TIDMIAG
RNS Number : 9698Q
International Cons Airlines Group
24 February 2023
IAG full year results 2022
Strong recovery in profits in 2022
-- In 2022 we saw a strong recovery in our core markets as
COVID-19 restrictions were lifted, which drove revenue momentum and
a return to profit with significantly positive operating cash
flow
-- Further recovery in profits expected in 2023, with full year
operating profit before exceptional items expected to be in the
range of EUR1.8 to EUR2.3 billion, based on current foreign
exchange rates and jet fuel forward prices. However, we are mindful
of uncertainty in the macro environment and fuel and non-fuel cost
inflation
-- Committed to generating long-term shareholder value and
confident in returning to pre-COVID-19 levels of operating profit
within the next few years
Luis Gallego, IAG Chief Executive Officer, said:
"2022 was a year of strong recovery, driven by sustained leisure
demand and markets reopening. At this point of the year we continue
to see robust forward-bookings, while also remaining conscious of
global macro-economic uncertainties. We are transforming our
businesses, with the intention of returning IAG to pre-COVID levels
of profit within the next few years, through major initiatives to
improve customer experience and operational performance. Our unique
group structure allows us to maximise revenue and cost synergies,
and invest capital to achieve strong returns, whilst continuing
progress towards net zero by 2050.
"With the acquisition of Air Europa now agreed but subject to
regulatory and other approvals which could take around 18 months,
we are intending to welcome another leading airline to the Group.
This acquisition will enable us to grow Madrid as a hub, offering a
gateway to Latin America and beyond, with benefits for customers,
employees and shareholders.
"I would like to thank the teams across IAG for their
exceptionally hard work in addressing the challenges of ramping up
the operation throughout the year."
Financial summary:
Three months to December
Year to December 31 31
===================== ==========================
Statutory results (EUR million) 2022 2021 2022 2021
============================================ ========= ========== ============ ============
Total revenue 23,066 8,455 6,386 3,534
Operating profit/(loss) 1,256 (2,765) 486 (278)
Profit/(loss) after tax 431 (2,933) 232 (311)
------------ ------------
Basic earnings/(loss) per share
(EUR cents) 8.7 (59.1)
============================================ ========= ==========
Cash, cash equivalents and interest-bearing
deposits 9,599 7,943
Borrowings 19,984 19,610
============================================ ========= ==========
Alternative performance measures
(EUR million) 2022 2021 2022 2021
============================================ ========= ========== ============ ============
Total revenue before exceptional
items 23,066 8,450 6,386 3,534
Operating profit/(loss) before
exceptional items 1,225 (2,970) 486 (305)
Profit/(loss) after tax before
exceptional items 402 (3,038) 232 (263)
------------ ------------
Adjusted earnings/(loss) per share
(EUR cents) 5.6 (61.2)
============================================ ========= ==========
Net debt 10,385 11,667
============================================ ========= ==========
Total liquidity(1) 13,999 11,986
============================================ ========= ==========
1 Total liquidity includes Cash, cash equivalents and
interest-bearing deposits, plus committed and undrawn general and
aircraft-specific financing facilities
-- Significant improvement to our financial performance with
operating profit before exceptional items of EUR1,225 million, an
increase of EUR4,195 million compared to full year 2021
-- Restored 87 per cent of 2019 capacity, measured in available
seat kilometres (ASKs), by quarter 4 and 78 per cent in the full
year
-- Passenger unit revenue was 11.0% higher than in 2019, with
the increase seen particularly in the second half of 2022, with
strong leisure traffic recovery and business traffic steadily
improving. The premium leisure segment performed very well.
-- Higher non-fuel unit costs, up 24.1% versus 2019, driven by
supplier cost inflation net of transformation initiatives, capacity
levels still below 2019 and foreign exchange
-- Fuel unit cost was up 30.2% versus 2019, negatively impacted
by significant rise in commodity prices for jet fuel, following the
Russian invasion of Ukraine in February 2022, partially offset by
the benefit of our hedging policy
-- Invested EUR3.9 billion to make important improvements in
fleet, customer offerings, IT infrastructure and sustainability
-- Reduction in net debt to EUR10.4 billion, driven by operating
profit and significant working capital inflows
-- Liquidity continued to strengthen to EUR14.0 billion at
December 31, 2022, from EUR12.0 billion at the end of 2021
Good progress against strategic objectives in 2022
-- Investing for our customers:
-- Quickly recovered operations in our main hubs in Madrid, Dublin and Barcelona
-- Iberia recognised as the most punctual European airline in
2022. Iberia Express and Vueling also ranked as the third and
fourth most punctual airlines in Europe(1) .
-- Significant focus on rebuilding operational stability at
London Heathrow, with British Airways' operational performance
improving through the summer, with 7,400 new colleagues recruited
in 2022
-- 27 deliveries of modern, fuel-efficient aircraft and 59
longhaul aircraft embodied with next generation products for
British Airways and Iberia at the end of 2022
-- Ordered 109 new shorthaul aircraft, bringing fuel efficiency
benefits of up to 20 per cent versus the aircraft they will
replace
-- Carbon intensity, measured as grammes of CO(2) per passenger
kilometre, 7 per cent lower than in 2019
-- Agreement with Globalia to acquire the remaining 80 per cent
equity of Air Europa, following the acquisition of a 20 per cent
equity stake in August 2022. The transaction is subject to
regulatory and other approvals which could take around 18
months
-- Funding level of British Airways' main pension scheme (NAPS)
improved such that the scheme was in surplus on its triennial
funding basis and no deficit recovery payments were made during
2022 or required in the foreseeable future
Trading outlook
Full year 2023 capacity (ASKs) of approximately 98 per cent of
the 2019 level, with quarter 1, 2023 approximately 96 per cent of
the quarter 1, 2019 level.
Full year 2023 operating profit before exceptional items
expected to be in the range of EUR1.8 to EUR2.3 billion, with most
of the improvement over 2022 in the first half of the year. Quarter
1, 2023 operating loss of approximately EUR200 million. This
assumes no further setbacks related to COVID-19 or material impacts
from geopolitical developments.
Capital expenditure for 2023 of approximately EUR4.0 billion,
subject to the timing of aircraft deliveries. Net debt broadly
maintained at the December 31, 2022 level of EUR10.4 billion by the
end of 2023.
This guidance is based on forward jet fuel prices and spot
foreign exchange rates at February 23, 2023.
IAG plans to update the market with further strategic and
financial information at a Capital Markets event later in 2023.
Notes
1 Cirium report 'The On-time Performance Review 2022 Airlines & Airports', January 2023
LEI: 959800TZHQRUSH1ESL13
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, acquisitions and divestments
relating to the Group and discussions of the Group's business
plans. 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 current economic and
geopolitical environment and ongoing recovery from the COVID-19
pandemic and uncertainties about its future 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 2021 Annual Report and Accounts; this
document is 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 ongoing recovery from the COVID-19
pandemic and uncertainties about its future impact and duration of
any further disruption to the global airline industry as well as
the current economic and geopolitical environment.
IAG Investor Relations
Waterside (HAA2),
PO Box 365,
Harmondsworth,
Middlesex,
UB7 0GB
Investor.relations@iairgroup.com
CONSOLIDATED INCOME STATEMENT
Three months to December
Year to December 31 31
========================== ============================
Higher/ Higher/
EUR million 2022 2021 (lower) 2022 2021 (lower)
============================================= ======= ======= ======== ======= ======= ==========
Passenger revenue 19,458 5,835 nm 5,438 2,695 nm
Cargo revenue 1,615 1,673 (3.5)% 399 499 (20.0)%
Other revenue 1,993 947 nm 549 340 61.5 %
============================================= ======= ======= ======== ======= ======= ==========
Total revenue 23,066 8,455 nm 6,386 3,534 80.7 %
============================================= ======= ======= ======== ======= ======= ==========
Employee costs 4,647 3,013 54.2 % 1,230 914 34.6 %
Fuel, oil costs and emissions
charges 6,120 1,781 nm 1,720 732 nm
Handling, catering and other
operating costs 2,971 1,308 nm 828 520 59.2 %
Landing fees and en-route charges 1,890 923 nm 499 325 53.5 %
Engineering and other aircraft
costs 2,101 1,085 93.6 % 594 383 55.1 %
Property, IT and other costs 950 758 25.3 % 280 218 28.4 %
Selling costs 920 434 nm 249 154 61.7 %
Depreciation, amortisation and
impairment 2,070 1,932 7.1 % 539 548 (1.6)%
Currency differences 141 (14) nm (39) 18 nm
============================================= ======= ======= ======== ======= ======= ==========
Total expenditure on operations 21,810 11,220 94.4 % 5,900 3,812 54.8 %
============================================= ======= ======= ======== ======= ======= ==========
Operating profit/(loss) 1,256 (2,765) nm 486 (278) nm
Finance costs (1,017) (830) 22.5 % (294) (218) 34.9 %
Finance income 52 13 nm 41 8 nm
Net change in fair value of
financial instruments 81 89 (9.0)% (51) 85 nm
Net financing credit/(charge)
relating to pensions 26 (2) nm 7 (4) nm
Net currency retranslation (charges)/credits (115) (82) 40.2 % 190 (19) nm
Other non-operating credits/(charges) 132 70 88.6 % (130) (31) nm
============================================= ======= ======= ======== ======= ======= ==========
Total net non-operating costs (841) (742) 13.3 % (237) (179) 32.4 %
============================================= ======= ======= ======== ======= ======= ==========
Profit/(loss) before tax 415 (3,507) nm 249 (457) nm
Tax 16 574 (97.2)% (17) 146 nm
============================================= ======= ======= ======== ======= ======= ==========
Profit/(loss) after tax 431 (2,933) nm 232 (311) nm
============================================= ======= ======= ======== ======= ======= ==========
ALTERNATIVE PERFORMANCE MEASURES
All figures in the tables below are before exceptional items.
Refer to Alternative performance measures section for more
detail.
Three months to December
Year to December 31 31
============================ ============================
Before exceptional items Before exceptional items
============================ ============================
Higher/ Higher/
EUR million 2022 2021 (lower) 2022 2021 (lower)
============================================= ========= ======= ======== ======== ======== ========
Passenger revenue 19,458 5,830 nm 5,438 2,695 nm
Cargo revenue 1,615 1,673 (3.5)% 399 499 (20.0)%
Other revenue 1,993 947 nm 549 340 61.5 %
============================================= ========= ======= ======== ======== ======== ========
Total revenue 23,066 8,450 nm 6,386 3,534 80.7 %
============================================= ========= ======= ======== ======== ======== ========
Employee costs 4,647 3,031 53.3 % 1,230 932 32.0 %
Fuel, oil costs and emissions
charges 6,120 1,935 nm 1,720 733 nm
Handling, catering and other
operating costs 2,971 1,308 nm 828 520 59.2 %
Landing fees and en-route charges 1,890 923 nm 499 325 53.5 %
Engineering and other aircraft
costs 2,101 1,092 92.4 % 594 383 55.1 %
Property, IT and other costs 973 758 28.4 % 280 218 28.4 %
Selling costs 920 434 nm 249 154 61.7 %
Depreciation, amortisation and
impairment 2,078 1,953 6.4 % 539 556 (3.1)%
Currency differences 141 (14) nm (39) 18 nm
============================================= ========= ======= ======== ======== ======== ========
Total expenditure on operations 21,841 11,420 91.3 % 5,900 3,839 53.7 %
============================================= ========= ======= ======== ======== ======== ========
Operating profit/(loss) 1,225 (2,970) nm 486 (305) nm
Finance costs (1,017) (830) 22.5 % (294) (218) 34.9 %
Finance income 52 13 nm 41 8 nm
Net change in fair value of
financial instruments 81 89 (9.0)% (51) 85 nm
Net financing credit/(charge)
relating to pensions 26 (2) nm 7 (4) nm
Net currency retranslation (charges)/credits (115) (82) 40.2 % 190 (19) nm
Other non-operating credits/(charges) 132 145 (9.0)% (130) 44 nm
============================================= ========= ======= ======== ======== ======== ========
Total net non-operating costs (841) (667) 26.1 % (237) (104) nm
============================================= ========= ======= ======== ======== ======== ========
Profit/(loss) before tax 384 (3,637) nm 249 (409) nm
Tax 18 599 (97.0)% (17) 146 nm
============================================= ========= ======= ======== ======== ======== ========
Profit/(loss) after tax 402 (3,038) nm 232 (263) nm
============================================= ========= ======= ======== ======== ======== ========
Higher/ Higher/
Operating figures 2022 2021 (lower) 2022 2021 (lower)
============================================= ========= ======= ======== ======== ======== ========
Available seat kilometres (ASK
million) 263,592 121,965 nm 71,048 47,842 48.5 %
Revenue passenger kilometres
(RPK million) 215,749 78,689 nm 59,125 34,225 72.8 %
Seat factor (per cent) 81.8 64.5 17.3 pts 83.2 71.5 11.7 pts
Passenger numbers (thousands) 94,726 38,864 nm 25,222 15,309 64.8 %
Cargo tonne kilometres (CTK
million) 3,980 3,970 0.3 % 1,090 1,129 (3.5)%
Sold cargo tonnes (thousands) 561 539 4.1 % 153 157 (2.5)%
Sectors 619,122 307,519 nm 162,285 114,686 41.5 %
Block hours (hours) 1,781,829 892,455 99.7 % 473,511 328,739 44.0 %
============================================= ========= ======= ======== ======== ======== ========
Average manpower equivalent(1) 59,505 50,222 18.5 % 63,790 49,114 29.9 %
Aircraft in service 558 531 5.1 % n/a n/a n/a
============================================= ========= ======= ======== ======== ======== ========
Passenger revenue per RPK (EUR
cents) 9.02 7.41 21.7 % 9.20 7.87 16.8 %
Passenger revenue per ASK (EUR
cents) 7.38 4.78 54.4 % 7.65 5.63 35.9 %
Cargo revenue per CTK (EUR cents) 40.58 42.14 (3.7)% 36.61 44.20 (17.2)%
Fuel cost per ASK (EUR cents) 2.32 1.59 46.3 % 2.42 1.53 58.0 %
Non-fuel costs per ASK (EUR
cents) 5.96 7.78 (23.3)% 5.88 6.49 (9.4)%
Total cost per ASK (EUR cents) 8.29 9.36 (11.5)% 8.30 8.02 3.5 %
============================================= ========= ======= ======== ======== ======== ========
1 Included in the average manpower equivalent are staff on
furlough, wage support and equivalent schemes, including the
Temporary Redundancy Plan arrangements in Spain.
FINANCIAL REVIEW
IAG capacity
The year 2022 was a year of rebuilding capacity, with COVID-19
related travel restrictions eased or removed in most of the Group's
markets, allowing the airline industry to substantially restore
capacity towards levels seen in 2019, in line with strong pent-up
demand for travel. For the year, IAG capacity, measured in
available seat kilometres (ASKs), reached 78.0 per cent of 2019.
Each airline had a different recovery path, reflecting its
respective network, markets served and constraints at hub and other
airports. Group capacity increased steadily over the quarters,
starting at 65.1 per cent of 2019 in quarter 1 and reaching 86.6
per cent of 2019 in quarter 4.
Proportion of 2019 passenger capacity operated by quarter
Year to December 31, 2022 (per cent) Q1 Q2 Q3 Q4 Total
===================================== ==== ===== ===== ===== =====
Aer Lingus 69.0 85.6 89.9 98.5 86.8
British Airways 57.4 69.1 74.2 79.8 70.3
Iberia 84.7 87.0 84.2 92.8 87.1
Level 30.3 60.7 55.5 51.3 50.5
Vueling 72.9 100.2 102.9 111.3 98.2
===================================== ==== ===== ===== ===== =====
Group 65.1 78.0 81.1 86.6 78.0
===================================== ==== ===== ===== ===== =====
Capacity operated as a percentage of 2019 by quarter by
region
Year to December 31, 2022 (per cent) Q1 Q2 Q3 Q4 Total
===================================== ==== ===== ===== ===== =====
Domestic 90.1 105.1 101.5 104.0 100.6
Europe 63.3 84.7 88.2 96.0 84.0
North America 62.6 83.8 92.0 94.0 83.9
Latin America and Caribbean 90.2 81.0 75.0 85.5 82.8
Africa, Middle East and South Asia 64.3 73.9 79.0 88.8 76.4
Asia Pacific 5.9 9.5 10.4 19.2 11.3
===================================== ==== ===== ===== ===== =====
Total network 65.1 78.0 81.1 86.6 78.0
===================================== ==== ===== ===== ===== =====
The impact of COVID-19 and related travel restrictions was
significantly less than in 2021, when many countries were still in
lockdown or had severe travel restrictions in place. The strong
recovery in demand and traffic was reflected in the Group's
passenger load factor, which reached 81.8 per cent for the year,
down just 2.8 points from 2019. The recovery increased across the
year, with the passenger load factor in quarter 1 at 72.2 per cent
and quarter 4 rising to 83.2 per cent.
Capacity operated out of London Heathrow airport was lower than
originally planned at the start of the year. British Airways'
capacity was capped by Heathrow Airport and along with limited
access to South Asia, capacity reached 70.3 per cent of 2019
levels. In addition, there was an impact from the Omicron variant
of COVID-19 in January and February. As global travel restrictions
eased, British Airways restarted routes such as Sydney, San Jose in
California, Tokyo and Hong Kong. In March 2022 British Airways also
launched its new shorthaul Gatwick subsidiary, BA Euroflyer,
operating to 35 new destinations in the summer, flying under the
British Airways brand.
Iberia's capacity saw increasing recovery over the course of the
year, after quarter 1 was negatively impacted by Omicron.
Performance improved steadily, especially in the Latin America and
Caribbean (LACAR) region, North America and Europe. For the year,
Iberia significantly grew its capacity in LACAR versus 2021 by
increasing frequencies to destinations such as Mexico and Colombia.
Load factor was at 84.6 per cent in this region, only 0.8 points
lower than 2019. The increase in capacity versus 2019 was lower in
quarter 3 than quarter 2, as in 2019 the seasonal increase in
Iberia's schedule to LACAR for the peak summer months was greater
than in 2022.
Vueling adopted a new strategy to reduce its seasonality and
increase aircraft utilisation during the winter travel months. The
airline started seeing the results of this strategy in quarter 4,
when Vueling had capacity growth above 2019 levels by 11.3 per
cent, despite fewer aircraft in service, with new routes and growth
into existing markets such as the Canary Islands.
Aer Lingus was able to restore the majority of its transatlantic
services and in addition operated three transatlantic services from
its new Manchester Airport base in the UK, all of which started in
late 2021. These services represented 13 per cent of Aer Lingus'
transatlantic capacity and 8 per cent of its total network in 2022.
The Manchester base supported Aer Lingus in restoring longhaul
passenger capacity to similar levels to 2019 by the end of the
year.
IAG regional capacity
Passenger
ASKs ASKs load
higher/(lower) higher/(lower) factor Higher/(lower) Higher/(lower)
Year to December 31, 2022 v2019 v2021 (per cent) v2019 v2021
=================================== =============== =============== =========== ============== ==============
Domestic 0.6% 36.9% 85.5 (1.7)pts 10.6pts
Europe (16.0%) 138.2% 81.5 (2.1)pts 12.4pts
North America (16.1%) 192.9% 79.3 (4.8)pts 29.9pts
Latin America and Caribbean (17.2%) 73.5% 85.1 (1.3)pts 15.3pts
Africa, Middle East and South Asia (23.6%) 130.0% 81.1 (1.9)pts 13.7pts
Asia Pacific (88.7%) (7.1%) 84.0 (1.8)pts 44.6pts
=================================== =============== =============== =========== ============== ==============
Total network (22.0%) 116.1% 81.8 (2.8)pts 17.3pts
=================================== =============== =============== =========== ============== ==============
Domestic and Europe
Capacity in IAG's Domestic markets recovered to a greater extent
than other regions, with capacity slightly higher than 2019 by 0.6
per cent and higher than 2021 by 36.9 per cent. Iberia and Vueling
benefited from strong leisure demand to the Canary and Balearic
Islands, with capacity increases above 2019. Passenger load factor
for the region remained the highest for the Group at 85.5 per cent,
down 1.7 points versus 2019 and up 10.6 points versus 2021.
The Group's capacity in Europe was 16.0 per cent lower than
2019; however, it recovered to 138.2 per cent above 2021 as demand
for travel increased. Outside of Russia and the countries
neighbouring Ukraine, the impact of the conflict has been
relatively limited in this region. Vueling expanded its operations
from Paris Orly in November 2021, with an additional 18 slots that
allowed Vueling to base an additional four aircraft at the airport,
taking its total to nine at an airport which is highly
slot-constrained. British Airways launched a new route to Nuremberg
in Germany and BA Cityflyer launched a number of new routes from
London City, including to Barcelona, San Sebastian and
Thessaloniki. Iberia reopened its route to Bergen in Norway.
Passenger load factor for the region was down 2.1 points versus
2019 to 81.5 per cent and was up 12.4 points versus 2021.
North America
IAG's North American capacity was 16.1 per cent lower than 2019
and was up significantly versus 2021, by 192.9 per cent. The United
States Government eased its COVID-19 travel restrictions in
November 2021 for vaccinated passengers and removed the need for a
COVID-19 test prior to arrival in June 2022. British Airways was
able to substantially restore its network to North America by the
end of the year by reopening seven routes and adding a new service
to Portland, Oregon. During the year, Iberia reopened flights to
San Francisco and launched new routes to Washington and Dallas. Aer
Lingus reopened six routes to North America during the year.
Passenger load factor for the region was down 4.8 points versus
2019 to 79.3 per cent and was up 29.9 points versus 2021.
Latin America and Caribbean (LACAR)
IAG's capacity in LACAR was down 17.2 per cent on 2019 but
increased 73.5 per cent on 2021. Demand in this region was strong,
with the Group benefiting from pent-up demand as COVID-19 travel
restrictions to LACAR were lifted earlier than in other regions.
Iberia significantly increased its capacity to LACAR during the
year, with Mexico up to three flights daily and increased
frequencies for Bogotá, Colombia from 10 to 14 flights per week in
February 2022. Passenger load factor was down 1.3 points versus
2019 at 85.1 per cent and was up 15.3 points versus 2021.
Africa, Middle East and South Asia (AMESA)
Capacity to this region was down 23.6 per cent versus 2019 and
up significantly versus 2021. British Airways had restored almost
90 per cent of its 2019 capacity to AMESA by quarter 4 and during
the year reopened routes to Morocco, Doha and Cape Town. Iberia had
strong results in Israel as Tel Aviv recovered faster than
expected, and North Africa also performed well with good recovery
to Morocco. Vueling launched new routes to Cairo, Alexandria and
Amman. Passenger load factor for the region was down 1.9 points
versus 2019 at 81.1 per cent and was up 13.7 points versus
2021.
Asia Pacific
During 2022, the Asia Pacific region remained the most
capacity-constrained region, as strict travel restrictions
continued to severely impact demand. Australia opened its borders
to international travel in February 2022, while other countries
such as Singapore, Japan and Hong Kong lifted travel restrictions
later, while China did not lift restrictions until January 2023.
During the year, British Airways restarted routes to Sydney, Hong
Kong and Tokyo. Passenger load factor for the region was down 1.8
points versus 2019 at 84.0 per cent and was up 44.6 points versus
2021.
Basis of Preparation
At December 31, 2022, the Group had total liquidity of EUR13,999
million, comprising cash, cash equivalents and interest-bearing
deposits of EUR9,599 million, EUR3,284 million of committed and
undrawn general facilities, and a further EUR1,116 million of
committed and undrawn aircraft-specific facilities. The Group has
been successful in raising financing since the outbreak of
COVID-19, having financed all aircraft deliveries in 2020, 2021 and
2022. The Group continues to secure aircraft financing on long-term
arrangements.
In its assessment of going concern over the period to June 30,
2024 (the 'going concern period'), the Group has prepared extensive
modelling, including considering a plausible but severe downside
scenario and further sensitivities to the downside scenario. Having
reviewed these scenarios and sensitivities, the Directors have a
reasonable expectation that the Group has sufficient liquidity to
continue in operational existence over the going concern period,
and hence continue to adopt the going concern basis in preparing
the consolidated financial statements.
In adopting the going concern basis of accounting, the
consolidated financial statements have been prepared without the
inclusion of a material uncertainty, which has been removed since
the 2021 Annual Report and Accounts. The removal of the material
uncertainty arises from the reduction in uncertainty over the going
concern period due to both the continued recovery subsequent to the
COVID-19 pandemic and the strength of the Group's liquidity at
December 31, 2022.
Summary
The Group was able to substantially restore its capacity by the
end of the year, having operated a significantly reduced schedule
in 2020 and 2021 due to the impact of the COVID-19 pandemic. As
capacity was increasingly restored through the year the operating
result improved, with the third quarter, which includes the
airlines' summer peak seasons, approaching levels of profitability
seen in 2019. Fuel prices were significantly higher than both the
previous year and 2019 and the airline sector also experienced high
supplier price inflation. Due to the strong demand, passenger unit
revenues also rose above those in 2019, thus allowing the airlines
to recover a substantial portion of the fuel price increase and
other cost inflation.
The net result was an operating profit for the year of EUR1,256
million, versus an operating loss of EUR2,765 million in 2021. The
profit after tax for the year was EUR431 million, versus a loss of
EUR2,933 million in 2021.
Profit/(loss) for the year
Statutory results Higher/
EUR million (lower)
2022 2021 vly
========================= ===== ======= ========
Operating profit/(loss) 1,256 (2,765) 4,021
Profit/(loss) before tax 415 (3,507) 3,922
Profit/(loss) after tax 431 (2,933) 3,364
========================= ===== ======= ========
The biggest driver of the year-on-year changes in revenues and
costs was the significant restoration of the airlines' flying
programmes, linked to the opening of markets and recovery from the
substantial impacts of COVID-19 in 2020 and 2021. Passenger
capacity, measured in ASKs, was more than double the level of the
previous year, up 116 per cent on 2021. Such an increase has made
percentage increases not meaningful and hence they are excluded
from the tables below.
Summary of exceptional items
The Group uses Alternative Performance Measures (APMs) to
analyse the underlying results of the business excluding
exceptional items, which are those that in management's view need
to be separately disclosed by virtue of their size or incidence in
understanding the entity's financial performance.
In 2020 and 2021, the Group recorded a number of exceptional
items arising as a direct result of COVID-19, which during 2021
principally related to the fair value movements on derivatives
de-designated from hedge accounting and the reversal of the
impairment of certain aircraft stood back up in 2021. In 2021 all
items were associated with the impact of COVID-19, except for the
termination payment to Globalia.
During the course of 2022 the Group recorded exceptional credits
relating to the partial reversal of a fine issued to British
Airways in 2010 and the reversal of the impairment of certain
aircraft returned to service in 2022.
A summary of the exceptional items relating to 2022 and 2021 is
given below, with more detail in the Alternative Performance
Measures section, including a breakdown of the exceptional items by
operating company.
Credit/(charge)
to the
Income statement
EUR million
=========================== ========================================== ===================
Income statement line Exceptional item description 2022 2021
=========================== ========================================== ========= ========
Discontinuation of hedge accounting
for foreign currency derivatives
Passenger revenue for revenue - 5
=========================== ========================================== ========= ========
Employee costs Restructuring costs - 18
=========================== ========================================== ========= ========
Discontinuation of hedge accounting
Fuel, oil and emissions for fuel and associated foreign exchange
costs derivatives - 154
=========================== ========================================== ========= ========
Engineering and other Inventory write down and charge in
aircraft costs relation to contractual lease provisions - 7
=========================== ========================================== ========= ========
Property, IT and other
costs Reversal of fine 23 -
=========================== ========================================== ========= ========
Depreciation, amortisation Impairment reversal of fleet and
and impairment associated assets 8 21
=========================== ========================================== ========= ========
Non-operating costs Termination payment to Globalia - (75)
=========================== ========================================== ========= ========
Tax Tax on exceptional items (2) (25)
=========================== ========================================== ========= ========
Excluding the impact of the exceptional items shown above, the
operating profit for 2022 was EUR1,225 million, EUR4,195 million
better than the operating loss of EUR2,970 million for 2021,
reflecting the continued recovery in capacity. The profit after tax
and before exceptional items was EUR402 million, EUR3,440 million
higher than the 2021 loss of EUR3,038 million.
Alternative Performance Measures (before exceptional Higher/
items) (lower)
EUR million 2022 2021 vly
===================================================== ===== ======= ========
Operating profit/(loss) 1,225 (2,970) 4,195
Profit/(loss) before tax 384 (3,637) 4,021
Profit/(loss) after tax 402 (3,038) 3,440
===================================================== ===== ======= ========
Revenue
Higher/
(lower)
EUR million 2022 2021 vly
====================== ====== ===== ========
Passenger revenue (1) 19,458 5,835 13,623
Cargo revenue 1,615 1,673 (58)
Other revenue 1,993 947 1,046
====================== ====== ===== ========
Total revenue 23,066 8,455 14,611
====================== ====== ===== ========
1 For 2021 includes an exceptional credit of EUR5 million
related to discontinued hedge accounting of revenue foreign
currency derivatives. Further information is given in the
Alternative Performance Measures section.
Total revenue increased EUR14,611 million versus 2021, of which
EUR782 million was due to favourable exchange rate movements.
Passenger revenue
The increase in passenger revenue of EUR13,623 million was
significantly ahead of the increase in passenger capacity, driven
by higher yields and higher load factors than in 2021, linked to
the reopening of markets, strong pent-up customer demand and
increases in ticket prices to reflect a higher cost environment,
with higher fuel prices and supplier price inflation, particularly
following the outbreak of the war in Ukraine in February 2022.
The passenger load factor for the year of 81.8 per cent was 17.3
points higher than in 2021 and only 2.8 points lower than in 2019,
with recovery increasingly seen as the year progressed and the
final quarter of the year just 1.1 points lower than in 2019.
Passenger yields, measured as passenger revenue per revenue
passenger kilometre (RPK) were 21.7 per cent higher than in 2021
and up 14.7 per cent on 2019. The resulting passenger unit revenue
(passenger revenue per ASK) for the year was 54.4 per cent higher
than in 2021 and 11.0 per cent higher than in 2019. Passenger unit
revenue also steadily rose as capacity was restored, being 11.7 per
cent lower than 2019 in the first quarter, achieving 21.9 per cent
higher than in 2019 in the summer peak of quarter 3 and still 16.4
per cent higher than 2019 in the fourth quarter.
Cargo revenue
Cargo revenue, at EUR1,615 million, was only 3.5 per cent lower
than in 2021, which was a record year for cargo revenue and was
linked to the number of additional cargo flights that were operated
due to the severely restricted passenger flying programmes. In
2022, as passenger flying schedules were restored, there were
significantly fewer cargo-only flights operating, with 502 during
the year, compared with 3,788 in 2021. The early part of 2022
experienced global supply chain disruption, which eased across the
year as shipping capacity returned, with cargo volumes, measured in
cargo tonne kilometres (CTKs), 15.9 per cent higher than the
previous year in quarter 1, but lower than in the previous year by
3.5 per cent by quarter 4; total cargo carried for the year was
almost the same as in 2021, up 0.3 per cent. Cargo yields, measured
as cargo revenue per cargo tonne kilometre, were 3.7 per cent below
those of 2021, although double those of 2019. As global supply
chain issues eased, cargo yields also declined across the year,
with quarter 1 up 6.5 per cent on the previous year but quarter 4
being 17.2 per cent lower than in quarter 4 2021. The yield
environment is expected to moderate, along with global air cargo
volumes, in 2023.
Other revenue
The largest Other revenue streams for the Group are BA Holidays,
Iberia's Maintenance, Repair and Overhaul (MRO) and Handling
businesses and IAG Loyalty. Other revenue from activities linked to
the volume of passenger flying rose significantly with larger
flying programmes, resulting in Other revenue more than double the
level in 2021 and 3.7 per cent higher than that of 2019. BA
Holidays bookings benefited from an increase in British Airways'
flying schedule and the strong demand for leisure travel. Iberia's
third party MRO and handling businesses improved, reflecting higher
activity. IAG Loyalty improved (on both 2019 and 2021), with a
significant growth in the number of Avios issued linked to its
partnerships, including with American Express, resulting in an
increase in customers collecting Avios and with higher average
numbers of Avios collected per customer. IAG Loyalty also launched
a new partnership with Barclays in 2022.
Operating costs
Total expenditure on operations rose from EUR11,220 million in
2021 to EUR21,810 million in 2022, linked to the higher volume of
flights and passenger numbers, together with adverse foreign
currency movements of EUR1,104 million, which were mainly due to
the strengthening of the US dollar against the euro and pound
sterling.
