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International Consolidated Airlines Group. S.A.
Investor Presentation • May 7, 2021
1846_rns_2021-05-07_3db61bdc-0def-44b6-a6b9-dbb1468b4933.pdf
Investor Presentation
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IAG results presentation
Quarter One 2021
7 May 2021
Highlights
Luis Gallego, Chief Executive Officer
Limited passenger flying but liquidity is strong and IAG is ready to re-start
1Q 2021 highlights and outlook
- Pre-exceptional operating loss of -€1,135m compared to a loss of -€535m last year
- Total revenue of €963m down -79.0% vs. 1Q 2020 and down -81.8% vs. 1Q 2019
- Passenger capacity (ASKs) decline of -80.4% vs. 1Q 2019 in line with previous expectations, lower than -73.4% in 4Q 2020
- Cargo revenue remains strong up +42.3% vs. 1Q 2020 and up +27.3% vs. 1Q 2019
- Liquidity remains strong: €10.5bn at the end of March compared to €10.3bn pro-forma at the end of 2020, due to successful debt and facility raising activities
- £2.0bn UKEF guaranteed 5-year loan facility drawdown by British Airways
- €75m ISIF facility drawdown for Aer Lingus
- €1.2bn IAG unsecured bonds issued
- \$1.755bn IAG 3-year RCF available to Aer Lingus, British Airways and Iberia
- Outlook depends on Governments allowing a summer re-start
- Vaccine success, lower infection rates, greater testing capability and availability of digital apps means travel can and should re-start safely in the summer as lockdowns are eased
- 2Q 2021 capacity to be c.25% compared to 2Q 2019
- Sustainability enhancements
- First European airline group to commit to powering 10% of its flights with sustainable aviation fuel by 2030
- First airline group worldwide to extend its net zero commitment to its supply chain by 2050 (Scope 3)
Financial results
Steve Gunning, Chief Financial Officer
Continued losses due to COVID-19
Pre exceptional operating results, 1Q 2021
| 1Q 2021 | 1Q 2020 | vly | 1Q 2019 | v2y | |
|---|---|---|---|---|---|
| Passenger revenue | 454 | 3,953 | -88.5% | 4,623 | -90.2% |
| Cargo revenue | 350 | 246 | 42.3% | 275 | 27.3% |
| Other revenue | 159 | 386 | -58.8% | 397 | -59.9% |
| Total revenue | 963 | 4,585 | -79.0% | 5,295 | -81.8% |
| Employee costs | 622 | 1,234 | -49.6% | 1,204 | -48.3% |
| Fuel, oil costs and emissions charges | 288 | 1,209 | -76.2% | 1,366 | -78.9% |
| Handling, catering and other operating costs | 173 | 652 | -73.5% | 664 | -73.9% |
| Landing fees and en-route charges | 127 | 451 | -71.8% | 485 | -73.8% |
| Engineering and other aircraft costs | 207 | 504 | -58.9% | 485 | -57.3% |
| Property, IT and other costs | 184 | 225 | -18.2% | 169 | 8.9% |
| Selling costs | 70 | 211 | -66.8% | 281 | -75.1% |
| Depreciation, amortisation and impairment | 470 | 570 | -17.5% | 515 | -8.7% |
| Currency differences | -43 | 64 | nm | -9 | nm |
| Total expenditure on operations | 2,098 | 5,120 | -59.0% | 5,160 | -59.3% |
| Pre exceptional operating result | -1,135 | -535 | nm | 135 | nm |
| ASKs | 14,796 | 67,522 | -78.1% | 75,423 | -80.4% |
Exceptional over-hedging gain of €67m
- Exceptional items in 1Q 2021 related to a net 'over-hedging' gain of €67m
