Last checked at 29 Apr 2016 07:00
THREE MONTHS RESULTS ANNOUNCEMENT
International Consolidated Airlines Group (IAG) today (April 29, 2016) presented Group consolidated results for the three months to March 31, 2016.
IAG period highlights on results:
· First quarter operating profit €155 million before exceptional items (2015: operating profit of €25 million), excluding Aer Lingus €181 million
· Passenger unit revenue for the quarter down 3.5 per cent and at constant currency down 4.7 per cent (excluding Aer Lingus and at constant currency down 5.2 per cent)
· Non-fuel unit costs for the quarter up 1.3 per cent and at constant currency up 0.6 per cent (excluding Aer Lingus and at constant currency down 0.5 per cent)
· Fuel unit costs before exceptional items for the quarter down 23.4 per cent, down 30.4 per cent at constant currency
· Cash of €6,824 million at March 31, 2016 was up €968 million on 2015 year end
· Adjusted gearing remained constant at 54 per cent and adjusted net debt to EBITDAR down 0.1 points to 1.8 times
Performance summary:
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| Three months to March 31 | |||
Financial data € million | 2016 | 2015 | Higher / (lower) | |
Passenger revenue | 4,465 | 4,136 | 8.0 % | |
Total revenue | 5,078 | 4,707 | 7.9 % | |
Operating profit | 155 | 25 | 520.0 % | |
Exceptional items | 13 | - | ||
Operating profit after exceptional items | 168 | 25 | 572.0 % | |
Profit/(loss) after tax | 104 | (26) | 500.0 % | |
Basic earnings/(loss) per share (€ cents) | 4.9 | (1.5) | 6.4pts | |
Operating figures | 2016 | 2015 | Higher / (lower) | |
Available seat kilometres (ASK million) | 66,151 | 59,105 | 11.9 % | |
Seat factor (per cent) | 78.9 | 77.7 | 1.2pts | |
Passenger unit revenue per ASK (€ cents) | 6.75 | 7.00 | (3.5)% | |
Non-fuel unit costs per ASK (€ cents) | 5.64 | 5.57 | 1.3 % | |
€ million | March 31, | December 31, | Higher / (lower) | |
2016 | 2015 | |||
Cash and interest-bearing deposits | 6,824 | 5,856 | 16.5 % | |
Adjusted net debt(1) | 8,264 | 8,510 | (2.9)% | |
Adjusted net debt to EBITDAR | 1.8 | 1.9 | (0.1)pts | |
Adjusted gearing(2) | 54% | 54% | 0pts | |
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(1)Adjusted net debt is net debt plus capitalised rolling four quarter aircraft operating lease costs. | ||||
(2)Adjusted gearing is adjusted net debt, divided by adjusted net debt and adjusted equity. | ||||
Willie Walsh, IAG Chief Executive Officer, said:
"We're reporting an operating profit of €155 million before exceptional items which is up by €130 million compared to last year. This is a good performance with a strong increase in what is traditionally the weakest quarter. Total revenue was up 7.9 per cent and total cost per ASK decreased by 6.1 per cent.
"January and February's revenue was in line with Q4 2015 trends. March revenue was affected by the timing of Easter and the Brussels terrorist attacks with the latter continuing into quarter two.
"Our productivity has improved 5.9 per cent and the underlying non-fuel unit costs performance continued to show improvement across our companies."
Trading outlook
Revenue trends in quarter two have been affected by the aftermath of the Brussels terrorist attacks, as well as some softness in underlying premium demand. As a result, IAG has moderated its short term capacity growth plans. The Group also expects to reduce its underlying ex-fuel unit costs for the full year by around one per cent. Consequently, in 2016, IAG still expects to generate an absolute operating profit increase similar to 2015.
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 2015; these documents are available on www.iagshares.com.
