ---------------------- --------
Increase in trade
receivables - (811) (811)
Increase in inventories - 4 4
Increase in other
receivables and
current assets - (85) (85)
Increase in trade
payables - 733 733
Increase in deferred
revenue - 2,370 2,370
Increase in other
payables and current
liabilities - 527 527
----------------------- ----------- ---------------------- ---------------------- ---------------------- --------
Movement in working
capital - - - 2,738 2,738
----------------------- ----------- ---------------------- ---------------------- ---------------------- --------
Net cash flows from
operating activities 3,212 - 38 - 3,250
----------------------- ----------- ---------------------- ---------------------- ---------------------- --------
Net cash flows from
investing activities (2,100) - - - (2,100)
----------------------- ----------- ---------------------- ---------------------- ---------------------- --------
Net cash flows from
financing activities (19) - - - (19)
----------------------- ----------- ---------------------- ---------------------- ---------------------- --------
Net increase in cash
and cash equivalents 1,093 38 1,131
Net foreign exchange
differences 19 (38) (19)
Cash and cash
equivalents at 1
January 7,892 7,892
----------------------- ----------- ---------------------- ---------------------- ---------------------- --------
Cash and cash
equivalents at period
end 9,004 - - - 9,004
----------------------- ----------- ---------------------- ---------------------- ---------------------- --------
Interest-bearing
deposits maturing
after more than three
months 186 - - - 186
----------------------- ----------- ---------------------- ---------------------- ---------------------- --------
Cash, cash equivalents
and interest-bearing
deposits 9,190 - - - 9,190
----------------------- ----------- ---------------------- ---------------------- ---------------------- --------
20. POST BALANCE SHEET EVENTS
On July 4, 2023, the Group redeemed upon maturity the senior
unsecured EUR500 million fixed rate bond.
On July 27, 2023, the Group announced that it had converted six
Boeing 787-10 options held by British Airways into firm orders and
at the same time is adding a further six 787-10 options to its
longhaul order book. The Group is also converting one Airbus
A350-900 option held by Iberia into a firm order. The firm aircraft
will be delivered in 2025 and 2026 and will be used by British
Airways and Iberia to restore capacity in the airlines' longhaul
fleets.
STATEMENT OF DIRECTORS' RESPONSIBILITIES
LIABILITY STATEMENT OF COMPANY 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 July 27, 2023, the directors of
International Consolidated Airlines Group, S.A. (the "Company")
state that, to the best of their knowledge, the condensed
consolidated financial statements for the six months to June 30,
2023, prepared in accordance with the applicable set of accounting
standards, give a true and fair view of the assets, liabilities,
financial position and profit or loss of the Company and of the
companies that fall within the consolidated group taken as a whole,
and that the interim management report includes a fair review of
the required information.
July 27, 2023
Javier Ferrán Larraz Luis Gallego Martín
Chairman Chief Executive Officer
Giles Agutter Peggy Bruzelius
Eva Castillo Sanz Margaret Ewing
Maurice Lam Heather Ann McSharry
Robin Phillips Emilio Saracho Rodríguez
de Torres
Lucy Nicola Shaw
Limited Review Report on the Condensed Consolidated Interim
Financial Statements
To the Shareholders of International Consolidated Airlines
Group, S.A. commissioned by management:
REPORT ON THE CONDENSED CONSOLIDATED INTERIM FINANCIAL
STATEMENTS
Introduction
We have carried out a limited review of the accompanying
condensed consolidated interim financial statements (the "interim
financial statements") of International Consolidated Airlines
Group, S.A. (the "Company") and subsidiaries (together the
"Group"), which comprise the balance sheet at 30 June 2023, the
income statement, statement of other comprehensive income,
statement of changes in equity, cash flow statement and the
explanatory notes thereto for the six-month period then ended (all
condensed and consolidated). The Directors of the Company are
responsible for the preparation of these interim financial
statements in accordance with International Accounting Standard
(IAS) 34 "Interim Financial Reporting" as adopted by the European
Union, pursuant to article 12 of Royal Decree 1362/2007 as regards
the preparation of condensed interim financial information. Our
responsibility is to express a conclusion on these interim
financial statements based on our limited review.