- A fuel 'over-hedging' gain of €62m based on forward jet fuel prices and foreign currency rates as of the end of March
- Driven by the positive impact from the increase in fuel prices since 31 December 2020
- A revised fuel hedging policy designed to provide more flexibility to both significant unexpected reductions in travel demand or capacity and/or material or sudden changes in jet fuel prices. Key changes include:
- Lower maximum hedging limits
- Greater use of call options
- Hedging beyond 24 months only in exceptional circumstances
Different approaches to different challenges
Financial performance at airline level, 1Q 2021
| 1Q 2021 (€m) |
vly | v2y | 1Q 2021 (£m) |
vly | v2y | 1Q 2021 (€m) |
vly | v2y | 1Q 2021 (€m) |
vly | v2y | |
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Passenger revenue | 12 | -95.7% | -96.5% | 172 | -92.0% | -93.5% | 199 | -73.0% | -76.0% | 47 | -84.7% | -87.5% |
| Cargo revenue | 15 | -2.5% | +13.6% | 231 | +57.0% | +31.6% | 86 | +42.9% | +22.9% | - | - | - |
| Other revenue | 1 | -75.8% | -88.9% | 16 | -87.8% | -88.1% | 142 | -52.0% | -50.9% | - | nm | nm |
| Total revenue | 28 | -90.9% | -92.4% | 419 | -82.7% | -85.9% | 427 | -61.0% | -64.1% | 47 | -84.8% | -87.6% |
| Total costs | 131 | -66.8% | -67.1% | 1,060 | -60.3% | -61.2% | 620 | -47.3% | -48.9% | 152 | -61.4% | -65.5% |
| Pre exceptional operating result | -103 | -13 | -69 | -641 | -386 | -868 | -193 | -111 | -169 | -105 | -18 | -40 |
| Pre exceptional operating margin | -371.0% | -341.3pts | -361.5pts | -153.3% | -142.7pts | -160.9pts | -45.3% | -37.8pts | -43.3pts | -225.7% | -197.3pts | -208.3pts |
| ASK (m) | 883 | -83.3% | -84.8% | 6,466 | -83.5% | -85.2% | 6,159 | -58.6% | -62.5% | 1,096 | -81.1% | -85.3% |
| RPK (m) | 124 | -96.3% | -97.1% | 2,480 | -91.5% | -92.9% | 3,366 | -72.2% | -75.9% | 667 | -86.5% | -89.3% |
| Load factor (%) | 14.0% | -49.2% | -59.3% | 38.4% | -35.8% | -41.2% | 54.7% | -26.9% | -30.4% | 60.9% | -24.5% | -23.2% |
| Sector length (km) | 2,570 | +35.3% | +36.8% | 4,422 | +36.4% | +36.8% | 2,913 | +2.2% | +4.1% | 1,013 | +5.7% | +7.3% |
Liquidity position higher than before the COVID-19 crisis
€1.8bn increase in net debt in the first quarter, of which €0.6bn non-cash Leverage
| €m | 31 Mar 2021 | 31 Dec 2020 | 30 Sep 2020 | 30 Jun 2020 | 31 Mar 2020 | 31 Dec 2019 |
|---|---|---|---|---|---|---|
| Gross debt | 19,539 | 15,679 | 16,107 | 16,479 | 14,453 | 14,254 |
| Bank and other loans | 6,948 | 3,369 | 4,078 | 4,014 | 1,995 | 1,954 |
| Asset finance and lease liabilities | 12,591 | 12,310 | 12,029 | 12,465 | 12,458 | 12,300 |
| Cash, cash equivalents and interest-bearing deposits |
7,975 | 5,917 | 5,011 | 6,016 | 6,945 | 6,683 |
| Net debt | 11,564* | 9,762 | 11,096 | 10,463 | 7,508 | 7,571 |
| Net debt / EBITDA | Nm | nm | nm | 4.2x | 1.6x | 1.4x |
9
Weekly cash operating costs expected to rise as capacity resumes
Note: excludes revenue, working capital, tax, debt amortisation and pension deficit payments; includes interest cash expense and income; includes finance lease repayments and operating lease rentals; includes fuel and FX 'over-hedge' losses.
