Last checked at 5 May 2017 07:00
THREE MONTHS RESULTS ANNOUNCEMENT
International Consolidated Airlines Group (IAG) today (May 5, 2017) presented Group consolidated results for the three months to March 31, 2017.
IAG period highlights on results:
· First quarter operating profit €170 million before exceptional items (2016: €155 million)
· Net foreign exchange operating profit impact for the quarter adverse €32 million
· Passenger unit revenue for the quarter down 7.2 per cent, down 3.1 per cent at constant currency
· Non-fuel unit costs before exceptional items for the quarter down 3.9 per cent, up 1.4 per cent at constant currency
· Fuel unit costs before exceptional items for the quarter down 13.6 per cent, down 16.1 per cent at constant currency
· Cash of €7,495 million at March 31, 2017 was up €1,067 million on 2016 year end
· Adjusted net debt to EBITDAR improved by 0.3 to 1.5 times
Performance summary:
| Three months to March 31 | |||
Financial data € million | 2017 | 2016 | Higher / (lower) | |
Passenger revenue | 4,279 | 4,465 | (4.2)% | |
Total revenue | 4,934 | 5,078 | (2.8)% | |
Operating profit before exceptional items | 170 | 155 | 9.7 % | |
Exceptional items | (19) | 13 | (246.2)% | |
Operating profit after exceptional items | 151 | 168 | (10.1)% | |
Profit after tax | 27 | 104 | (74.0)% | |
Diluted earnings per share (€ cents) | 1.0 | 4.9 | (79.6)% | |
Operating figures | 2017 | 2016 | Higher / (lower) | |
Available seat kilometres (ASK million) | 68,304 | 66,151 | 3.3 % | |
Seat factor (per cent) | 79.0 | 78.9 | 0.1pts | |
Passenger unit revenue per ASK (€ cents) | 6.26 | 6.75 | (7.2)% | |
Non-fuel unit costs per ASK (€ cents) | 5.42 | 5.64 | (3.9)% | |
| March 31, 2017 | December 31, 2016 | Higher / (lower) | |
Cash and interest-bearing deposits | 7,495 | 6,428 | 16.6 % | |
Adjusted net debt | 7,098 | 8,159 | (13.0)% | |
Adjusted net debt to EBITDAR | 1.5 | 1.8 | (0.3pts) | |
Adjusted gearing | 49% | 51% | (2pts) | |
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For definitions refer to the IAG Annual Report and Accounts 2016. | ||||
Willie Walsh, IAG Chief Executive Officer, said:
"We're reporting an operating profit of €170 million before exceptional items which is up from €155 million compared to last year. This is a record performance in Q1, traditionally our weakest quarter, with the improving trend in passenger unit revenue continuing.
"The impact of currency exchange was €32 million in the quarter due to the translation of sterling profit into euros.
"In March we launched LEVEL, our new longhaul low cost airline brand, which starts flights from Barcelona to Los Angeles, San Francisco, Punta Cana and Buenos Aires in June. It's already been extremely successful with sales running well ahead of expectations".
Trading outlook
At current fuel prices and exchange rates, IAG expects its operating profit for 2017 to show an improvement year-on-year. The Group expects quarter 2 passenger unit revenue (passenger revenue per ASK) to show an increase versus last year, at constant currency.
LEI: 959800TZHQRUSH1ESL13
This announcement contains inside information and is disclosed in accordance with the Company's obligations under the Market Abuse Regulation (EU) No 596/2014.
Enrique Dupuy, Chief Financial Officer, (responsible for arranging the release of this announcement).
Forward-looking statements:
Certain statements included in this report are forward-looking and involve risks and uncertainties that could cause actual results to differ materially from those expressed or implied by such forward-looking statements.
Forward-looking statements can typically be identified by the use of forward-looking terminology, such as "expects", "may", "will", "could", "should", "intends", "plans", "predicts", "envisages" or "anticipates" and include, without limitation, any projections relating to 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 expenditures and divestments relating to the Group and discussions of the Group's Business plan. All forward-looking statements in this report are based upon information known to the Group on the date of this report. The Group undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.
It is not reasonably possible to itemise all of the many factors and specific events that could cause the forward-looking statements in this report to be incorrect or that could otherwise have a material adverse effect on the future operations or results of an airline operating in the global economy. Further information on the primary risks of the business and the risk management process of the Group is given in the Annual Report and Accounts 2016; these documents are available on www.iagshares.com.