Scope of Review
We conducted our limited review in accordance with International
Standard on Review Engagements 2410, "Review of Interim Financial
Information Performed by the Independent Auditor of the Entity". A
limited review of interim financial statements consists of making
inquiries, primarily of persons responsible for financial and
accounting matters, and applying analytical and other review
procedures. A limited review is substantially less in scope than an
audit conducted in accordance with prevailing legislation
regulating the audit of accounts in Spain and, consequently, does
not enable us to obtain assurance that we would become aware of all
significant matters that might be identified in an audit.
Accordingly, we do not express an audit opinion on the accompanying
interim financial statements.
Conclusion
Based on our limited review, which can under no circumstances be
considered an audit, nothing has come to our attention that causes
us to believe that the accompanying interim financial statements
for the six-month period ended 30 June 2023 have not been prepared,
in all material respects, in accordance with International
Accounting Standard (IAS) 34 "Interim Financial Reporting", as
adopted by the European Union, pursuant to article 12 of Royal
Decree 1362/2007 as regards the preparation of condensed interim
financial statements.
Emphasis of Matter
We draw your attention to the accompanying note 1, which states
that these interim financial statements do not include all the
information that would be required in a complete set of
consolidated financial statements prepared in accordance with
International Financial Reporting Standards as adopted by the
European Union. The accompanying interim financial statements
should therefore be read in conjunction with the Group's
consolidated annual accounts for the year ended 31 December 2022.
This matter does not modify our conclusion.
REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTS
The accompanying consolidated interim management report for the
six-month period ended 30 June 2023 contains such explanations as
the Directors of the Company consider relevant with respect to the
significant events that have taken place in this period and their
effect on the interim financial statements, as well as the
disclosures required by article 15 of Royal Decree 1362/2007. The
consolidated interim management report is not an integral part of
the interim financial statements. We have verified that the
accounting information contained therein is consistent with that
disclosed in the interim financial statements for the six-month
period ended 30 June 2023. Our work is limited to the verification
of the consolidated interim management report within the scope
described in this paragraph and does not include a review of
information other than that obtained from the accounting records of
International Consolidated Airlines Group, S.A. and
subsidiaries.
Other Matter
This report has been prepared at the request of management in
relation to the publication of the six-monthly financial report
required by article 100 of Law 6/2023 of 17 March 2023 on
Securities Markets and Investment Services.
KPMG Auditores, S.L.
Bernardo Rücker-Embden
27 July 2023
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 the six months to June 30, 2023, 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, 2022.
The impact of and the recovery from the COVID-19 pandemic has
significantly changed the basis on which the Board, Management
Committee and external parties monitor the performance of the
Group. In this regard measures relating to Levered free cash flow,
Net debt to EBITDA before exceptional items and Return on capital
employed do not provide the level of meaningful additional
information that they have done in the past. However, the Group
continues to present these APMs for consistency and they will
become more prominent and relevant subsequent to the recovery from
the COVID-19 pandemic.
The definition of each APM, together with a reconciliation to
the nearest measure prepared in accordance with IFRS is presented
below
a Profit/(loss) after tax before exceptional items
Exceptional items are those that in the Board's and management's
view need to be separately disclosed by virtue of their size or
incidence to supplement the understanding of the entity's financial
performance. The Management Committee of the Group uses financial
performance on a pre-exceptional basis to evaluate operating
performance and to make strategic, financial and operational
decisions, and externally because it is widely used by security
analysts and investors in evaluating the performance of the Group
between reporting periods and against other companies.