Outlook
Luis Gallego, Chief Executive Officer
Bookings volatile but indicate existence of pent-up demand
Weekly new passenger booking intake vs. 2019 (5 Jan 2020 - 2 May 2021)
IAG's main markets (Europe and USA) have the most restricted access
Capacity (seats) by regional flow: April 2021 vs April 2019
US border remains open for most countries except European countries
US entry requirements
IAG is ready for a summer re-start, building on positive health developments
IAG airlines are well prepared
- Industry health and operating protocols for airlines and airports (e.g. ICAO, EASA/ECDC COVID-19 Aviation Health Safety Protocol)
- Operating solutions make aircraft safer and healthier than elsewhere (HEPA filters, cleaning procedures, masks, crew training, etc)
- Testing infrastructure at airports and kits offered by airlines (e.g. BA Qured)
- Digital verification and contactless solutions (e.g. IATA Travel Pass, VeriFLY)
- Fleet/crew readiness plans for re-opening of air travel
Governments have taken first steps
- COVID-19 infection rates significantly lower (UK being the lowest in our key markets)
- Vaccination programmes successful (UK 100% of eligible adult population by end July, EU 70% by end August, US 100% by end July)
- Domestic testing capacity strong, increasingly accurate and rapid (antigen tests more accurate)
- Re-opening roadmaps and frameworks in place (UK)
- Traffic Light systems designed (UK and EC)
- EU COVID-19 certificate proposals by EC
- Online Passenger Locator Forms (PLFs) in place
However, further government actions are needed to re-start summer travel at scale
| Enabler | Required actions |
|---|---|
| Legal barriers | • Harmonised EU roadmap to air travel re-start • Ending of penalties in UK and Republic of Ireland for non-essential travel • Repeal of US entry ban for UK, Schengen and Republic of Ireland citizens |
| Traffic Light systems | • Harmonised across Europe (EU, UK) • Consistent criteria to determine Green, Amber, Red countries • Travel corridors between Green countries/regions (e.g. UK/US) • Islands and regions to be treated on their own merits not the national classification • Official travel advice to align with traffic light tiers |
| Testing | • Testing to replace quarantines • More affordable, simpler (lateral flow replacing PCR), faster and proportionate • Vaccinated travellers to travel without quarantine • Unvaccinated travellers to travel with testing |
| Airports and Borders | • Re-opening of e-gates • Improved border control resourcing and processes to handle volume recovery |
| Digital passes | • Vaccination and testing certificates captured in industry apps • Passenger locator apps integrated with border control and industry apps • Global agreement on a digital standard for testing and vaccination documentation |
Continuing to lead the airline industry on tackling climate change
2019 GHG emissions, in tonnes CO2 equivalent 1
Previous commitment (October 2019)
1 st airline group worldwide to commit to achieve net zero carbon emissions by 2050 (Scope 1 and 2)
New commitments (April 2021)
1 st airline group worldwide to commit to achieve supply chain net zero carbon emissions by 2050 and 20% reduction by 2030 (Scope 3)
1 st European airline group to commit to powering 10% flights with sustainable aviation fuel by 2030
17
Outlook depends on governments allowing a summer re-start
- Assuming limited progress on opening up travel in our home markets, 2Q 2021 capacity expected to be c.25% compared to 2Q 2019
- 3Q 2021 capacity will depend on the extent and speed of travel restrictions relaxation
- IAG is doing everything in its power to emerge in a stronger competitive position and is confident that a safe re-start can happen as shown by the scientific data