IAG Investor Relations
2 World Business Centre Heathrow
Newall Road, London Heathrow Airport
HOUNSLOW TW6 2SF
Tel: +44 (0)208 564 2900
Investor.relations@iairgroup.com
CONSOLIDATED INCOME STATEMENT |
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| Three months to March 31 | ||||
€ million | Before exceptional items | Exceptional items | Total 2016 |
| Higher/ (lower) |
2016 | 2015 (1) | ||||
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Passenger revenue | 4,465 | 4,465 | 4,136 | 8.0 % | |
Cargo revenue | 262 |
| 262 | 266 | (1.5)% |
Other revenue | 351 |
| 351 | 305 | 15.1 % |
Total revenue | 5,078 |
| 5,078 | 4,707 | 7.9 % |
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Employee costs | 1,226 |
| 1,226 | 1,124 | 9.1 % |
Fuel, oil costs and emissions charges | 1,191 | (13) | 1,178 | 1,389 | (14.3)% |
Handling, catering and other operating costs | 607 |
| 607 | 551 | 10.2 % |
Landing fees and en-route charges | 474 |
| 474 | 362 | 30.9 % |
Engineering and other aircraft costs | 404 |
| 404 | 334 | 21.0 % |
Property, IT and other costs | 224 |
| 224 | 199 | 12.6 % |
Selling costs | 252 |
| 252 | 227 | 11.0 % |
Depreciation, amortisation and impairment | 338 |
| 338 | 306 | 10.5 % |
Aircraft operating lease costs | 188 |
| 188 | 144 | 30.6 % |
Currency differences | 19 |
| 19 | 46 | (58.7)% |
Total expenditure on operations | 4,923 | (13) | 4,910 | 4,682 | 5.1 % |
Operating profit | 155 | 13 | 168 | 25 | 520.0 % |
Net non-operating costs | (44) |
| (44) | (62) | (29.0)% |
Profit/(loss) before tax | 111 | 13 | 124 | (37) | 400.0 % |
Tax | (18) | (2) | (20) | 11 | (263.6)% |
Profit/(loss) after tax for the period | 93 | 11 | 104 | (26) | 457.7 % |
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Operating figures | 2016 (2) | 2015 | Higher/ (lower) | ||
Available seat kilometres (ASK million) | 66,151 | 59,105 | 11.9 % | ||
Revenue passenger kilometres (RPK million) | 52,222 | 45,898 | 13.8 % | ||
Seat factor (per cent) | 78.9 | 77.7 | 1.2pts | ||
Cargo tonne kilometres (CTK million) | 1,320 | 1,314 | 0.5 % | ||
Passenger numbers (thousands) | 20,369 | 16,678 | 22.1 % | ||
Tonnes of cargo carried (thousands) | 205 | 218 | (6.0)% | ||
Sectors | 152,063 | 135,168 | 12.5 % | ||
Block hours (hours) | 450,128 | 391,504 | 15.0 % | ||
Average manpower equivalent | 61,342 | 58,057 | 5.7 % | ||
Aircraft in service | 533 | 466 | 14.4 % | ||
Passenger revenue per RPK (€ cents) | 8.55 | 9.01 | (5.1)% | ||
Passenger unit revenue per ASK (€ cents) | 6.75 | 7.00 | (3.5)% | ||
Cargo revenue per CTK (€ cents) | 19.85 | 20.24 | (1.9)% | ||
Fuel cost per ASK (€ cents) | 1.80 | 2.35 | (23.4)% | ||
Non-fuel unit costs per ASK (€ cents) | 5.64 | 5.57 | 1.3 % | ||
Total cost per ASK (€ cents) | 7.44 | 7.92 | (6.1)% | ||
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(1)The prior year Consolidated income statement includes reclassifications to conform to the current year presentation. Refer to the Financial review for further details. | |||||
(2)Financial ratios are before exceptional items. | |||||
Financial review:
Operating and market environment
The three month period has seen decreasing fuel prices partially offset by adverse exchange from a stronger US dollar against both the euro and the pound sterling. The Group has had minimal translation impact as the pound sterling has strengthened only marginally versus the euro. The impact of transaction foreign exchange was €62 million adverse.
Basis of presentation
The Group's performance for the three month period to March 31, 2016 includes Aer Lingus' operations. Aer Lingus was acquired on August 18, 2015, therefore the Group's quarter to March 31, 2015 excludes Aer Lingus' performance.