While there have been no exceptional items recorded in the six
months to June 30, 2023, exceptional items in the six months to
June 30, 2022 include: significant changes in the long-term fleet
plans that result in the reversal of impairment of fleet assets and
legal re-imbursements.
The table below reconciles the statutory Income statement to the
Income statement before exceptional items of the Group:
Six months to June 30
----------------------------------------------------------------------------------------------------
Before Before
Exceptional exceptional Statutory Exceptional exceptional
EUR million Statutory 2023 items items 2023 2022(1) items items 2022
---------------- -------------- --------------- --------------- --------------- ---------------- ---------------
Passenger
revenue 11,784 - 11,784 7,604 - 7,604
Cargo revenue 603 - 603 843 - 843
Other revenue 1,196 - 1,196 904 - 904
---------------- -------------- --------------- --------------- --------------- ---------------- ---------------
Total revenue 13,583 - 13,583 9,351 - 9,351
---------------- -------------- --------------- --------------- --------------- ---------------- ---------------
Employee costs 2,610 - 2,610 2,167 - 2,167
Fuel, oil costs
and emissions
charges 3,550 - 3,550 2,566 - 2,566
Handling,
catering and
other operating
costs 1,796 - 1,796 1,322 - 1,322
Landing fees and
en-route
charges 1,104 - 1,104 847 - 847
Engineering and
other aircraft
costs 1,208 - 1,208 928 - 928
Property, IT and
other costs (2) 515 - 515 435 (23) 458
Selling costs 578 - 578 442 - 442
Depreciation,
amortisation
and impairment
(3) 983 - 983 1,015 (6) 1,021
Net gain on sale
of property,
plant and
equipment (17) - (17) (21) - (21)
Currency
differences (4) - (4) 67 - 67
---------------- -------------- --------------- --------------- --------------- ---------------- ---------------
Total
expenditure on
operations 12,323 - 12,323 9,768 (29) 9,797
---------------- -------------- --------------- --------------- --------------- ---------------- ---------------
Operating
profit/(loss) 1,260 - 1,260 (417) 29 (446)
Finance costs (565) - (565) (480) - (480)
Finance income 167 - 167 3 - 3
Net change in
fair value of
financial
instruments (13) - (13) 130 - 130
Net financing
credit/(charge)
relating to
pensions 51 - 51 13 - 13
Net currency
retranslation
charges 149 - 149 (197) - (197)
Other
non-operating
credits (12) - (12) 105 - 105
---------------- -------------- --------------- --------------- --------------- ---------------- ---------------
Total net
non-operating
costs (223) - (223) (426) - (426)
---------------- -------------- --------------- --------------- --------------- ---------------- ---------------
Profit/(loss)
before tax 1,037 - 1,037 (843) 29 (872)
Tax (116) - (116) 189 - 189
---------------- -------------- --------------- --------------- --------------- ---------------- ---------------
Profit/(loss)
after tax for
the period 921 - 921 (654) 29 (683)
---------------- -------------- --------------- --------------- --------------- ---------------- ---------------
Three months to June 30
----------------------------------------------------------------------------------------------------
Before Before
Exceptional exceptional Statutory Exceptional exceptional
EUR million Statutory 2023 items items 2023 2022(1) items items 2022
---------------- -------------- --------------- --------------- --------------- ---------------- ---------------
Passenger
revenue 6,743 - 6,743 4,949 - 4,949
Cargo revenue 280 - 280 411 - 411
Other revenue 671 - 671 556 - 556
---------------- -------------- --------------- --------------- --------------- ---------------- ---------------
Total revenue 7,694 - 7,694 5,916 - 5,916
---------------- -------------- --------------- --------------- --------------- ---------------- ---------------