- IAG airlines are ready and governments have taken first steps. However, further government action is needed:
- Travel corridors without restrictions between countries with successful vaccination rollouts and effective testing such us the UK and the US
- Testing: Affordable, simple and proportionate testing to replace quarantine and costly, multi-layered testing
- Borders: Well-staffed borders using contactless technology including e-gates to ensure a safe, smooth flow of people and frictionless travel
- Digital passes for testing and vaccination documentation to facilitate international travel
Appendices
Net loss of c.€1.1bn in the first quarter
Reconciliation between pre exceptional operating result and post exceptional result after tax
| €m | 1Q 2021 | 1Q 2020 |
|---|---|---|
| Operating result (pre exceptional) | -1,135 | -535 |
| Exceptional items | 67 | -1,325 |
| Operating result (post exceptional) | -1,068 | -1,860 |
| Net finance costs | -174 | -140 |
| Net financing (charge)/credit relating to pensions | -1 | 1 |
| Net currency retranslation (charges)/credits | -13 | 77 |
| Other non-operating credits | 40 | 40 |
| Result before tax (post exceptional) |
-1,216 | -1,882 |
| Tax | 149 | 199 |
| Result after tax (post exceptional) |
-1,067 | -1,683 |
1Q 2021 traffic and capacity statistics: Group performance
| Group performance |
Quarter | ||||
|---|---|---|---|---|---|
| Q1 2021 |
Q1 2020 |
vLY | Q1 2019 |
v19 | |
| carried ('000s) Passengers |
2,612 | 19,877 | -86.9% | 24,382 | -89.3% |
| Domestic (UK & Spain) |
1,256 | 5,023 | -75.0% | 5,921 | -78.8% |
| Europe | 667 | 9,582 | -93.0% | 12,406 | -94.6% |
| North America |
115 | 2,072 | -94.4% | 2,482 | -95.4% |
| Latin America & Caribbean |
301 | 1,435 | -79.0% | 1,475 | -79.6% |
| Africa & Middle East |
260 | 1,342 | -80.6% | 1,521 | -82.9% |
| Pacific Asia & |
13 | 423 | -96.9% | 577 | -97.7% |
| Revenue passenger km (m) |
6,779 | 51,617 | -86.9% | 60,878 | -88.9% |
| Domestic (UK & Spain) |
1,117 | 3,899 | -71.4% | 4,331 | -74.2% |
| Europe | 810 | 10,431 | -92.2% | 13,551 | -94.0% |
| North America |
746 | 13,738 | -94.6% | 16,550 | -95.5% |
| Caribbean Latin America & |
2,510 | 11,821 | -78.8% | 12,182 | -79.4% |
| Africa & Middle East |
1,473 | 7,667 | -80.8% | 8,719 | -83.1% |
| Asia & Pacific |
123 | 4,061 | -97.0% | 5,545 | -97.8% |
| Available km (m) seat |
14,796 | 67,522 | -78.1% | 75,423 | -80.4% |
| (UK Spain) Domestic & |
1,797 | 4,775 | -62.4% | 5,161 | -65.2% |
| Europe | 1,469 | 14,045 | -89.5% | 17,074 | -91.4% |
| North America |
3,746 | 19,389 | -80.7% | 21,428 | -82.5% |
| Latin America & Caribbean |
4,924 | 14,080 | -65.0% | 14,359 | -65.7% |
| Africa & Middle East |
2,487 | 9,786 | -74.6% | 10,699 | -76.8% |
| Asia & Pacific |
373 | 5,447 | -93.2% | 6,702 | -94.4% |
| factor (%) Passenger load |
45.8 | 76.4 | -30.7 pts |
80.7 | -34.9 pts |
| Domestic (UK & Spain) |
62.2 | 81.7 | -19.5 pts |
83.9 | -21.8 pts |
| Europe | 55.1 | 74.3 | -19.1 pts |
79.4 | -24.2 pts |
| North America |
19.9 | 70.9 | -50.9 pts |
77.2 | -57.3 pts |
| Latin America & Caribbean |
51.0 | 84.0 | -33.0 pts |
84.8 | -33.9 pts |
| Africa & Middle East |
59.2 | 78.3 | -19.1 pts |
81.5 | -22.3 pts |
| Pacific Asia & |
33.0 | 74.6 | -41.6 pts |
82.7 | -49.8 pts |
| Cargo km (m) tonne |
854 | 1,173 | -27.2% | 1,393 | -38.7% |
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1Q 2021 traffic and capacity statistics: Airline performance
| Performance by airline |
Quarter | ||||
|---|---|---|---|---|---|
| Q1 2021 |
Q1 2020 |
vLY | Q1 2019 |
v19 | |
| Passengers carried ('000s) | 82 | 1,669 | -95.1% | 2,196 | -96.3% |
| Revenue passenger km (m) | 124 | 3,338 | -96.3% | 4,255 | -97.1% |
| Available seat km (m) | 883 | 5,277 | -83.3% | 5,804 | -84.8% |
