IAG achieves a significant step up in profitability for all its airlines in quarter three IAG financial results highlights for the period:
- Operating profit for the third quarter 1,208 million euros (2021: operating loss 452 million euros), and operating profit before exceptional items 1,206 million euros (2021: operating loss before exceptional items 485 million euros)
- Operating profit for the nine months 770 million euros (2021: operating loss 2,487 million euros), and operating profit before exceptional items 739 million euros (2021: operating loss before exceptional items 2,665 million euros)
- Profit after tax and exceptional items for the third quarter 853 million euros (2021: loss 574 million euros) and profit after tax before exceptional items 853 million euros (2021: loss 606 million euros)
- Profit after tax and exceptional items for the nine months 199 million euros (2021: loss 2,622 million euros) and profit after tax before exceptional items 170 million euros (2021: loss 2,775 million euros)
- Strong liquidity at September 30, 2022:
- Total liquidity increased to 13,488 million euros (December 31, 2021: 11,986 million euros)
- Cash1 of 9,260 million euros, up 1,317 million euros on December 31, 2021
- Committed and undrawn general and aircraft financing facilities of 4,228 million euros (December 31, 2021: 4,043 million euros); availability of $1,755 million revolving credit facility extended by one year to March 2025
- Net debt at September 30, 2022 was down €609 million since December 31, 2021 to 11,058 million euros
Total revenue fully recovered despite lower capacity than in 2019
- Total revenue for quarter 3 of 7,329 million euros, 0.9 per cent higher than in 2019, despite the restrictions imposed at London Heathrow airport and the Asia Pacific network remaining substantially closed
- Passenger unit revenue increased in quarter 3 by 21.9% vs 2019 (quarter 2 up 6.4%)
- Passenger capacity in quarter 3 was 81.1% of 2019 up from 78.0% in quarter 2, driven primarily by IAG’s key regions of European shorthaul (91% of 2019), North America (92%) and Latin America & Caribbean (75%)
- Passenger yield for quarter 3 was 22.9% higher than in 2019 and load factor of 87.0% was only 0.7pts lower
- By the end of quarter 3, premium leisure revenue had fully recovered to 2019’s level, despite capacity being significantly lower. Business channel revenue had recovered to c.75% of 2019’s level
- Non-fuel unit costs were 25.5% higher than 2019 in quarter 3, driven by the lower capacity operated, adverse foreign exchange and inflation
- British Airways’ capacity for the quarter was in line with previous guidance and operational performance significantly improved during the quarter, with further improvements planned in order to achieve the levels we expect
- IAG’s overall passenger capacity plans are for c.87% of 2019 capacity for quarter 4 and c.78% for the full year 2022
- British Airways’ main pension scheme (NAPS) – heads of terms for 2021 valuation agreed with Trustees, with no deficit reduction contributions expected under the existing overfunding protection mechanism
Luis Gallego, IAG Chief Executive Officer, said: “We achieved another strong performance in the third quarter, with an operating profit of €1.2 billion and liquidity of over 13 billion euros. All our airlines were significantly profitable and we are continuing to see strong passenger demand, while capacity and load factors recover.
“Leisure demand is particularly healthy and leisure revenue has recovered to pre-pandemic levels. Business travel continues to recover steadily. I would like to thank our employees across the Group for their hard work which has been key to our recovery. This strong trading performance allows us to continue to invest in our customers, our people and our industry-leading sustainability agenda. We’re pleased that our shareholders have recently approved the acquisition of 87 new shorthaul aircraft that will bring us long-term cost savings, lower carbon emissions as well as an improved customer experience.
“While demand remains strong, we are conscious of the uncertainties in the economic outlook and the ongoing pressures on households. Against this backdrop, we are focused on adapting our operations to meet demand, strengthening our balance sheet by re-building our profitability and cashflows and capitalising on our high level of liquidity. This will allow us to allocate capital while investing in a disciplined way in our service and our people, to build capacity and enable future growth.
“As we build back our operational resilience, we are confident in our strengths as a Group: first, a portfolio of leading airline brands; second, leading positions in our key markets and hubs; and third, the flexibility afforded by IAG to drive operational efficiency and innovation. These will enable us to return to pre-COVID levels of profit and generate long-term value for all our stakeholders.”
Trading outlook
At current fuel prices and exchange rates, IAG expects its 2022 pre-exceptional operating profit to be approximately €1.1 billion. Net cash flow from operating activities is expected to be significantly positive for the year. This assumes no further setbacks related to COVID-19 and material impacts from geopolitical developments. Net debt is expected to increase by year-end, linked to seasonal booking patterns and capital expenditure associated with aircraft deliveries in quarter 4. Quarter 4 2022 capacity, measured in ASKs, is expected to be approximately 87% of 2019, resulting in full year 2022 capacity of c.78% of the 2019 level. Capacity in the first quarter of 2023 is expected to be approximately 95% of 2019.