IAG Investor Relations
Waterside (HAA2),
PO Box 365,
Harmondsworth,
Middlesex,
UB7 0GB
Tel: +44 (0)208 564 2900
Investor.relations@iairgroup.com
CONSOLIDATED INCOME STATEMENT
| Three months to March 31 | ||||||
€ million | Before exceptional items 2017 | Exceptional items | Total 2017 | Before exceptional items 2016 | Exceptional items | Total 2016 | Higher/ (lower) |
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Passenger revenue | 4,279 | 4,279 | 4,465 | 4,465 | (4.2)% | ||
Cargo revenue | 256 | 256 | 262 | 262 | (2.3)% | ||
Other revenue | 399 | 399 | 351 | 351 | 13.7 % | ||
Total revenue | 4,934 | 4,934 | 5,078 | 5,078 | (2.8)% | ||
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Employee costs | 1,152 | 19 | 1,171 | 1,226 | 1,226 | (6.0)% | |
Fuel, oil costs and emissions charges | 1,062 | 1,062 | 1,191 | (13) | 1,178 | (10.8)% | |
Handling, catering and other operating costs | 612 | 612 | 607 | 607 | 0.8 % | ||
Landing fees and en-route charges | 476 | 476 | 474 | 474 | 0.4 % | ||
Engineering and other aircraft costs | 478 | 478 | 404 | 404 | 18.3 % | ||
Property, IT and other costs | 215 | 215 | 224 | 224 | (4.0)% | ||
Selling costs | 252 | 252 | 252 | 252 | - | ||
Depreciation, amortisation and impairment | 302 | 302 | 338 | 338 | (10.7)% | ||
Aircraft operating lease costs | 223 | 223 | 188 | 188 | 18.6 % | ||
Currency differences | (8) | (8) | 19 | 19 | (142.1)% | ||
Total expenditure on operations | 4,764 | 19 | 4,783 | 4,923 | (13) | 4,910 | (3.2)% |
Operating profit | 170 | (19) | 151 | 155 | 13 | 168 | 9.7 % |
Net non-operating costs | (116) | (116) | (44) | (44) | 163.6 % | ||
Profit before tax | 54 | (19) | 35 | 111 | 13 | 124 | (51.4)% |
Tax | (12) | 4 | (8) | (18) | (2) | (20) | (33.3)% |
Profit after tax for the period | 42 | (15) | 27 | 93 | 11 | 104 | (54.8)% |
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Operating figures | 2017(1) | 2016(1) | Higher/ (lower) | ||||
Available seat kilometres (ASK million) | 68,304 | 66,151 | 3.3 % | ||||
Revenue passenger kilometres (RPK million) | 53,944 | 52,222 | 3.3 % | ||||
Seat factor (per cent) | 79.0 | 78.9 | 0.1pts | ||||
Cargo tonne kilometres (CTK million) | 1,367 | 1,320 | 3.6 % | ||||
Passenger numbers (thousands) | 21,147 | 20,369 | 3.8 % | ||||
Tonnes of cargo carried (thousands) | 171 | 170 | 0.6 % | ||||
Sectors | 153,673 | 152,063 | 1.1 % | ||||
Block hours (hours) | 460,710 | 450,128 | 2.4 % | ||||
Average manpower equivalent | 62,237 | 61,342 | 1.5 % | ||||
Aircraft in service | 547 | 533 | 2.6 % | ||||
Passenger revenue per RPK (€ cents) | 7.93 | 8.55 | (7.2)% | ||||
Passenger unit revenue per ASK (€ cents) | 6.26 | 6.75 | (7.2)% | ||||
Cargo revenue per CTK (€ cents) | 18.73 | 19.85 | (5.6)% | ||||
Fuel cost per ASK (€ cents) | 1.55 | 1.80 | (13.6)% | ||||
Non-fuel unit costs per ASK (€ cents) | 5.42 | 5.64 | (3.9)% | ||||
Total cost per ASK (€ cents) | 6.97 | 7.44 | (6.3)% | ||||
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(1)Financial ratios are before exceptional items. | |||||||
FINANCIAL REVIEW
Strategic overview
On March 17th IAG launched LEVEL, a new longhaul low cost airline brand that will start its operation in June 2017 with flights from Barcelona to Los Angeles, San Francisco, Buenos Aires and Punta Cana. LEVEL will fly two new Airbus A330 aircraft fitted with 293 economy and 21 premium economy seats.
Operating and market environment
The three month period has seen increasing fuel prices and a stronger US dollar against both the euro and the pound sterling. The pound sterling has also devalued significantly against the euro. The transactional foreign exchange impact for the Group was net nil, while translation exchange was significant. The Group's reported revenues and expenses were lower by €406 million and €374 million respectively with a net adverse impact on operating profit of €32 million.