Employee costs
Higher/
(lower)
EUR million 2022 2021 vly
=================== ===== ===== ========
Employee costs (1) 4,647 3,013 1,634
=================== ===== ===== ========
1 For 2021 includes an exceptional credit of EUR18 million
related to the release of restructuring provisions. Further
information is given in the Alternative Performance Measures
section.
The rise in Employee costs to EUR4,647 million versus EUR3,013
million in 2021 reflected an increase in employee numbers as the
Group restored capacity and the end of the various government
schemes to support employees and businesses during the most intense
periods of the COVID-19 pandemic. The use of government wage
support and related schemes in 2022 was limited to a small residual
amount of EUR14 million, all in the first quarter, versus EUR555
million for the year in 2021. The Group agreed pay deals with the
substantial majority of its bargaining groups and employees during
2022.
Fuel, oil and emissions costs
Higher/
(lower)
EUR million 2022 2021 vly
========================================== ===== ===== ========
Fuel, oil costs and emissions charges (1) 6,120 1,781 4,339
========================================== ===== ===== ========
1 For 2021 includes an exceptional credit of EUR154 million
related to the discontinuation of hedge accounting for fuel
derivatives and fuel foreign currency derivatives as a result of
the impact of COVID-19. Further information is given in the
Alternative Performance Measures section.
Fuel, oil and emissions charges were up significantly on 2021,
up EUR4,339 million, reflecting increased flying volumes and the
significant rise in commodity prices for jet fuel, most notably
following the Russian invasion of Ukraine early in the year.
Foreign exchange movements accounted for EUR505 million of the
increase, principally due to the average US dollar exchange rates
being stronger versus the euro and pound sterling in 2022 compared
with 2021. Average spot prices in 2022 were 80 per cent higher than
the previous year, with prices at the end of 2022 39 per cent
higher than at the start of the year.
Jet fuel price trend ($ per metric tonne)
Fuel hedging
The Group seeks to reduce the impact of volatile commodity
prices by hedging prices in advance. The Group's fuel hedging
policy was approved by the Board in May 2021 and is designed to
provide flexibility to respond to both significant unexpected
reductions in travel demand or capacity and/or material or sudden
changes in jet fuel prices. The policy allows for differentiation
within the Group, to match the nature of each operating company,
and the use of call options for a proportion of the hedging
undertaken. The policy operates on a two-year rolling basis, with
hedging of up to 60 per cent of anticipated requirements in the
first 12 months and up to 30 per cent in the following 12 months,
and with flexibility for low-cost airlines within the Group to
adopt hedging up to 75 per cent in the first 12 months. For all
Group airlines, hedging between 25 and 36 months ahead is only
undertaken in exceptional circumstances.
Fuel consumption
The Group continued to benefit from reduced fuel consumption,
associated with the investment in new fleet, together with the
early retirement of older aircraft, including the retirement of 15
Airbus A340-600 and 32 Boeing 747-400 aircraft in quarter 2 of
2020. Increasing passenger load factors versus 2021 also
contributed to reduced carbon intensity.
Supplier costs
Higher/
(lower)
EUR million 2022 2021 vly
============================================= ===== ===== ========
Handling, catering and other operating costs 2,971 1,308 1,663
Landing fees and en-route charges 1,890 923 967
Engineering and other aircraft costs (1) 2,101 1,085 1,016
Property, IT and other costs (2) 950 758 192
Selling costs 920 434 486
Currency differences 141 (14) 155
============================================= ===== ===== ========
Total Supplier costs 8,973 4,494 4,479
============================================= ===== ===== ========
1 For 2021 includes an exceptional credit of EUR7 million
related to the reversal, due to adjusted fleet plans, of a 2020
inventory write-down and a charge relating to contractual lease
provisions. Further information is given in the Alternative
Performance Measures section.
2 Includes an exceptional credit of EUR23 million related to the
partial reversal of the historical fine, plus accrued interest,
initially issued by the European Commission to British Airways for
involvement in cartel activity and recognised as an exceptional
charge in 2010. Further information is given in the Alternative
Performance Measures section.
Total Supplier costs rose by EUR4,479 million to EUR8,973,
double the level of 2021, reflecting the higher capacity operated.
Supplier costs were impacted by higher levels of inflation,
although the impact was partially mitigated by the Group's
procurement initiatives.
Property, IT and other costs include an exceptional credit of
EUR23 million, due to the partial reversal of a fine originally
issued to British Airways in 2010.
Supplier costs include a EUR141 million currency differences
charge in 2022 versus a EUR14 million currency differences credit
in 2021; currency differences mainly reflect the retranslation of
current financial assets and liabilities at the closing foreign
exchange rate for the period, which in 2022 reflects the
strengthening of the US dollar against both the euro and the pound
sterling over the course of 2022. Total foreign currency impacts on
Supplier costs, including currency differences, were EUR526 million
adverse versus 2021.
Ownership costs
Ownership costs include depreciation, amortisation and
impairment of tangible and intangible assets, including right of
use assets.
Higher/
(lower)
EUR million 2022 2021 vly
==================== ===== ===== ========
Ownership costs (1) 2,070 1,932 138
==================== ===== ===== ========
1 Includes an exceptional credit of EUR8 million (2021:
exceptional credit of EUR21 million) related to the partial
reversal of an impairment relating to fleet assets that were
previously stood down in 2020. Further information is given in the
Alternative Performance Measures section.
The increase in ownership costs versus 2022 is mainly driven by
the increase in the Group's fleet of aircraft, linked to the
restoration of capacity and 27 deliveries of new aircraft in the
year. An exceptional credit of EUR8 million was recorded in the
year, reflecting the partial reversal of an impairment related to
six aircraft previously stood down by Vueling in 2020 on the
assumption these aircraft were no longer required and would not
return to service; in 2022 it was determined the aircraft are
required for Vueling's flying programme and they were stood up and
re-entered service.
Aircraft fleet
In 2022, the in-service fleet increased by 27 aircraft, with 25
of the new aircraft delivered in 2022 in service by the end of the
year; the remaining two entered service early in 2023. During the
year 12 aircraft were removed from service, pending lease return or
disposal, and 14 aircraft re-entered service, having previously
been stood down from active service.
Number of fleet
Higher/
(lower)
Number of fleet in-service 2022 2021 vly
=========================== ==== ==== ========
Shorthaul 381 363 5.0%
Longhaul 177 168 5.4%
=========================== ==== ==== ========
558 531 5.1%
=========================== ==== ==== ========
In addition to the in-service fleet, there were a further 18
aircraft not in service, made up of 16 aircraft held by the Group
pending disposal or lease return and two aircraft delivered late in
2022 and not in service by December 31, 2022.
Exchange rate impact
Exchange rate impacts are calculated by retranslating current
year results at prior year exchange rates. The reported revenues
and expenditures are impacted by the translation of currencies
other than euro to the Group's reporting currency of euro,
primarily British Airways and IAG Loyalty. From a transaction
perspective, the Group performance is impacted by the fluctuation
of exchange rates, primarily exposure to the pound sterling, euro
and US dollar. The Group typically generates a surplus in most
currencies in which it does business, except the US dollar, for
which capital expenditure, debt repayments and fuel purchases
typically create a deficit which is managed and partially hedged.
The Group hedges its economic exposure from transacting in foreign
currencies but does not hedge the translation impact of reporting
in euro.
Overall, in 2022 the Group operating profit before exceptional
items was reduced by EUR322 million due to adverse exchange rate
impacts.
Exchange rate impact before exceptional items
2022
================================================ =========== =========== =========
Total
EUR million Translation Transaction exchange
Favourable/(adverse) impact impact impact
================================================ =========== =========== =========
Total exchange impact on revenue 97 685 782
Total exchange impact on operating expenditures (129) (975) (1,104)
================================================ =========== =========== =========
Total exchange impact on operating profit (32) (290) (322)
================================================ =========== =========== =========
2021
================================================ =========== =========== =========
Total
EUR million Translation Transaction exchange
Favourable/(adverse) impact impact impact
================================================ =========== =========== =========
Total exchange impact on revenue 220 (163) 57
Total exchange impact on operating expenditures (251) 292 41
================================================ =========== =========== =========
Total exchange impact on operating loss (31) 129 98
================================================ =========== =========== =========
The exchange rates of the Group were as follows:
Higher/
(lower)
2022 2021 vly
================================================== ==== ==== ========
Translation - Balance sheet
GBP to EUR 1.14 1.18 (2.8)%
================================================== ==== ==== ========
Translation - Income statement (weighted average)
GBP to EUR 1.17 1.15 1.9%
================================================== ==== ==== ========
Transaction (weighted average)
GBP to EUR 1.17 1.15 1.9%
EUR to $ 1.05 1.20 (12.6)%
GBP to $ 1.23 1.38 (10.8)%
================================================== ==== ==== ========
Total net non-operating costs
Total net non-operating costs for the year were EUR841 million,
versus EUR742 million in 2021. The main driver of the increase was
Finance costs, which were up EUR187 million, reflecting a full year
of interest on the debt raised in 2021 and the impact of higher
interest rates on the Group's floating rate debt.
The net change in the fair value of financial instruments of
EUR81 million reflects fair value adjustments at December 31, 2022
of IAG's convertible bond maturing in 2028, partially offset by the
fair value movements on the convertible loan issued to Globalia
during quarter 2 and converted into a 20 per cent equity stake in
Air Europa Holdings in quarter 3. In 2021 non-operating costs
included a EUR89 million non-cash credit relating to movements in
the fair value of the EUR825 million IAG convertible bond.
Other non-operating credits of EUR132 million (2021: EUR70
million) represent net gains on derivative contracts for which
hedge accounting is not applied; in 2021 the credit of EUR70
million is net of an exceptional non-operating charge of EUR75
million, relating to a settlement agreement reached with Globalia
to terminate the previous agreements signed in 2019 and 2021 for
Iberia to acquire the issued share capital of Air Europa
Holdings.
Tax
The tax credit on the profit for the year was EUR16 million
(2021: tax credit of EUR574 million), and the effective tax rate
was negative 3.9 per cent (2021: 16.4 per cent).
The substantial majority of the Group's activities are taxed
where the main operations are based: in the UK, Spain and Ireland,
which had statutory corporation tax rates of 19 per cent, 25 per
cent and 12.5 per cent respectively for 2022. The expected
effective tax rate for the Group is determined by applying the
relevant corporation tax rate to the profits or losses of each
jurisdiction.
The geographical distribution of profits and losses in the Group
results in the expected tax rate being 24.6 per cent for the year
to December 31, 2022. The difference between the actual effective
tax rate of negative 3.9 per cent and the expected tax rate of 24.6
per cent is primarily due to the recognition of previously
unrecognised tax losses in the Group's Spanish companies.
The profit after tax for the year was EUR431 million (2021: loss
of EUR2,933 million).
On March 3, 2021 the UK Chancellor of the Exchequer announced
that legislation would be introduced in the Finance Bill 2021 to
set the main rate of corporation tax at 25 per cent from April
2023. On May 24, 2021 the Finance Bill was substantively enacted,
which has led to the remeasurement of deferred tax balances and
will increase the Group's future current tax charge accordingly. As
a result of the remeasurement of deferred tax balances in UK
entities, a credit of EUR17 million (2021: EUR78 million credit) is
recorded in the Income statement and a charge of EUR10 million
(2021: EUR61 million credit) is recorded in Other comprehensive
income.
On October 8, 2021 the Irish Government announced that it would
increase the rate of corporation tax for certain multinational
businesses to 15 per cent with effect from 2023. This expected tax
rate change has not been reflected in these results because it has
not yet been substantively enacted.
The Group is monitoring the OECD's proposed two-pillar solution
to address the tax challenges arising from the digitalisation of
the economy. This proposed reform to the international tax system
addresses the geographical allocation of profits for the purposes
of taxation, and is designed to ensure that multinational
enterprises will be subject to a minimum 15 per cent effective tax
rate. On December 15, 2022, the Council of the European Union
formally adopted the EU Pillar Two Directive. Member States are
expected to transpose the Directive into national law by the end of
2023. The Group is continuing to assess the implications of the
reform and these will be determined when the relevant legislation
is finalised.
Operating profit and loss performance of operating companies
Iberia Vueling
British Airways Aer Lingus EUR EUR
GBP million EUR million million million
Higher/ Higher/ Higher/ Higher/
(lower) (lower) (lower) (lower)
Statutory 2022 vly 2022 vly 2022 vly 2022 vly
==================================== ======= ======== ===== ======== ===== ======== ===== ========
Passenger revenue 9,215 6,894 1,679 1,372 4,042 2,318 2,584 1,573
Cargo revenue 1,060 (37) 80 15 347 (47) - -
Other revenue 755 474 10 6 1,122 456 14 9
==================================== ======= ======== ===== ======== ===== ======== ===== ========
Total revenue 11,030 7,331 1,769 1,393 5,511 2,727 2,598 1,582
==================================== ======= ======== ===== ======== ===== ======== ===== ========
Fuel, oil costs and emissions
charges 2,929 2,099 539 450 1,313 794 739 541
Employee costs 2,100 629 393 213 1,161 438 370 170
Supplier costs 4,595 2,407 646 341 2,284 872 1,088 464
Ownership costs (1) 1,084 105 146 6 371 21 206 (21)
==================================== ======= ======== ===== ======== ===== ======== ===== ========
Operating profit 322 2,091 45 383 382 602 195 428
==================================== ======= ======== ===== ======== ===== ======== ===== ========
50.7 92.6 14.8 30.5
Operating margin 2.9% pts 2.6% pts 6.9% pts 7.5% pts
==================================== ======= ======== ===== ======== ===== ======== ===== ========
Alternative Performance Measures
(2)
==================================== ======= ======== ===== ======== ===== ======== ===== ========
Passenger revenue 9,215 6,899 1,679 1,371 4,042 2,318 2,584 1,573
Cargo revenue 1,060 (37) 80 15 347 (47) - -
Other revenue 755 474 10 6 1,122 456 14 9
==================================== ======= ======== ===== ======== ===== ======== ===== ========
Total revenue before exceptional
items 11,030 7,336 1,769 1,392 5,511 2,727 2,598 1,582
==================================== ======= ======== ===== ======== ===== ======== ===== ========
Fuel, oil costs and emissions
charges 2,929 1,990 539 440 1,313 785 739 532
Employee costs 2,100 618 393 213 1,161 433 370 170
Supplier costs 4,614 2,426 646 341 2,284 872 1,088 457
Ownership costs (1) 1,084 99 146 6 371 21 214 (26)
==================================== ======= ======== ===== ======== ===== ======== ===== ========
Operating profit before exceptional
items 303 2,203 45 392 382 616 187 449
==================================== ======= ======== ===== ======== ===== ======== ===== ========
Operating margin before exceptional 54.1 94.7 15.3 33.0
items 2.7% pts 2.6% pts 6.9% pts 7.2% pts
==================================== ======= ======== ===== ======== ===== ======== ===== ========
1 Ownership costs reflects Depreciation, amortisation and impairment.
2 Further detail is provided in the Alternative Performance Measures section.
Review by operating company
All four of the airline operating companies saw a return to
profitability in 2022, following the significant negative impacts
of COVID-19 in 2020 and 2021. The shape of each airline's recovery
was linked to the pace of the easing of government travel
restrictions and re-opening of travel in their key markets,
together with operating constraints at their hubs and other
airports.
British Airways operated the lowest passenger capacity relative
to 2019, with ASKs at 70.3 per cent of 2019, partly linked to
constraints at London Heathrow Airport. Aer Lingus operated at 86.8
per cent of 2019, including the impact of a new base at Manchester
Airport in the UK, with Iberia at 87.1 per cent and Vueling at 98.2
per cent, including its expanded operation at Paris Orly.
Operating profit/(loss) before exceptional items
2022 2021 2019
============================== ==== ======= =====
British Airways (GBP million) 303 (1,900) 1,890
Aer Lingus (EUR million) 45 (347) 276
Iberia (EUR million) 382 (234) 497
Vueling (EUR million) 187 (262) 240
============================== ==== ======= =====
Iberia and Vueling saw the greatest return to profit versus
2019, linked to strong demand in the Domestic, Europe and LACAR
regions. Aer Lingus saw an increasing recovery through the year and
a strong quarter 3, in which there was strong pent-up demand for
summer travel. British Airways also experienced rising
profitability through the year, strong pent-up demand and
significantly increased unit revenues versus 2019 in the second
half of the year, as load factors improved and average yields
rose.
All of the airlines experienced significantly higher fuel prices
than in 2019 or 2021, although the impact was partly mitigated by
the Group's hedging policy. Supplier costs were impacted by the
high levels of price inflation and costs to restart the business
following COVID-19 restrictions, with the impact lessened by
procurement and transformation initiatives.
IAG Loyalty showed significant growth in its non-airline partner
revenue streams, together with benefiting from the recovery in the
Group's airlines, leading to operating profit before exceptional
items of GBP240 million (EUR282 million), up from GBP113 million
(EUR131 million) in 2021.
Capital expenditure
In 2022 the Group increased investment in its aircraft fleets,
customer products and services, IT infrastructure and
sustainability, as the business recovered, with capital expenditure
of EUR3,875 million, compared with EUR744 million in 2021.
During 2022 the Group took delivery of aircraft delayed from
2020 and 2021 due to the impact of COVID-19, together with making
pre-delivery payments for future aircraft deliveries, which had
also been deferred. In 2022 the Group took delivery of 27 aircraft:
10 for British Airways, 15 for Iberia and two for Aer Lingus. Of
these deliveries, 25 were aircraft acquired from Airbus and Boeing
and two were leased directly from aircraft lessors. This contrasts
with 2021, in which only five A320neo family aircraft were acquired
from Airbus, with the remainder of the 11 deliveries in the year on
direct lease arrangements from aircraft lessors.
Aircraft deliveries 2022 2021
==================== ==== ====
Airbus A320 family 12 8
Airbus A330 - 1
Airbus A350 12 -
Boeing 787-10 3 -
Embraer E190 - 2
==================== ==== ====
Total 27 11
==================== ==== ====
Aircraft orders
The Group exercised options for 22 Airbus A320neo family
aircraft in the first half of 2022, for delivery in 2024 and 2025.
The Group entered into direct leasing contracts for and took
delivery of two Airbus A320neo aircraft in the year. In October
2022 an Extraordinary Shareholders' Meeting approved the
acquisition of a further 37 Airbus A320neo family aircraft and 50
Boeing 737 aircraft. The aircraft will replace Airbus A320ceo
family aircraft and are up to 20 per cent more fuel-efficient than
the aircraft they replace. These aircraft are expected to be
delivered between 2024 and 2028.
Aircraft future deliveries at December 31 2022 2021
========================================== ==== ====
Airbus A320/A321 91 42
Airbus A321 XLR 14 14
Airbus A350 12 26
Boeing 737 50 -
Boeing 777-9 18 18
Boeing 787-10 7 10
========================================== ==== ====
Total 192 110
========================================== ==== ====
Following the orders placed in 2022, at December 31, 2022 the
Group held options to acquire a further 246 aircraft from Airbus
and Boeing.
Capital commitments
Capital expenditure authorised and contracted for at December
31, 2022 amounted to EUR13,749 million (2021: EUR10,911 million),
with the increase attributable to the net of the aircraft
deliveries and orders described above. Most of these commitments
are denominated in US dollars.
The Group has certain rights to cancel commitments in the event
of significant delays to aircraft deliveries caused by the aircraft
manufacturers. No such rights had been exercised as at December 31,
2022.
Working capital
The Group saw strong booking inflows for travel in 2023 during
the second half of 2022, reflecting expanded flying programmes as
the recovery from COVID-19 continued, with capacity in 2023
expected to approach that of 2019 and with higher average yields.
At December 31, 2022, Deferred revenue on ticket sales, which
includes loyalty points (Avios), had risen EUR1,092 million on the
previous year to close at EUR7,644 million. Of this balance,
EUR7,318 million is included in current liabilities and EUR326
million within non-current liabilities, associated with the renewal
of IAG Loyalty's multi-year contract with American Express in
2020.
Sales in advance of carriage, related to passenger ticket sales,
were up EUR1,282 million versus 2021, at EUR5,014 million. Vouchers
issued for future travel in lieu of a cash refund represented 13
per cent of sales in advance of carriage.
The value of loyalty points (Avios) issued and yet to be
recognised in revenue was down EUR190 million versus 2021 at
EUR2,630 million, reflecting the net impact of the unwind of the
remainder of a pre-payment from American Express made in 2020 and
the balance of Avios issued versus redeemed in 2022.
Trade receivables rose by EUR595 million to EUR1,330 million,
related to the increased flying programmes and higher yields.
Trade and other payables rose by EUR1,497 million to EUR5,209
million, again due to the significantly increased flying schedule
and cost inflation. In quarter 4, 2022, the period to which the
Trade and other payables mainly relates, the Group operated 86.6
per cent of 2019 passenger capacity, versus 58.3 per cent operated
in quarter 4 of 2021.
Funding and debt
IAG's long-term objectives when managing capital are: to
safeguard the Group's ability to continue as a going concern and
its long-term viability; to maintain an optimal capital structure
in order to reduce the cost of capital; and to provide sustainable
returns to shareholders. In November 2018, S&P and Moody's
assigned IAG with a long-term investment-grade credit rating with a
stable outlook; IAG's credit ratings remained investment-grade up
until the outbreak of COVID-19. The impact of COVID-19 on the Group
and wider airline industry led to ratings falling by three notches
for S&P and two notches for Moody's. The Group's current
ratings (at February 23, 2023) are: S&P: BB, Moody's: Ba2.
Debt and capital
The Group monitors leverage using net debt to EBITDA before
exceptional items, in addition to closely following measures used
by the credit ratings agencies, including those based on total
borrowings (gross debt).
The Group had previously set a target of net debt to EBITDA
before exceptional items below 1.8 times.
In 2022, net debt to EBITDA before exceptional items was 3.1
times, compared with 1.4 times in 2019, reflecting a partial
recovery in operating profitability in 2022 following the
significant impact of COVID-19 in 2020 and 2021, together with the
impact of debt raised during the pandemic to boost liquidity and
resilience. In 2021, EBITDA was negative, rendering the net debt to
EBITDA before exceptional items ratio not meaningful; the
calculation for 2021 resulted in net debt to EBITDA before
exceptional items of minus 11.5 times.
Net debt
Higher
EUR million 2022 2021 / (lower)
======================================================= ======= ======= ==========
Debt 19,610 15,679 3,931
Cash, cash equivalents and interest-bearing deposits (7,943) (5,917) (2,026)
======================================================= ======= ======= ==========
Net debt at January 1 11,667 9,762 1,905
======================================================= ======= ======= ==========
Increase in cash net of exchange (1,656) (2,026) 370
======================================================= ======= ======= ==========
Movements in total borrowings
Net cash outflow from repayments of borrowings and
lease liabilities (2,505) (2,265) (240)
Net cash inflow from new borrowings 1,436 4,817 (3,381)
Non-cash impact of new leases 1,017 518 499
======================================================= ======= ======= ==========
(Decrease)/increase in net debt from regular financing (52) 3,070 (3,122)
======================================================= ======= ======= ==========
Exchange and other non-cash movements 426 861 (435)
======================================================= ======= ======= ==========
Net debt at December 31 10,385 11,667 (1,282)
======================================================= ======= ======= ==========
Net debt reduced by EUR1,282 million, principally due to the
recovery in profitability and positive working capital from
bookings into 2023, partially offset by the capital expenditure of
EUR3,875 million. Gross debt increased by EUR374 million during the
year to EUR19,984 million. Repayments exceeded new borrowings by
EUR1,069 million, reflecting scheduled repayments of aircraft debt,
new aircraft debt raised during the year and the repayments of
non-aircraft financing as detailed below. Gross debt is subject to
foreign exchange translation movements, as the majority of the
Group's aircraft debt is denominated in US dollars. Over the course
of 2022 the euro and pound sterling weakened against the US dollar
which increased gross debt by EUR518 million.
Cash
Cash, cash equivalents and interest-bearing deposits
Higher/
EUR million 2022 2021 (lower)
===================================================== ===== ===== ========
British Airways 2,877 1,986 891
Iberia 2,389 761 1,628
Vueling 766 441 325
Aer Lingus 375 228 147
IAG Loyalty 993 954 39
IAG and other Group companies 2,199 3,573 (1,374)
===================================================== ===== ===== ========
Cash, cash equivalents and interest-bearing deposits 9,599 7,943 1,656
===================================================== ===== ===== ========
British Airways, Iberia, Vueling and Aer Lingus all experienced
significant positive operating cash flow in the year. The reduction
in the balance of cash, cash equivalents and interest-bearing
deposits in IAG and other Group companies reflects the repayment of
unsecured debt in IAG and intragroup loan payments to Iberia and
Aer Lingus.
Debt
Long-term aircraft financing was successfully secured during
2022 for all 27 of IAG's aircraft delivered in the year; financing
for five of these aircraft for British Airways will be drawn in
2023. Committed aircraft financing facilities at December 31, 2022
includes an amount of EUR571 million for these five aircraft,
together with one further Airbus A320neo, which will be delivered
in 2023. Seven aircraft were financed via operating leases,
reported as Lease liabilities, with five Iberia A350-900s financed
through sale and leaseback transactions subsequent to the delivery
of the aircraft and two Aer Lingus A320neos leased directly from
aircraft lessors. All of British Airways' 10 deliveries and the
remaining 10 Iberia aircraft were financed through finance leases,
reported as Asset financed liabilities.
During 2022 IAG repaid its EUR500 million convertible bond
originally issued in 2015 and Aer Lingus repaid EUR100 million of
its loan from the Ireland Strategic Investment Fund (ISIF), thereby
increasing the amount of its ISIF facility that is undrawn and
available to draw in the future, if needed, to EUR300 million.
The maturity profile of the Group's Bank and other loans
includes, in 2023, the maturity of a EUR500 million unsecured bond
issued in 2019, along with the first amortisation of the syndicated
loans to Iberia and Vueling drawn in 2020, which were partly backed
by Spain's Instituto de Crédito Oficial (ICO). In 2026, the main
maturity is a EUR2.3 billion (GBP2.0 billion) syndicated loan to
British Airways drawn in 2021, which was partly backed by UK Export
Finance (UKEF).
Maturity profile of Bank and other loans
After
2026
EUR million 2023 2024 2025 2026 (1)
========================== ==== ==== ==== ===== =====
Payment of debt principal 715 287 875 2,738 2,096
========================== ==== ==== ==== ===== =====
1 Includes the EUR825 million IAG 2028 convertible bond.
Equity
No equity was raised or repaid during the year, nor in 2021.
Liquidity facilities
During the year, the Group extended its facility with Ireland's
ISIF for Aer Lingus by EUR200 million, bringing the total facility
to EUR350 million. At December 31, 2022 EUR50 million had been
drawn and EUR300 million was undrawn.
The Group also exercised a one-year extension to the
availability of its $1,755 million (EUR1,654 million) Revolving
Credit Facility (RCF), which now has committed availability until
March 2025. The facility was originally agreed and executed with a
syndicate of banks in 2021, with availability for three years, plus
two consecutive one-year extension periods, at the discretion of
the lenders. The facility is available to Aer Lingus, British
Airways and Iberia, each of whom has a separate borrower limit
within the overall facility. Any drawings under the facility would
be secured against eligible unencumbered aircraft assets and/or
take-off and landing rights at London Heathrow or London Gatwick
airports. This facility was undrawn at December 31, 2022.
The other major general facility for the Group is a GBP1,000
million (EUR1,143 million) committed credit facility for British
Airways, partially guaranteed by UKEF, which was agreed and
executed in 2021 and matures in 2026. This facility was also
undrawn at December 31, 2022.
The Group also has certain other committed and undrawn general
facilities, bringing total committed and undrawn general facilities
at December 31, 2022 to EUR3,284 million (2021: EUR2,917
million).
The Group also holds EUR1,116 million of committed and undrawn
aircraft financing facilities (2021: EUR1,126 million), including
EUR620 million remaining undrawn from committed and undrawn
sustainability-linked aircraft financing for British Airways agreed
and committed in 2022 and to be drawn in 2023. The Group also has
certain backstop financing arrangements, which can be used against
certain future aircraft deliveries.
In total, the Group had EUR4,400 million of committed and
undrawn general and aircraft facilities as at December 31, 2022
(2021: EUR4,043 million).
The facilities values above do not include the balance of
certain shorter-term working capital facilities available to the
Group's operating companies.
Dividends
No dividends were proposed or paid in 2022 (2021: nil).
Liquidity and cash flow
Total liquidity, measured as cash, cash equivalents and
interest-bearing deposits of EUR9,599 million and committed and
undrawn general and aircraft facilities of EUR4,400 million, was
EUR13,999 million at December 31, 2022. This represented an
increase of EUR2,013 million versus total liquidity of EUR11,986
million at the end of 2021.
Cash flow
The Group saw strong cash flow generation in 2022, mainly linked
to a return to profitability and positive working capital
movements, including an increase in bookings for future travel as
the airlines' schedules increased and yields rose in the light of
higher fuel prices and inflation. The resulting net cash flows from
operating activities of EUR4,835 million was significantly higher
than the net cash outflows from investing and financing activities,
leading to an increase in Cash, cash equivalents and
interest-bearing deposits of EUR1,656 million to
EUR9,599 million.
Condensed cash flow summary
EUR million 2022 2021 Movement
===================================================== ======= ===== ========
Net cash flows from operating activities 4,835 (141) 4,976
Net cash flows from investing activities (3,463) (181) (3,282)
Net cash flows from financing activities (56) 2,235 (2,291)
===================================================== ======= ===== ========
Net increase in cash and cash equivalents 1,316 1,913 (597)
===================================================== ======= ===== ========
Net foreign exchange differences (12) 205 (217)
Cash and cash equivalents at January 1 7,892 5,774 2,118
===================================================== ======= ===== ========
Cash and cash equivalents at year end 9,196 7,892 1,304
===================================================== ======= ===== ========
Interest-bearing deposits maturing after more than
three months 403 51 352
===================================================== ======= ===== ========
Cash, cash equivalents and interest-bearing deposits 9,599 7,943 1,656
===================================================== ======= ===== ========
Many of the significant cash flow items are already explained
above, including in the sections covering operating costs,
non-operating costs, capital expenditure, working capital and other
initiatives and funding. Further detail of other movements is
provided below.
Cash flows from operating activities
EUR million 2022 2021 Movement
================================================= ===== ======= ========
Operating profit/(loss) 1,256 (2,765) 4,021
Depreciation, amortisation and impairment 2,070 1,932 138
Movement in working capital 1,884 1,634 250
Payments related to restructuring (81) (161) 80
Pension contributions net of service costs (5) (15) 10
Provision and other non-cash movements 627 305 322
Settlement of derivatives where hedge accounting
has been discontinued - (497) 497
Interest paid (824) (640) (184)
Interest received 42 3 39
Tax (paid)/received (134) 63 (197)
================================================= ===== ======= ========
Net cash flows from operating activities 4,835 (141) 4,976
================================================= ===== ======= ========
Restructuring payments principally include payments in Spain
relating to redundancy programmes in Iberia agreed prior to
2020.
In December 2022, British Airways agreed the valuation of its
main defined benefit pension scheme, the New Airways Pension Scheme
(NAPS), with the scheme's Trustee, which resulted in a deficit as
at the valuation date of March 31, 2021 of GBP1,650 million
(EUR1,887 million). As at December 31, 2022, the scheme was over
100 per cent funded on the 2021 valuation basis and an overfunding
protection mechanism agreed with the NAPS Trustee meant that no
contributions were due. Deficit contributions could resume should
the funding level fall in the future. Previously British Airways
had agreed deferrals of deficit contributions with the NAPS Trustee
from October 2020 to September 2021. From October 2021 to December
2022, an overfunding mechanism agreed as part of the previous
triennial valuation led to no deficit contributions being required.
The pension cash flows shown above represent payments to various
smaller schemes within the Group.
Provision and other non-cash movements mainly relate to
restoration and handback provisions for leased aircraft and ETS
allowances.
The cash outflow for the Settlement of derivatives where hedge
accounting has been discontinued of EUR497 million in 2021
represented cash payments relating to overhedging of fuel and
foreign exchange in 2020, linked to the significant fall in airline
capacity in 2020, due to the impact of COVID-19.
The increase in interest expense in 2022 reflects the full year
impact of additional debt raised in 2021 and higher interest rates.
Approximately one quarter of the Group's total debt is on floating
rate arrangements.