Employee costs 1,353 - 1,353 1,122 - 1,122
Fuel, oil costs
and emissions
charges 1,792 - 1,792 1,648 - 1,648
Handling,
catering and
other operating
costs 1,020 - 1,020 780 - 780
Landing fees and
en-route
charges 620 - 620 489 - 489
Engineering and
other aircraft
costs 621 - 621 553 - 553
Property, IT and
other costs 266 - 266 231 - 231
Selling costs 298 - 298 241 - 241
Depreciation,
amortisation
and impairment
(3) 497 - 497 484 (6) 490
Net gain on sale
of property,
plant and
equipment (7) - (7) (8) - (8)
Currency
differences (17) - (17) 75 - 75
---------------- -------------- --------------- --------------- --------------- ---------------- ---------------
Total
expenditure on
operations 6,443 - 6,443 5,615 (6) 5,621
---------------- -------------- --------------- --------------- --------------- ---------------- ---------------
Operating profit 1,251 - 1,251 301 6 295
Finance costs (291) - (291) (247) - (247)
Finance income 99 - 99 2 - 2
Net change in
fair value of
financial
instruments (12) - (12) 70 - 70
Net financing
credit/(charge)
relating to
pensions 26 - 26 6 - 6
Net currency
retranslation
charges 89 - 89 (136) - (136)
Other
non-operating
credits (4) - (4) 77 - 77
---------------- -------------- --------------- --------------- --------------- ---------------- ---------------
Total net
non-operating
costs (93) - (93) (228) - (228)
---------------- -------------- --------------- --------------- --------------- ---------------- ---------------
Profit/(loss)
before tax 1,158 - 1,158 73 6 67
Tax (150) - (150) 60 - 60
---------------- -------------- --------------- --------------- --------------- ---------------- ---------------
Profit/(loss)
after tax for
the period 1,008 - 1,008 133 6 127
---------------- -------------- --------------- --------------- --------------- ---------------- ---------------
(1) The 2022 results include a reclassification to confirm with
the current period presentation for the Net (gains)/losses on sale
of property, plant and equipment. Accordingly, for the six month
and three month periods to June 30, 2022, the Group has
reclassified EUR21 million and EUR8 million, respectively, of gains
from Other non-operating (charges)/credits to Net (gains)/losses on
sale of property, plant and equipment within Operating expenses.
There is no impact on the Loss after tax.
The rationale for each exceptional item is given below.
(2) Partial reversal of historical fine
The exceptional credit of EUR23 million for the six months to
June 30, 2022, relates to the partial reversal of the fine, plus
accrued interest, initially issued by the European Commission, in
2010, to British Airways regarding its involvement in cartel
activity in the air cargo sector and that had been recognised as an
exceptional charge. The exceptional credit was recorded within
Property, IT and other costs in the Income statement with no
resultant tax charge arising. The cash inflow associated with the
partial reversal of the fine was recognised during 2022.
(3) Impairment reversal of fleet and associated assets
The exceptional impairment reversal of EUR6 million for the six
months to June 30, 2022, relates to four Airbus A320s in Vueling,
previously stood down in the fourth quarter of 2020 and
subsequently stood up in the second quarter of 2022. The
exceptional impairment reversal was recorded within Right of use
assets on the Balance sheet and within Depreciation, amortisation
and impairment in the Income statement.
b Adjusted earnings/(loss) per share (KPI)
Adjusted earnings are based on results before exceptional items
after tax and adjusted for earnings attributable to equity holders
and interest on convertible bonds, divided by the weighted average
number of ordinary shares, adjusted for the dilutive impact of the
assumed conversion of the bonds and employee share schemes
outstanding .
