H1 Earnings Friday, 2 nd August 2019
International Consolidated Airlines Group SA – H1 Earnings Friday, 2 nd August 2019 Antonio Vázquez: Good morning everybody. Welcome to this results presentation. I want to share with you that the board of director of IAG is extremely happy with the way the management is per forming and managing the company. Once more, we’re happy to share with you very good results. We are one of the few airlines worldwide to report an improved operating margin, compared to one year ago, and we are glad to present to you the highest operating margin from European Airlines. As far as the dividends is concerned, the AGM in June, shareholders approved at our AGM, a final dividend of 16.5 cents, in respect to 2018. This makes a total of 31 euro cents for last year, which is a 15% higher and, in addition, the AGM approved as well the payment of special dividend of €700 million, equivalent to 35 euro cents per share, paid in early July. As far as the board is concerned, we are pleased to announce the election of three new board members, at the AGM, Steve Gunning as CFO who is going to be presenting to you today, Margaret Ewing and Javier Ferrá n. And I’m happy to welcome the Senior Independent Director of the Board, Alberto Terol, which is joining us today. So I hand over to Willie. Willie Walsh: Thank yo u Chairman, and good morning everybody. I’m very pleased you could join us this morning for another good set of results. We continue to do what we promise, we’re strengthening the platform, and you can see evidence of that, and you will see more when Steve takes you through the financial performance. LEVEL has continued to expand its business out of Barcelona, we’ve now opened the Amsterdam base as well, and you’re now seeing more tangible evidence of the investment that British Airways is making in new products in addition to the new club lounge at JFK and San Francisco, the first of the Airbus A350- 1000 aircraft has been delivered and that’s fitted with the new Club World Suite. I think a number of you have been able to see that. We’re seeing strong performance on NPS, particularly at British Airways and Vueling, and I’ll take you through some of those issues later on in the presentation. And when we look to grow – we’re growing the business, I believe, in a very sensible manner; 3.4% growth on the North Atlantic, principally coming from investing in the strong networks that we have, but expanding the network as well at British Airways, to places like Charleston and Pittsburgh, LEVEL out of Barcelona to New York and the Air Lingus transatlantic performance continues to be very strong, having launched Minneapolis just recently. Unfortunately, because of ongoing delays with Airbus A321s from the Hamburg facility which clearly has been unacceptable, we’ve had to postpone the launch of Montreal from Dublin until summer of next year. LEVEL is also expanding our network into Latin America with the start of Barcelona Santiago, and when we look at the growth on Latin America and LACAR , our Caribbean region, it’s important to point out that some of that is actually into the Caribbean through the BA additional seating on the 777-200s that are operating from Gatwick. And Europe for us has been good; very strong performance on our domestic network. We are slowing growth in Vueling through the peak summer to reflect the difficult ATC environment which we anticipated and that is having a positive impact, both in terms of NPS, but equally you’ll see that it’s – it’s offsetting some of the EU 261 compensation costs that we would have seen and we’re investing that in re silience. And we continue to take advantage of the strength of IAG in negotiating new contracts with the aircraft, both Boeing and Airbus, and 2
International Consolidated Airlines Group SA – H1 Earnings Friday, 2 nd August 2019 we’ve seen the orders for the 321 XLRs for Air Lingus and Iberia, the order of the 777 -9 for BA, and the recent letter of intent with Boeing for 200 Max aircraft. Financial performance I think is very solid, an increase as the Chairman has said in the quarter from €900 million last year to €960 million on a pro forma basis, better results at BA, and at Vueling, flat at Iberia and Air Lingus, and a positive unit revenue environment. So, you know, it’s a good second quarter for us, we are main taining our guidance for the year, it is unchanged, and you can read it in the document there. And as the chairman said, very pleased to see the AGM approve the final and special dividend, and I thank all the shareholders who have written to me to thank us for the special dividend in particular. You’ll see we’re slowing down growth as we promised to do, so we’re tapering that, particularly in the fourth quarter and I’ll take you through a more detailed presentation. Before I do that, I’ll hand you over to Steve who will take you through a closer look at the financial performance. Steve. Steve Gunning: Thanks, Willie. Good morning. So, let me canter you through the results. As Willie says, operating profit for the quarter, 960 million, that’s up 60 mil lion on last year. At constant currency it’s up 52 million, so FX not a big story at an operating profit level in Q2. In terms of capacity, up 5.4%, as Willie was alluding to, we knew Q1 would be the highest capacity growth; it’s less growth in Q2 of 5.4 %, RPKs were up 6.6, so seat factor, load factor was up 2. In terms of passenger unit revenue at constant currency, up 1.1%, which is a turnaround from quarter one where we were down 1.4% at constant currency on RASK, so a 2.5-point swing, quarter on quarter. And clearly there was a benefit of Easter and other holiday timings in that – in that number. And then finally on this slide, non-fuel unit costs, up 0.4 at constant currency. If we strip out the sort of non-ASK driven businesses, Iberia MRO, BA Holidays, actually the underlying non-fuel unit costs are actually down 1.7%, so overall a strong performance, all with a backdrop of fuel price – fuel costs up; fuel costs were up €245 million in the quarter, so to grow profit in that context was a good result. Let me take you through a little bit more as to what’s been going on with the revenue, because this is quite a turnaround in terms of how this graph looks compared to Q1. In Q1, all of the regions with the exception of Domestic were showing a negative RASK movement, and now, as you can see, all regions have improved with the exception of LACAR. Let me just give you a quick canter around these. Domestics. Domestic was the one strong region in Q1, it continues to be strong. This is primarily driven through demand in the Canaries and the Balearic islands because there is this price discount assistance that the residents are getting there. As Willie just alluded to in terms of Europe, it’s a pretty good performance in Europe, both Iberia and Vueling h ad positive RASK development, and if you looked at Q1, we were down 5.7 in Q1, so to be down 1.1 is a good improvement in those numbers. In terms of Asia Pacific, all of our routes have improved on the quarter, with the exception of China Mainland, and I think the main drivers of that is partly the Chinese economy, but primarily the amount of capacity that’s going into – that’s being put into the market by the Chinese carriers. With regards to AMESA, also a very positive performance, sort of three points to highlight there; firstly, India, our performance there has benefited from the demise 3
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