Cash flows from investing activities
EUR million 2022 2021 Movement
====================================================== ======= ===== ========
Acquisition of PPE and intangible assets (3,875) (744) (3,131)
Sale of PPE, intangible assets and investments 837 544 293
(Increase)/decrease in other current interest-bearing
deposits (351) 91 (442)
Payment to Globalia for convertible loan (100) - (100)
Other investing movements 26 (72) 98
====================================================== ======= ===== ========
Net cash flows from investing activities (3,463) (181) (3,282)
====================================================== ======= ===== ========
The EUR837 million of cash inflow from Sale of property, plant
and equipment and intangible assets and investments is mainly due
to the aircraft sale and leaseback transactions discussed in the
Funding and debt section above, together with the disposal of
surplus assets, principally aircraft being retired from service.
The increase from 2021 is due to the value of aircraft financed
through sale and leaseback transactions being higher, as in 2022 it
includes five wide-bodied A350-900 aircraft.
In March of 2022 IAG entered into a convertible loan with
Globalia for EUR100 million, convertible into an equity stake in
Air Europa Holdings of 20 per cent. The conversion option was
exercised in August 2022.
Cash flows from financing activities
EUR million 2022 2021 Movement
=================================================== ======= ======= ========
Proceeds from borrowings 1,436 4,817 (3,381)
Repayment of borrowings (1,050) (784) (266)
Repayment of lease liabilities (1,455) (1,481) 26
Settlement of derivative financial instruments 1,036 (268) 1,304
Acquisition of treasury shares and other financing
movements (23) (49) 26
=================================================== ======= ======= ========
Net cash flows from financing activities (56) 2,235 (2,291)
=================================================== ======= ======= ========
Proceeds from borrowings reflect the cash inflows from aircraft
financing as described in the Funding and debt section above. There
was no non-aircraft financing raised in 2022, whereas in 2021
British Airways raised GBP2.0 billion (EUR2.3 billion) through a
loan guaranteed by the UKEF, Aer Lingus drew a further EUR75
million from ISIF and the Group raised EUR1.2 billion through
unsecured bonds and issued a EUR825 million convertible bond.
Repayments of borrowings and lease liabilities includes the
repayment of IAG's 2015 EUR500 million convertible bond, EUR100
million to the Ireland's ISIF and the principal element of ongoing
lease payments.
Settlement of derivative financial instruments relates to
settlements of foreign exchange instruments taken out to hedge
long-term debt payments, including US dollar lease payments. The
significant inflow in 2022 relates to the strengthening of the US
dollar versus the euro and pound sterling.
STRATEGIC FRAMEWORK
IAG's purpose in the world is to connect people, businesses and
countries, and we hold innovation, commitment, care for people,
responsibility, pragmatism, execution, ambition and resilience as
key values that enable us to fulfil our purpose.
We create value through a unique model that enables our airlines
to perform in the long-term interests of our customers, people,
shareholders and society - knowing that success in each reinforces
the others.
IAG, as the parent company, actively engages and works
collaboratively with its portfolio of operating companies, sharing
best practices and talent, overseeing intra-Group coordination and
managing central functions that drive synergies and value to the
Group. Its independence from the operating companies enables IAG to
implement a long-term strategy for the Group that is aligned with
our purpose and values, as well as set performance targets for the
operating companies, track their progress and efficiently allocate
capital within the Group.
IAG's strategic priorities are:
-- Strengthening a portfolio of world-class brands and
operations;
-- Growing global leadership positions; and
-- Enhancing IAG's central platform.
These strategic priorities are achieved through:
-- An unrivalled customer proposition;
-- Value-accretive and sustainable growth; and
-- Efficiency and innovation
Our commitment to sustainability underpins our strategy - it is
an important part of how we do business. As a Group, we have clear
processes in place to drive our sustainability strategy forward,
and remain committed to using 10 per cent SAF by 2030 and to reach
the goal of net zero CO(2) emissions for our Group and its supply
chain by 2050. We also continue to prioritise other key
sustainability issues, including waste management, stakeholder
engagement and welfare.
PRINCIPAL RISKS AND UNCERTAINTIES
The Group has continued to maintain its framework and processes
to identify, assess and manage risks. It continually reviews how
its principal risks are evolving and how the severity or likelihood
of occurrence of risks change, given the Group's exposure to the
external risk environment, particularly weaknesses in the
resilience of the aviation sector's supply chain and inflation
impacts, combined with an ambitious transformation and change
agenda.
Throughout 2022, the Group has reviewed the macroeconomic and
geopolitical landscape to identify emerging risks and the
implications of market uncertainty and impacts on inflation,
interest and exchange rates have been reflected in the principal
risk assessments. By continuing to develop the Group's assessment
of the interdependencies of risks; scenario planning to quantify
risk impact under different combinations and assumptions; and
considering the risks within the Group's risk environment that have
increased either as a result of the external factors or as a result
of decisions made by the Group, the Board and management are better
informed and can react more quickly. Where further action has been
required the Board has considered potential mitigations and, where
appropriate or feasible, the Group has implemented or confirmed
plans that would address those risks or retain them within the
Board's determined Group risk appetite.
The principal risks and uncertainties affecting the Group,
detailed on pages 100 to 121 of the 2021 Annual Report and
Accounts, remain relevant at the date of this report. In assessing
its principal risks, the Group has considered operational
resilience, competition and market risk changes, the status of the
financial markets and access to finance, people and culture across
the Group and customer satisfaction and trust. Management remains
focused on mitigating these risks at all levels in the business and
investing to increase resilience whilst recognising that such risk
events may not be so easily planned for and that mitigations are
more responsive in nature. The Board reviews and challenges
management on the risk landscape in the light of changes that
influence the Group and the aviation industry.
No new principal risks were identified through the risk
management assessment discussions across the business in the year.
One risk has been reconsidered as part of the reviews in the year
and has been reframed as 'Operational resilience' from 'Event
causing significant network disruption' to recognise that the risk
to the operational resilience of the business may be challenged by
multiple combining events with significant network and customer
impact and these may be more significant to the Group where they
persist over a longer time frame compared to one-off events.
From the risks identified in the 2021 Annual Report and
Accounts, the main risks that continue to be a key area of focus,
due to their potential implications for the Group, are outlined
below. Business responses implemented by management and that
effectively mitigate or reduce the risk are reflected in the
Group's latest business plan and related downside scenarios.
-- Brand and customer trust. Operational resilience and customer
satisfaction build brand value and customer trust. Reliability,
including on-time performance, is a key element of the brands and
of each customer's experience. The Group is pro-actively addressing
its customer service processes and systems to deliver excellent
customer service and support customers through disruption, which
will help ensure that our customers choose to fly with the Group's
airlines.
-- Critical third parties in the supply chain. The aviation
sector has been affected by global supply chain disruption which
has impacted aircraft deliveries, component availability, resource
availability and/or threat of employee industrial action in
critical third parties and airport services. Operational staffing
shortages at hubs and airports have required capacity adjustments.
The Group has pro-actively assessed its schedules to ensure that
our customers have sufficient notice of any changes to their flight
plans wherever possible and within our control. The Group continues
to work with all critical suppliers to understand any potential
disruption within their supply chains from either a shortage of
available resource or production delays which could delay the
availability of new fleet, engines or critical goods or services.
It remains reliant on the resilience within the operations of air
traffic control airspace services to deliver its flight schedules
as planned.
-- Cyber attack and data security. The threat of ransomware
attacks on critical infrastructure and services has increased as a
result of the war in Ukraine and the potential for state sponsored
cyber attacks. The Group continues to focus its efforts on
appropriate monitoring to mitigate the risk.
-- Debt funding. Access to the unsecured debt markets is
currently restricted for sub investment grade organisations which
may reduce the external funding options available to the Group
where it chooses to re-finance upcoming maturities. Rising interest
rates also increase the cost for the Group for existing floating
rate debt, which represented approximately 25 per cent of the
Group's debt at December 31, 2022, as well as for new financing.
The Group continues to successfully secure aircraft financing,
having secured financing for all its deliveries in 2020, 2021 and
2022.
-- Economic, political and regulatory environment. The economic
impact of energy shortages and increases in commodity and wage
costs has driven significant inflation and uncertainty over the
economic outlook. The Group is closely reviewing the impacts of
wage and supplier inflation on margins and customer demand. The
Group will continue to adjust its future capacity plans
accordingly, retaining flexibility to adapt as required and where
possible.
-- Financial and treasury related risk. Fuel cost increases have
been partly mitigated by the Group's fuel hedging policy. Access to
fuel hedging instruments or the ability to pass increased fuel
costs on to consumers could impact the Group's profits. The Group
continues to assess the strength of the US dollar against the euro
and pound sterling and the potential impacts on the Group's
operating results. All airlines hedge in line with the Group
hedging policy.
-- IT systems and IT infrastructure. The Group is reliant upon
the resilience of its systems for key customer and business
processes and is exposed to risks that relate to poor performance,
obsolescence or failure of these systems. The Group is currently
engaged in a number of major programmes to modernise and upgrade
its IT systems, digital capability, customer propositions and core
IT infrastructure and network where required. Mitigating actions
that prioritise operational stability and resilience have been
built into all cutover plans.
-- Operational resilience. The pandemic resulted in an
unprecedented level of disruption to the aviation sector and
changed the Group's perspective on how resilient it needed to be.
Ongoing labour shortages, threat of strike action in the aviation
sector and staff sickness have impacted the operational environment
of the Group's airlines as well as the operations of the businesses
on which the Group relies. Many of these events can occur within a
close timeframe and challenge operational resilience. In addition,
the Group has significant IT infrastructure changes to complete
which could impact operations. The Group is focussed on minimising
any unplanned outages or disruption to customers with additional
resilience built into the airlines' networks.
-- People, culture and employee relations. The resilience and
engagement of our people and leaders are critical to achieving our
transformation plans. Our people are a critical enabler of the
Group's future success and the Group has identified the skills and
capabilities that are required to manage its transformation, which
include delivering on the Group's diversity and inclusion plan. Our
leadership recognises the efforts of our staff and their resilience
and commitment supporting the ramp up of operations. Resource
shortages and the timelines to secure resource, particularly in UK
and Ireland, can impact operational readiness and resilience. The
Group is focused on measures to attract and secure flight and
ground staff into its airlines to enable them to fulfil their
schedules and maintain competitiveness. Across the Group,
collective bargaining is in place with various unions. The Group is
exposed to the risk of industrial relations action and the
operating companies continue to engage in discussions with unions
to address and resolve disputes arising within the
negotiations.
-- Transformation and change. The Group recognises the need to
transform to compete. The impact on our people of the wide-ranging
change agenda if poorly managed or uncoordinated could lead to
logistical and engagement challenges with the potential to
negatively impact the delivery of customer and revenue benefits and
cost efficiencies. The Chief Transformation Officer has clear
oversight of all programmes to assess performance against plan. The
Group transformation agenda is subject to Board approval and
progress is regularly monitored by the Board.
The Board and its sub committees have been apprised of
regulatory, competitor and governmental responses on an ongoing
basis.
INTERNATIONAL CONSOLIDATED AIRLINES GROUP S.A.
Full year Unaudited Consolidated Financial Statements
January 1, 2022 - December 31, 2022
CONSOLIDATED INCOME STATEMENT
Year to December
31
==================
EUR million Note 2022 2021
=================================================== ==== ======== ========
Passenger revenue 19,458 5,835
Cargo revenue 1,615 1,673
Other revenue 1,993 947
=================================================== ==== ======== ========
Total revenue 5 23,066 8,455
=================================================== ==== ======== ========
Employee costs 8 4,647 3,013
Fuel, oil costs and emissions charges 6,120 1,781
Handling, catering and other operating costs 2,971 1,308
Landing fees and en-route charges 1,890 923
Engineering and other aircraft costs 2,101 1,085
Property, IT and other costs 950 758
Selling costs 920 434
Depreciation, amortisation and impairment 6 2,070 1,932
Currency differences 141 (14)
=================================================== ==== ======== ========
Total expenditure on operations 21,810 11,220
=================================================== ==== ======== ========
Operating profit/(loss) 1,256 (2,765)
Finance costs 9 (1,017) (830)
Finance income 9 52 13
Net change in fair value of financial instruments 9 81 89
Net financing credit/(charge) relating to pensions 9 26 (2)
Net currency retranslation charges (115) (82)
Other non-operating credits 9 132 70
=================================================== ==== ======== ========
Total net non-operating costs (841) (742)
=================================================== ==== ======== ========
Profit/(loss) before tax 415 (3,507)
Tax 10 16 574
=================================================== ==== ======== ========
Profit/(loss) after tax for the year 431 (2,933)
=================================================== ==== ======== ========
Attributable to:
Equity holders of the parent 431 (2,933)
Non-controlling interest - -
=================================================== ==== ======== ========
431 (2,933)
=================================================== ==== ======== ========
Basic earnings/(loss) per share (EUR cents) 11 8.7 (59.1)
=================================================== ==== ======== ========
Diluted earnings/(loss) per share (EUR cents) 11 6.1 (59.1)
=================================================== ==== ======== ========
CONSOLIDATED STATEMENT OF OTHER COMPREHENSIVE INCOME
Year to December
31
==================
EUR million Note 2022 2021
======================================================== ==== ======== ========
Items that may be reclassified subsequently to net
profit
Cash flow hedges:
Fair value movements in equity 1,299 794
Reclassified and reported in net profit (1,233) (81)
Fair value movements on cost of hedging (106) 10
Cost of hedging reclassified and reported in net
profit 38 (12)
Currency translation differences 31 (53) (12)
Items that will not be reclassified to net profit
Fair value movements on other equity investments 19 2 -
Fair value movements on cash flow hedges 173 54
Fair value movements on cost of hedging (9) -
Fair value movements on liabilities attributable
to credit risk changes (6) (15)
Remeasurements of post-employment benefit obligations 662 1,400
Remeasurements of long-term employee-related provisions 52 25
======================================================== ==== ======== ========
Total other comprehensive profit for the year, net
of tax 819 2,163
======================================================== ==== ======== ========
Profit/(loss) after tax for the year 431 (2,933)
Total comprehensive profit/(loss) for the year 1,250 (770)
======================================================== ==== ======== ========
Total comprehensive profit/(loss) is attributable
to:
Equity holders of the parent 1,250 (770)
Non-controlling interest 31 - -
======================================================== ==== ======== ========
1,250 (770)
======================================================== ==== ======== ========
Items in the consolidated Statement of other comprehensive
income above are disclosed net of tax.
CONSOLIDATED BALANCE SHEET
December December
31, 31,
EUR million Note 2022 2021
================================================== ==== ======== ========
Non-current assets
Property, plant and equipment 13 18,346 17,161
Intangible assets 17 3,556 3,239
Investments accounted for using the equity method 18 43 40
Other equity investments 19 55 31
Employee benefit assets 32 2,334 1,775
Derivative financial instruments 28 81 77
Deferred tax assets 10 1,282 1,282
Other non-current assets 20 362 250
================================================== ==== ======== ========
26,059 23,855
================================================== ==== ======== ========
Current assets
Non-current assets held for sale 16 19 20
Inventories 353 334
Trade receivables 20 1,330 735
Other current assets 20 1,226 960
Current tax receivable 10 72 16
Derivative financial instruments 28 645 543
Current interest-bearing deposits 21 403 51
Cash and cash equivalents 21 9,196 7,892
================================================== ==== ======== ========
13,244 10,551
================================================== ==== ======== ========
Total assets 39,303 34,406
================================================== ==== ======== ========
Shareholders' equity
Issued share capital 29 497 497
Share premium 29 7,770 7,770
Treasury shares (28) (24)
Other reserves (6,223) (7,403)
================================================== ==== ======== ========
Total shareholders' equity 2,016 840
================================================== ==== ======== ========
Non-controlling interest 31 6 6
================================================== ==== ======== ========
Total equity 2,022 846
================================================== ==== ======== ========
Non-current liabilities
Borrowings 25 17,141 17,084
Employee benefit obligations 32 217 285
Deferred tax liability 10 - -
Provisions 26 2,652 2,267
Deferred revenue on ticket sales 23 326 391
Derivative financial instruments 28 84 47
Other long-term liabilities 24 200 208
================================================== ==== ======== ========
20,620 20,282
================================================== ==== ======== ========
Current liabilities
Borrowings 25 2,843 2,526
Trade and other payables 22 5,209 3,712
Deferred revenue on ticket sales 23 7,318 6,161
Derivative financial instruments 28 387 126
Current tax payable 10 8 21
Provisions 26 896 732
================================================== ==== ======== ========
16,661 13,278
================================================== ==== ======== ========
Total liabilities 37,281 33,560
================================================== ==== ======== ========
Total equity and liabilities 39,303 34,406
================================================== ==== ======== ========
CONSOLIDATED CASH FLOW STATEMENT
Year to December
31
==================
EUR million Note 2022 2021
======================================================= ==== ======== ========
Cash flows from operating activities
Operating profit/(loss) 1,256 (2,765)
Depreciation, amortisation and impairment 6 2,070 1,932
Movement in working capital 1,884 1,634
Increase in trade receivables, inventories and
other current assets (914) (351)
Increase in trade and other payables and deferred
revenue on ticket sales 2,798 1,985
Payments related to restructuring 26 (81) (161)
Employer contributions to pension schemes (22) (41)
Pension scheme service costs 32 17 26
Provisions and other non-cash movements 627 305
Settlement of derivatives where hedge accounting
has been discontinued - (497)
Interest paid (824) (640)
Interest received 42 3
Tax (paid)/received (134) 63
======================================================= ==== ======== ========
Net cash flows from operating activities 4,835 (141)
======================================================= ==== ======== ========
Cash flows from investing activities
Acquisition of property, plant and equipment and
intangible assets (3,875) (744)
Sale of property, plant and equipment and intangible
assets and investments 837 544
(Increase)/decrease in other current interest-bearing
deposits (351) 91
Payment to Globalia for convertible loan (100) -
Other investing movements 26 (72)
======================================================= ==== ======== ========
Net cash flows from investing activities (3,463) (181)
======================================================= ==== ======== ========
Cash flows from financing activities
Proceeds from borrowings 1,436 4,817
Repayment of borrowings (1,050) (784)
Repayment of lease liabilities (1,455) (1,481)
Settlement of derivative financial instruments 25c 1,036 (268)
Acquisition of treasury shares (23) (24)
Other financing movements - (25)
======================================================= ==== ======== ========
Net cash flows from financing activities (56) 2,235
======================================================= ==== ======== ========
Net increase in cash and cash equivalents 1,316 1,913
Net foreign exchange differences (12) 205
Cash and cash equivalents at 1 January 7,892 5,774
======================================================= ==== ======== ========
Cash and cash equivalents at year end 21 9,196 7,892
======================================================= ==== ======== ========
Interest-bearing deposits maturing after more than
three months 21 403 51
======================================================= ==== ======== ========
Cash, cash equivalents and interest-bearing deposits 21 9,599 7,943
======================================================= ==== ======== ========
For details on restricted cash balances refer to note 21 Cash,
cash equivalents and current interest-bearing deposits .
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the year to December 31, 2022
Issued
share Share Treasury Other Non-controlling
capital premium shares reserves Total interest
(note (note (note (note Retained shareholders' (note Total
EUR million 29) 29) 29) 31) earnings equity 31) equity
======================== ======== ======== ======== ========= ========= ============== =============== =======
January 1, 2022 497 7,770 (24) (1,673) (5,730) 840 6 846
Profit for the year - - - - 431 431 - 431
Other comprehensive
profit
for the year
Cash flow hedges
reclassified
and reported in net
profit:
Fuel and oil costs - - - (1,115) - (1,115) - (1,115)
Currency differences - - - (90) - (90) - (90)
Finance costs - - - 10 - 10 - 10
Discontinuance of
hedge
accounting - - - (22) - (22) - (22)
Ineffectiveness
recognised
in other
non-operating
costs - - - (16) - (16) - (16)
Net change in fair value
of cash flow hedges - - - 1,472 - 1,472 - 1,472
Net change in fair value
of equity investments - - - 2 - 2 - 2
Net change in fair value
of cost of hedging - - - (115) - (115) - (115)
Cost of hedging
reclassified
and reported in net
profit - - - 38 - 38 - 38
Fair value movements on
liabilities
attributable
to credit risk changes - - - (6) - (6) - (6)
Currency translation
differences - - - (53) - (53) - (53)
Remeasurements of
post-employment
benefit obligations - - - - 662 662 - 662
Remeasurements of
long-term
employee-related
provisions - - - - 52 52 - 52
======================== ======== ======== ======== ========= ========= ============== =============== =======
Total comprehensive
profit
for the year - - - 105 1,145 1,250 - 1,250
======================== ======== ======== ======== ========= ========= ============== =============== =======
Hedges reclassified and
reported in property,
plant and equipment - - - (65) - (65) - (65)
Hedges reclassified and
reported in sales in
advance
of carriage - - - 36 - 36 - 36
Hedges reclassified and
reported in inventory - - - (58) - (58) - (58)
Cost of share-based
payments - - - - 39 39 - 39
Vesting of share-based
payment schemes - - 19 - (22) (3) - (3)
Acquisition of treasury
shares - - (23) - - (23) - (23)
Redemption of
convertible
bond - - - (62) 62 - - -
======================== ======== ======== ======== ========= ========= ============== =============== =======
December 31, 2022 497 7,770 (28) (1,717) (4,506) 2,016 6 2,022
======================== ======== ======== ======== ========= ========= ============== =============== =======
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the year to December 31, 2021
Issued
share Share Treasury Other Non-controlling
capital premium shares reserves Total interest
(note (note (note (note Retained shareholders' (note Total
EUR million 29) 29) 29) 31) earnings equity 31) equity
======================== ======== ======== ======== ========= ========= ============== =============== =======
January 1, 2021 497 7,770 (40) (2,420) (4,203) 1,604 6 1,610
Loss for the year - - - - (2,933) (2,933) - (2,933)
Other comprehensive loss
for the year
Cash flow hedges
reclassified
and reported in net
profit:
Passenger revenue - - - 18 - 18 - 18
Fuel and oil costs - - - (45) - (45) - (45)
Currency differences - - - (15) - (15) - (15)
Finance costs - - - 23 - 23 - 23
Discontinuance of
hedge
accounting - - - (62) - (62) - (62)
Net change in fair value
of cash flow hedges - - - 848 - 848 - 848
Net change in fair value
of cost of hedging - - - 10 - 10 - 10
Cost of hedging
reclassified
and reported in net
profit - - - (12) - (12) - (12)
Fair value movements on
liabilities
attributable
to credit risk changes - - - (15) - (15) - (15)
Currency translation
differences - - - (12) - (12) - (12)
Remeasurements of
post-employment
benefit obligations - - - - 1,400 1,400 - 1,400
Remeasurements of
long-term
employee-related
provisions - - - - 25 25 - 25
======================== ======== ======== ======== ========= ========= ============== =============== =======
Total comprehensive loss
for the year - - - 738 (1,508) (770) - (770)
======================== ======== ======== ======== ========= ========= ============== =============== =======
Hedges reclassified and
reported in property,
plant
and equipment - - - 9 - 9 - 9
Cost of share-based
payments - - - - 23 23 - 23
Vesting of share-based
payment schemes - - 40 - (42) (2) - (2)
Acquisition of treasury
shares - - (24) - - (24) - (24)
======================== ======== ======== ======== ========= ========= ============== =============== =======
December 31, 2021 497 7,770 (24) (1,673) (5,730) 840 6 846
======================== ======== ======== ======== ========= ========= ============== =============== =======
NOTES TO THE ACCOUNTS
For the year to December 31, 2022
1 Background and general information
International Consolidated Airlines Group S.A. (hereinafter
'International Airlines Group', 'IAG' or the 'Group') is a leading
European airline group, formed to hold the interests of airline and
ancillary operations. IAG (hereinafter the 'Company') is a Spanish
company registered in Madrid and was incorporated on December 17,
2009. The registered address of IAG is El Caserío, Zona industrial
2, Camino de La Muñoza s/n, 28042, Madrid, Spain. On January 21,
2011 British Airways Plc and Iberia Líneas Aéreas de España S.A.
Operadora (hereinafter 'British Airways' and 'Iberia' respectively)
completed a merger transaction becoming the first two airlines of
the Group. Vueling Airlines S.A. ('Vueling') was acquired on April
26, 2013, and Aer Lingus Group Plc ('Aer Lingus') on August 18,
2015. A list of the subsidiaries of the Group is included in the
Group investments section.
IAG shares are traded on the London Stock Exchange's main market
for listed securities and also on the stock exchanges of Madrid,
Barcelona, Bilbao and Valencia (the 'Spanish Stock Exchanges'),
through the Spanish Stock Exchanges Interconnection System (Mercado
Continuo Español).
2 Significant accounting policies
Basis of preparation
The consolidated financial statements of the Group have been
prepared in accordance with the International Financial Reporting
Standards as endorsed by the European Union (IFRSs as endorsed by
the EU). The consolidated financial statements herein are not the
Group's statutory accounts and are unaudited. The consolidated
financial statements are rounded to the nearest million unless
otherwise stated. These financial statements have been prepared on
a historical cost convention except for certain financial assets
and liabilities, including the EUR825 million convertible bond due
2028, derivative financial instruments and other equity investments
that are measured at fair value. The notes to the financial
statements for the prior year include reclassifications that were
made to conform to the current year presentation.
The Group's financial statements for the year to December 31,
2022 were authorised for issue, and approved by the Board of
Directors on February 23, 2023.
Going concern
At December 31, 2022, the Group had total liquidity of EUR13,999
million (December 31, 2021: total liquidity of EUR11,986 million),
comprising cash, cash equivalents and interest-bearing deposits of
EUR9,599 million, EUR3,284 million of committed and undrawn general
facilities and a further EUR1,116 million of committed and undrawn
aircraft specific facilities. At December 31, 2022, the Group has
no financial covenants associated with its loans and
borrowings.
In its assessment of going concern, the Group has modelled two
scenarios referred to below as the Base Case and the Downside Case
over the period to June 30, 2024 (the 'going concern period'). The
tenor of the going concern period encapsulates the seasonality of
the Group's operations. The Group's three-year business plan, used
in the creation of the Base Case, was prepared for and approved by
the Board in December 2022. The business plan takes into account
the Board's and management's views on the anticipated continued
recovery from the COVID-19 pandemic and the wider economic and
geopolitical environments on the Group's businesses across the
going concern period. The key inputs and assumptions underlying the
Base Case include:
-- capacity recovery modelled by geographical region (and in
certain regions, by key destinations) with capacity gradually
increasing from 97 per cent in quarter 1 2023 (compared to the
equivalent period in 2019) to pre-pandemic levels by the end of the
going concern period;
-- passenger unit revenue per ASK is forecast to continue to
remain above the levels obtained in 2019 throughout the going
concern period, which is based on, amongst other assumptions,
higher ticket prices to reflect both higher fuel prices and cost
inflation;
-- the Group has assumed that the committed and undrawn general
facilities of EUR3.3 billion will not be drawn over the going
concern period. The availability of certain of these facilities
reduces over time, with EUR3.2 billion being available to the Group
at the end of the going concern period;
-- the Group has assumed that EUR1.0 billion of the committed
and undrawn aircraft specific facilities of EUR1.1 billion would be
available to be drawn over the going concern period if required, of
which EUR0.6 billion, relating to the EETC financing structures and
other specific asset securitised financing are expected to be
utilised;
-- the Group has assumed that the EUR500 million bond that
matures in July 2023 will not be refinanced;
-- of the capital commitments detailed in note 15, EUR4.4
billion is due to be paid over the going concern period;
-- in addition to the EUR0.6 billion of committed aircraft
financing, the Group has forecast securing approximately 100 per
cent, or EUR4.9 billion, of the aircraft financing required that is
currently uncommitted, to align with the timing and payments for
these aircraft deliveries. This loan to value assumption is
consistent with the level of financing the Group has been able to
achieve recently, including over the course of the COVID-19
pandemic to date; and
-- the acquisition of the remaining shares in Air Europa
Holdings, that the Group does not currently own, shall receive the
relevant approvals and complete during the going concern
period.
The Downside Case applies stress to the Base Case to model
adverse commercial and operational impacts as the Group's capacity
recovers over the going concern period, represented by: reduced
levels of capacity operated in each month, including reductions of
at least 25 per cent for three months during 2023 to reflect the
risk of more severe operational disruption; reduced passenger unit
revenue per ASK reflective of general pricing pressure due to the
current economic backdrop; and increased operational costs
reflective of inflationary pressures. In the Downside Case, over
the going concern period capacity would be ten per cent down when
compared to the Base Case. The Downside Case assumes that EUR350
million of the EUR3,284 million of available general credit
facilities are required to be drawn. The Directors consider the
Downside Case to be a severe but plausible scenario.
While not incorporated in the Downside Case, the Group has
modelled the impact of further deteriorations in capacity operated
and yield, as well as increases in the price of jet fuel by 20 per
cent and a reduction in the forecast loan to value to 80 per cent
of the uncommitted financing, but has also considered further
mitigating actions, such as reducing operating and capital
expenditure and deferring currently forecast early repayments of
loans and borrowings. The Group expects to be able to continue to
secure financing for future aircraft deliveries and in addition has
further potential mitigating actions, including asset disposals, it
would pursue in the event of adverse liquidity experience.
Having reviewed the Base Case, the Downside Case and additional
sensitivities, the Directors have a reasonable expectation that the
Group has sufficient liquidity to continue in operational existence
over the going concern period and hence continue to adopt the going
concern basis in preparing the consolidated financial statements
for year to December 31, 2022. In adopting the going concern basis
of accounting, the consolidated financial statements have been
prepared without the inclusion of a material uncertainty, which has
been removed since the Annual report and accounts 2021. The removal
of the material uncertainty arises from the reduction in
uncertainty over the going concern period due to both the continued
recovery subsequent to the COVID-19 pandemic and the strength of
the Group's liquidity at December 31, 2022.
Consolidation
The Group financial statements include the financial statements
of the Company and its subsidiaries, each made up to December 31,
together with the attributable share of results and reserves of
associates and joint ventures, adjusted where appropriate to
conform to the Group's accounting policies.
Subsidiaries are consolidated from the date of their
acquisition, which is the date on which the Group obtains control
and continue to be consolidated until the date that such control
ceases. Control exists when the Group is exposed to, or has rights
to, variable returns from its involvement with the entity and has
the ability to affect those returns through its power over the
entity.
The Group applies the acquisition method to account for business
combinations. The consideration paid is the fair value of the
assets transferred, the liabilities incurred and the equity
interests issued by the Group. Identifiable assets acquired and
liabilities assumed in a business combination are measured
initially at their fair values at the acquisition date.
Non-controlling interests represent the portion of profit or loss
and net assets in subsidiaries that are not held by the Group and
are presented separately within equity in the Consolidated balance
sheet. Acquisition-related costs are expensed as incurred.
If the business combination is achieved in stages, as at the
acquisition date the acquirer's previously held equity interest in
the acquiree is remeasured to fair value at the acquisition date
through the Income statement.
Goodwill is initially measured as the excess of the aggregate of
the consideration transferred and the fair value of non-controlling
interest over the net identifiable assets acquired and liabilities
assumed.
All intragroup account balances, including intragroup profits,
are eliminated in preparing the consolidated financial
statements.
Unconsolidated structured entities
The Group regularly uses sale and leaseback transactions to
finance the acquisition of aircraft. In certain instances the Group
will undertake several such sale and leaseback transactions at once
through Enhanced Equipment Trust Certificates (EETCs). Under each
of these financing structures, a company or companies (the EETC
Issuer) are established to facilitate such financing on behalf of a
number of unrelated investors. In certain of these financing
structures, additional special purpose vehicles (the Lessor SPV)
are established to provide additional financing from a number of
further unrelated investors to the EETC Issuer. The proceeds from
the issuance of the EETCs by the EETC Issuer, and where relevant
the proceeds obtained from the Lessor SPV, are then used to
purchase aircraft solely from the Group. The Group will then enter
into fixed rate lease arrangements (which meet the recognition
criteria of Asset financed liabilities) with the EETC Issuer, or
where relevant the Lessor SPV, with payments made by the Group to
the EETC Issuer, or the Lessor SPV, distributed, through a trust,
to the aforementioned unrelated investors. The main purpose of the
trust structure is to enhance the credit-worthiness of the Group's
debt obligations through certain bankruptcy protection provisions
and liquidity facilities, and also to lower the Group's total
borrowing cost.
The EETC Issuer and the Lessor SPV are established solely with
the purpose of providing the asset-backed financing and upon
maturity of such financing are expected to have no further
activity. The relevant activities of the EETC Issuer and the Lessor
SPV are restricted to pre-established financing agreements and the
retention of the title of the associated financed aircraft.