Six months to June 30
-----------------------
EUR million 2023 2022
--------------------------------------------------------------------------------------------- ---------- -----------
Profit/(loss) after tax attributable to equity holders of the parent 921 (654)
Exceptional items - 29
--------------------------------------------------------------------------------------------- ---------- -----------
Profit/(loss) after tax attributable to equity holders of the parent before exceptional items 921 (683)
--------------------------------------------------------------------------------------------- ---------- -----------
Income statement impact of convertible bonds 13 -
--------------------------------------------------------------------------------------------- ---------- -----------
Adjusted profit/(loss) 934 (683)
--------------------------------------------------------------------------------------------- ---------- -----------
Weighted average number of shares used for basic earnings/(loss) per share 4,950 4,963
Weighted average number of shares used for diluted earnings/(loss) per share 5,297 4,963
Basic earnings/(loss) per share (EUR cents) 18.6 (13.8)
--------------------------------------------------------------------------------------------- ---------- -----------
Basic earnings/(loss) per share before exceptional items (EUR cents) 18.6 (13.8)
--------------------------------------------------------------------------------------------- ---------- -----------
Adjusted earnings/(loss) per share before exceptional items (EUR cents) 17.6 (13.8)
--------------------------------------------------------------------------------------------- ---------- -----------
c Airline non-fuel costs per ASK
The Group monitors airline unit costs (per ASK, a standard
airline measure of capacity) as a means of tracking operating
efficiency of the core airline business. As fuel costs can vary
with commodity prices, the Group monitors fuel and non-fuel costs
individually. Within non-fuel costs are the costs associated with
generating Other revenue, which typically do not represent the
costs of transporting passengers or cargo and instead represent the
costs of handling and maintenance for other airlines, non-flight
products in BA Holidays and costs associated with other
miscellaneous non-flight revenue streams. Airline non-fuel costs
per ASK is defined as total operating expenditure before
exceptional items, less fuel, oil costs and emission charges and
less non-flight specific costs divided by total available seat
kilometres (ASKs), and is shown on a constant currency basis
(abbreviated to 'ccy').
Six months to June 30, Six months to June 30, Six months to June 30,
EUR million 2023 Reported ccy adjustment(1) 2023 ccy 2022
------------------------ ----------------------- ----------------- ----------------------- -----------------------
Total expenditure on
operations 12,323 177 12,500 9,768
Add: exceptional items
in operating
expenditure - - - (29)
Less: fuel, oil costs
and emission charges 3,550 (58) 3,492 2,566
------------------------ ----------------------- ----------------- ----------------------- -----------------------
Non-fuel costs 8,773 235 9,008 7,231
Less: Non-flight
specific costs 1,030 17 1,047 757
Airline non-fuel costs 7,743 218 7,961 6,474
------------------------ ----------------------- ----------------- ----------------------- -----------------------
ASKs (millions) 154,034 - 154,034 117,710
Airline non-fuel unit
costs per ASK (EUR
cents) 5.03 - 5.17 5.50
------------------------ ----------------------- ----------------- ----------------------- -----------------------
(1) Refer to note g for
the definition of the
ccy adjustment .
d Levered free cash flow (KPI)
Levered free cash flow represents the cash generated, and the
financing raised, by the businesses before shareholder returns and
is defined as the net increase in cash and cash equivalents taken
from the Cash flow statement, adjusting for movements in Current
interest-bearing deposits and adding back the cash outflows
associated with dividends paid and the acquisition of treasury
shares. The Group believes that this measure is useful to the users
of the financial statements in understanding the cash generating
ability of the Group that is available to return to shareholders,
to improve leverage and/or to undertake inorganic growth
opportunities.
Six months to June 30
-----------------------
EUR million 2023 2022
--------------------------------------------------------- ----------- ----------
Net Increase in cash and cash equivalents 1,387 1,131
--------------------------------------------------------- ----------- ----------
Add: Increase in other current interest-bearing deposits 869 134
--------------------------------------------------------- ----------- ----------
Levered free cash flow 2,256 1,265
--------------------------------------------------------- ----------- ----------
e Net debt to EBITDA before exceptional items (KPI)
To supplement total borrowings as presented in accordance with
IFRS, the Group reviews net debt to EBITDA before exceptional items
to assess its level of net debt in comparison to the underlying
earnings generated by the Group in order to evaluate the underlying
business performance of the Group. This measure is used to monitor
the Group's leverage and to assess financial headroom against
internal and external security analyst and investor benchmarks.