| Passenger load factor (%) | 14.0 | 63.3 | -49.2 pts | 73.3 | -59.3 pts |
| Cargo tonne km (m) | 20 | 42 | -52.4% | 39 | -48.7% |
| Passengers carried ('000s) | 630 | 8,548 | -92.6% | 10,472 | -94.0% |
| Revenue passenger km (m) | 2,480 | 29,119 | -91.5% | 34,875 | -92.9% |
| Available seat km (m) | 6,466 | 39,248 | -83.5% | 43,833 | -85.2% |
| Passenger load factor (%) | 38.4 | 74.2 | -35.8 pts | 79.6 | -41.2 pts |
| Cargo tonne km (m) | 658 | 879 | -25.1% | 1,062 | -38.0% |
| Passengers carried ('000s) | 1,232 | 4,164 | -70.4% | 4,946 | -75.1% |
| Revenue passenger km (m) | 3,366 | 12,124 | -72.2% | 13,966 | -75.9% |
| Available seat km (m) | 6,159 | 14,870 | -58.6% | 16,425 | -62.5% |
| Passenger load factor (%) | 54.7 | 81.5 | -26.9 pts | 85.0 | -30.4 pts |
| Cargo tonne km (m) | 174 | 248 | -29.8% | 291 | -40.2% |
| Passengers carried ('000s) | 13 | 439 | -97.0% | 289 | -95.5% |
| Revenue passenger km (m) | 142 | 2,082 | -93.2% | 1,527 | -90.7% |
| Available seat km (m) | 192 | 2,322 | -91.7% | 1,918 | -90.0% |
| Passenger load factor (%) | 74.0 | 89.7 | -15.7 pts | 79.6 | -5.7 pts |
| Cargo tonne km (m) | 2 | 4 | -50.0% | 1 | +100.0% |
| Passengers carried ('000s) | 655 | 5,057 | -87.0% | 6,479 | -89.9% |
| Revenue passenger km (m) | 667 | 4,954 | -86.5% | 6,255 | -89.3% |
| Available seat km (m) | 1,096 | 5,805 | -81.1% | 7,443 | -85.3% |
| Passenger load factor (%) | 60.9 | 85.3 | -24.5 pts | 84.0 | -23.2 pts |
| Cargo tonne km (m) | n/a | n/a | n/a | n/a | n/a |
22
Disclaimer
Forward-looking statements:
Certain statements included in this announcement are forward-looking. These statements can be identified by the fact that they do not relate only to historical or current facts. By their nature, they involve risk and uncertainties because they relate to events and depend on circumstances that will occur in the future. Actual results could differ materially from those expressed or implied by such forward-looking statements.
Forward-looking statements often use words such as "expects", "may", "will", "could", "should", "intends", "plans", "predicts", "envisages" or "anticipates" or other words of similar meaning. They include, without limitation, any and all projections relating to the results of operations and financial conditions of International Consolidated Airlines Group, S.A. and its subsidiary undertakings from time to time (the 'Group'), as well as plans and objectives for future operations, expected future revenues, financing plans, expected expenditure and divestments relating to the Group and discussions of the Group's business plan. All forward-looking statements in this announcement are based upon information known to the Group on the date of this announcement and speak as of the date of this announcement. Other than in accordance with its legal or regulatory obligations, the Group does not undertake to update or revise any forward-looking statement to reflect any changes in events, conditions or circumstances on which any such statement is based.
Actual results may differ from those expressed or implied in the forward-looking statements in this announcement as a result of any number of known and unknown risks, uncertainties and other factors, including, but not limited to, the effects of the COVID-19 pandemic and uncertainties about its impact and duration, many of which are difficult to predict and are generally beyond the control of the Group, and it is not reasonably possible to itemise each item. Accordingly, readers of this 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 2020; these documents are 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 COVID-19 pandemic and any further disruption to the global airline industry and economic environment as a result.