Accordingly, the Group has determined that each EETC Issuer and the
Lessor SPVs are structured entities. Under the contractual terms of
the financing structures, the Group has no exposure to losses in
these entities, does not own any of the share capital of the EETC
Issuer or the Lessor SPV, does not have any representation on the
respective boards and has no ability to influence decision
making.
In addition to the above, such financial transactions expose the
Group to no further significant financial or economic risks, such
as no variability over time in interest rates.
In considering the aforementioned facts, management has
concluded that the Group does not have access to variable returns
from the EETC Issuers and Lessor SPVs because its involvement is
limited to the payment of principal and interest under the
arrangement and, therefore, it does not control the EETC Issuers or
the Lessor SPVs and as such does not consolidate them.
Further information as to the financial impact of these
financial transactions is given in note 25.
Segmental reporting
Operating segments are reported in a manner consistent with how
resource allocation decisions are made by the chief operating
decision-maker. The chief operating decision-maker, who is
responsible for resource allocation and assessing performance of
the operating segments, has been identified as the IAG Management
Committee.
Foreign currency translation
a Functional and presentation currency
Items included in the financial statements of each of the
Group's entities are measured using the functional currency, being
the currency of the primary economic environment in which the
entity operates. In particular, British Airways and IAG Loyalty
have a functional currency of pound sterling. The Group's
consolidated financial statements are presented in euros, which is
the Group's presentation currency.
b Transactions and balances
Transactions in foreign currencies are initially recorded in the
functional currency using the rate of exchange prevailing on the
date of the transaction. Monetary foreign currency balances are
translated into the functional currency at the rates ruling at the
balance sheet date. Foreign exchange gains and losses resulting
from the settlement of such transactions and from the translation
at balance sheet exchange rates of monetary assets and liabilities
denominated in foreign currencies are recognised in the Income
statement, except where hedge accounting is applied. Foreign
exchange gains and losses arising on the retranslation of monetary
assets and liabilities classified as non-current on the Balance
sheet are recognised within Net currency retranslation
(charges)/credits in the Income statement. All other gains and
losses arising on the retranslation of monetary assets and
liabilities are recognised in operating profit.
c Group companies
The net assets of foreign operations are translated into euros
at the rate of exchange ruling at the balance sheet date. Profits
and losses of such operations are translated into euros at average
rates of exchange during the year. The resulting exchange
differences are taken directly to a separate component of equity
(Currency translation reserve) until all or part of the interest is
sold, when the relevant portion of the cumulative exchange
difference is recognised in the Income statement.
Property, plant and equipment
Property, plant and equipment are held at cost. The Group has a
policy of not revaluing property, plant and equipment. Depreciation
is calculated to write off the cost less the estimated residual
value on a straight-line basis, over the economic life of the
asset. Residual values, where applicable, are reviewed annually
against prevailing market values for equivalently aged assets and
depreciation rates adjusted accordingly on a prospective basis.
a Fleet
All aircraft are stated at the fair value of the consideration
given after taking account of manufacturers' credits. Fleet assets
owned or right of use ('ROU') assets are disaggregated into
separate components and depreciated at rates calculated to write
down the cost of each component to the estimated residual value at
the end of their planned operational lives (which is the shorter of
their useful life or lease term) on a straight-line basis.
Depreciation rates are specific to aircraft type, based on the
Group's fleet plans, within overall parameters of 23 years and up
to 5 per cent residual value for shorthaul aircraft and between 23
and 29 years (depending on aircraft) and up to 5 per cent residual
value for longhaul aircraft.
Right of use assets are depreciated over the shorter of the
lease term and the aforementioned depreciation rates. Where the
lease includes a purchase option, at the discretion of the Group,
where it is expected that the purchase option will be exercised,
the associated right of use asset is depreciated using the
aforementioned depreciation rates to reflect the reasonably certain
life of the aircraft, irrespective of the lease term.
Cabin interior modifications, including those required for brand
changes and relaunches, are depreciated over the lower of 12 years
and the remaining economic life of the aircraft, whether owned or
leased.
Aircraft and engine spares acquired on the introduction or
expansion of a fleet, as well as rotable spares purchased
separately, are carried as property, plant and equipment and
generally depreciated in line with the fleet to which they
relate.
Major overhaul expenditure, including replacement spares and
labour costs, is capitalised and amortised over the average
expected life between major overhaul. All other replacement spares
and other costs relating to maintenance of fleet assets (including
maintenance provided under 'pay-as-you-go' contracts) are charged
to the Income statement on consumption or as incurred
respectively.
b Other property, plant and equipment
Provision is made for the depreciation of all property, plant
and equipment. Property, with the exception of freehold land, is
depreciated over its expected useful life over periods not
exceeding 50 years, or in the case of leasehold properties, over
the duration of the lease if shorter, on a straight-line basis.
Equipment is depreciated over periods ranging from four to 20
years.
c Capitalisation of interest on progress payments
Interest costs attributed to progress payments made on account
of aircraft and other qualifying assets under construction are
capitalised and added to the cost of the asset concerned. All other
borrowing costs are recognised in the Income statement in the year
in which they are incurred.
d Liquidated damages
Liquidated damages are recognised in the Income statement only
to the extent that they relate to compensation for loss of income
and/or incremental operating costs, when a contractual entitlement
exists, the amounts can be reliably measured and the receipt is
virtually certain. When liquidated damages do not relate to
compensation for loss of income and/or incremental operating costs,
the amounts are recorded as a reduction in the cost of the
associated aircraft in the Balance sheet and depreciated over the
life of the aircraft.
e Leases
The Group leases various aircraft, properties, equipment and
other assets. The lease terms of these assets are consistent with
the determined useful economic life of similar assets within
property, plant and equipment.
At inception of a contract, the Group assesses whether a
contract is, or contains, a lease. A contract is, or contains, a
lease if the contract conveys the right to control the use of an
identified tangible asset for a period in exchange for
consideration. The Group has elected not to apply such
consideration where the contract relates to an intangible asset,
such as for landing rights or IT software, in which case payments
associated with the contract are expensed as incurred.
Leases are recognised as a ROU asset and a corresponding lease
liability at the date at which the leased asset is available for
use by the Group.
Right of use assets
At the lease commencement date a ROU asset is measured at cost
comprising the following: the amount of the initial measurement of
the lease liability; any lease payments made at or before the
commencement date less any lease incentives received; and any
initial direct costs. In addition, at the lease commencement date a
ROU asset will incorporate unavoidable restoration costs, such as
the removal of airline-specific branding and configuration, to
return the asset to its original condition, for which a
corresponding amount is recognised within Provisions. The ROU asset
is depreciated over the shorter of the asset's useful life and the
lease term on a straight-line basis. If ownership of the ROU asset
transfers to the Group at the end of the lease term or the cost
reflects the exercise of a purchase option, depreciation is
calculated using the estimated useful life of the asset.
Lease liabilities
Lease liabilities are initially measured at their present value,
which includes the following lease payments: fixed payments
(including in-substance fixed payments), less any lease incentives
receivable; variable lease payments that are based on an index or a
rate; amounts expected to be payable by the Group under residual
value guarantees; the exercise price of a purchase option if the
Group is reasonably certain to exercise that option; payments of
penalties for terminating the lease, if the lease term reflects the
Group exercising that option; and payments to be made under
reasonably certain extension options.
Aircraft lease payments are discounted using the interest rate
implicit in the lease. The interest rate implicit in the lease is
the discount rate that, at the inception of the lease, causes the
aggregate present value of the minimum lease payments and the
unguaranteed residual value to be equal to the fair value of the
leased asset and any initial indirect costs of the lessor. For
aircraft leases these inputs are either observable in the contract
or readily available from external market data. The initial direct
costs of the lessor are considered to be immaterial. If the
interest rate implicit in the lease cannot be determined, the Group
entity's incremental borrowing rate is used.
Each lease payment is allocated between the principal and
finance cost. The finance cost is charged to the Income statement
over the lease period so as to produce a constant periodic rate of
interest on the remaining balance of the lease liability for each
period. After the commencement date, the amount of lease
liabilities is increased to reflect the accretion of interest and
reduced for the lease payments made.
The carrying amount of lease liabilities is remeasured if there
is a modification of the lease contract, a re-assessment of the
lease term (specifically in regard to assumptions regarding
extension and termination options) and changes in variable lease
payments that are based on an index or a rate.
Amounts excluded from recognition as lease liabilities
The Group has elected not to recognise ROU assets and lease
liabilities for short-term leases that have a lease term of 12
months or less and those leases of low-value assets. Payments
associated with short-term leases and leases of low-value assets
are recognised on a straight line basis as an expense in the Income
statement. Short-term leases are leases with a lease term of 12
months or less, that do not contain a purchase option. Low-value
assets comprise IT equipment and small items of office
furniture.
The Group is exposed to potential future increases in variable
lease payments based on an index or rate, which are not included in
the lease liability until they take effect. When adjustments to
lease payments based on an index or rate take effect, the lease
liability is re-assessed and adjusted against the ROU asset.
Extension options are included in a number of aircraft, property
and equipment leases across the Group and are reflected in the
lease payments where the Group is reasonably certain that it will
exercise the option. The Group is also exposed to variable lease
payments based on usage or revenue generated over a defined period.
Such variable lease payments are expensed to the Income statement
as incurred.
Sale and leaseback transactions
The Group regularly uses sale and lease transactions to finance
the acquisition of aircraft. Each transaction is assessed as to
whether it meets the criteria within IFRS 15 'Revenue from
contracts with customers' for a sale to have occurred. The
principal criterion for assessing whether a sale has occurred or
not, is whether the contract contains the option, at the discretion
of the Group, to repurchase the aircraft over the lease term; with
the existence of such a repurchase option resulting in a sale
having been deemed not to have occurred; and if no such repurchase
option exists, then a sale is deemed to have occurred. The
following defines the accounting for such transactions:
-- if a sale is determined to have occurred, then the associated
asset is de-recognised and a ROU asset and lease liability are
recognised. The ROU asset recognised is based on the proportion of
the previous carrying amount of the asset that is retained. Any
gain or loss is restricted to the amount that relates to the rights
that have been transferred to the counter-party to the transaction;
and
-- where a sale is determined to have not occurred, the asset is
retained on the balance sheet within Property, plant and equipment
and an Asset financed liability recognised equal to the financing
proceeds.
Cash flow presentation - lease liabilities
Lease payments are presented as follows in the Consolidated cash
flow statement:
-- where the proceeds received from sale and leaseback
transactions represent the fair value of the asset being
transferred, the total proceeds are presented within cash flows
from investing activities. Where the proceeds received from sale
and leaseback transactions exceed the fair value of the asset being
transferred, the element of the proceeds equivalent to the fair
value of the asset being transferred is presented within investing
activities and the amount of proceeds in excess of the fair value
is presented within financing activities;
-- the repayments of the principal element of lease liabilities
are presented within cash flows from financing activities;
-- the payments of the interest element of lease liabilities are
included within cash flows from operating activities; and
-- the payments arising from variable elements of a lease,
short-term leases and low-value assets are presented within cash
flows from operating activities.
Cash flow presentation - asset financed liabilities
Payments associated with asset financed liabilities are
presented as follows in the Consolidated cash flow statement:
-- the proceeds received asset financed liabilities are
presented within cash flows from financing activities;
-- the repayments of the principal element of asset financed
liabilities are presented within cash flows from financing
activities; and
-- the payments of the interest element of asset financed
liabilities are included within cash flows from operating
activities.
COVID-19 related rent concessions
On May 28, 2020, the IASB issued 'COVID-19 Related Rent
Concessions - amendments to IFRS 16 Leases'. The EU subsequently
adopted the amendment on October 9, 2020. The amendment provides a
practical expedient for lessees, up to June 30, 2021, not to assess
whether a COVID-19 related rent concession is a lease modification.
On March 31, 2021, the IASB extended the period for the application
of these concessions through to June 30, 2022. The EU subsequently
adopted the amendment on August 31, 2021. The extended amendment is
effective for annual reporting periods commencing on or after April
1, 2021 and the Group has elected to adopt this amendment for the
year to December 31, 2022.
Lessor accounting
From time to time the Group will lease, to third parties,
specific assets, including certain property, plant and equipment.
On inception of the lease, the Group determines whether each lease
is a finance lease or an operating lease.
In order to make this determination, the Group assesses whether
the lease transfers substantially all of the risks and rewards of
ownership to the lessee. Factors in making this assessment include,
but are not limited to, whether the lease term is for the major
part of the economic life of the underlying asset and whether the
underlying asset transfers to the lessee or the lessee has the
option to purchase the underlying asset at the end of the lease.
Where substantially all of the risks and rewards of ownership have
been transferred, then the lease is recorded as a finance lease,
otherwise it is recorded as an operating lease.
Intangible assets
a Goodwill
Goodwill arises on the acquisition of subsidiaries, associates
and joint ventures and represents the excess of the consideration
paid over the net fair value of the identifiable assets and
liabilities of the acquiree. Where the net fair value of the
identifiable assets and liabilities of the acquiree is in excess of
the consideration paid, a gain on bargain purchase is recognised
immediately in the Income statement.
For the purpose of assessing impairment, goodwill is grouped at
the lowest levels for which there are separately identifiable cash
flows (cash generating units). Goodwill is tested for impairment
annually and whenever indicators exist that the carrying value may
not be recoverable.
b Brands
Brands arising on the acquisition of subsidiaries are initially
recognised at fair value at the acquisition date. Long established
brands that are expected to be used indefinitely are not amortised
but assessed annually for impairment.
c Customer loyalty programmes
Customer loyalty programmes arising on the acquisition of
subsidiaries are initially recognised at fair value at the
acquisition date. A customer loyalty programme with an expected
useful life is amortised over the expected remaining useful life.
Established customer loyalty programmes that are expected to be
used indefinitely are not amortised but assessed annually for
impairment.
d Landing rights
Landing rights acquired in a business combination are recognised
at fair value at the acquisition date. Landing rights acquired from
other airlines are capitalised at cost.
Capitalised landing rights based outside of the UK and the EU
are amortised on a straight-line basis over a period not exceeding
20 years. Capitalised landing rights based within the UK and the EU
are not amortised, as regulations provide that these landing rights
are perpetual.
e Contract-based intangibles
Contract based intangibles acquired in a business combination
are recognised initially at fair value at the acquisition date and
amortised over the remaining life of the contract.
f Software
The cost to purchase or develop computer software that is
separable from an item of related hardware is capitalised
separately and amortised on a straight-line basis generally over a
period not exceeding five years, with certain specific software
developments amortised over a period of up to ten years.
g Emissions allowances
Where an operating company purchases emissions allowances these
amounts are recognised at cost and recorded within Intangible
assets. As an operating company emits CO(2) equivalent and builds
up an obligation to the relevant authorities, a provision is
recognised.
Emissions allowances recorded within Intangible assets are not
revalued or amortised but are tested for impairment whenever
indicators exist that the carrying value may not be recoverable.
For those obligations arising for which the operating company has
purchased emission allowances to offset the emissions, the
provision is recognised at the weighted average cost of the
intangible asset. For those obligations arising for which the
operating company has not yet purchased emission allowances to
offset the emissions, the provision is recognised at the market
price of the allowances required at the reporting date. As the
provision is recognised, a corresponding amount is recorded in the
Income statement within Fuel, oil costs and emission charges.
The Group's emissions obligation, recognised as a separate
liability, is extinguished when the associated emission
certificates are surrendered, which is typically within 12 months
of the reporting date.
From time to time the Group enters into sale and repurchase
transactions for specified emission allowances. Such transactions
do not meet the recognition criteria of a sale under IFRS 15 and
accordingly the asset is retained on the balance sheet within
Intangible assets and an Other financing liability recognised equal
to the proceeds received.
Impairment of non-financial assets
Assets that have an indefinite useful life are not subject to
amortisation and are tested annually for impairment. Assets that
are subject to amortisation are reviewed for impairment whenever
events or changes in circumstances indicate that the carrying
amount may not be recoverable. An impairment loss is recognised for
the value by which the asset's carrying value exceeds its
recoverable amount. The recoverable amount is the higher of an
asset's fair value less cost to sell and value-in-use.
Non-financial assets other than goodwill that were subject to an
impairment are reviewed for possible reversal of the impairment at
each reporting date.
a Property, plant and equipment, including Right of use assets
The carrying value is reviewed for impairment when events or
changes in circumstances indicate the carrying value may not be
recoverable and the cumulative impairment losses are shown as a
reduction in the carrying value of property, plant and
equipment.
b Intangible assets
Intangible assets are held at cost and are either amortised on a
straight-line basis over their economic life, or they are deemed to
have an indefinite economic life and are not amortised. Indefinite
life intangible assets are tested annually for impairment or more
frequently if events or changes in circumstances indicate the
carrying value may not be recoverable.
Investments in associates and joint ventures
An associate is an undertaking in which the Group has a
long-term equity interest and over which it has the power to
exercise significant influence. Where the Group cannot exercise
control over an entity in which it has a shareholding greater than
51 per cent, the equity interest is treated as an associated
undertaking.
A joint venture is a type of joint arrangement whereby the
parties that have joint control of the arrangement have rights to
the net assets of the joint venture. Joint control is the
contractually agreed sharing of control of an arrangement, which
exists only when decisions about the relevant activities require
unanimous consent of the parties sharing control. The
considerations made in determining significant influence or joint
control are similar to those necessary to determine control over
subsidiaries.
Investments in associates and joint ventures are accounted for
using the equity method, and initially recognised at cost. The
Group's interest in the net assets of associates and joint ventures
is included in Investments accounted for using the equity method in
the Balance sheet and its interest in their results is included in
the Income statement, below operating result. The attributable
results of those companies acquired or disposed of during the year
are included for the periods of ownership.
Financial instruments
a Financial assets and liabilities
Financial assets and financial liabilities are classified, upon
initial recognition, as measured at amortised cost, at fair value
through other comprehensive income (OCI), or fair value through
profit or loss. Financial assets and financial liabilities are not
reclassified subsequent to their initial recognition unless the
Group changes its business model for managing financial assets and
financial liabilities.
The classification of financial assets and financial liabilities
at initial recognition depends on the financial assets' and
financial liabilities' contractual cash flow characteristics and
the Group's business model for managing them. In order for a
financial asset and financial liability to be classified and
measured at amortised cost or fair value through OCI, it needs to
give rise to cash flows that are 'solely payments of principal and
interest' (SPPI) on the principal amount outstanding. A financial
asset or financial liability that is not SPPI is classified and
measured at fair value through profit or loss. This assessment is
performed on an instrument by instrument basis.
The Group's business model for managing financial assets and
financial liabilities establishes how it manages its financial
assets and financial liabilities in order to generate cash flows.
The business model determines whether cash flows will result from
collecting contractual cash flows, selling the financial assets, or
both. Financial assets and financial liabilities classified and
measured at amortised cost are held within a business model with
the objective to hold financial assets in order to collect
contractual cash flows while financial assets and financial
liabilities classified and measured at fair value through OCI are
held within a business model with the objective of both holding to
collect contractual cash flows and selling.
Long term borrowings
Long-term borrowings are recorded at amortised cost, including
lease liabilities which contain interest rate swaps that are
closely related to the underlying financing and as such are not
accounted for as an embedded derivative.
Convertible debt
Convertible bonds are classified as either compound financial
instruments or hybrid financial instruments depending on the
settlement alternatives upon redemption. Where the bondholders
exercise their equity conversion options and the Group has no
alternative other than to settle the convertible bonds into a fixed
number of ordinary shares of the Company, then the bonds are
classified as a compound financial instrument. Where the Group has
an alternative settlement mechanism to the convertible bonds that
permits settlement in cash, then the convertible instrument is
classified as a hybrid financial instrument.
Convertible bonds that are classified as compound financial
instruments consist of a liability and an equity component. At the
date of issue, the fair value of the liability component is
estimated using the prevailing market interest rate for similar
non-convertible debt, and is subsequently recorded on an amortised
cost basis using the effective interest method until extinguished
on conversion or maturity of the bonds, and is recognised within
Long-term borrowings. The difference between the proceeds of issue
of the convertible bond and the fair value assigned to the
liability component, representing the embedded option to convert
the liability into equity of the Group, is included in the equity
portion of the convertible bond in Other reserves and is not
subsequently remeasured. The interest expense on the liability
component is calculated by applying the effective interest rate for
similar non-convertible debt to the liability component of the
instrument. The difference between this value and the interest paid
is added to the carrying amount of the liability.
Convertible bonds that are classified as hybrid financial
instruments consist only of a liability component recognised within
Long-term borrowings. At the date of issue, the entirety of the
convertible bonds is accounted for at fair value with subsequent
fair value gains or losses recorded within Long-term borrowings.
The fair value of such financial instruments is obtained from their
respective quoted prices in active markets, with the portion of the
change in fair value attributable to changes in the credit risk of
the convertible bonds recognised in Other comprehensive income and
the portion of the change in fair value attributable to market
conditions recognised in the Income statement within Finance
costs.
Issue costs associated with compound financial instruments are
apportioned between the liability and equity components of the
convertible bonds where appropriate based on their relative
carrying values at the date of issue. The portion relating to the
equity component is charged directly against equity. Issue costs
associated with hybrid financial instruments are expensed
immediately to the Income statement.
Other equity investments
Other equity investments are non-derivative financial assets
including listed and unlisted investments, excluding interests in
associates and joint ventures. On initial recognition, these equity
investments are irrevocably designated as measured at fair value
through Other comprehensive income. They are subsequently measured
at fair value, with changes in fair value recognised in Other
comprehensive income with no recycling of these gains and losses to
the Income statement when the investment is sold or a change in the
structure of transaction changes its classification as an Other
equity instrument. Dividends received on other equity investments
are recognised in the Income statement.
The fair value of quoted investments is determined by reference
to bid prices at the close of business on the balance sheet
date.
Where there is no active market, fair value is determined using
valuation techniques.
Interest-bearing deposits
Interest-bearing deposits, principally comprising funds held
with banks and other financial institutions with contractual cash
flows that are SPPI, and held in order to collect contractual cash
flows, are carried at amortised cost using the effective interest
method.
Impairment of financial assets
At each balance sheet date, the Group recognises provisions for
expected credit losses on financial assets measured at amortised
cost, based on either 12-month or lifetime losses depending on
whether there has been a significant increase in credit risk since
initial recognition. The simplified approach, based on the
calculation and recognition of lifetime expected credit losses, is
applied to contracts that have a maturity of one year or less,
including trade receivables.
When determining whether there has been a significant increase
in credit risk since initial recognition and when estimating the
expected credit loss, the Group considers reasonable and
supportable information that is relevant and available. This
includes both quantitative and qualitative information and
analysis, based on the Group's historical experience and informed
credit assessment, including forward-looking information. Such
forward-looking information takes into consideration the forecast
economic conditions expected to impact the outstanding balances at
the balance sheet date. A financial asset is written off when there
is no reasonable expectation of recovery, such as the customer
having filed for liquidation.
b Cash and cash equivalents
Cash and cash equivalents include cash in hand and deposits with
any qualifying financial institution repayable on demand or
maturing within three months of the date of acquisition and which
are subject to an insignificant risk of change in value.
c Derivative and non-derivative financial instruments and hedging activities
Derivative financial instruments, comprising interest rate swap
derivatives, foreign exchange derivatives and fuel hedging
derivatives (including options, swaps and forward contracts) are
initially recognised at fair value on the date a derivative
contract is entered into and are subsequently remeasured at their
fair value. They are classified as financial instruments through
the Income statement. The method of recognising the resulting gain
or loss arising from remeasurement depends on whether the
derivative is designated as a hedging instrument, and if so, the
nature of the item being hedged (as detailed below under cash flow
hedges). The time value of options is excluded from the designated
hedging instrument and accounted for as a cost of hedging.
Movements in the time value of options are recognised in Other
comprehensive income until the underlying transaction affects the
Income statement.
When forward contracts are used to hedge forecast transactions,
the Group generally designates only the spot component of the
forward contract as the hedging instrument within a hedge
relationship. Gains or losses arising on the change in fair value
of the spot component are recognised within Other comprehensive
income in the Cash flow hedge reserve within equity. The forward
component of a forward contract is not designated within a hedge
relationship, with the associated gains and losses on the forward
component recorded within Other comprehensive income in the Cost of
hedging reserve within equity until the underlying transaction
affects the Income statement.
To manage foreign exchange movements on foreign currency
customer cash inflows (denominated in US dollars, euros and
Japanese yen), certain non-derivative repayment instalments on
foreign currency-denominated interest-bearing liabilities are
designated as hedging instruments within a hedge relationship.
Gains or losses arising from movements in foreign exchange rates
are recognised within Other comprehensive income in the Cash flow
hedge reserve within equity. Accumulated gains or losses within the
cash flow hedge reserve are transferred to Sales in advance of
carriage in the same period as the forecast transaction occurs or
when hedge accounting is discontinued when the forecast transaction
is no longer expected to occur, at which point amounts are
immediately reclassified to Passenger revenue.
When a derivative is designated as a hedging instrument and that
instrument expires, is sold or is restructured, if the initial
forecast transaction is still expected to occur, any cumulative
gain or loss remains in the cash flow hedge reserve until such time
as the hedge item impacts the Income statement. Where there is a
change in the risk management objective, then hedge accounting is
discontinued and the associated cumulative gain or loss arising
prior to the change in risk management objective remains in the
cash flow hedge reserve until such time as the underlying hedged
item impacts the Income statement had the risk management objective
continued to have been met. Where a forecast transaction which was
previously determined to be highly probable and for which hedge
accounting applied, is no longer expected to occur, hedge
accounting is discontinued and the cumulative gain or loss in the
cash flow hedge reserve is immediately reclassified to the Income
statement.
Each operating company enters into foreign currency derivative
contracts, that are not designated in a hedge relationship, in
order to mitigate foreign exchange movements on financial
liabilities designated in currencies other than the presentational
currency of each operating company, including but not limited to,
lease liabilities. Movements in the fair value of such derivatives
are recognised in the Income statement in the period in which they
occur and are presented within Net currency retranslation
charges.
Exchange gains and losses on monetary investments are taken to
the Income statement unless the item has been designated and is
assessed as an effective hedging instrument. Exchange gains and
losses on non-monetary investments are reflected in equity.
d Cash flow hedges
Changes in the fair value of derivative financial instruments
designated as in a hedge relationship of a highly probable expected
future transaction are assessed for effectiveness and accordingly
recorded in the Cash flow hedge reserve within equity.
Hedge effectiveness
Hedge effectiveness is determined at the inception of the hedge
relationship, and through periodic prospective effectiveness
assessments, to ensure that an economic relationship exists between
the hedged item and hedging instrument. A hedging relationship
qualifies for hedge accounting if it meets all of the following
effectiveness requirements: (i) there is 'an economic relationship'
between the hedged item and the hedging instrument; (ii) the effect
of credit risk does not dominate the value changes that result from
that economic relationship; and (iii) the hedge ratio is aligned
with the requirements of the Group's risk management strategy and
in all instances is maintained at a ratio of 1:1.
Sources of ineffectiveness include the following:
-- in hedges of fuel purchases, ineffectiveness may arise if the
timing of the forecast transaction changes from what was originally
estimated, or if there are changes in the credit risk of the Group
or the derivative counterparty;
-- in hedges of foreign currency purchases, ineffectiveness may
arise if the timing of the forecast transaction changes from what
was originally estimated, or if there are changes in the credit
risk of the Group or the derivative counterparty; and
-- in hedges of interest rate payments, ineffectiveness may
arise if there are differences in the critical terms between the
interest rate derivative instrument and the underlying hedged item,
or if there are changes in the credit risk of the Group or the
derivative counterparty.
Ineffectiveness is recorded within the Income statement as
Realised/unrealised (losses)/gains on derivatives not qualifying
for hedge accounting and presented within Other non-operating
charges.
Reclassification adjustments
Gains and losses accumulated in the Cash flow hedge reserve
within equity are reclassified from the Cash flow hedge reserve
when the hedged item affects the Income statement as follows:
-- where the forecast hedged item results in the recognition of
expenses within the Income statement (such as the purchase of jet
fuel for which both fuel and the associated foreign currency
derivatives are designated as the hedging instrument), the
accumulated gains and losses recorded in both the cash flow hedge
reserve and the cost of hedging reserve are reclassified and
included in the Income statement within the same caption as the
hedged item is presented. Such reclassification occurs in the same
period as the hedged item is recognised in the Income
statement;
-- where the forecast hedged item results in the recognition of
a non-financial asset (such as the purchase of aircraft for which
foreign currency derivatives are designated as the hedging
instrument or where the purchase of jet fuel gives rise to the
recognition of fuel inventory in storage facilities), or a
non-financial liability (such as the sales in advance of carriage
for which both foreign currency derivatives and non-financial
derivative instruments are designated as the hedging instrument),
the accumulated gains and losses recorded within both the cash flow
hedge reserve and the cost of hedging reserve are included in the
initial cost of the asset and liability, respectively. These gains
or losses are recorded in the Income statement as the non-financial
asset and the non-financial liability affects the Income statement
(which for aircraft is through Depreciation over the expected life
of the aircraft, for fuel inventory through Fuel, oil costs and
emission charges and for sales in advance of carriage through
Passenger revenue when the flight is flown); and
-- where the forecast hedged items results in the recognition of
a financial asset or liability (such as variable rate debt for
which interest rate swaps are designated as the hedging
instrument), the accumulated gains and losses recorded within the
cash flow hedge reserve are reclassified to Interest expense within
the Income statement at the same time as the interest expense
arises on the hedged item.
Further information on the risk management activities of the
Group is given in note 28d.
e Interest rate benchmark reform
In 2020 the Group adopted the amendments to IFRS 9 and IFRS 7
relating to the interest rate benchmark reform Phase 1, ('Phase 1')
and in 2021 the Group adopted the amendments to IFRS 9, IAS 39,
IFRS 7, IFRS 4 and IFRS 16 relating to the interest rate benchmark
reform Phase 2 ('Phase 2').
The Phase 1 amendments provide temporary relief from applying
certain hedge accounting requirements to hedging relationships
directly affected by Interbank Offered Rates ('IBOR') reform. The
reliefs have the effect that IBOR reform does not cause hedge
accounting to terminate prior to contracts being amended. Where
transition to an alternative benchmark rate has taken place, the
Group ceases to apply the Phase 1 amendments and instead applies
the Phase 2 amendments.
Hedge accounting
Where the Group continues to apply the Phase 1 amendments, the
following reliefs are applied:
-- when considering the highly probable requirement, the Group
has assumed that those benchmark rates that need to be transitioned
to an alternative benchmark rate, on which the Group's hedged
long-term borrowings are based, do not change as a result of IBOR
reform;
-- in assessing whether the hedge is expected to be highly
effective on a forward-looking basis the Group has assumed that
those benchmark rates that need to be transitioned to an
alternative benchmark rate, on which the cash flows of the hedged
long-term borrowings and the interest rate swaps that hedge them
are based, are not altered by IBOR reform; and
-- the Group has not recycled the cash flow hedge reserve
relating to the period after the IBOR reform is expected to take
effect.
When the Group ceases to apply the Phase 1 amendments, the Group
amends its hedge designation to reflect changes which are required
by IBOR reform, but only to make one or more of the following
changes:
-- designating an alternative benchmark rate (contractually or
non-contractually specified) as the hedged risk;
-- amending the description of the hedged item, including the
description of the designated portion of the cash flows being
hedged; or
-- amending the description of the hedging instrument.
The associated hedge documentation is updated to reflect these
changes in designation by the end of the reporting period in which
the changes are made. Such amendments do not give rise to the hedge
relationship being discontinued.
When the Group transitions to an alternative benchmark rate, the
accumulated amounts within the cash flow hedge reserve are
determined to be based on the alternative benchmark rate and no
reclassification adjustments are made from the cash flow hedge
reserve to the Income statement.
Long-term borrowings and lease liabilities
Phase 2 of the amendments requires that, for financial
instruments measured using amortised cost measurement, changes to
the basis for determining the contractual cash flows required by
interest rate benchmark reform are reflected by adjusting their
effective interest rate prospectively. No gain or loss is
recognised upon transition to the new benchmark. The expedient is
only applicable to direct changes that are required by interest
rate benchmark reform.
For lease liabilities where there is a change to the basis for
determining the contractual cash flows, as a practical expedient
the lease liability is remeasured by discounting the revised lease
payments using a discount rate that reflects the change in the
interest rate where the change is required by IBOR reform.
Further information on the management of and uncertainty arising
from interest rate reform is given in note 27i. No amounts have
been recorded in the current or prior periods as a result of these
amendments.