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.
EBITDA before exceptional items is defined as the rolling four
quarters operating result before exceptional items, interest,
taxation, depreciation, amortisation and impairment.
The Group believes that this additional measure, which is used
internally to assess the Group's financial capacity, is useful to
the users of the financial statements in helping them to see how
the Group's financial capacity has changed over the period. It is a
measure of the profitability of the Group and of the core operating
cash flows generated by the business model.
Six months
to June December
EUR million 30, 2023 31, 2022(1)
----------------------------------------------------------------------- ------------ ---------------
Interest-bearing long-term borrowings 19,623 19,984
Less: Cash and cash equivalents (10,728) (9,196)
Less: Other current interest-bearing deposits (1,282) (403)
----------------------------------------------------------------------- ------------ ---------------
Net debt 7,613 10,385
----------------------------------------------------------------------- ------------ ---------------
Operating profit 2,955 1,278
Add: Depreciation, amortisation and impairment 2,038 2,070
----------------------------------------------------------------------- ------------ ---------------
EBITDA 4,993 3,348
----------------------------------------------------------------------- ------------ ---------------
Add: Exceptional items (excluding those reported within
Depreciation, amortisation and impairment) - (23)
----------------------------------------------------------------------- ------------ ---------------
EBITDA before exceptional items 4,993 3,325
----------------------------------------------------------------------- ------------ ---------------
Net debt to EBITDA before exceptional items (times) 1.5 3.1
----------------------------------------------------------------------- ------------ ---------------
(1) The 2022 results include a reclassification to conform with the current period presentation
for the Net gain on sale of property, plant and equipment.
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 the rolling four quarters EBITDA
before exceptional items, less fleet depreciation adjusted for
inflation, depreciation of other property, plant and equipment, and
amortisation of software intangibles, divided by average invested
capital and is expressed as a percentage.
Invested capital is defined as the average of property, plant
and equipment and software intangible assets over a 12-month period
between the opening and closing net book values. The fleet aspect
of property, plant and equipment is inflated over the average age
of the fleet to approximate the replacement cost of the associated
assets.
EUR million June 30, 2023 December 31, 2022(1)
------------------------------------------------------------------ ------------- --------------------
EBITDA before exceptional items 4,993 3,325
Less: Fleet depreciation multiplied by inflation adjustment (1,901) (1,944)
Less: Other property, plant and equipment depreciation (214) (247)
Less: Software intangible amortisation (207) (210)
------------------------------------------------------------------ ------------- --------------------
2,671 924
------------------------------------------------------------------ ------------- --------------------
Invested capital
Average fleet value(2) 16,448 15,717
Less: Average progress payments(3) (1,055) (910)
------------------------------------------------------------------ ------------- --------------------
Fleet book value less progress payments 15,393 14,807
Inflation adjustment(4) 1.18 1.18
------------------------------------------------------------------ ------------- --------------------
18,114 17,435
Average net book value of other property, plant and equipment (5) 2,098 2,037
Average net book value of software intangible assets (6) 664 640
------------------------------------------------------------------ ------------- --------------------
Total invested capital 20,876 20,112
------------------------------------------------------------------ ------------- --------------------
Return on Invested Capital 12.8% 4.6%
------------------------------------------------------------------ ------------- --------------------
(1) The 2022 results include a reclassification to conform with
the current period presentation for the Net gain on sale of
property, plant and equipment. See note 1.
(2) The average net book value of aircraft is calculated from an
amount of EUR16,087 million at June 30, 2022 and EUR16,809 million
at June 30, 2023.
(3) The average net book value of progress payments is
calculated from an amount of EUR1,141 million at June 30, 2022 and
EUR969 million at June 30, 2023.
(4) Presented to two decimal places and calculated using a 1.5
per cent inflation (June 30, 2022: 1.5 per cent inflation) rate
over the weighted average age of the fleet at June 30, 2023: 11.1
years (June 30, 2022: 10.8 years).