In 2016 the Group reviewed and amended the reporting of individual line items in the income statement to better reflect the nature of underlying transactions and improve comparability between reporting periods. As a result, for the three months to March 31, 2015, revenue of €40 million previously reported as Other revenue has been reclassified to Passenger revenue (€20 million) and Cargo revenue (€20 million). Expenditure of €40 million in respect of certain subcontracted services, previously allocated to Property, IT and other costs, has been reclassified to Handling, catering and other operating costs. These reclassifications have not affected reported total revenue, expenditure or operating profit for the three months to March 31, 2015.
Capacity
IAG increased capacity (ASKs) by 11.9 per cent in the first three months of the year, traffic volumes rose higher and seat factor improved 1.2 points to 78.9 per cent. Excluding Aer Lingus, capacity was increased by 4.8 per cent partially due to the extra day in February. Vueling and Iberia continued their growth patterns while British Airways' capacity increase reflects some changes to its network and aircraft. All four airlines had seat factor improvements.
Revenue
Passenger revenue increased 8.0 per cent compared to the same period last year, 0.7 per cent excluding Aer Lingus. Passenger unit revenue (passenger revenue per ASK) was down 4.7 per cent at constant currency ('ccy') from lower yields (passenger revenue/revenue passenger kilometre) partially offset by higher volumes. At ccy, passenger yields decreased due to fare pressure on oil related routes from lower fuel prices and on corporate accounts from the shift of Easter and a slowdown in market demand. Passenger revenue performance was also impacted by terrorist attacks in Brussels. Passengers carried by the Group rose to 20,369 million, an increase of 22.1 per cent, 10.2 per cent excluding Aer Lingus.
Cargo revenue for the period decreased by 1.5 per cent, 5.9 per cent excluding Aer Lingus. The Cargo premium mix remained strong but overall market conditions were weaker than last year which benefited from the US port strike.
Other revenue was up 15.1 per cent from an increase in activity at BA Holidays and in Iberia's third party maintenance. Avios revenue rose through increased customer redemptions.
Costs
Employee costs increased 9.1 per cent, 2.4 per cent excluding Aer Lingus. At ccy, employee unit costs improved 3.0 per cent with salary awards more than offset by efficient growth. The average number of employees increased 5.7 per cent for the Group driven primarily by the addition of Aer Lingus while productivity improved 5.9 per cent.
Fuel costs decreased by 14.3 per cent, with fuel unit costs down 23.4 per cent from lower average fuel prices net of hedging. The introduction of new fleet and improved operational procedures continued to drive efficiencies.
Supplier costs increased 15.2 per cent, 5.6 per cent excluding Aer Lingus. At ccy, supplier unit costs were up 2.6 per cent with 2 points due to Aer Lingus' shorter stage length. The prior year period saw reductions in maintenance and in landing fees from one time benefits. The underlying supplier unit cost performance versus last year improved in selling costs through efficient growth and from reductions in handling as more activity is performed within the Group.
Ownership costs increased 16.9 per cent, 8.7 per cent excluding Aer Lingus from the additional aircraft, strength of the US dollar and accelerated depreciation of Iberia's Airbus A340-300s.
Exceptional items
Under the Business combination standard, gains or losses on cash flow hedges acquired should not be recycled to the income statement but recognised in equity. Following the acquisition of Aer Lingus, IAG continued to unwind the cash flow fuel hedges acquired in the before exceptional items column. A credit was recognised in the exceptional column reversing the impact of unwinding the cash flow hedges to reach the total Fuel, oil costs and emissions charges.
Non-operating costs, taxation and profit after tax
Net non-operating costs were €44 million for the quarter compared to €62 million in 2015. Net currency retranslation credits increased, partially offset by losses on derivatives not qualifying for hedge accounting and an increase in net financing costs. Net financing costs increased €13 million.
The profit before tax after exceptional items for the quarter was €124 million (2015: €37 million loss), a €161 million improvement in the period.
The tax charge for the period was €20 million with an effective tax rate for the Group of 16 per cent impacted by the mix of profits and losses earned by jurisdiction (2015: 30 per cent).
Cash and leverage
The Group's cash position was €6,824 million up €968 million from December 31, 2015. Compared to December 31, 2015, the Group's adjusted net debt decreased €246 million to €8,264 million, adjusted net debt to EBITDAR was lower by 0.1 points to 1.8 times, and adjusted gearing was flat at 54 per cent.