Employee benefit plans
a Pension obligations
The Group has both defined benefit and defined contribution
plans. A defined contribution plan is a pension plan under which
the Group pays fixed contributions into a separate entity. The
Group has no legal or constructive obligations to pay further
contributions if the fund does not hold sufficient assets to pay
all employees the benefits relating to employee service in the
current and prior years.
Typically defined benefit plans define an amount of pension
benefit that an employee will receive on retirement, usually
dependent on one or more factors such as age, years of service and
compensation.
The Group's net obligation in respect of defined benefit pension
plans is calculated separately for each plan by estimating the
amount of future benefit that employees have earned in return for
their service in the current and prior years. The benefit is
discounted to determine its present value, and the fair value of
any plan assets are deducted. The discount rate is the yield at the
balance sheet date on AA-rated corporate bonds of the appropriate
currency that have durations approximating those of the Group's
obligations. The calculation is performed by a qualified actuary
using the projected unit credit method. When the net obligation
calculation results in an asset for the Group, the recognition of
an asset is limited to the present value of any future refunds, net
of the relevant taxes, from the plan or reductions in future
contributions to the plan ('the asset ceiling'). The fair value of
the plan assets is based on market price information and, in the
case of quoted securities, is the published bid price. The fair
value of insurance policies which exactly match the amount and
timing of some or all benefits payable under the scheme are deemed
to be the present value of the related obligations. Longevity swaps
are measured at their fair value.
Current service costs are recognised within employee costs in
the year in which they arise. Past service costs are recognised in
the event of a plan amendment or curtailment, or when the Group
recognises related restructuring costs or severance obligations.
The net interest is calculated by applying the discount rate used
to measure the defined benefit obligation at the beginning of the
period to the net defined benefit liability or asset, taking into
account any changes in the net defined benefit liability or asset
during the period as a result of contributions and benefit
payments. Net interest and other expenses related to the defined
benefit plans are recognised in the Income statement.
Remeasurements, comprising IAS 19 gains and losses, the effect of
the asset ceiling (excluding interest) and the return on plan
assets (excluding interest), are recognised immediately in Other
comprehensive income. Remeasurements are not reclassified to the
Income statement in subsequent periods.
b Severance obligations
Severance obligations are recognised when employment is
terminated by the Group before the normal retirement date, or
whenever an employee accepts voluntary redundancy in exchange for
these benefits. The Group recognises a provision for severance
payments when it is demonstrably committed to either terminating
the employment of current employees according to a detailed formal
plan without realistic possibility of withdrawal, or providing
severance payments as a result of an offer made to encourage
voluntary redundancy.
Other employee benefits are recognised when there is deemed to
be a present obligation.
Taxation
Current income tax assets and liabilities are measured at the
amount expected to be recovered from or paid to the taxation
authorities, based on tax rates and laws that are enacted or
substantively enacted at the balance sheet date.
Deferred income tax is recognised on all temporary differences
arising between the tax bases of assets and liabilities and their
carrying amounts in the financial statements, with the following
exceptions:
-- where the temporary difference arises from the initial
recognition of goodwill or of an asset or liability in a
transaction that is not a business combination that at the time of
the transaction affects neither accounting nor taxable profit or
loss;
-- in respect of taxable temporary differences associated with
investments in subsidiaries or associates, where the timing of the
reversal of the temporary differences can be controlled and it is
probable that the temporary differences will not reverse in the
foreseeable future; and
-- deferred income tax assets are recognised only to the extent
that it is probable that taxable profit will be available against
which the deductible temporary differences, carried forward tax
credits or tax losses can be utilised.
Deferred income tax assets and liabilities are measured on an
undiscounted basis at the tax rates that are expected to apply when
the related asset is realised or liability is settled, based on tax
rates and laws enacted or substantively enacted at the balance
sheet date.
Income tax is charged or credited directly to equity if it
relates to items that are credited or charged to equity. Otherwise
income tax is recognised in the Income statement.
Inventories
Inventories are valued at the lower of cost and net realisable
value. Such cost is determined by the weighted average cost method.
Inventories include mainly aircraft spare parts, repairable
aircraft engine parts and fuel held in storage facilities.
Share-based payments
The Group operates a number of equity-settled, share-based
payment plans, under which the Group awards equity instruments of
the Group for services rendered by employees. The fair value of the
share-based payment plans is measured at the date of grant using a
valuation model provided by external specialists. The resulting
cost, as adjusted for the expected and actual level of vesting of
the plan, is charged to the Income statement over the period in
which the options vest. At each balance sheet date before vesting,
the cumulative expense is calculated, representing the extent to
which the vesting period has expired and management's best estimate
of the achievement or otherwise of non-market conditions, and
accordingly the number of equity instruments that will ultimately
vest. The movement in the cumulative expense since the previous
balance sheet date is recognised in the Income statement with a
corresponding entry in equity.
Provisions
Provisions are made when an obligation exists for a present
liability in respect of a past event and where the amount of the
obligation can be reliably estimated and where it is considered
probable that an outflow of economic resources will be required to
settle the obligation. Where it is not considered probable that
there will be an outflow of economic resources required to settle
the obligation, the Group does not recognise a provision, but
discloses the matter as a contingent liability. The Group assesses
whether each matter is probable of there being an outflow of
economic resources to settle the obligation at each reporting
date.
Employee leaving indemnities and other employee provisions are
recorded for flight crew who, meeting certain conditions, have the
option of being placed on reserve or of taking early retirement.
The Group is obligated to remunerate these employees until they
reach the statutory retirement age. The calculation is performed by
independent actuaries using the projected unit credit method.
Other employee related provisions are recognised for direct
expenditures of business reorganisation such as severance payments
(restructuring provisions) where plans are sufficiently detailed
and well advanced, and where appropriate communication to those
affected has been undertaken at the balance sheet date.
Restoration and handback provisions arising on inception of a
lease are recognised as a provision with a corresponding amount
recognised as part of the ROU asset. Any subsequent change in
estimation relating to such costs are reflected in the ROU asset.
Maintenance and handback provisions that occur through usage or
through the passage of time are recognised as such activity occurs,
with a corresponding expense recorded in the Income statement. Any
subsequent change in estimation are recognised in the Income
statement.
The method for determining legal claims provisions is determined
on a claim by claim basis. Where a claim includes a significant
population of items, the weighted average provision is estimated by
determining all potential outcomes and the probability of their
occurrence. Where a claim relates to a single item, then the Group
determines the associated provision by applying the most likely
outcome giving consideration to alternative outcomes. Where an
individual claim is significant, the disclosure of quantitative
information is restricted to the extent that it does not prejudice
the outcome of the claim. If the effect is material, expected
future cash flows are discounted using a rate that reflects, where
appropriate, the risks specific to the provision. Where discounting
is used, the effect of unwinding the discount rate is recognised as
a finance cost in the Income statement.
Revenue recognition
Passenger revenue
The Group's revenue primarily derives from transportation
services for both passengers and cargo. Revenue is recognised when
the transportation service has been provided.
Passenger tickets are generally paid for in advance of
transportation and are recognised, net of discounts, as Deferred
revenue on ticket sales in current liabilities until either the
customer has flown or, for flexible tickets, when unused ticket
revenue is recognised or the ticket expires unused.
At the time of expected travel, revenue is recognised in
relation to flexible tickets where a customer can reschedule the
date of intended travel, that are not expected to be used, a term
referred to as 'unused flexible tickets'. This revenue is
recognised based on the terms and conditions of the ticket and
analysis of historical experience. For these unused flexible
tickets, revenue is recognised only when the risk of a significant
reversal of revenue is remote based on the terms and conditions of
the ticket and analysis of historical experience. The estimation
regarding historical experience is updated at each reporting
date.
Where a flight is cancelled, the passenger is entitled to either
compensation, a refund, changing to an alternative flight or the
receipt of a voucher. Where compensation is issued to the customer,
such payments are presented net within Passenger revenue against
the original ticket purchased. Where the Group provides a refund to
a customer, Deferred revenue on ticket sales is reduced and no
amount is recorded within revenue. Where a voucher is issued it is
retained within Deferred revenue on ticket sales until such time as
it is redeemed for a flight or it expires, at which time it is
recorded within Passenger revenue. The Group also recognises
revenue by estimating the amount of vouchers that are not expected
to be redeemed prior to expiry using analysis of historical
experience. The estimation regarding historical experience is
updated at each reporting date. The amount of such revenue
recognised is constrained, where necessary, such that the risk of a
significant reversal of revenue in the future is remote.
Payments received in relation to certain ancillary services
regarding passenger transportation, such as change fees, are not
considered to be distinct from the performance obligation to
provide the passenger flight. Payments relating to these ancillary
services are recognised in Deferred revenue on ticket sales in
current liabilities until the customer has flown.
The Group considers whether it is an agent or a principal in
relation to passenger transportation services by considering
whether it has a performance obligation to provide services to the
customer or whether the obligation is to arrange for the services
to be provided by a third party. The Group acts as an agent where
(i) it collects various taxes, duties and fees assessed on the sale
of tickets to passengers and remits these to the relevant taxing
authorities; and (ii) where it provides interline services to
airline partners outside of the Group. Commissions earned in
relation to agency services are recognised as revenue when the
underlying goods or services have been transferred to the customer.
In all other instances, the Group considers it acts as the
principal in relation to passenger transportation services.
Cargo revenue
The Group has identified a single performance obligation in
relation to cargo services and the associated revenue is measured
at its standalone selling price and recognised on satisfaction of
the performance obligation, which occurs on the fulfilment of the
transportation service.
Other revenue
The Group has identified several performance obligations in
relation to services that give rise to revenue being recognised
within Other revenue. These services, their performance obligations
and associated revenue recognition include:
-- the provision of maintenance services and overhaul services
for engines and airframes, where the Group is engaged to enhance an
asset while the customer retains control of the asset. Accordingly,
the performance obligations are satisfied, and revenue recognised,
over time. The Group estimates the proportion of the contract
completed at the reporting date and recognises revenue based on the
percentage of completion of the contract;
-- the provision of ground handling services, where the
performance obligations are fulfilled when the services are
provided;
-- the provision of holiday and hotel services, where the
performance obligations are satisfied over time as the customer
receives the benefit of the service; and
-- brand and marketing activities, where the performance
obligations are satisfied as the associated activities occur.
Customer loyalty programmes
The Group operates four loyalty programmes: the British Airways
Executive Club, Iberia Plus, Vueling Club and the Aer Lingus Aer
Club. The customer loyalty programmes award travellers Avios to
redeem for various rewards, primarily redemption travel, including
flights, hotels and car hire. Avios are also sold to commercial
partners to use in loyalty activity.
Avios issuance
When issued, the standalone selling price of an Avios is
recorded within Deferred revenue on ticket sales in current
liabilities until the customer redeems the Avios. The standalone
selling price of Avios is based on the value of the awards for
which the points could be redeemed. The Group also recognises
revenue associated with the proportion of Avios which are not
expected to be redeemed, referred to as 'breakage', based on the
results of modelling using historical experiences and expected
future trends in customer behaviour, up until the reporting date.
The amount of such revenue recognised is limited, where necessary,
such that the risk of a significant reversal of revenue in the
future is remote.
Where the issuance of Avios arises from travel on the Group's
airlines, the consideration received from the customer may differ
to the aggregation of the relative standalone selling prices. In
such instances the allocation of the consideration to each
performance obligation is undertaken on a proportional basis using
the relative standalone selling prices.
The Group has contractual arrangements with non-Group airlines
and non-air partners for the issuance and redemption of Avios, for
which it has identified the following performance obligations:
Companion vouchers
Certain non-air partners issue their card holders with companion
vouchers, which forms part of the variable consideration of the
overall contract, depending on the level of expenditure by the card
holders, for redemption on the airlines of the Group for the same
flight and class of cabin as the underlying fare being purchased.
The Group estimates the standalone selling price of the companion
voucher performance obligation, using valuation techniques, by
reference to the amount that a third party would be prepared to pay
in an arm's length transaction.
Brand and marketing activities
For both air and non-air partners, the Group licenses the Avios
and the airline brands for certain activities, such as the creation
of co-branded credit cards. In addition, the Group has certain
contractual arrangements whereby it commits to provide marketing
services to the members of the loyalty schemes on behalf of those
partners. For the provision of both brand and marketing services,
the partner receives benefits incremental to the issuance of Avios.
The Group estimates the standalone selling price of the brand and
marketing performance obligations, using valuation techniques, by
reference to the amount that a third party would be prepared to pay
in an arm's length transaction for access to comparable brands for
the period over which they use the brand. For brand services, as
the Group considers that the partner has the right to use the
brand, revenue is recognised as the brand service is provided and
not over time. For marketing performance obligations, revenue is
recognised as the marketing activities occur based on when the
partner receives the benefit of those services.
Upfront payments
Where a partner makes an upfront payment to the Group which does
not relate to any specific performance obligation, then the Group
considers such payments as advance payments for future goods and
services and the associated revenue is recognised as those goods
and services are provided, as detailed above. In such instances the
payment is allocated across all of the performance obligations over
the contract term. The Group estimates the expected level of Avios
to be issued over the contract term using experience, historical
and expected future trends, and allocates the payments to the
relevant performance obligations accordingly. At each reporting
date, the Group updates its estimate of the number of Avios
expected to be issued over the total contract term and recognises a
cumulative catch-up adjustment where necessary.
When a partner makes an upfront payment to the Group, the Group
assesses whether such a payment is representative of a significant
financing event. Where a significant financing component is
identified, the Group estimates a market rate of interest that an
arm's length financial liability of similar size and tenor would
yield. The Group recognises the imputed interest as a Finance
expense in the Income statement.
Other considerations
The Group considers whether it is an agent or a principal in
relation to the loyalty services by considering whether it has a
performance obligation to provide services to the customer or
whether the obligation is to arrange for the services to be
provided by a third party. In particular, the Group acts as an
agent where customers redeem their Avios on interline partner
flights outside of the Group, where the fees payable to the
interline partner are presented net against the associated release
of the Deferred revenue from ticket sales.
Exceptional items
Exceptional items are those that in management's view need to be
separately disclosed by virtue of their size or nature and where
such presentation is relevant to an understanding of the Group's
financial performance. While management has defined a list of items
and a quantitative threshold that would merit categorisation as
exceptional that has been established through historical
experience, the Group retains the flexibility to add additional
items should their size or nature merit such presentation. The
accounting policy in respect of exceptional items and
classification of an item as exceptional is approved by the Board,
through the Audit and Compliance Committee.
The financial performance of the Group is monitored by the
Management Committee and the Board on a pre-exceptional basis to
enable comparison to prior reporting periods as well as to other
selected companies, and also for making strategic, financial and
operational decisions.
The exceptional items recorded in the Income statement include,
but are not limited to, items such as significant settlement
agreements with the Group's pension schemes; significant
restructuring; the impact of business combination transactions that
do not contribute to the ongoing results of the Group; significant
discontinuance of hedge accounting; legal settlements; individually
significant tax transactions; and the impact of the sale, disposal
or impairment of an asset or investment in a business. Where
exceptional items are separately disclosed, the resultant tax
impact is additionally separately disclosed. Certain exceptional
items may cover more than a single reporting period, such as
significant restructuring events, but not more than two reporting
periods.
Further information is given in the Alternative performance
measures section.
Government grants
Government grants are recognised where there is reasonable
assurance that the grant will be received. Loans provided and/or
guaranteed by governments that represent market rates of interest
are recorded at the amount of the proceeds received and recognised
within Borrowings. Those loans provided and/or guaranteed by
governments that represent below market rates of interest are
measured at inception at their fair value and recognised within
Borrowings, with the differential to the proceeds received recorded
within Deferred income and released to the relevant financial
statement caption in the Income statement on a systematic basis.
Grants that compensate the Group for expenses incurred are
recognised in the Income statement in the relevant financial
statement caption on a systematic basis in the periods in which the
expenses are recognised.
Critical accounting estimates, assumptions and judgements
The preparation of financial statements requires management to
make judgements, estimates and assumptions that affect the
application of policies and reported amounts of assets and
liabilities, income and expenses. These judgements, estimates and
associated assumptions are based on historical experience and
various other factors believed to be reasonable under the
circumstances. Actual results in the future may differ from
judgements and estimates upon which financial information has been
prepared. These underlying assumptions are reviewed on an ongoing
basis. Revisions to accounting estimates are recognised
prospectively.
Estimates
The estimates and assumptions that have a significant risk of
causing a material adjustment to the carrying amounts of assets and
liabilities within the next financial year are as follows:
a Employee benefit obligations, employee leaving indemnities,
other employee related restructuring
At December 31, 2022 the Group recognised EUR2,334 million in
respect of employee benefit assets (2021: EUR1,775 million) and
EUR217 million in respect of employee benefit obligations (2021:
EUR285 million). Further information on employee benefit
obligations is disclosed in note 32.
The cost of employee benefit obligations, employee leaving
indemnities and other employee-related provisions is determined
using the valuation requirements of IAS 19. These valuations
involve making assumptions about discount rates, future salary
increases, mortality rates and future pension increases. Due to the
long-term nature of these schemes, such assumptions are subject to
significant uncertainty. The assumptions relating to these schemes
are disclosed in note 32. The Group determines the assumptions to
be adopted in discussion with qualified actuaries. Any difference
between these assumptions and the actual outcome will impact future
net assets and total comprehensive income. The sensitivity to
changes in pension assumptions is disclosed in note 32.
Under the Group's Airways Pension Scheme (APS) and New Airways
Pension Scheme (NAPS) defined benefit schemes, increases to
pensions are based on the annual Government Pension Increase
(Review) Orders, which since 2011 have been based on the Consumer
Prices Index (CPI). Additionally, in APS there is provision for the
Trustee to pay increases up to the level of the Retail Prices Index
(RPI), subject to certain affordability tests. Historically market
expectations for RPI could be derived by comparing the prices of UK
Government fixed-interest and index-linked gilts, with CPI assessed
by considering the Bank of England's inflation target and
comparison of the construction of the two inflation indices.
In November 2020, the UK Government and UK Statistics Authority
(UKSA) confirmed alignment of RPI with CPIH (a variant of CPI) from
February 2030. In assessing RPI and CPI inflation from investment
market data, allowance has been made for alignment of RPI with CPIH
from 2030 and, therefore, effectively no gap between RPI and CPI
inflation from that date. CPI inflation before 2030 is assumed to
be 1 per cent per annum below RPI inflation.
b Revenue recognition
At December 31, 2022 the Group recognised EUR7,644 million
(2021: EUR6,552 million) in respect of deferred revenue on ticket
sales of which EUR2,630 million (2021: EUR2,820 million) related to
customer loyalty programmes. Further information on deferred
revenue from ticket sales is included in note 23.
Passenger revenue
Passenger revenue is recognised when the transportation service
is provided. At the time of transportation, revenue is also
recognised in respect of unused tickets and is estimated based on
the terms and conditions of the tickets and historical experience.
The Group considers that there is no reasonably possible change to
unused ticket assumptions that would have a material impact on
Passenger revenue recorded in the year.
Historically, where a voucher has been issued to a customer in
the event of a flight cancellation, the Group estimated, based on
historical experience, the level of such vouchers not expected to
be used prior to expiry and recognised revenue accordingly. During
2020 and 2021, due to the significant level of flight cancellations
arising from COVID-19, the Group issued a greater volume of
vouchers than it would have otherwise done so. In addition, given
the uncertainty as to the timing of customers redeeming these
vouchers, the Group was unable to estimate with a high degree of
probability that there would not be a significant reversal of
revenue in the future had it applied the historical expiry trends
over the period of the pandemic. Accordingly, for the years ended
December 31, 2020, and December 31, 2021, the Group did not
recognise revenue arising from those vouchers issued due to
COVID-19 related cancellations until either the voucher was
redeemed or it expired.
During 2022, while the recovery from COVID-19 has seen much
lower levels of voucher issuance and high levels of voucher
redemption, the Group's operating companies' voucher programmes
have had limited voucher expiry in 2022, with the majority not
expected until 2023 at the earliest. Accordingly, the Group has had
insufficient historical expiry experience relating to vouchers
issued during the pandemic and therefore has not applied any
breakage to existing voucher liabilities as it cannot confirm that
there would not be a subsequent significant reversal of revenue if
it were to do so.
Customer loyalty schemes
Revenue associated with the issuance of Avios under customer
loyalty programmes is based on the relative standalone selling
prices of the related performance obligations (brand, marketing and
Avios), determined using estimation techniques. The transaction
price of brand and marketing services is determined using specific
brand valuation methodologies. The transaction price of an Avios is
determined as the price of the rewards against which they can be
redeemed and is reduced to take account of the proportion of Avios
that are not expected to be redeemed by customers.
During 2020 and 2021, due to the significant restrictions
imposed on the ability of customers to redeem Avios coupled with
the disruption in the patterns of redemption caused by COVID-19,
the Group considered that the trends experienced since the start of
the COVID-19 pandemic were not reflective of the long-term expected
patterns of redemption and accordingly, the Group was unable to
determine with a high degree of probability that there would not be
a significant reversal of revenue in the future had it applied the
redemption trends over the period of the pandemic. Accordingly, for
the years to December 31, 2020 and December 31, 2021, the Group
continued to estimate the level of redemption activity based on
pre-COVID-19 customer behaviour. While 2022 has seen all operating
companies recover from the COVID-19 pandemic, there remains
uncertainty as to whether recent redemption data is representative
of long-term behavioural trends and accordingly the Group cannot
confirm that there would not be a subsequent significant reversal
of revenue if the level of redemption estimates were to be updated
to reflect behaviours during the COVID-19 period. Accordingly, the
Group continues to estimate the level of redemption activity based
on pre-COVID-19 customer behaviour.
The Group estimates the number of Avios not expected to be
redeemed using statistical modelling based on historical experience
and expected future trends in customer behaviour. A five percentage
point increase in the assumption of Avios outstanding and not
expected to be redeemed would result in an adjustment to Deferred
revenue from ticket sales of EUR95 million, with an offsetting
adjustment to increase revenue and operating profit recognised in
the year.
c Income taxes
At December 31, 2022 the Group recognised EUR1,282 million in
respect of deferred tax assets (2021: EUR1,282 million). Further
information on current and deferred tax is disclosed in note
10.
The Group is subject to income taxes in numerous jurisdictions.
Estimates are required in determining the worldwide provision for
income taxes. There are many transactions and calculations for
which the ultimate tax determination is uncertain because it may be
unclear how tax law applies to a particular transaction or
circumstance. Where the Group determines that it is more likely
than not that the tax authorities would accept the position taken
in the tax return, amounts are recognised in the financial
statements on that basis. Where the amount of tax payable or
recoverable is uncertain, the Group recognises a liability based on
either: the Group's judgement of the most likely outcome; or, when
there is a wide range of possible outcomes, a probability-weighted
average approach.
The Group recognises deferred tax assets only to the extent that
it is probable that the taxable profit will be available against
which the deductible temporary differences, carried forward tax
credits or tax losses can be utilised. Management uses judgement,
including the consideration of past and current operating
performance and the future projections of performance laid out in
the approved business plan in order to assess the probability of
recoverability.
In exercising this judgement, while there are no time
restrictions on the utilisation of historic tax losses in the
principal jurisdictions in which the Group operates, future cash
flow projections are forecast for a period of up to ten years from
the balance sheet date, which represents the period over which it
is probable that future taxable profits will be available.
At December 31, 2022, the Group had unrecognised deferred tax
assets of EUR2,084 million relating to tax losses the Group does
not reasonably expect to utilise. In applying the aforementioned
judgement, had the Group extended the period of future cash flow
projections indefinitely, then the amount of unrecognised deferred
tax assets would have reduced by EUR1,608 million. Conversely, if
the forecast profit before tax for each operating company was
reduced by two percentage points over the forecast period, the
amount of the unrecognised deferred tax asset relating to tax
losses would increase by EUR11 million.
d Impairment of non-financial assets
At December 31, 2022 the Group recognised EUR2,423 million
(2021: EUR2,439 million) in respect of intangible assets with an
indefinite life, including goodwill. Further information on these
assets is included in note 17.
Goodwill and intangible assets with indefinite economic lives
are tested, as part of the cash-generating units to which they
relate, for impairment annually and at other times when such
indicators exist. The recoverable amounts of cash-generating units
have been determined based on value-in-use calculations, which use
a weighted average multi-scenario discounted cash flow model, which
are then compared to the carrying amount of the associated
cash-generating unit.
In determining the carrying value of each cash generating unit,
the Group allocates all associated operating tangible and
intangible assets, including ROU assets. In addition the Group has
allocated certain liabilities to the carrying value of each CGU
where those liabilities are critical to the underlying operations
of the cash-generating unit and in the event of a disposal of the
cash-generating unit would be required to be transferred to the
purchaser. Such liabilities include lease liabilities.
The Group has applied judgement in the weighting of each
scenario in the discounted cash flow model and these calculations
require the use of estimates in the determination of key
assumptions and sensitivities as disclosed in notes 4 and 17.
The Group assesses whether there are any indicators of
impairment for all non-financial assets at each reporting date.
When such indicators are identified, then non-financial assets are
tested for impairment.
e Engineering and other aircraft costs
At December 31, 2022, the Group recognised EUR2,400 million in
respect of maintenance, restoration and handback provisions (2021:
EUR1,832 million). Information on movements on the provision is
disclosed in note 26.
The Group has a number of contracts with service providers to
replace or repair engine parts and for other maintenance checks.
These agreements are complex and generally cover a number of years.
Provisions for maintenance, restoration and handback are made based
on the best estimate of the likely committed cash outflow. In
determining this best estimate, the Group applies significant
judgement as to the level of forecast costs expected to be incurred
when the aircraft is returned to the lessor. The assumptions of
this significant judgement include aircraft utilisation, expected
maintenance intervals, future maintenance costs and the aircraft's
condition. The associated forecast costs are discounted to their
present value. In 2021, the Group considered that there was no
reasonably possible change to a single assumption that would have
had a material impact on the provisions, however a combination of
changes in multiple assumptions may have. In 2022, with the status
of the macro-economic environment, the Group considers that a
reasonable possible change in the inflation rate and discount rate
assumptions of a 100 basis points increase would give rise to an
increase of EUR51 million and a decrease of EUR68 million,
respectively, when applied in isolation to one another.
Judgements
a Determining the lease term of contracts with renewal and termination options
The Group determines the lease term as the non-cancellable term
of the lease, together with any periods covered by an option to
extend the lease if it is reasonably certain to be exercised, or
any periods covered by an option to terminate the lease, if it is
reasonably certain not to be exercised. The Group applies judgement
in evaluating whether it is reasonably certain whether or not to
exercise the option to renew or terminate the lease. Such judgement
includes consideration of fleet plans which underpin approved
business plans and historical experience regarding the extension of
leases. After the commencement date, the Group re-assesses the
lease term if there is a significant event or change in
circumstances that affects the Group's ability to exercise or not
to exercise the option to renew or to terminate. Further
information is given in note 14.
b Determining whether the Group has significant influence over Air Europa Holdings
The Group applies judgement in the determination as to whether
it has the power with which to participate in the decision making
of, and as a result significant influence over, Air Europa
Holdings, S.L. (Air Europa Holdings). Such judgement includes the
consideration as to the ability of the Group to: have
representation on the board of Air Europa Holdings; participate in
the policy-making processes, including participation in decisions
regarding dividends and other distributions; the existence of
material transactions between Air Europa Holdings and the Group;
enable the interchange of management personnel and provide
essential technical information.
In forming its judgement, the Group notes that: it does not have
the ability to have representation on the board of Air Europa
Holdings; it does not have the ability to participate in the
policy-making processes; has not entered into material transactions
outside of the normal course of business; it does not have the
ability to enable the interchange of management personnel and it
does not have the ability to provide essential technical
information. The Group has therefore concluded that it does not
have significant influence over Air Europa Holdings.
Accordingly, the Group accounts for its shareholding in Air
Europa Holdings as an Other equity investment and measures it at
fair value through Other comprehensive income. Had the Group
concluded that it does have significant influence over Air Europa
Holdings, then the shareholding would have been classified as an
associate, measured at fair value on inception and subsequently
measured using the equity method. At December 31, 2022, the fair
value of its shareholding in Air Europa Holdings was EUR24 million.
Further information is given in
note 19.
New standards, amendments and interpretations
The following amendments and interpretations apply for the first
time in 2022, but do not have a material impact on the consolidated
financial statements of the Group:
-- property, plant and equipment: proceeds before intended use -
amendments to IAS 16 effective for periods beginning on or
after
January 1, 2022;
-- reference to the Conceptual Framework - amendments to IFRS 3
effective for periods beginning on or after January 1, 2022;
-- onerous contracts - cost of fulfilling a contract -
amendments to IAS 37 effective for periods beginning on or after
January 1, 2022; and
-- annual improvements to IFRS standards 2018-2020 - effective
for periods beginning on or after January 1, 2022.
The IASB and IFRIC have issued the following standards,
amendments and interpretations with an effective date after the
year end of these financial statements which management believe
could impact the Group in future periods. The Group has assessed
the impact of these standards, amendments and interpretations and
it is not expected that these will have a material effect on the
reported income or net assets of the Group. Unless otherwise
stated, the Group plans to adopt the following standards,
interpretations and amendments on the date they become
mandatory:
-- IFRS 17 Insurance contracts - effective for periods beginning
on or after January 1, 2023;
-- definition of accounting estimate - amendments to IAS 8
effective for periods beginning on or after January 1, 2023;
-- disclosure of accounting policies - amendments to IAS 1 and
IFRS Practice statement 2 effective for periods beginning on or
after January 1, 2023; and
-- deferred tax related to assets and liabilities arising from a
single transaction - amendments to IAS 12 effective for periods
beginning on or after January 1, 2023.
On October 31, 2022, the IASB issued the amendments to IAS 1 -
classification of liabilities as current or non-current (the
'Amendments'), effective for periods beginning on or after January
1, 2024. The Amendments will require the EUR825 million convertible
bond that matures in 2028, which as at December 31, 2022, had a
carrying value of EUR605 million, to be reclassified from a
non-current liability to a current liability with the comparative
presentation as at December 31, 2023 also reclassified. The
Amendments require that where the conversion feature of a
convertible instrument does not meet the recognition criteria for
separate presentation within equity and where the associated bond
holders have the irrevocable right to exercise the conversion
feature within twelve months of the balance sheet date, that such
convertible instruments be presented as current. Other than this
reclassification, the Amendments will not have a material effect on
the reported results or net assets of the Group.
3 Significant changes and transactions in the current reporting period
The financial performance and position of the Group was affected
by the following significant events and transactions in the year to
December 31, 2022 as detailed below:
-- on March 4, 2022 Aer Lingus entered into a financing
arrangement with the Ireland Strategic Investment Fund (ISIF),
which subsequently increased the existing EUR150 million of
facilities to EUR350 million and extended the maturity to March
2025. On December 13, 2022, Aer Lingus repaid EUR100 million of the
EUR150 million it had previously drawn against this facility. At
December 31, 2022, EUR300 million of undrawn facilities remains
available for draw down;
-- on April 12, 2022, the Group entered into an asset-financing
structure, under which five aircraft were financed. These
transactions mature between 2032 and 2036. This arrangement was
transacted through an unconsolidated structured entity, which in
turn issued the Iberia Pass Through Certificates, Series 2022-1,
commonly referred to as EETCs. In doing so, the asset financing
structure provides committed aircraft financing of EUR680
million;
-- on May 19, 2022, the Group entered into an agreement with
Boeing to purchase 25 737-8200 and 25 737-10 aircraft, plus 100
options. The aircraft will be delivered between 2023 and 2027 and
will be used for shorthaul fleet renewal. The fleet order was
subsequently approved by shareholders on October 26, 2022;
-- on June 15, 2022, following approval from Sociedad Estatal de
Participaciones Industriales (SEPI) (the Spanish state holding
company that has a direct participation in Air Europa Holdings) and
the Instituto de Crédito Oficial (ICO) in Spain, the Group entered
into a financing arrangement with Globalia Corporación Empresarial,
S,A, ('Globalia'), whereby, the Group provided a EUR100 million
seven-year unsecured loan. The loan was convertible for a period of
two years from inception into a fixed number of the shares of Air
Europa Holdings;
-- in the first half of 2022, the Group converted 22 Airbus
A320neos options into firm orders for 17 Airbus A320neos and five
Airbus A321neos;
-- on July 28, 2022, IAG announced a further order for more
fuel-efficient Airbus A320neo family aircraft, as part of its plan
to meet climate commitments. The Group converted 12 Airbus
A320neo/A321neo options into firm orders and ordered a further 25
Airbus A320neo/A321neo aircraft, with the option to purchase 50
additional aircraft. The firm orders will replace existing Airbus
A320ceo family aircraft and are for delivery between 2025 and 2028;
the split between A320neos and A321neos will be determined nearer
to delivery. The fleet order was subsequently approved by
shareholders on October 26, 2022;
-- on August 16, 2022, the Group exercised its exchange option
and converted the EUR100 million loan it had made to Globalia into
20 per cent of the share capital of Air Europa Holdings, which has
been recognised within Other equity instruments. The fair value of
the loan immediately prior to conversion was EUR65 million,
representing a reduction of EUR35 million from inception, which has
been recorded within the Income statement. Upon converting the loan
into share capital of Air Europa Holdings, the fair value of the
investment was determined to be EUR22 million, with the difference
between the fair value of the loan immediately prior to conversion
and the fair value of the equity investment immediately after
conversion, representing EUR43 million, being recorded as a loss
within the Income statement. Further details regarding the
investment in Air Europa Holdings are given in note 19;
-- on August 23, 2022, the Group extended its $1.755 billion
secured Revolving Credit Facility accessible by British Airways,
Iberia and Aer Lingus, previously due to mature on March 23, 2024,
by a further 12 months to March 23, 2025;
-- on October 21, 2022, the Group entered into an
asset-financing structure, under which four aircraft were financed.