(5) The average net book value of other property, plant and
equipment is calculated from an amount of EUR2,077 million at June
30, 2022 and EUR2,119 million at June 30, 2023.
(6) The average net book value of software intangible assets is
calculated from an amount of EUR640 million at June 30, 2022 and
EUR689 million at June 30, 2023.
g Results on a constant currency basis
Movements in foreign exchange rates impact the Group's financial
results. The Group reviews the results, including revenue and
operating costs at constant rates of exchange. The Group calculates
these financial measures at constant rates of exchange based on a
retranslation, at prior period exchange rates, of the current
period'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 2023 figures are
stated at a constant currency basis, they have applied the 2022
rates stated below:
Foreign exchange rates
-------------------
Weighted average six months to June 30 Closing at June 30 Closing at December 31
----------------------------------------
2023 2022 2023 2022
Pound sterling to euro 1.14 1.19 1.17 1.14
Euro to US dollar 1.08 1.16 1.09 1.06
Pound sterling to US dollar 1.24 1.38 1.28 1.21
h Liquidity
The Board and the Management Committee monitor liquidity in
order to assess the resilience of the Group to adverse events and
uncertainty and develop funding initiatives to maintain this
resilience.
Liquidity is used by analysts, investors and other users of the
financial statements as a measure to the financial health and
resilience of the Group.
Liquidity is defined as Cash and cash equivalents plus Current
interest-bearing deposits, plus committed and undrawn general,
aircraft and overdraft facilities.
EUR million June 30, 2023 December 31, 2022
Cash and cash equivalents 10,728 9,196
Current interest-bearing deposits 1,282 403
Committed general undrawn facilities 3,255 3,231
Committed aircraft undrawn facilities 234 1,116
Overdrafts and other facilities 53 53
Total liquidity 15,552 13,999
AIRCRAFT FLEET
Number in service with Group companies
Total Changes since
June 30, Total December 31, Future
Owned Finance lease Operating lease 2023 December 31, 2022 2022 deliveries Options(1)
Airbus
A319ceo 9 - 33 42 41 1 - -
Airbus
A320ceo 46 16 132 194 199 (5) - -
Airbus
A320neo 1 38 23 62 60 2 53 40
Airbus
A321ceo 11 3 29 43 44 (1) - -
Airbus
A321neo - 2 18 20 16 4 42 -
Airbus
A321 LR - - 8 8 8 - - -
Airbus
A321 XLR - - - - - - 14 14
Airbus
A330-200 2 1 15 18 16 2 - -
Airbus
A330-300 4 4 12 20 20 - - -
Airbus
A350-900 - 6 10 16 15 1 7 16
Airbus
A350-1000 1 13 - 14 13 1 4 36
Airbus
A380 2 10 - 12 12 - - -
Boeing
737-8200 - - - - - - 25 100
Boeing
737-10 - - - - - - 25 -
Boeing
777-200 38 2 3 43 43 - - -
Boeing
777-300 7 2 7 16 16 - - -
Boeing
777-9 - - - - - - 18 24
Boeing
787-8 - 10 2 12 12 - - -
Boeing
787-9 1 8 9 18 18 - - -
Boeing
787-10 2 5 - 7 4 3 5 6
Embraer
E190 9 - 11 20 21 (1) - -
Group
total 133 120 312 565 558 7 193 236
Aircraft are reported based on their contractual definitions as opposed to their accounting
determination. For accounting purposes, while all operating leases are presented as lease
liabilities, finance leases are presented as either lease liabilities or asset financed liabilities,
depending on the nature of the individual arrangement.
(1) The options to purchase 100 Boeing 737 aircraft allow for flexibility in the choice of
variant.
As well as those aircraft in service, the Group also holds 10 aircraft (December 31, 2022:
18) not in service.
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