Capacity
In the first three months of 2017, IAG capacity (ASK) was higher by 3.3 per cent with increases across all regions. Aer Lingus continued its growth across the North Atlantic while Vueling grew in Spain partially reducing its seasonality. British Airways launched new routes including Santiago and Oakland and discontinued its route to Chengdu. Iberia continued to consolidate its capacity in Europe offset by longhaul increases from routes launched in 2016 such as Shanghai, Tokyo and Johannesburg. Passenger load factor rose 0.1 pts to 79.0 per cent.
Revenue
Passenger revenue decreased 4.2 per cent compared to the same period last year. Passenger unit revenue (passenger revenue per ASK) was down 3.1 per cent at constant currency ('ccy') from lower yields (passenger revenue/revenue passenger kilometre) impacted by the timing of Easter. At ccy, passenger yields decreased on leisure routes with the shift in Easter from March last year to April this year, partially offset by improvements in corporate bookings. Although passenger yields are down in the quarter, the passenger revenue performance trend improved versus the previous quarter. Passengers carried by the Group rose to 21,147 thousand, an increase of 3.8 per cent.
Cargo revenue for the period decreased 2.3 per cent, 2.1 per cent at ccy. The Cargo premium mix remained strong partially offsetting overall yield decreases while cargo tonnes carried were broadly flat.
Other revenue was up 13.7 per cent or €64 million excluding currency impacts, from an increase in activity at Iberia's third party maintenance (MRO) business, BA Holidays and Avios.
Costs
Employee costs decreased 6.0 per cent compared to the same period last year. On a unit basis and at ccy, employee unit costs improved 2.6 per cent with salary awards more than offset by efficiency initiatives achieved by all airlines. The average number of employees rose 1.5 per cent for the Group while productivity increased 1.8 per cent with improvements at British Airways, Iberia and Aer Lingus.
Fuel costs decreased 10.8 per cent with fuel unit costs down 16.1 per cent at ccy primarily from average fuel prices net of hedging. The introduction of new fleet and improved operational procedures continued to drive efficiencies.
Supplier costs increased 2.3 per cent and at ccy supplier unit costs were up 4.2 per cent. The Group's non-ASK businesses MRO, BA Holidays and Avios grew, increasing supplier costs. This affected handling and engineering costs with a corresponding increase in Other revenue. Excluding these items, the airline supplier unit costs rose from higher maintenance costs related to fleet mix, the shift to pay as you go maintenance contracts and additional EU compensation claims. The Group has also recognised elements of airport recharges as a cost in the quarter, rather than against revenues as in previous years, following a change in contractual arrangements.
Ownership costs decreased 0.2 per cent and at ccy ownership unit costs increased 0.1 per cent. Depreciation costs were down versus last year which included accelerated depreciation of Iberia's Airbus A340-300s. Excluding this, depreciation costs at ccy were up including IT charges with the new check-in and aircraft boarding system. Aircraft operating lease costs increase with additional leased aircraft, including 9 Boeing 787-9s and 8 aircraft from the Airbus A330 family.
Operating profit
The Group's operating profit for the period was €170 million, an increase of €15 million versus last year, or €47 million at ccy.
Exceptional items
In 2017, the Group recognised an exceptional charge of €19 million related to the continuation of British Airways transformation initiatives. In 2016, the exceptional charge reflects the impact of recording Aer Lingus fuel cost at the hedged price in the pre-exceptional column, rather than at spot price in the reported column.
Non-operating costs, taxation and profit after tax
Net non-operating costs were €116 million for the quarter compared to €44 million in 2016. The increase was from higher unrealised losses on the remeasurement of derivatives not qualifying for hedge accounting and unrealised net currency retranslation charges, partially offset by a €17 million reduction in net financing costs.
The tax charge for the period was €8 million after exceptional items with an effective tax rate for the Group of 23 per cent impacted by the mix of profits and losses earned by jurisdiction (2016: 16 per cent).
The profit after tax and exceptional items for the quarter was €27 million (2016: €104 million), a reduction of €77 million in the period.
Cash and leverage
The Group's cash position was €7,495 million up €1,067 million from December 31, 2016. Compared to December 31, 2016, the Group's adjusted net debt decreased €1,061 million to €7,098 million, adjusted net debt to EBITDAR was lower by 0.3 at 1.5 times, and adjusted gearing decreased 2 points to 49 per cent.