These transactions mature between 2032 and 2036. This arrangement
was transacted through an unconsolidated structured entity, which
in turn issued the British Airways Pass Through Certificates,
Series 2022-1, commonly referred to as EETCs . In doing so, the
asset financing structure provides committed aircraft financing of
EUR416 million; and
-- on November 17, 2022, the Group redeemed the convertible bond
issued in November 2015 for its nominal value of EUR500
million.
4 Impact of climate change on financial reporting
Significant transactions and critical accounting estimates,
assumptions and judgements in the determination of the impact of
climate change
As a result of climate change the Group has designed and
approved its Flightpath Net Zero climate strategy, which commits
the Group to net zero emissions by 2050. While approved business
plans currently have a duration of three years, the Flightpath Net
Zero climate strategy impacts both the short, medium and long-term
operations of the Group.
The details regarding the inputs and assumptions used in the
determination of the Flightpath Net Zero climate strategy include,
but are not limited to, the following that are within the control
of the Group:
-- the additional cost of the Group's commitment to increasing
the level of Sustainable Aviation Fuels (SAF) to ten per cent by
2030 and to seventy per cent by 2050;
-- the cost of incurring an increase in the level of carbon
offsetting and carbon capture schemes; and
-- the impact of introducing more fuel-efficient aircraft and
being able to operate these more efficiently.
In addition to these inputs and measures within the control of
management, Flightpath Net Zero includes assumptions pertaining to
consumers, governments and regulators regarding the following:
-- the impact on passenger demand for air travel as a result of
both passenger trends regarding climate change and government
policies;
-- investment and policy regarding the development of SAF
production facilities;
-- investment and improvements in air traffic management;
and
-- the price of carbon through the EU, Swiss and UK Emissions
Trading Schemes (ETS) and the UN Carbon Offsetting and Reduction
Scheme for International Aviation (CORSIA).
The level of uncertainty regarding the impact of these factors
increases over time. Accordingly, the Group has applied critical
estimation and judgement in the evaluation of the impact of climate
change regarding the recognition and measurement of assets and
liabilities within the financial statements.
Critical accounting estimates, assumptions and judgements - cash
flow forecast estimation
With the Flightpath Net Zero climate strategy assessing the
impact over a long-term horizon to 2050, the level of estimation
uncertainty in the determination of cash flow forecasts increases
over time. For those assets and liabilities, where their
recoverability is dependent on long-term cash flows, the following
critical accounting estimates, assumptions and judgements, to the
extent they can be reliably measured, have been applied:
a Long-term fleet plans and useful economic lives
The Group's Flightpath Net Zero climate strategy has been
developed in conjunction with the long-term fleet plans of each
operating company. This includes the annual assessment of useful
lives and the residual values of each aircraft type.
During the course of 2020 as a result of the impact of COVID-19,
the Group permanently stood down 82 aircraft (of which ten were
subsequently stood back up), their associated engines and rotable
inventories. These permanently stood down aircraft were older
generation aircraft, that were less fuel efficient, more carbon
intensive and more expensive to operate than more modern
models.
With the permanent standing down of these aircraft, coupled with
the future committed delivery of 192 fuel efficient aircraft as
detailed in note 15, the Group considers the existing fleet assets
align with the long-term fleet plans to achieve its Flightpath Net
Zero climate strategy. All aircraft in the fleet, and those due to
be delivered in the future, have the capability to utilise SAF in
their operations without impediment. Accordingly, no impairment has
arisen in the current or prior year, nor have the useful lives and
residual values of aircraft been amended, as a result of the
Group's decarbonisation plans.
b Impairment testing of the Group's cash generating units
The Group applies discounted cash flow models, for each cash
generating unit, derived from the cash flow forecasts from the
approved three-year business plans. The Group's Flightpath Net Zero
climate strategy is long-term in nature and includes commitments
that will occur at differing points over this time horizon. To the
extent that certain of those commitments occur over the short-term,
then they have been incorporated into the three-year business
plans.
The Group adjusts the final year (being the third year) of these
probability weighted cash flows to incorporate the impacts of
climate change from the Group's Flightpath Net Zero climate
strategy that are expected to occur over the medium term. These
adjustments are limited to those that: (i) the Group can reliably
estimate at the reporting date; (ii) only relate to the Group's
existing asset base in its current condition; and (iii) incorporate
legislation and regulation that is expected to be required to
achieve the Group's Flightpath Net Zero climate strategy, and which
is sufficiently progressed at the reporting date.
As a result, the Group's impairment modelling incorporates the
following aspects of the Group's Flightpath Net Zero climate
strategy through to 2030, after which time the level of uncertainty
regarding timing and costing becomes insufficiently reliable to
estimate: (i) an increase in the level of SAF consumption of 10 per
cent of the overall fuel mix; (ii) forecast cost of carbon,
including SAF, ETS allowances and CORSIA allowances (all derived
from externally sourced or derived information); (iii) the removal
of existing free ETS allowances issued by the EU member states,
Switzerland and the UK; (iv) forecast kerosene taxes applied to jet
fuel for all intra EU flight activity; and (v) assumptions
regarding the ability of the Group to recover these incremental
costs through increased ticket pricing.
In preparing the impairment models, the Group cash flow
projections are prepared on the basis of using the current fleet in
its current condition. The Group excludes the estimated cash flows
expected to arise from future restructuring unless already
committed and assets not currently in use by the Group. In
addition, for the avoidance of doubt, the Group's impairment
modelling excludes the following aspects of the Group's Flightpath
Net Zero climate strategy: (i) the expected transition to electric
and hydrogen aircraft, as well as future technological developments
to jet engines and airframes; (ii) any savings from the transition
to more fuel efficient aircraft other than those either in the
Group's fleet or those committed orders due to be delivered over
the business plan period; (iii) the benefit of the development of
carbon capture technologies and enhanced carbon offsetting
mechanisms; (iv) the required beneficial reforms to air traffic
management regulation and legislation; and (v) the required
government incentives and/or support across the supply chain.
As detailed in note 17, the Group applies a long-term growth
rate to these adjusted probability weighted cash flows, per CGU,
and each of the long-term growth rates include a specific
adjustment to reduce the rate to reflect the Group's assumptions
regarding the reduced demand and elasticity impact arising from
climate change. These impacts are derived with reference to
external market data, industry publications and internal
analysis.
Given the inherent uncertainty associated with the impact of
climate change, the Group has applied additional sensitivities in
note 17 to reflect a more adverse impact of climate change than
currently expected. This has been captured through both the
downward sensitivities of the long-term growth rates, ASKs,
operating margins and the increased fuel price sensitivity.
c Valuation of employee benefit scheme assets
The Group's employee benefit schemes are principally represented
by the British Airways APS and NAPS schemes in the UK. The schemes
are structured to make post-employment payments to members over the
long term, with the Trustee having established both return seeking
assets and liability matching assets that mature over the long-term
to align with the forecast benefit payments.
The assets of these schemes are invested predominantly in a
diversified range of equities, bonds and property. The valuation of
these assets ranges from those with quoted prices in active
markets, where prices are readily and regularly available, through
to those where the valuations are not based on observable market
data, often requiring complex valuation models. The trustees of the
schemes have integrated climate change considerations into their
long-term decision making and reporting processes across all
classes of assets, actively engaging with all fund and portfolio
managers to ensure that where unobservable inputs are required into
valuation models, that such valuation models incorporate long-term
expectations regarding the impact of climate change.
d Recoverability of deferred tax assets
In determining the recoverable amounts of the Group's deferred
tax assets, the Group applies the future cash flow projections for
a period of up to ten years derived from the approved three-year
business plans. The Group applies a medium-term growth rate
subsequent to the three-year business plans, specific to each
operating company. In considering the impact of the Group's
Flightpath Net Zero climate strategy, management adjusts this
medium-term growth rate, where applicable, to incorporate the
assumed impacts on both revenue and costs to the Group.
e The price of carbon through the EU, Swiss and UK Emissions Trading Schemes
The EU, Swiss and the UK's ETS were established to reduce
greenhouse gas emissions cost effectively. Under these schemes,
companies, including the Group, are required to buy emission
allowances, or are issued them under existing quotas. The Group is
required to surrender these allowances to the relevant authorities
annually dependent on the level of CO(2) equivalent emitted within
a 12-month period. Over time the level of available emission
allowances decreases in order to reduce total emissions, which has
the effect of increasing the price of such allowances. The Group
expects that the future price of such allowances will continue to
increase and that the free allocation of emission allowances will
cease. Given the relative illiquid nature of the emission allowance
market there is uncertainty as to the future pricing of such
allowances.
As detailed in note 2, the Group accounts for the purchase of
allowances as an addition to Intangible assets, which are measured
at amortised cost. In addition, as the Group emits CO(2) equivalent
as part of its flight operations, a provision is recorded to settle
the obligation. For emissions for which the Group has already
purchased allowances, the provision is valued at the weighted cost
of those allowances. Where the level of emissions exceeds the
amounts of allowances held, this deficit is measured at the market
price of such allowances at the reporting date.
At December 31, 2022, the Group has recorded ETS allowances
within Intangibles assets of EUR407 million, representing
sufficient allowances, by operating company, to settle its forecast
obligations through to at least December 31, 2023. At December 31,
2022, the Group has recorded a provision for settling its 2022
emissions obligation of EUR132 million.
5 Segment information
a Business segments
The chief operating decision-maker is responsible for allocating
resources and assessing performance of the operating segments, and
has been identified as the IAG Management Committee (IAG MC).
The Group has a number of entities which are managed as
individual operating companies including airline and platform
functions. Each airline operates its network operations as a single
business unit and the IAG MC assesses performance based on measures
including operating profit, and makes resource allocation decisions
for the airlines based on network profitability, primarily by
reference to the passenger markets in which the companies operate.
The objective in making resource allocation decisions is to
optimise consolidated financial results.
The Group has determined its operating segments based on the way
that it treats its businesses and the manner in which resource
allocation decisions are made. British Airways, Iberia, Vueling,
Aer Lingus and IAG Loyalty have been identified for financial
reporting purposes as reportable operating segments. LEVEL is also
an operating segment but does not exceed the quantitative
thresholds to be reportable and management has concluded that there
are currently no other reasons why LEVEL should be separately
disclosed.
The platform functions of the business primarily support the
airline operations. These activities are not considered to be
reportable operating segments as they either earn revenues
incidental to the activities of the Group and resource allocation
decisions are made based on the passenger business or are not
reviewed regularly by the IAG MC and are included within Other
Group companies.
For the year to December 31, 2022
2022
=========================================================================
Other
British Aer Group
EUR million Airways Iberia Vueling Lingus IAG Loyalty companies(1) Total
=============================== ======== ======= ======= ======= =========== ============= ========
Revenue
Passenger revenue 10,523 4,002 2,584 1,665 451 233 19,458
Cargo revenue 1,239 284 - 80 - 12 1,615
Other revenue 848 799 14 10 322 - 1,993
=============================== ======== ======= ======= ======= =========== ============= ========
External revenue 12,610 5,085 2,598 1,755 773 245 23,066
Inter-segment revenue 311 426 - 14 228 378 1,357
=============================== ======== ======= ======= ======= =========== ============= ========
Segment revenue 12,921 5,511 2,598 1,769 1,001 623 24,423
=============================== ======== ======= ======= ======= =========== ============= ========
Depreciation and amortisation
charge (1,272) (371) (222) (146) (8) (59) (2,078)
Impairment reversal - - 8 - - - 8
Operating profit/(loss) 362 382 195 45 282 (10) 1,256
=============================== ======== ======= ======= ======= =========== ============= ========
Exceptional items(2) 23 - 8 - - - 31
Operating profit/(loss) before
exceptional items 339 382 187 45 282 (10) 1,225
=============================== ======== ======= ======= ======= =========== ============= ========
Net non-operating costs (841)
=============================== ======== ======= ======= ======= =========== ============= ========
Profit before tax 415
=============================== ======== ======= ======= ======= =========== ============= ========
Total assets 23,788 9,200 3,177 1,946 3,303 (2,111) 39,303
Total liabilities (20,975) (9,005) (3,774) (1,942) (2,914) 1,329 (37,281)
=============================== ======== ======= ======= ======= =========== ============= ========
1 Includes eliminations on total assets of EUR16,159 million and
total liabilities of EUR5,755 million.
2 For details on exceptional items refer to the Alternative performance measures section.
For the year to December 31, 2021
2021
=================================================================================
Other
British Group
EUR million Airways Iberia Vueling Aer Lingus IAG Loyalty(1) companies(1,2) Total
=============================== ======== ======= ======= ========== ============== =============== ========
Revenue
Passenger revenue 2,607 1,707 1,011 302 180 28 5,835
Cargo revenue 1,268 333 - 65 - 7 1,673
Other revenue 314 443 5 4 181 - 947
=============================== ======== ======= ======= ========== ============== =============== ========
External revenue 4,189 2,483 1,016 371 361 35 8,455
Inter-segment revenue 129 301 - 5 77 293 805
=============================== ======== ======= ======= ========== ============== =============== ========
Segment revenue 4,318 2,784 1,016 376 438 328 9,260
=============================== ======== ======= ======= ========== ============== =============== ========
Depreciation and amortisation
charge (1,104) (350) (240) (140) (7) (74) (1,915)
Impairment (charge)/reversal (30) - 13 - - - (17)
Operating (loss)/profit (2,041) (220) (233) (338) 131 (64) (2,765)
=============================== ======== ======= ======= ========== ============== =============== ========
Exceptional items(3) 151 14 29 9 - 2 205
Operating (loss)/profit before
exceptional items (2,192) (234) (262) (347) 131 (66) (2,970)
=============================== ======== ======= ======= ========== ============== =============== ========
Net non-operating costs(4) (742)
=============================== ======== ======= ======= ========== ============== =============== ========
Loss before tax (3,507)
=============================== ======== ======= ======= ========== ============== =============== ========
Total assets 20,891 6,919 2,671 1,820 3,184 (1,079) 34,406
Total liabilities (18,795) (7,062) (3,364) (1,806) (3,009) 476 (33,560)
=============================== ======== ======= ======= ========== ============== =============== ========
1 In 2022, based on size thresholds the Group determined that
IAG Loyalty was a reportable segment and accordingly presented the
financial information of the segment separately. The prior year
segment note has been re-presented to align with the current year
presentation.
2 Includes eliminations on total assets of EUR16,023 million and
total liabilities of EUR5,833 million.
3 For details on exceptional items refer to the Alternative performance measures section.
4 Includes EUR75 million of exceptional items relating to the
Air Europa Holdings termination settlement payment.
b Geographical analysis
Revenue by area of original sale
Year to December
31
==================
EUR million 2022 2021
============== ========= =======
UK 7,923 2,435
Spain 4,313 2,189
USA 3,735 931
Rest of world 7,095 2,900
============== ========= =======
23,066 8,455
============== ========= =======
Assets by area
December 31, 2022
Property,
plant Intangible
EUR million and equipment assets
============== ============== ==========
UK 12,026 1,490
Spain 5,082 1,462
USA 47 9
Rest of world 1,191 595
============== ============== ==========
18,346 3,556
============== ============== ==========
December 31, 2021
Property,
plant Intangible
EUR million and equipment assets
============== ============== ==========
UK 11,544 1,317
Spain 4,404 1,333
USA 76 13
Rest of world 1,137 576
============== ============== ==========
17,161 3,239
============== ============== ==========
6 Expenses by nature
Operating result is arrived at after charging
Depreciation, amortisation and impairment of non-current
assets:
EUR million 2022 2021
=========================================================== ===== =====
Depreciation charge on right of use assets 1,092 1,058
Depreciation charge on owned assets 748 638
Gain arising on de-designation of foreign exchange hedges
recorded in Depreciation(1) (29) -
Impairment reversal on owned property, plant and equipment - (4)
Amortisation and impairment of intangible assets 218 178
Impairment (reversal)/charge on right of use assets (8) 20
Depreciation charge on other leasehold assets 49 42
=========================================================== ===== =====
2,070 1,932
=========================================================== ===== =====
1 Included in the Depreciation charge, not included within note
13 is a credit of EUR29 million relating to the de-designation of
hedge accounting that had been applied to mitigate the foreign
currency exposure on aircraft purchases.
Cost of inventories:
EUR million 2022 2021
============================================= ==== =====
Cost of inventories recognised as an expense 749 1,038
============================================= ==== =====
749 1,038
============================================= ==== =====
7 Auditor's remuneration
The fees for the year to December 31, 2022, for audit and
non-audit services provided by the auditor of the Group's
consolidated financial statements and of certain individual
financial statements of the consolidated companies, KPMG Auditores
S.L., and by companies belonging to KPMG's network, were as
follows:
EUR'000 2022 2021
=============================================================== ====== =====
Fees payable for the audit of the Group and individual
accounts 6,378 4,860
Fees payable for other services:
Audit of the Group's subsidiaries pursuant to legislation 985 532
Other services pursuant to legislation 195 431
Other audit and assurance services 1,644 569
Services relating to working capital review 1,022 776
=============================================================== ====== =====
10,224 7,168
=============================================================== ====== =====
Fees payable to the Group's auditor for the audit of the Group's
pension scheme during the year total EUR236 thousand (2021: EUR182
thousand).
8 Employee costs and numbers
EUR million 2022 2021
========================================= ===== =====
Wages and salaries 3,207 2,135
Social security costs 519 307
Costs related to pension scheme benefits 272 232
Share-based payment charge 39 23
Other employee costs(1) 610 316
========================================= ===== =====
Total employee costs 4,647 3,013
========================================= ===== =====
1 Other employee costs include allowances and accommodation for crew.
The number of employees during the year and at December 31 was
as follows:
2022 2021
=========================================== ===========================================
December 31, December 31,
2022 2021
========================= =========================
Average Average
number Number Percentage number Number Percentage
of employees(1) of employees of women of employees(1) of employees of women
===================== ================ ============= ========== ================ ============= ==========
In the air:
Cabin crew 19,801 22,278 70% 9,304 17,865 70%
Pilots 7,340 7,864 7% 3,879 7,607 6%
On the ground:
Airports 13,798 15,087 38% 6,728 12,842 37%
Corporate 11,741 13,819 49% 8,612 10,709 52%
Maintenance 6,908 6,775 8% 6,345 7,448 8%
Senior executives 212 221 34% 167 187 33%
===================== ================ ============= ========== ================ ============= ==========
59,800 66,044 44% 35,035 56,658 42%
===================== ================ ============= ========== ================ ============= ==========
1 The average number of employees excludes those employees who
were on furlough, wage support and equivalent schemes, including
the Temporary Redundancy Plan arrangements in Spain. For further
details see note 34. The total average number of employees
including these schemes is 61,192.
The number of employees is based on actual headcount at December
31. The average manpower equivalent for 2022 was 59,505 (2021:
50,222), which includes employees on furlough, wage support and
equivalent schemes, including Temporary Redundancy Plan
arrangements in Spain.
9 Finance costs, income and other non-operating charges
a Finance costs
EUR million 2022 2021
========================================== ======= =====
Interest expense on:
Bank borrowings (191) (133)
Asset financed liabilities (107) (65)
Lease liabilities (464) (408)
Bonds(1) (83) (63)
Provisions unwinding of discount (43) (12)
Other borrowings(1) (102) (90)
Capitalised interest on progress payments 11 3
Other finance costs (38) (62)
========================================== ======= =====
(1,017) (830)
========================================== ======= =====
1 The 2021 total finance costs include a reclassification of
results to conform with the current basis of presentation. A charge
of EUR63 million has been reclassified from Other borrowings to
Bonds. There is no change to total finance costs.
b Finance income
EUR million 2022 2021
============================================ ==== ====
Interest on other interest-bearing deposits 51 5
Other finance income 1 8
============================================ ==== ====
52 13
============================================ ==== ====
c Net change in fair value of financial instruments
EUR million 2022 2021
============================================================ ==== ====
Net change in the fair value of convertible bond 159 89
Net fair value losses on financial assets at fair value
through profit or loss (35) -
Net fair value losses on de-recognition of financial assets
and recognition of other equity investment (43) -
============================================================ ==== ====
81 89
============================================================ ==== ====
d Net financing credit/(charge) relating to pensions
EUR million 2022 2021
=================================================== ==== ====
Net financing credit/(charge) relating to pensions 26 (2)
=================================================== ==== ====
e Other non-operating charges
EUR million 2022 2021
================================================================== ==== ====
Gains on sale of property, plant and equipment and investments(1) 22 59
Charge related to equity investments (note 19) (3) -
Share of profits in investments accounted for using the
equity method (note 18) 5 2
Realised gains on derivatives not qualifying for hedge
accounting 190 37
Unrealised (losses)/gains on derivatives not qualifying
for hedge accounting (82) 47
Air Europa Holdings termination settlement payment - (75)
================================================================== ==== ====
132 70
================================================================== ==== ====
1 2021 includes a gain of EUR24 million arising from the
disposal of Compañía Auxiliar al Cargo Exprés, S.A. and Auxiliar
Logística Aeroportuaria, S.A. The Group previously owned 75 per
cent of the share capital of these companies and disposed of them
during the fourth quarter of 2021. The disposal led to the
de-recognition of EUR12 million of net assets from the consolidated
financial statements of the Group.
10 Tax
a Tax credits/(charges)
Tax credits/(charges) recognised in the Income statement, Other
comprehensive income and directly in equity:
2022 2021
=============================================== ================================================
Other Recognised Other Recognised
Income comprehensive directly Income comprehensive directly
EUR million statement income in equity Total statement income in equity Total
================= ========== ================ ========== ===== ========== ================= ========== =====
Current tax
Movement in
respect
of prior years (6) - - (6) 10 - (1) 9
Movement in
respect
of current year (64) 3 - (61) (9) 5 - (4)
================= ========== ================ ========== ===== ========== ================= ========== =====
Total current tax (70) 3 - (67) 1 5 (1) 5
================= ========== ================ ========== ===== ========== ================= ========== =====
Deferred tax
Movement in
respect
of prior years (36) (2) - (38) (23) - - (23)
Movement in
respect
of current year 105 (60) 5 50 518 (420) - 98
Rate change/rate
differences 17 (10) - 7 78 61 - 139
================= ========== ================ ========== ===== ========== ================= ========== =====
Total deferred
tax 86 (72) 5 19 573 (359) - 214
================= ========== ================ ========== ===== ========== ================= ========== =====
Total tax 16 (69) 5 (48) 574 (354) (1) 219
================= ========== ================ ========== ===== ========== ================= ========== =====
The current tax credit in Other comprehensive income relates to
the fair value movements on the convertible bond of EUR2 million
(2021: EUR5 million) and movements relating to employee benefit
plans of EUR1 million (2021: EURnil).
Tax recognised directly in equity relates to cash flow hedges of
EUR5 million (2021: EURnil) and share-based payment schemes of
EURnil (2021: EUR1 million).
Within tax in Other comprehensive income is a tax credit of EUR8
million (2021: tax charge of EUR123 million) that may be
reclassified to the Income statement and a tax charge of EUR77
million (2021: tax charge of EUR231 million) that will not.
b Current tax asset/(liability)
EUR million 2022 2021
============================== ==== ====
Balance at January 1 (5) 53
Income statement (70) 1
Other comprehensive income 3 5
Recognised directly in equity - (1)
Cash 134 (63)
Exchange movements and other 2 -
============================== ==== ====
Balance at December 31 64 (5)
============================== ==== ====
Current tax asset 72 16
Current tax liability (8) (21)
============================== ==== ====
Balance at December 31 64 (5)
============================== ==== ====
c Deferred tax asset/(liability)
Tax
loss
Employee Fair carried
Right leaving Employee value Share-based forward Other
Fixed of use Lease indemnities benefit gains/ payment and tax temporary
EUR million assets assets liabilities and others plans losses(1) schemes credits differences Total
============== ====== ====== =========== =========== ======== ========= =========== ======= =========== =====
Balance at
January
1, 2022 (477) (220) 19 196 62 57 11 1,573 61 1,282
Income
statement (194) 169 (9) 19 1 - 6 87 7 86
Other
comprehensive
income(2) - - - (17) (12) (46) - 3 - (72)
Recognised
directly
in equity - - - - - 5 - - - 5
Exchange
movements
and other (9) 7 (1) (1) 3 (19) - (27) 28 (19)
============== ====== ====== =========== =========== ======== ========= =========== ======= =========== =====
Balance at
December
31, 2022 (680) (44) 9 197 54 (3) 17 1,636 96 1,282
============== ====== ====== =========== =========== ======== ========= =========== ======= =========== =====
Balance at
January
1, 2021 (589) (248) 21 194 298 195 10 1,090 64 1,035
Income
statement 106 67 (3) 9 (11) (14) 1 408 10 573
Other
comprehensive
income - - - (9) (237) (133) - 20 - (359)
Recognised
directly
in equity - - - - - - - - - -
Exchange
movements
and other 6 (39) 1 2 12 9 - 55 (13) 33
============== ====== ====== =========== =========== ======== ========= =========== ======= =========== =====
Balance at
December
31, 2021 (477) (220) 19 196 62 57 11 1,573 61 1,282
============== ====== ====== =========== =========== ======== ========= =========== ======= =========== =====
1 Fair value gains/losses include both the Cash flow hedge
reserve and the Cost of hedging reserve, of which the movement in
relation to Other comprehensive income recognised in the Cash flow
hedge reserve for 2022 was EUR68 million (refer to note 28d).
2 Movements in Other comprehensive income relating to
post-employment benefit obligations increase the Group's tax losses
by EUR3 million (tax value) at December 31, 2022 (2021: EUR20
million) and have therefore been disclosed as tax loss carried
forward and tax credits in the above table.
EUR million 2022 2021
======================= ===== =====
Deferred tax asset 1,282 1,282
Deferred tax liability - -
======================= ===== =====
Balance at December 31 1,282 1,282
======================= ===== =====
The deferred tax assets mainly arise in Spain and the UK and are
expected to reverse in full beyond one year. Recognition of the
deferred tax assets is supported by the expected reversal of
deferred tax liabilities in corresponding periods, and projections
of operating performance laid out in the management approved
business plans.
d Reconciliation of the total tax charge in the Income statement
The tax (charge)/credit is calculated at the domestic rates
applicable to pro ts/(losses) in the country in which the
profits/(losses) arise. The differences between the expected tax
charge (2021: credit) and the actual tax credit (2021: credit) on
the profit for the year to December 31, 2022 (2021: loss) are
explained below:
EUR million 2022 2021
========================================================= ===== =======
Accounting profit/(loss) before tax 415 (3,507)
========================================================= ===== =======
Weighted average tax (charge)/credit of the Group(1) (102) 683
Unrecognised losses and deductible temporary differences
arising in the year (2) (193)
Disposal and write down of investments - 8
Effect of tax rate changes 17 78
Prior year tax assets recognised 153 44
Effect of lower tax rate in the Canary Islands 5 (23)
Movement in respect of prior years (42) (13)
Non-deductible expenses (22) (15)
Other items 9 5
========================================================= ===== =======
Tax credit in the Income statement 16 574
========================================================= ===== =======
1 The expected tax credit is calculated by aggregating the
expected tax (charges)/credits arising in each company in the Group
and changes each year as tax rates and profit mix change. The 2022
corporate tax rates for the Group's main countries of operation are
Spain 25% (2021: 25%), the UK 19% (2021: 19%) and Ireland 12.5%
(2021: 12.5%).
e Payroll-related taxes and UK Air Passenger Duty
The Group was also subject to other taxes paid during the year
which are as follows:
EUR million 2022 2021
====================== ===== ====
Payroll related taxes 522 310
UK Air Passenger Duty 722 204
====================== ===== ====
1,244 514
====================== ===== ====
f Factors that may affect future tax charges
Unrecognised deductible temporary differences and losses
EUR million 2022 2021
========================================= ===== =====
Income tax losses
Spanish corporate income tax losses 1,596 1,993
Openskies SASU trading losses 405 390
UK trading losses 72 72
Other trading losses 11 3
========================================= ===== =====
2,084 2,458
Other losses and temporary differences
Spanish deductible temporary differences 481 648
UK capital losses 343 361
Irish capital losses 17 17
========================================= ===== =====
841 1,026
========================================= ===== =====
None of the unrecognised temporary differences have an expiry
date. Further information with regard to the sensitivity of the
recoverability of deferred tax assets is given in note 2.
Unrecognised temporary differences - investment in subsidiaries
and associates
No deferred tax liability has been recognised in respect of
EUR823 million (2021: EUR617 million) of temporary differences
relating to subsidiaries and associates. The Group either controls
the reversal of these temporary differences and it is probable that
they will not reverse in the foreseeable future or no tax
consequences would arise from their reversal to a material
extent.
Tax rate changes
On March 3, 2021 the UK Chancellor of the Exchequer announced
that legislation would be introduced in the Finance Bill 2021 to
set the main rate of corporation tax at 25 per cent from April
2023. On May 24, 2021 the Finance Bill was substantively enacted,
which has led to the remeasurement of deferred tax balances and
will increase the Group's future current tax charge accordingly. As
a result of the remeasurement of deferred tax balances in UK
entities, a credit of EUR17 million (2021: EUR78 million credit) is
recorded in the Income statement and a charge of EUR10 million
(2021: EUR61 million credit) is recorded in Other comprehensive
income.
On October 8, 2021 Ireland announced that it would increase the
rate of corporation tax for certain multinational businesses to 15
per cent with effect from 2023. This expected tax rate change has
not been reflected in these results because it has not yet been
substantively enacted. The effect of the proposed rate change is
not expected to be material over the period of the management
approved business plan.
Tax policy developments
The Group is monitoring the OECD's proposed two-pillar solution
to address the tax challenges arising from the digitalisation of
the economy. This proposed reform to the international tax system
addresses the geographical allocation of profits for the purposes
of taxation and is designed to ensure that multinational
enterprises will be subject to a minimum 15 per cent effective tax
rate. On December 15, 2022, the Council of the European Union
formally adopted the EU Pillar Two Directive. Member States are
expected to transpose the Directive into national law by the end of
2023 and effective from 2024. The Group is continuing to assess the
implications of the reform and these will be determined when the
relevant legislation is finalised.
g Tax-related contingent liabilities
The Group has certain contingent liabilities that could be
reliably estimated, across all taxes, at December 31, 2022
amounting to EUR110 million (December 31, 2021: EUR106 million). No
material losses are likely to arise from such contingent
liabilities. As such the Group does not consider it appropriate to
make a provision for these amounts. Included in the tax related
contingent liabilities are the following:
Merger gain
Following tax audits covering the period 2011 to 2014, the
Spanish Tax Authorities issued a corporate income tax assessment to
the Company regarding the merger in 2011 between British Airways
and Iberia. The maximum exposure in this case is EUR98 million
(December 31, 2021: EUR95 million), being the amount in the tax
assessment with an estimate of the interest accrued on that
assessment through to December 31, 2022.
The Company appealed the assessment to the Tribunal
Económico-Administrativo Central or 'TEAC' (Central Administrative
Tax Tribunal). On October 23, 2019, the TEAC ruled in favour of the
Spanish Tax Authorities. The Company subsequently appealed this
ruling to the Audiencia Nacional (National High Court) on December
20, 2019, and on July 24, 2020 filed submissions in support of its
case. The Company does not expect a hearing at the National High
Court until late 2023 at the earliest.
The Company disputes the technical merits of the assessment and
ruling of the TEAC, both in terms of whether a gain arose and in
terms of the quantum of any gain. The Company believes that it has
strong arguments to support its appeals. The Company does not
consider it appropriate to make a provision for these amounts and
accordingly has classified this matter as a contingent
liability.
IAG Loyalty VAT
In the year ended December 31, 2022 and through to the date of
this report, His Majesty's Revenue and Customs (HMRC) has issued
notices of VAT assessments for the 13 months ended March 2019 to
Avios Group (AGL) Limited, a controlled undertaking of the Group
trading as IAG Loyalty. At December 31, 2022 and through to the
date of these financial statements HMRC's enquiries into IAG
Loyalty's VAT position remain at an early stage. The Group has
reviewed the position with its advisors and considers it has strong
arguments to support its VAT accounting, including having received
rulings previously from HMRC on the matter, and therefore does not
consider it probable that an adverse ruling will eventuate. Given
the above the Group does not consider it appropriate to record any
provision. It is further not possible to estimate reliably any
exposure that may arise from this matter until HMRC's enquiries are
further progressed. The Group expects further developments of these
matters during the remainder of 2023.
11 Earnings per share
EUR million 2022 2021
========================================================= ===== =======
Earnings/(losses) attributable to equity holders of the
parent for basic earnings/(losses) per share 431 (2,933)
Income statement impact of convertible bonds (104) -
========================================================= ===== =======
Diluted earnings/(losses) attributable to equity holders
of the parent and diluted earnings/(losses) per share 327 (2,933)
========================================================= ===== =======
2022 2021
Number Number
'000 '000
======================================================== ========= =========
Weighted average number of ordinary shares in issue 4,958,420 4,963,945
======================================================== ========= =========
Weighted average number of ordinary shares in issue for
diluted earnings/(losses) per share 5,344,152 4,963,945
======================================================== ========= =========
EUR cents 2022 2021
==================================== ==== ======
Basic earnings/(losses) per share 8.7 (59.1)
==================================== ==== ======
Diluted earnings/(losses) per share 6.1 (59.1)
==================================== ==== ======
The effect of the assumed conversion of the EUR825 million
convertible bond 2028 and outstanding employee share schemes have a
dilutive impact on the earnings per share for the year to December
31, 2022 due to the reported profit after tax for the year, but are
antidilutive for the year to December 31, 2021 due to the reported
loss after tax for the year, and therefore have not been included
in the diluted loss per share calculation for 2021.
For information relating to Adjusted earnings/(losses) per share
refer to the Alternative performance measures section.
12 Dividends
The Directors propose that no dividend be paid for the year to
December 31, 2022 (2021: EURnil).
The future dividend capacity of the Group is dependent on the
liquidity requirements and the distributable reserves of the
Group's main operating companies and their capacity to pay
dividends to the Company, together with the Company's distributable
reserves and liquidity.
Certain debt obligations place restrictions or conditions on the
payment of dividends from the Group's main operating companies to
the Company, including a loan to British Airways partially
guaranteed by UKEF and loans to Iberia and Vueling partially
guaranteed by the Instituto de Crédito Oficial (ICO) in Spain;
these loans can be repaid early without penalty at the election of
each company. In Spain, Iberia and Vueling are not permitted to
make dividend payments in the reporting period in which they are in
receipt of Expedientes de Regulación Temporal de Empleo or 'ERTE'
(Temporary Employment Regulation Records). British Airways agreed
with the Trustee of its main UK defined benefit pension scheme
(NAPS) as part of the triennial valuation as at March 31, 2021
that, subject to the over-funding protection mechanism, no
dividends will be paid to IAG before December 31, 2023 and that any
dividends paid to IAG from January 1, 2024 through to September 30,
2025, will trigger a pension contribution of 50 per cent of the
amount of the dividend. Further details on the British Airways
dividend restrictions agreed with NAPS are given in note 32a.
13 Property, plant and equipment
EUR million Fleet Property Equipment Total
============================================== ======= ======== ========= =======
Cost
Balance at January 1, 2021 26,936 2,982 1,501 31,419
Additions 709 38 37 784
Modification of leases 236 (2) (26) 208
Disposals (3,035) (74) (135) (3,244)
Reclassifications (4) - (1) (5)
Transfers to Non-current assets held for sale
(note 16) (111) - - (111)
Exchange movements 1,265 181 74 1,520
============================================== ======= ======== ========= =======
Balance at December 31, 2021 25,996 3,125 1,450 30,571
Additions 3,765 61 101 3,927
Modification of leases 241 129 - 370
Disposals (1,700) (406) (120) (2,226)
Reclassifications (4) - - (4)
Transfers to Non-current assets held for sale
(note 16) (44) - - (44)
Exchange movements (552) (73) (31) (656)
============================================== ======= ======== ========= =======
December 31, 2022 27,702 2,836 1,400 31,938
============================================== ======= ======== ========= =======
Depreciation and impairment
Balance at January 1, 2021 11,571 1,282 1,035 13,888
Depreciation charge for the year 1,500 154 84 1,738
Impairment (reversal)/charge for the year(1) (3) 19 - 16
Disposals (2,699) (63) (105) (2,867)
Modification of leases - - (14) (14)
Transfers to Non-current assets held for sale
(note 16) (91) - - (91)
Exchange movements 602 81 57 740
============================================== ======= ======== ========= =======
Balance at December 31, 2021 10,880 1,473 1,057 13,410
Depreciation charge for the year 1,642 168 79 1,889
Impairment reversal for the year(1) (8) - - (8)
Disposals (857) (403) (107) (1,367)
Transfers to Non-current assets held for sale
(note 16) (25) - - (25)
Exchange movements (247) (32) (28) (307)
============================================== ======= ======== ========= =======
December 31, 2022 11,385 1,206 1,001 13,592
============================================== ======= ======== ========= =======
1 For details regarding the impairment reversal on fleet assets
refer to the Alternative performance measures section. For details
regarding the operating segment in which the impairment
(reversal)/charge arose, refer to note 5.
Net book values
December 31, 2022 16,317 1,630 399 18,346
December 31, 2021 15,116 1,652 393 17,161
================== ====== ===== === ======
Analysis at December 31, 2022
Owned 7,242 833 338 8,413
Right of use assets (note 14) 7,993 684 20 8,697
Progress payments 1,071 113 40 1,224
Assets not in current use 11 - 1 12
============================== ====== ===== === ======
Property, plant and equipment 16,317 1,630 399 18,346
============================== ====== ===== === ======
Analysis at December 31, 2021
Owned 5,736 916 330 6,982
Right of use assets (note 14) 8,626 640 37 9,303
Progress payments 748 96 26 870
Assets not in current use 6 - - 6
============================== ====== ===== === ======
Property, plant and equipment 15,116 1,652 393 17,161
============================== ====== ===== === ======
The net book value of property comprises:
EUR million 2022 2021
======================================================== ===== =====
Freehold 469 495
Right of use assets (note 14) 684 640
Long leasehold improvements with a contractual life in
excess of 50 years 301 311
Short leasehold improvements with a contractual life of
less than 50 years 176 206
======================================================== ===== =====
Property 1,630 1,652
======================================================== ===== =====
At December 31, 2022, bank and other loans of the Group are
secured on owned fleet assets with a net book value of EUR3,931
million
(2021: EUR3,081 million).
14 Leases
a Amounts recognised in the Consolidated balance sheet
Property, plant and equipment includes the following amounts
relating to right of use assets:
EUR million Fleet Property Equipment Total
==================================== ====== ======== ========= ======
Cost
Balance at January 1, 2021 14,008 893 99 15,000
Additions 240 15 - 255
Modifications of leases 236 (2) (26) 208
Disposals (72) (12) (1) (85)
Reclassifications(1) (759) - - (759)
Exchange movements 565 55 2 622
==================================== ====== ======== ========= ======
December 31, 2021 14,218 949 74 15,241
==================================== ====== ======== ========= ======
Additions 586 28 1 615
Modification of leases 241 129 - 370
Disposals (214) (171) (2) (387)
Reclassifications(1) (849) - (24) (873)
Exchange movements (232) (24) - (256)
==================================== ====== ======== ========= ======
December 31, 2022 13,750 911 49 14,710
==================================== ====== ======== ========= ======
Depreciation and impairment
Balance at January 1, 2021 4,884 198 43 5,125
Depreciation charge for the year 963 87 8 1,058
Impairment charge for the year(2) 4 16 - 20
Disposals (71) (4) (1) (76)
Modification of leases - - (14) (14)
Reclassifications(1) (394) - - (394)
Exchange movements 206 12 1 219
==================================== ====== ======== ========= ======
December 31, 2021 5,592 309 37 5,938
==================================== ====== ======== ========= ======
Depreciation charge for the year 991 93 8 1,092
Impairment reversal for the year(2) (8) - - (8)
Disposals (191) (170) (1) (362)
Reclassifications(1) (528) - (14) (542)
Exchange movements (99) (5) (1) (105)
==================================== ====== ======== ========= ======
December 31, 2022 5,757 227 29 6,013
==================================== ====== ======== ========= ======
Net book value
December 31, 2022 7,993 684 20 8,697
December 31, 2021 8,626 640 37 9,303
==================================== ====== ======== ========= ======
1 Amounts with a net book value of EUR331 million (2021: EUR365
million) were reclassified from ROU assets to Owned Property, plant
and equipment at the cessation of the respective leases. The assets
reclassified relate to leases with purchase options that were
grandfathered as ROU assets upon transition to IFRS 16, for which
the Group had been depreciating over the expected useful life of
the aircraft, incorporating the purchase option.
2 For details regarding the impairment (reversal)/charge on
fleet assets refer to the Alternative performance measures
section.
Interest-bearing long-term borrowings includes the following
amount relating to lease liabilities:
EUR million 2022 2021
======================== ======= =======
January 1 9,637 10,024
Additions 639 310
Modifications of leases 378 208
Repayments (1,886) (1,855)
Interest expense 464 400
Disposals (28) (8)
Exchange movements 415 558
======================== ======= =======
December 31 9,619 9,637
======================== ======= =======
Current 1,766 1,521
Non-current 7,853 8,116
======================== ======= =======
b Amounts recognised in the Consolidated income statement
EUR million 2022 2021
============================================================= ===== =====
Amounts not included in the measurement of lease liabilities
Variable lease payments 2 1
Expenses relating to short-term leases 39 26
Amounts expensed as a result of the recognition of ROU
assets and lease liabilities
Interest expense on lease liabilities 464 400
Gains/(losses) arising from sale and leaseback transactions 1 (6)
Depreciation charge for the year 1,092 1,058
Impairment (reversal)/charge for the year (8) 20
============================================================= ===== =====
During 2020 the IASB issued 'COVID-19 related rent concessions -
amendment to IFRS 16 Leases' to provide a practical expedient to
lessees from applying IFRS 16 guidance on lease modification
accounting for rent concessions for those lease modifications
arising as a direct result of COVID-19. During 2021, the IASB
extended the period for the application of the practical
expedient.
The Group has applied this practical expedient to all such
modifications in the preparation of the consolidated financial
statements. The net impact on the Income statement for 2022 was
EURnil (2021: credit of EUR8 million) reflecting the changes to
lease payments that arose from such concessions.
c Amounts recognised in the Consolidated cash flow statement
EUR million 2022 2021(1)
================================================================ ===== =======
Cash flows arising from transactions giving rise to lease
liabilities
Total cash outflows arising from lease liabilities - aircraft 1,699 1,711
Total cash outflows arising from lease liabilities - other 178 137
Total cash inflows arising from sale and leaseback transactions
- aircraft 718 213
Cash flows arising from transactions that do not give
rise to the recognition of lease liabilities
Total cash outflows arising from short-term leases, low-value
assets and variable lease payments 41 27
Total cash outflows arising from asset financed liabilities 292 209
================================================================ ===== =======
1 During 2022, the Group has re-presented cash flow amounts to
disclose amounts arising from all contractual leases as opposed to
only those that give rise to right of use assets and lease
liabilities.
The Group is not exposed to future cash outflows as at December
31, 2022 and December 31, 2021, for which no amount has been
recognised in relation to leases not yet commenced to which the
Group is committed.
d Maturity profile of the lease liabilities
The maturity profile of the lease liabilities is disclosed in
note 27f.
e Extension options
The Group has certain leases which contain extension options
exercisable by the Group prior to the non-cancellable contract
period. Where practicable, the Group seeks to include extension
options in new leases to provide operational flexibility. The Group
assesses at lease commencement whether it is reasonably certain to
exercise the extension options.
The Group is exposed to future cash outflows (on an undiscounted
basis) at December 31, 2022, for which no amount has been
recognised, for potential extension options of EUR945 million
(2021: EUR795 million) due to it not being reasonably certain that
these leases will be extended.
f Lessor accounting
The Group leases out certain of its property, plant and
equipment. The Group has classified those leases that transfer
substantially all of the risks and rewards of ownership to the
lessee as finance leases and those leases that do not transfer
substantially all of the risks and rewards of ownership to the
lessee as operating leases.
Finance leases
Rental income from finance leases recognised by the Group in
2022 was EUR4 million (2021: EURnil). Rental income is recorded
within Property, IT and other within the Income statement.
The following table sets out a maturity analysis of finance
lease receipts, showing the undiscounted lease receipts to be
received after the reporting date:
EUR million 2022 2021
===================== ==== ====
Within one year 2 4
One to two years 6 5
Two to five years - 2
More than five years - -
===================== ==== ====
Total 8 11
===================== ==== ====
15 Capital expenditure commitments
Capital expenditure authorised and contracted but not provided
for in the accounts, including outstanding aircraft commitments, at
December 31, 2022 amounted to EUR13,749 million (December 31, 2021:
EUR10,911 million). The outstanding aircraft commitments including
the expected delivery timeframes, totalling EUR13,484 million
(2021: EUR10,813 million), are as follows:
Aircraft future deliveries at December 31 2022(1) 2021(1)
========================================== ======= =======
Airbus A320 (from 2023 to 2028) 45 22
Airbus A321 (from 2023 to 2028) 46 20
Airbus A321 XLR (from 2024 to 2026) 14 14
Airbus A350-900 (from 2023 to 2030) 7 16
Airbus A350-1000 (from 2023 to 2024) 5 10
Boeing 777-9 (from 2026 to 2028) 18 18
Boeing 787-10 (from 2023 to 2024) 7 10
Boeing 737-8200 (from 2024 to 2025) 25 -
Boeing 737-10 (from 2026 to 2027) 25 -
========================================== ======= =======
Total 192 110
========================================== ======= =======
1 Capital commitments exclude options to purchase additional aircraft.
In May 2022, the Group agreed to purchase 25 Boeing 737-8200 and
25 737-10 aircraft, with 100 options to purchase further such
aircraft. In addition, in July 2022, the Group agreed to exercise
its option over 12 Airbus A320neos/A321neos and to purchase 25
Airbus A320neos/A321neos with 50 options to purchase further such
aircraft. The determination of the split between A320neos and
A321neos will be made closer to delivery. Both of these agreements
were subject to shareholder approval and were subsequently approved
at the Extraordinary General Meeting of the Company on October 26,
2022.
The majority of these commitments are denominated in US dollars
translated at the closing exchange rate at the reporting date and
include escalation clauses dependent on the timing of aircraft
deliveries. Under the terms of the committed purchase agreements,
the Group is required to make periodic advance payments towards the
purchase price, with the commitments above stated net of advance
payments that have been made at the reporting date.
The Group has certain rights to defer aircraft deliveries and to
cancel commitments in the event of significant delays to aircraft
deliveries caused by the aircraft manufacturers. No such rights had
been exercised as at December 31, 2022.
16 Non-current assets held for sale
As at December 31, 2022, the non-current assets held for sale of
EUR19 million represented two Airbus A321 aircraft. No gain or loss
was recognised on classification as non-current assets held for
sale. These aircraft were presented within the British Airways
segment and are expected to exit the business during 2023.
As at December 31, 2021, the non-current assets held for sale of
EUR20 million represented three Airbus A321 aircraft. No gain or
loss was recognised on classification as non-current assets held
for sale. These aircraft are presented within the Aer Lingus
segment and exited the business during 2022.
17 Intangible assets and impairment review
a Intangible assets
Customer
loyalty Landing ETS
EUR million Goodwill Brand programmes rights(1) Software assets(2) Other(2) Total
============================ ======== ===== =========== ========== ======== ========== ======== =====
Cost
Balance at January 1,
2021 593 451 253 1,555 1,474 76 85 4,487
Additions - - - - 149 33 1 183
Disposals - - - (6) (19) (49) - (74)
Exchange movements 3 - - 56 70 2 1 132
============================ ======== ===== =========== ========== ======== ========== ======== =====
Balance at December
31, 2021 596 451 253 1,605 1,674 62 87 4,728
Additions - - - 14 218 360 1 593
Disposals - - - (6) (52) (9) - (67)
Exchange movements (1) - - (25) (34) (6) - (66)
============================ ======== ===== =========== ========== ======== ========== ======== =====
December 31, 2022 595 451 253 1,588 1,806 407 88 5,188
============================ ======== ===== =========== ========== ======== ========== ======== =====
Amortisation and impairment
Balance at January 1,
2021 249 - - 132 836 - 62 1,279
Amortisation charge
for the year - - - 6 167 - 5 178
Disposals - - - - (13) - - (13)
Exchange movements - - - 4 42 - (1) 45
============================ ======== ===== =========== ========== ======== ========== ======== =====
Balance at December
31, 2021 249 - - 142 1,032 - 66 1,489
Amortisation charge
for the year - - - 6 210 - 2 218
Disposals - - - - (50) - - (50)
Exchange movements - - - (2) (23) - - (25)
============================ ======== ===== =========== ========== ======== ========== ======== =====
December 31, 2022 249 - - 146 1,169 - 68 1,632
============================ ======== ===== =========== ========== ======== ========== ======== =====
Net book values
December 31, 2022 346 451 253 1,442 637 407 20 3,556
December 31, 2021 347 451 253 1,463 642 62 21 3,239
============================ ======== ===== =========== ========== ======== ========== ======== =====
1 The net book value includes non-UK and non-EU based landing
rights of EUR69 million (2021: EUR75 million) that have a definite
life. The remaining average life of these landing rights is 13
years.
2 During 2022 the Group separated the ETS assets from Other
intangible assets. This change resulted in an amount of EUR76
million and EUR62 million recorded within ETS assets at January 1,
2021 and January 1, 2022, respectively. There was no net change in
total intangible assets.
b Impairment review
The carrying amounts of intangible assets with indefinite life
and goodwill allocated to cash generating units (CGUs) of the Group
are:
Customer
Landing loyalty
EUR million Goodwill rights Brand programmes Total
================================ ======== ======= ===== =========== =====
2022
Iberia
================================ ======== ======= ===== =========== =====
January 1 and December 31, 2022 - 423 306 - 729
================================ ======== ======= ===== =========== =====
British Airways
January 1, 2022 47 809 - - 856
Additions - 14 - - 14
Disposals - (6) - - (6)
Exchange movements (1) (23) - - (24)
================================ ======== ======= ===== =========== =====
December 31, 2022 46 794 - - 840
================================ ======== ======= ===== =========== =====
Vueling
================================ ======== ======= ===== =========== =====
January 1 and December 31, 2022 28 94 35 - 157
================================ ======== ======= ===== =========== =====
Aer Lingus
================================ ======== ======= ===== =========== =====
January 1 and December 31, 2022 272 62 110 - 444
================================ ======== ======= ===== =========== =====
IAG Loyalty
================================ ======== ======= ===== =========== =====
January 1 and December 31, 2022 - - - 253 253
================================ ======== ======= ===== =========== =====
December 31, 2022 346 1,373 451 253 2,423
================================ ======== ======= ===== =========== =====
Customer
Landing loyalty
EUR million Goodwill rights Brand programmes Total
================================ ======== ======= ===== =========== =====
2021
Iberia
================================ ======== ======= ===== =========== =====
January 1 and December 31, 2021 - 423 306 - 729
================================ ======== ======= ===== =========== =====
British Airways
January 1, 2021 44 763 - - 807
Disposals - (6) - - (6)
Exchange movements 3 52 - - 55
================================ ======== ======= ===== =========== =====
December 31, 2021 47 809 - - 856
================================ ======== ======= ===== =========== =====
Vueling
================================ ======== ======= ===== =========== =====
January 1 and December 31, 2021 28 94 35 - 157
================================ ======== ======= ===== =========== =====
Aer Lingus
================================ ======== ======= ===== =========== =====
January 1 and December 31, 2021 272 62 110 - 444
================================ ======== ======= ===== =========== =====
IAG Loyalty
================================ ======== ======= ===== =========== =====
January 1 and December 31, 2021 - - - 253 253
================================ ======== ======= ===== =========== =====
December 31, 2021 347 1,388 451 253 2,439
================================ ======== ======= ===== =========== =====
Basis for calculating recoverable amount
The recoverable amounts of the Group's CGUs have been measured
based on their value-in-use, which utilises a weighted average
multi-scenario discounted cash flow model. The details of these
scenarios are given in the going concern section of note 2, with a
weighting of 70 per cent to the Base Case and 30 per cent to the
Downside Case. Cash flow projections are based on the business
plans approved by the relevant operating companies covering a
three-year period. Cash flows extrapolated beyond the three-year
period are projected to increase based on long-term growth rates.
Cash flow projections are discounted using each CGU's pre-tax
discount rate.
Annually the relevant operating companies prepare and approve
three-year business plans, and the Board approved the Group
three-year business plan in the fourth quarter of the year.
Adjustments have been made to the final year of the business plan
cash flows to incorporate the impacts of climate change that the
Group can reliably estimate at the reporting date. However, given
the long-term nature of the Group's sustainability commitments,
there are other aspects of these commitments that cannot be
reliably estimated and accordingly have been excluded from the
value-in-use calculations (refer to note 4). The business plan cash
flows used in the value-in-use calculations also reflect all
restructuring of the business where relevant that has been approved
by the Board and which can be executed by management under existing
labour agreements.
Key assumptions
The value-in-use calculations for each CGU reflect the ongoing
uncertainty of the future implications of COVID-19 and the wider
economic and geopolitical environments, including updated projected
cash flows for activity from 2023 through to the end of 2025. For
each of the Group's CGUs the key assumptions used in the
value-in-use calculations are as follows:
2022
==================================================
British
Per cent Airways Iberia Vueling Aer Lingus IAG Loyalty
================================== ======== ====== ======= ========== ===========
Operating margin(1) 5-13 5-10 0-10 4-12 23-25
ASKs as a proportion of 2019(1,2) 90-105 92-107 113-123 102-127 n/a
Long-term growth rate 1.7 1.5 1.4 1.6 1.7
Pre-tax discount rate 10.4 11.2 12.8 10.1 13.4
================================== ======== ====== ======= ========== ===========
2021
==================================================
British
Per cent Airways Iberia Vueling Aer Lingus IAG Loyalty
================================== ======== ====== ======= ========== ===========
Operating margin(1) 3-13 2-12 2-11 0-14 22-24
ASKs as a proportion of 2019(1,2) 75-103 77-100 97-119 84-115 n/a
Long-term growth rate 1.9 1.7 1.6 1.7 1.6
Pre-tax discount rate 11.8 11.4 11.1 10.1 12.0
================================== ======== ====== ======= ========== ===========
1 ASKs as a proportion of 2019 and operating margin are both
stated as the weighted average derived from the multi-scenario
discounted cash flow model.
2 In prior periods the Group applied the average ASK growth per
annum as a key assumption. Given the impact of COVID-19, the Group
has presented ASKs as a proportion of the level of ASKs achieved in
2019, prior to the application of the terminal value
calculation.
Within 3 years
Jet fuel price ($ per MT) 12 months 1-2 years 2-3 years and thereafter
========================== ========== ========= ========= ===============
2022 867 809 780 780
2021 690 673 659 659
========================== ========== ========= ========= ===============
Forecast ASKs reflect the range of ASKs as a percentage of the
2019 actual ASKs over the forecast period, based on planned network
growth and taking into account management's expectation of the
market.
The long-term growth rate is calculated for each CGU,
considering a number of data points: (i) industry publications;
(ii) forecast weighted average exposure in each primary market
using gross domestic product (GDP); and (iii) internal analysis
regarding the long-term changes in consumer preferences and the
effects on demand from the increased costs to the Group of climate
change. The calculation of the long-term growth rate utilises a
Base Case and a Downside Case growth rate, which is then weighted
on the same basis as the cash flows detailed above of 70 per cent
to the Base Case and 30 per cent to the Downside Case. The terminal
value cash flows and long-term growth rate incorporate the impacts
of climate change insofar as they can be determined (note 4). The
airlines' network plans are reviewed annually as part of the
three-year business plan preparation and reflect management's plans
in response to specific market risk or opportunity.
Pre-tax discount rates represent the current market assessment
of the risks specific to each CGU, taking into consideration the
time value of money and underlying risks of its primary market. The
discount rate calculation is based on the circumstances of the
airline industry, the Group and the CGU. It is derived from the
weighted average cost of capital (WACC). The WACC takes into
consideration both debt and equity available to airlines. The cost
of equity is derived from the expected return on investment by
airline investors and the cost of debt is derived from both market
data and industry gearing levels derived from comparable companies.
CGU-specific risk is incorporated by applying individual beta
factors which are evaluated annually based on available market
data. The pre-tax discount rate reflects the timing of future tax
flows.
Jet fuel price assumptions are derived from forward price curves
in the fourth quarter of each year and sourced externally. The cash
flow forecasts reflect these price increases after taking into
consideration the level of fuel derivatives and their associated
prices that the Group has in place.
As detailed above, the Group adjusts the final year of the
three-year business plans to incorporate the medium-term impacts of
climate change from the Group's Flightpath Net Zero climate
strategy. These adjustments include the following key assumptions:
(i) a 10 per cent level of SAF consumption out of the overall fuel
mix with an assumed price of EUR2,275 per metric tonne; (ii) a
kerosene tax of EUR325 per metric tonne on all intra-EU flights;
(iii) for costs of carbon, prices of EUR130, EUR130, EUR175 and
EUR25 for EU ETS allowances, Swiss ETS allowances, UK ETS
allowances and CORSIA allowances, respectively, per tonne of CO(2)
equivalents emitted; and (iv) the removal of all free ETS and
CORSIA allowances.
Summary of results
At December 31, 2022 management reviewed the recoverable amount
of each of the CGUs and concluded the recoverable amounts exceeded
the carrying values.
Reasonable possible changes in key assumptions, both
individually and in combination, have been considered for each CGU,
where applicable, which include reducing the operating margin by 2
percentage points in each year, ASKs by 5 percentage points in each
year, long-term growth rates in the terminal value calculation to
zero, increasing pre-tax discount rates by 2.5 percentage points,
changing the weighting of the Base Case and the Downside Case to be
100 per cent weighted towards the Downside Case and increasing the
fuel price (both jet fuel and SAF) by 45 per cent with no assumed
cost recovery. Given the inherent uncertainty associated with the
impact of climate change, these sensitivities represent a
reasonably possible greater impact of climate change on the CGUs
than that included in the impairment models.
For the British Airways, Iberia, Vueling and Aer Lingus CGUs,
while the recoverable amounts are estimated to exceed the carrying
amounts by EUR15,432 million, EUR3,213 million, EUR1,606 million
and EUR1,407 million, respectively, the recoverable amounts would
be below the carrying amounts when applying reasonable possible
changes, over the forecast period, in assumptions in each of the
following scenarios:
-- British Airways: (i) if ASKs had been five per cent lower
combined with a fuel price increase without cost recovery of 22 per
cent; and (ii) if the fuel price had been 27 per cent higher
without cost recovery;
-- Iberia : (i) if ASKs had been five per cent lower combined
with a fuel price increase without cost recovery of 20 per cent;
and (ii) if the fuel price had been 27 per cent higher without cost
recovery;
-- Vueling : (i) if ASKs had been five per cent lower combined
with a fuel price increase without cost recovery of 15 per cent;
and (ii) if the fuel price had been 20 per cent higher without cost
recovery; and
-- Aer Lingus : (i) if ASKs had been five per cent lower
combined with a fuel price increase without cost recovery of 7 per
cent; and (ii) if the fuel price had been 14 per cent higher
without cost recovery.
For the remainder of the reasonably possible changes in key
assumptions applied to the British Airways, Iberia, Vueling and Aer
Lingus CGUs and for all the reasonably possible changes in key
assumptions applied to the IAG Loyalty CGU, no impairment
arises.
18 Investments
a Investments in subsidiaries
The Group's subsidiaries at December 31, 2022 are listed in the
Group investments section.
All subsidiary undertakings are included in the consolidation.
The proportion of the voting rights in the subsidiary undertakings
held directly do not differ from the proportion of ordinary shares
held. There have been no significant changes in ownership interests
of subsidiaries during the year.
The total non-controlling interest at December 31, 2022 is EUR6
million (2021: EUR6 million).
b Investments in associates and joint ventures
The share of assets, liabilities, revenue and profit of the
Group's associates and joint ventures, which are included in the
Group's financial statements, are as follows:
EUR million 2022 2021
==================== ===== ====
Total assets 148 115
Total liabilities (104) (85)
Revenue 89 64
Profit for the year 5 2
==================== ===== ====
The detail of the movement in Investment in associates and joint
ventures is shown as follows:
EUR million 2022 2021
========================== ==== ====
At beginning of year 40 29
Additions - 9
Share of retained profits 5 2
Dividends received (2) (1)
Exchange movements - 1
========================== ==== ====
43 40
========================== ==== ====
At December 31, 2022 there are no restrictions on the ability of
associates or joint ventures to transfer funds to the parent and
there are no related contingent liabilities.
At both December 31, 2022 and December 31, 2021 the investment
in Sociedad Conjunta para la Emisión y Gestión de Medios de Pago
EFC, S.A. exceeded 50 per cent ownership by the Group (50.5 per
cent). The entity is treated as a joint venture as decisions
regarding its strategy and operations require the unanimous consent
of the parties who share control, including IAG.
19 Other equity investments
Other equity investments include the following:
EUR million 2022 2021
==================== ==== ====
Unlisted securities 55 31
==================== ==== ====
55 31
==================== ==== ====
The charge relating to Other equity investments was EUR3 million
(2021: EURnil).
Investment in Air Europa Holdings
On June 15, 2022, the Group entered into a financing arrangement
with Globalia Corporación Empresarial, S,A, ('Globalia'), whereby,
the Group provided a EUR100 million seven-year unsecured loan,
which was convertible for a period of two years from inception into
a fixed number of the shares of Air Europa Holdings, S.L. ('Air
Europa Holdings'). The loan was accounted for at fair value through
the Income statement and recorded as an Other non-current financial
asset.
In determining the fair value of the financing arrangement, the
Group utilised the income approach, whereby, the financing
arrangement was valued using observable market data by which to
determine an interest rate that a market participant would require
to provide a loan with the same tenor and amount. This interest
rate was then used to discount back the existing contractual cash
flows to derive the fair value.
On August 16, 2022, the Group exercised its exchange option with
Globalia and converted the Other non-current financial asset into
an Other equity investment.
Immediately prior to exercising the exchange option, the fair
value of the Other non-current financial asset was EUR65 million,
representing a decrease from inception of EUR35 million, which has
been recorded within Net change in fair value of financial
instruments in the Income statement (see note 9c).
The Group determined the fair value of the investment in Air
Europa Holdings using both the market approach and the income
approach, whereby the Group used both observable market data and
unobservable inputs. The fair value was determined on the
stand-alone basis of Air Europa Holdings without consideration of
potential synergies that could be obtained if the Group were able
to obtain control over the operations of Air Europa Holdings. The
results of these valuation approaches resulted in a fair value of
EUR22 million, representing a difference of EUR43 million from the
fair value of the Other non-current financial asset prior to
exercising the option. This loss, which derives from the
de-recognition of the loan to Globalia prior to the recognition of
the investment in Air Europa Holdings, was recorded within Net
change in fair value of financial instruments in the Income
statement (see note 9c).
At December 31, 2022, the fair value of the investment in Air
Europa Holdings was EUR24 million, representing an increase of EUR2
million since August 16, 2022, which has been recorded within Other
comprehensive income.
20 Trade and other receivables
EUR million 2022 2021
===================================== ===== =====
Amounts falling due within one year
Trade receivables 1,444 850
Provision for expected credit loss (114) (115)
===================================== ===== =====
Net trade receivables 1,330 735
===================================== ===== =====
Prepayments and accrued income 870 764
Other non-trade receivables 356 196
===================================== ===== =====
Other current receivables 1,226 960
===================================== ===== =====
Amounts falling due after one year
Prepayments and accrued income 337 248
Other non-trade receivables 25 2
===================================== ===== =====
Other receivables due after one year 362 250
===================================== ===== =====
Movements in the provision for expected credit loss were as
follows:
EUR million 2022 2021
======================================== ==== ====
At beginning of year 115 125
Provided during the year 10 8
Released during the year (1) (11)
Receivables written off during the year (9) (10)
Exchange movements (1) 3
======================================== ==== ====
114 115
======================================== ==== ====
Trade receivables are generally non-interest-bearing and on 30
days terms (2021: 30 days).
The credit risk exposure on the Group's trade receivables is set
out below:
December 31, 2022
30-180 180-365 > 365
EUR million Current <30 days days days days
=================================== ======= ======== ====== ======= ======
Trade receivables 719 509 91 25 100
Expected credit loss rate 0.3% 0.1% 1.1% 44.0% 100.0%
=================================== ======= ======== ====== ======= ======
Provision for expected credit loss 2 - 1 11 100
=================================== ======= ======== ====== ======= ======
December 31, 2021
30-180 180-365 > 365
EUR million Current <30 days days days days
=================================== ======= ======== ====== ======= =====
Trade receivables 498 132 94 10 116
Expected credit loss rate 0.2% 0.1% 1.1% 20.0% 95.7%
=================================== ======= ======== ====== ======= =====
Provision for expected credit loss 1 - 1 2 111
=================================== ======= ======== ====== ======= =====
21 Cash, cash equivalents and other current interest-bearing
deposits
EUR million 2022 2021
=========================================================== ===== =====
Cash at bank and in hand 3,286 2,569
Short-term deposits maturing within three months 5,910 5,323
=========================================================== ===== =====
Cash and cash equivalents 9,196 7,892
Current interest-bearing deposits maturing after three
months 403 51
=========================================================== ===== =====
Cash, cash equivalents and other interest-bearing deposits 9,599 7,943
=========================================================== ===== =====
Cash at bank is primarily held in AAA money market funds and
bank deposits. Short-term deposits are for periods up to three
months and earn interest based on the floating deposit rates.
At December 31, 2022 the Group had no outstanding bank
overdrafts (2021: EURnil).
Current interest-bearing deposits have maturities in excess of
three months and typically within 12 months of the reporting date
and earn interest based on the market rates available at the time
the deposit was made.
At December 31, 2022 Aer Lingus held EUR33 million of restricted
cash (2021: EUR35 million) within interest-bearing deposits
maturing after more than three months to be used for
employee-related obligations.
a Net debt
Movements in net debt were as follows:
Balance Balance
at January Exchange New leases Other at December
EUR million 1, 2022 Cash flows movements and modifications items 31, 2022
================================== =========== ========== ========== ================== ====== ============
Bank, other loans and asset
financed liabilities 9,973 386 103 - (97) 10,365
Lease liabilities 9,637 (1,455) 415 1,017 5 9,619
Cash and cash equivalents (7,892) (1,316) 12 - - (9,196)
Current interest-bearing deposits (51) (351) (1) - - (403)
================================== =========== ========== ========== ================== ====== ============
11,667 (2,736) 529 1,017 (92) 10,385
================================== =========== ========== ========== ================== ====== ============
Balance Balance
at January Exchange New leases Other at December
EUR million 1, 2021 Cash flows movements and modifications items 31, 2021
================================== =========== ========== ========== ================== ====== ============
Bank, other loans and asset
financed liabilities 5,655 4,033 261 - 24 9,973
Lease liabilities 10,024 (1,481) 559 518 17 9,637
Cash and cash equivalents (5,774) (1,913) (205) - - (7,892)
Current interest-bearing deposits (143) 91 1 - - (51)
================================== =========== ========== ========== ================== ====== ============
9,762 730 616 518 41 11,667
================================== =========== ========== ========== ================== ====== ============
22 Trade and other payables
EUR million 2022 2021
=================================== ===== =====
Trade creditors(1) 2,969 2,068
Other creditors 1,244 898
Other taxation and social security 228 176
Accruals and deferred income 768 570
=================================== ===== =====
5,209 3,712
=================================== ===== =====
1 Trade creditors includes EUR48 million (2021: EUR89 million)
due to suppliers that have signed up to supply chain financing
programmes offered by a number of partner financial institutions.
Under these programmes either or both: (i) the suppliers can elect
on an invoice-by-invoice basis to receive a discounted early
payment from the partner financial institutions rather than being
paid in line with the agreed payment terms; and/or (ii) the Group
elects on an invoice-by-invoice basis for the partner financial
institution to pay the supplier in line with the agreed payment
terms and the Group enters into payment terms with the partner
financial institution of up to 150 days with interest incurred at
2.5 per cent.
The Group assesses the arrangement against indicators to assess
if liabilities which suppliers have transferred to the partner
financial institutions under the supplier financing programmes
continue to meet the definition of trade creditors or should be
classified as borrowings. The cash flows arising from such
arrangements are reported within cash flows from operating
activities or within cash flows from financing activities, in the
Consolidated cash flow statement, depending on whether the
associated liabilities meet the definition of trade creditors or as
borrowings.
At December 31, 2022 these liabilities met the criteria of Trade
creditors and are excluded from the Net debt table in note 21a.
Average payment days to suppliers - Spanish Group companies
Days 2022 2021
============================================== ==== ====
Average payment days for payment to suppliers 34 34
Ratio of transactions paid 33 32
Ratio of transactions outstanding for payment 53 78
============================================== ==== ====
EUR million 2022 2021
=========================== ===== =====
Total payments made 6,676 3,945
Total payments outstanding 264 147
=========================== ===== =====
Information on invoices paid in a period shorter than the
maximum period established in the late payment regulations -
Spanish Group companies
2022 2021
================================================== ===== =====
Total payments made (EUR million) 5,111 2,623
Percentage share of total payments to suppliers 77% 71%
Number of invoices paid (thousand) 110 63
Percentage share of total number of invoices paid 48% 48%
================================================== ===== =====
23 Deferred revenue on ticket sales
Customer Sales
loyalty in advance
EUR million programmes of carriage Total
==================================================== =========== ============ ========
Balance at January 1, 2022 2,820 3,732 6,552
Cash received from customers(1) - 21,000 21,000
Revenue recognised in the Income statement(2, 3) (780) (19,708) (20,488)
Changes in estimates (21) - (21)
Financing charge recognised in the Income statement 21 - 21
Loyalty points issued to customers(4) 662 82 744
Exchange movements (72) (92) (164)
==================================================== =========== ============ ========
Balance at December 31, 2022(5, 6) 2,630 5,014 7,644
==================================================== =========== ============ ========
Analysis:
Current 2,304 5,014 7,318
Non-current 326 - 326
==================================================== =========== ============ ========
2,630 5,014 7,644
==================================================== =========== ============ ========
Customer Sales
loyalty in advance
EUR million programmes of carriage Total
==================================================== =========== ============ =======
Balance at January 1, 2021 2,725 2,405 5,130
Cash received from customers(1) - 7,689 7,689
Revenue recognised in the Income statement(2, 3) (524) (6,518) (7,042)
Financing charge recognised in the Income statement 37 - 37
Loyalty points issued to customers(4) 407 40 447
Exchange movements 175 116 291
==================================================== =========== ============ =======
Balance at December 31, 2021(5, 6) 2,820 3,732 6,552
==================================================== =========== ============ =======
Analysis:
Current 2,429 3,732 6,161
Non-current 391 - 391
==================================================== =========== ============ =======
2,820 3,732 6,552
==================================================== =========== ============ =======
1 Cash received from customers is net of refunds.
2 Where the Group acts as an agent in the provision of
redemption products and services to customers through loyalty
programmes, or in the provision of interline flights to passengers,
revenue is recognised in the Income statement net of the related
costs.
3 Included within revenue recognised in the Income statement
during 2022 is an amount of EUR2,183 million previously held as
deferred revenue at January 1, 2022 (recognised during 2021 and
previously held as deferred revenue at January 1, 2021: EUR780
million).
4 Included within loyalty points issued to customers at December
31, 2022 is an amount of EUR82 million (December 31, 2021: EUR40
million) classified within Sales in advance of carriage
representing the cash component of the consideration paid by
customers, where such consideration comprises both cash and the
redemption of Avios.
5 Included within Deferred revenue on ticket sales at December
31, 2022 is an amount of EUR911 million (December 31, 2021:
EUR1,400 million) relating to unredeemed vouchers (including
associated taxes).
6 In the year to December 31, 2022, the Group recognised EUR266
million (2021: EUR154 million) within Other revenue related to
performance obligations associated with brand and marketing
services recognised on the issuance of Avios for both air and
non-air partners.
The unsatisfied performance obligation under the Group's
customer loyalty programmes that is classified as non-current was
EUR326 million at December 31, 2022. Of this amount, EUR317 million
is expected to be recognised as revenue in 1 to 5 years from the
reporting date and EUR9 million thereafter.
Deferred revenue relating to customer loyalty programmes
consists primarily of revenue allocated to performance obligations
associated with Avios. Avios are issued by the Group's airlines
through their loyalty programmes, or are sold to third parties such
as credit card providers, who issue them as part of their loyalty
programme. While Avios do not have an expiry date and can be
redeemed at any time in the future, a customer's membership account
is closed if there is a period of 36 months of inactivity in terms
of both issuances and redemptions. Revenue may therefore be
recognised at any time in the future.
Deferred revenue in respect of sales in advance of carriage
consists of revenue allocated to airline tickets to be used for
future travel. Typically these tickets expire within 12 months
after the planned travel date, if they are not used within that
time period, however, with the significant disruption caused by the
COVID-19 pandemic during 2020 and 2021, the Group extended the
expiry period up to 24 months after the planned travel date,
depending on the operating company. During the course of 2022 with
the disruption caused by the COVID-19 pandemic significantly
reduced, flexible fare tickets now typically expire within 12
months after the planned travel date. In addition, the significant
disruption caused by the COVID-19 pandemic led to a number of
flight cancellations during both 2020 and 2021, which entitled the
customer to either a refund or the issuance of a voucher for future
redemption.
24 Other long-term liabilities
EUR million 2022 2021
============================= ==== ====
Non-current trade creditors 147 121
Accruals and deferred income 53 87
============================= ==== ====
200 208
============================= ==== ====
25 Long-term borrowings
a Total borrowings
2022 2021
============================ ============================
EUR million Current Non-current Total Current Non-current Total
=============================== ======= =========== ====== ======= =========== ======
Bank and other loans 822 5,724 6,546 761 6,724 7,485
Asset financed liabilities 255 3,564 3,819 171 2,244 2,415
Lease liabilities 1,766 7,853 9,619 1,521 8,116 9,637
Other financing liabilities(1) - - - 73 - 73
=============================== ======= =========== ====== ======= =========== ======
Interest-bearing long-term
borrowings 2,843 17,141 19,984 2,526 17,084 19,610
=============================== ======= =========== ====== ======= =========== ======
1 Other financing liabilities recognised in 2021 included sale
and repurchase agreements with regard to emission allowances and
represent the amount the Group repurchased during 2022.
Long-term borrowings of the Group amounting to EUR3,962 million
(December 31, 2021: EUR2,434 million) are secured on owned fleet
assets with a net book value of EUR3,931 million (December 31,
2021: EUR2,938 million). Asset financed liabilities are all secured
on the associated aircraft or other property, plant and
equipment.
b Bank and other loans
EUR million 2022 2021
================================================================= ===== =====
Floating rate pound sterling term loan guaranteed by UK
Export Finance (UKEF)(1) 2,315 2,358
Floating rate Instituto de Crédito Oficial (ICO) guaranteed
loans(2) 1,070 1,095
EUR700 million fixed rate 3.75 per cent unsecured bond
2029(3) 717 710
EUR825 million fixed rate 1.125 per cent convertible bond
2028(4) 605 757
EUR500 million fixed rate 2.75 per cent unsecured bond
2025(3) 509 508
EUR500 million fixed rate 0.50 per cent bond 2023(5) 501 499
EUR500 million fixed rate 1.50 per cent bond 2027(5) 499 498
Floating rate euro mortgage loans secured on aircraft(6) 143 171
Fixed rate unsecured US dollar mortgage loan(7) 71 85
Fixed rate unsecured bonds(8) 56 138
Ireland Strategic Investment Fund (ISIF) facility(9) 50 149
Fixed rate unsecured euro loans with the Spanish State
(Department of Industry)(10) 10 15
EUR500 million fixed rate 0.625 per cent convertible bond
2022(11) - 491
Fixed rate Chinese yuan mortgage loans secured on aircraft(12) - 11
================================================================= ===== =====
6,546 7,485
Less: current instalments due on bank and other loans (822) (761)
================================================================= ===== =====
5,724 6,724
================================================================= ===== =====
1 On February 22, 2021, British Airways entered into a floating
rate five-year term loan Export Development Guarantee Facility of
EUR2.3 billion (GBP2.0 billion) underwritten by a syndicate of
banks, with 80 per cent of the principal guaranteed by UKEF. On
November 1, 2021, British Airways entered into a further 5 year
term loan Export Development Guarantee Facility of EUR1.1 billion
(GBP1.0 billion) underwritten by a syndicate of banks, with 80 per
cent of the principal guaranteed by UKEF. The further facility had
not been drawn as at December 31, 2022. The loan contains a number
of non-financial covenants to protect the position of the banks
involved, including restrictions on the upstreaming of cash to the
rest of the IAG companies.
2 On April 30, 2020, Iberia and Vueling entered into floating
rate syndicated financing agreements of EUR750 million and EUR260
million respectively. The loans are repayable from 2023 to 2026.
The ICO in Spain guarantees 70 per cent of the value of loans. The
loans contain a number of non-financial covenants to protect the
position of the banks involved, including restrictions on the
upstreaming of cash to the rest of the IAG companies.
3 On March 25, 2021, the Group issued two tranches of senior
unsecured bonds for an aggregate principal amount of EUR1.2
billion, EUR500 million due March 25, 2025 and EUR700 million due
March 25, 2029. The bonds bear a fixed rate of interest of 2.75 per
cent and 3.75 per cent per annum, payable in arrears, respectively.
The bonds were issued at 100 per cent of their principal amount,
respectively, and, unless previously redeemed or purchased and
cancelled, will be redeemed at 100 per cent of their principal
amount on their respective maturity dates.
4 A senior unsecured bond convertible into ordinary shares of
IAG was issued by the Group on May 11, 2021; EUR825 million fixed
rate 1.125 per cent raising net proceeds of EUR818 million and due
in 2028. The Group holds an option to redeem the convertible bond
at its principal amount, together with accrued interest, no earlier
than two years prior to the final maturity date. The bond contains
dividend protection and a total of 244,850,715 options at inception
and at December 31, 2022 and 2021 to convert into ordinary shares
of IAG. The Group also holds an option to redeem the convertible
bond, in full or in part, in cash in the event that bondholders
exercise their right to convert the bond into ordinary shares of
IAG. See further details below.
5 In July 2019, the Group issued two tranches of senior
unsecured bonds for an aggregate principal amount of EUR1 billion,
EUR500 million due July 4, 2023 and EUR500 million due July 4,
2027. The bonds bear a fixed rate of interest of 0.5 per cent and
1.5 per cent per annum annually payable in arrears, respectively.
The bonds were issued at 99.417 per cent and 98.803 per cent of
their principal amount, respectively, and, unless previously
redeemed or purchased and cancelled, will be redeemed at 100 per
cent of their principal amount on their respective maturity
dates.
6 Floating rate euro mortgage loans are secured on specific
aircraft assets of the Group and bear interest of between 2.1 and
3.6 per cent. The loans are repayable between 2024 and 2027.
7 Fixed rate unsecured US dollar mortgage loan bearing interest
between 1.38 to 2.86 per cent. The loan is repayable between 2023
and 2026.
8 Total of EUR200 million fixed rate unsecured bonds between
3.75 to 4.93 per cent coupon repayable between 2023 and 2027.
9 On December 23, 2020, Aer Lingus entered into a floating rate
financing agreement with the Ireland Strategic Investment Fund
(ISIF) for EUR75 million. On March 27, 2021, Aer Lingus entered
into a further floating rate financing agreement with the ISIF for
an additional EUR75 million. On March 4, 2022, Aer Lingus entered
into a financing arrangement with ISIF, which subsequently
extinguished the existing EUR150 million of facilities and replaced
them with a EUR350 million facility that matures in March 2025. On
December 13, 2022, Aer Lingus early repaid EUR100 million of the
ISIF facility, with the EUR100 million being available to draw
again over the tenor of the facility. The facility is secured on
specific landing rights. At December 31, 2022, EUR300 million of
this facility remained undrawn.
10 Fixed rate unsecured euro loans with the Spanish State
(Department of Industry) bear nil interest and are repayable
between 2023 and 2028.
11 Senior unsecured bond convertible into ordinary shares of IAG
was issued by the Group in November 2015; EUR500 million fixed rate
0.625 per cent raising net proceeds of EUR494 million and due in
2022. The Group held an option to redeem the convertible bond at
its principal amount, together with accrued interest, no earlier
than two years prior to the final maturity date. The Group redeemed
the bond at maturity in November 2022 with no conversion into
ordinary shares.
12 Fixed rate Chinese yuan mortgage loans, secured on specific
aircraft assets of the Group were repaid in the fourth quarter of
2022.
In addition, on March 23, 2021, the Group entered into a
three-year US dollar secured Revolving Credit Facility accessible
by British Airways, Iberia and Aer Lingus. On August 23, 2022, the
Group extended the term of the Revolving Credit Facility by an
additional 12 months through to March 2025. The amount available
under the facility is $1.755 billion. As at December 31, 2022 no
amounts had been drawn under the facility (2021: nil). While the
Group does not forecast drawing down on the Revolving Credit
Facility, should it do so, the resultant debt would be secured
against specific landing rights and aircraft in the respective
operating companies.
Details of the 2028 convertible bond
The EUR825 million convertible bond issued in 2021 provides
bondholders with dividend protection and includes a total of
244,850,715 options at inception and at December 31, 2022 to
convert into ordinary shares of IAG. The Group holds an option to
redeem the convertible bond at its principal amount, together with
accrued interest, no earlier than two years prior to the final
maturity date. The Group also holds an option to redeem the
convertible bond, in full or in part, in cash in the event that
bondholders exercise their right to convert the bond into ordinary
shares of IAG.
The convertible bond is recorded at its fair value, which at
December 31, 2022 was EUR605 million (2021: EUR756 million),
representing a decrease of EUR151 million since January 1, 2022. Of
this decrease, the charge recorded in Other comprehensive income
arising from credit risk of the convertible bonds was EUR8 million
and a credit recorded within Finance costs in the Income statement
attributable to changes in market conditions of EUR159 million.
Transactions with unconsolidated entities
On April 12, 2022, the Group entered into an asset-financing
structure, under which five aircraft were financed. These
transactions mature between 2032 and 2036. This arrangement was
transacted through an unconsolidated structured entity, which in
turn issued the Iberia Pass Through Certificates, Series 2022-1,
commonly referred to as Enhanced Equipment Trust Certificates
(EETCs). In doing so the Group recognised EUR680 million of Asset
financed liabilities.
On October 21, 2022, the Group entered into an asset-financing
structure, under which four aircraft were financed. These
transactions mature between 2032 and 2036. This arrangement was
transacted through an unconsolidated structured entity, which in
turn issued the British Airways Pass Through Certificates, Series
2022-1. In doing so the Group recognised EUR159 million of Asset
financed liabilities.
In July 2021, the Group entered into an asset-financing
structure, under which seven aircraft were financed. These
transactions mature between 2031 and 2035. This arrangement was
transacted through an unconsolidated structured entity, which in
turn issued the British Airways Pass Through Certificates, Series
2021-1. In doing so the Group recognised EUR204 million of Asset
financed liabilities.
In the fourth quarter of 2020, the Group entered into an
asset-financing structure, under which nine aircraft were financed.
These transactions mature between 2028 and 2032. This arrangement
was transacted through an unconsolidated structured entity, which
in turn issued the British Airways Pass Through Certificates,
Series 2020-1. In doing so the Group recognised EUR472 million of
Asset financed liabilities.
In the third quarter of 2019, the Group entered into an
asset-financing structure, under which eight aircraft were
financed, with the transactions maturing between 2029 and 2034.
This arrangement was transacted through an unconsolidated
structured entity, which in turn issued the British Airways Pass
Through Certificates, Series 2019-1. In doing so the Group
recognised EUR725 million of Asset financed liabilities.
As at December 31, 2022, Asset financed liabilities include
cumulative amounts of EUR2,983 million (2021: EUR1,489 million) and
the associated assets recorded within Property, plant and equipment
include cumulative amounts of EUR3,400 million (2021: EUR3,029
million) associated with transactions with unconsolidated
structured entities having issued EETCs.
c Reconciliation of movements of liabilities to cash flows arising from financing activities
Bank,
other Derivatives
loans to mitigate
and asset volatility
financed Lease in financial
EUR million liabilities liabilities liabilities Total
================================================== ============ ============ ============= =======
Balance at January 1, 2022 9,973 9,637 (136) 19,474
Proceeds from borrowings 1,436 - - 1,436
Repayment of borrowings (1,050) - - (1,050)
Repayment of lease liabilities - (1,455) - (1,455)
Settlement of derivative financial instruments(1) - - 1,029 1,029
================================================== ============ ============ ============= =======
Total changes from financing cash flows 386 (1,455) 1,029 (40)
================================================== ============ ============ ============= =======
Interest paid (334) (422) - (756)
Interest expense 377 464 - 841
New leases and lease modifications - 1,017 - 1,017
Fair value movements (151) - (990) (1,141)
Other non-cash movements 11 (37) - (26)
Exchange movements 103 415 26 544
================================================== ============ ============ ============= =======
Balance at December 31, 2022 10,365 9,619 (71) 19,913
================================================== ============ ============ ============= =======
Bank,
other Derivatives
loans to mitigate
and asset volatility
financed Lease in financial
EUR million liabilities liabilities liabilities Total
================================================== ============ ============ ============= =======
Balance at January 1, 2021 5,655 10,024 429 16,108
Proceeds from borrowings 4,817 - - 4,817
Repayment of borrowings (784) - - (784)
Repayment of lease liabilities - (1,481) - (1,481)
Settlement of derivative financial instruments(1) - - (268) (268)
================================================== ============ ============ ============= =======
Total changes from financing cash flows 4,033 (1,481) (268) 2,284
================================================== ============ ============ ============= =======
Interest paid (212) (367) (26) (605)
Interest expense 307 393 - 700
New leases and lease modifications - 518 - 518
Fair value movements (69) - (286) (355)
Other non-cash movements (2) (9) 15 4
Exchange movements 261 559 - 820
================================================== ============ ============ ============= =======
Balance at December 31, 2021 9,973 9,637 (136) 19,474
================================================== ============ ============ ============= =======
1 Gain of EUR1,036 million (2021: loss of EUR268 million)
relating to derivatives not designated in hedge relationships and
reported within Net cash flows from financing activities in the
Cash flow statement, and a loss of EUR7 million (2021: EURnil)
relating to interest rate derivatives designated in hedge
relationships and reported within Net cash flows from operating
activities.
d Total loans, asset financed liabilities, other financing liabilities and lease liabilities
Million 2022 2021
================================== ========= =========
Loans
Bank:
US dollar $75 $98
Euro EUR1,273 EUR1,430
Pound sterling GBP2,026 GBP2,003
Chinese yuan - CNY 78
================================== ========= =========
EUR3,659 EUR3,883
================================== ========= =========
Fixed rate bonds:
Euro EUR2,887 EUR3,602
================================== ========= =========
EUR2,887 EUR3,602
================================== ========= =========
Asset financed liabilities
US dollar $3,285 $2,192
Euro EUR542 EUR408
Japanese yen Yen25,748 Yen8,226
================================== ========= =========
EUR3,819 EUR2,415
================================== ========= =========
Other financing liabilities
Euro - EUR73
================================== ========= =========
- EUR73
================================== ========= =========
Lease liabilities
US dollar $7,621 $7,709
Euro EUR1,239 EUR1,547
Japanese yen Yen71,994 Yen75,450
Pound sterling GBP620 GBP569
================================== ========= =========
EUR9,619 EUR9,637
================================== ========= =========
Total interest-bearing borrowings EUR19,984 EUR19,610
================================== ========= =========
26 Provisions
Employee
leaving
indemnities Legal
and other claims
Restoration employee and contractual
and handback Restructuring related disputes ETS Other
EUR million provisions provisions provisions provisions provisions(1) provisions(1) Total
================== ============= ============= ============ =============== ============== ============== =====
Net book value
January
1, 2022(1) 1,832 274 720 90 9 74 2,999
Provisions
recorded during
the year 596 14 74 47 134 31 896
Reclassifications (15) - - - - - (15)
Utilised during
the year (167) (81) (32) (2) (10) (31) (323)
Release of unused
amounts (42) (12) (24) (45) - (14) (137)
Unwinding of
discount 38 - 5 - - - 43
Remeasurements 27 - (69) - - - (42)
Exchange
differences 131 (1) (1) (1) (1) - 127
================== ============= ============= ============ =============== ============== ============== =====
Net book value
December
31, 2022 2,400 194 673 89 132 60 3,548
================== ============= ============= ============ =============== ============== ============== =====
Analysis:
Current 508 112 70 66 132 8 896
Non-current 1,892 82 603 23 - 52 2,652
================== ============= ============= ============ =============== ============== ============== =====
2,400 194 673 89 132 60 3,548
================== ============= ============= ============ =============== ============== ============== =====
1 During 2022 the Group has separated the ETS provision from
Other provisions. This change resulted in an amount of EUR9 million
recorded within ETS provisions at January 1, 2022. There was no net
change in total provisions.
Restoration and handback provisions
The provision for restoration and handback costs is maintained
to meet the contractual maintenance and return conditions on
aircraft held under lease. The provision also includes an amount
relating to leased land and buildings where restoration costs are
contractually required at the end of the lease. Such costs are
capitalised within ROU assets. The provision is long-term in
nature, typically covering the leased asset term, which for
aircraft is up to 12 years.
Included within the release of unused restoration and handback
provisions is an amount of EUR7 million relating to the reversal of
contractual lease provisions, which represent the estimation of the
cost to fulfil the handback conditions associated with the leased
aircraft that had been permanently stood down and impaired during
the year to December 31, 2020, which have subsequently been stood
back up with a resultant impairment reversal during the year to
December 31, 2022.
The provisions are determined by discounting the future cash
flows using pre-tax risk free rates specific to the tenor of the
provision and the currency in which it arises. The unwinding of the
discounting of the provisions is recorded as a finance cost in the
Income statement (refer to note 9a).
Remeasurements arising from changes in estimates relating to the
effects of both discounting and inflation are recorded in the
Income statement to the extent they relate to avoidable provisions
or recorded as an adjustment to the right of use asset (see note
14) for those unavoidable provisions.
Where amounts are finalised and the uncertainty relating to
these provisions removed, the associated liability is reclassified
to either current or non-current Other creditors, dependent on the
expecting timing of settlement.
Restructuring provisions
The restructuring provision includes provisions for voluntary
redundancies including the collective redundancy programme for
Iberia's Transformation Plan implemented prior to 2022, which
provides for payments to affected employees until they reach the
statutory retirement age. The amount provided for has been
determined by an actuarial valuation made by independent actuaries,
and was based on the same assumptions as those made to determine
the provisions for obligations to flight crew below, with the
exception of the discount rate, which in this case was 3.2 per
cent. The payments related to this provision will continue over the
next 7 years.
At December 31, 2022, EUR185 million of this provision related
to collective redundancy programmes (2021: EUR270 million).
Employee leaving indemnities and other employee related
provisions
This provision includes employees leaving indemnities relating
to staff under various contractual arrangements.
The Group recognises a provision relating to flight crew (both
pilots and cabin crew) who the Group expects to still be in
employment by the age of 60, at which point the individuals will
have the option of continuing full time employment, being placed on
reserve and retaining their employment relationship until reaching
the statutory retirement age (referred to as 'active'), or
alternatively taking early retirement (referred to as 'inactive').
The Group is required to remunerate these employees until they
reach the statutory retirement age. In determining the provision to
be recognised for the proportion of employees that will elect to be
inactive, the Group estimates a number of financial assumptions,
including, but not limited to: (i) medium to long-term salary
growth and inflation; (ii) the discount rate to apply; (iii) the
rate of public social security growth; (iv) mortality rates; and
(vi) staff turnover.
The provision was re-assessed at December 31, 2022 with the use
of independent actuaries using the projected unit credit method,
based on a discount rate consistent with the iBoxx index of 3.72
per cent for active employees and 3.50 per cent for inactive
employees (2021: iBoxx index of 0.91 per cent and 0.00 per cent,
respectively), the PERM/F-2000P mortality tables, and assuming
contractual salary increases of up to 6.1 per cent in 2023 and 2.0
per cent in 2024 and then 2.0 per cent per annum thereafter derived
from increases in the Consumer Price Index (CPI). At December 31,
2022, there were a total of 4,827 flight crew (December 31, 2021:
4,533) eligible for making such elections when they reach the age
of 60. At December 31, 2022, there were 426 employees having
reached the age of 60 who had elected to become inactive (December
31, 2021: 333). In addition, at December 31, 2022 the average
length of employment of the eligible flight crew was 18 years
(December 31, 2021: 20 years). This is mainly a long-term
provision. Remeasurements in the valuation of this provision are
recorded in Other comprehensive income. The amount relating to this
provision was EUR611 million at December 31, 2022
(2021: EUR644 million).
Legal claims and contractual disputes provisions
Legal claims and contractual disputes provisions include:
-- amounts for multi-party claims from groups of employees on a
number of matters related to their employment, including claims for
additional holiday pay and for age discrimination;
-- amounts related to ongoing contractual disputes arising from
the Group's operations; and
-- amounts related to investigations by a number of competition
authorities in connection with alleged anti-competitive activity
concerning the Group's passenger and cargo businesses.
The final amount required to settle the remaining claims and
fines is subject to uncertainty.
ETS provisions
ETS provisions relate to the Emissions Trading Scheme for CO(2)
equivalent emitted on flights within the EU, Switzerland and the
United Kingdom and due to be settled in the year subsequent to the
reporting date. See note 4 for further information.
27 Financial risk management objectives and policies
The Group is exposed to a variety of financial risks: market
risk (including fuel price risk, foreign currency risk and interest
rate risk), credit risk and liquidity risk. The principal impacts
of these on the financial statements are discussed below:
a Fuel price risk
The Group is exposed to fuel price risk. In order to mitigate
such risk, under the Group's fuel price risk management strategy a
variety of over the counter derivative instruments are entered
into. The Group strategy is to hedge a proportion of fuel
consumption up to two years within the approved hedging
profile.
The following table demonstrates the sensitivity of the Group's
principal foreign exchange exposure to a reasonable possible change
in the fuel price, based on current market volatility, with all
other variables held constant on the result before tax and
equity(1) . The sensitivity analysis has been performed on fuel
derivatives (both those designated in hedge relationships and those
not designated in hedge relationships) at the reporting date only
and is not reflective of the impact had the sensitised rates been
applied through the duration of the years to December 31, 2022 and
2021.
2022 2021
=================== ================ ============ =================== ================ ============
Increase/(decrease) Effect on result Effect on Increase/(decrease) Effect on result Effect on
in fuel price before tax equity in fuel price before tax equity
per cent EUR million EUR million per cent EUR million EUR million
=================== ================ ============ =================== ================ ============
45 - 1,402 30 - 834
(45) - (1,200) (30) - (520)
=================== ================ ============ =================== ================ ============
1 The sensitivity analysis on equity excludes the sensitivity
amounts recognised in the result before tax.
During 2022, following a substantial recovery in the global
price of crude oil and jet fuel, which continues to be impacted by
geopolitical events in Ukraine, the fair value of such net asset
derivative instruments was EUR87 million at December 31, 2022,
representing a decrease of EUR201 million since January 1,
2022.
b Foreign currency risk
The Group is exposed to foreign currency risk on revenue,
purchases and borrowings that are denominated in a currency other
than the functional currency of the Group (the euro). The
currencies in which these transactions are denominated are
primarily US dollar and pound sterling. The Group has a number of
strategies to hedge foreign currency risk including hedging a
proportion of its foreign currency sales and purchases for up to
three years.
The following table demonstrates the sensitivity of the Group's
principal foreign exchange exposure to a reasonable possible change
in the US dollar, pound sterling and Japanese yen exchange rates,
based on current market volatility, with all other variables held
constant on the result before tax and equity(1) . The sensitivity
analysis has been performed on interest-bearing liabilities, lease
liabilities and derivatives (both those designated in hedge
relationships and those not designated in hedge relationships)
denominated in foreign currencies at the reporting date only and is
not reflective of the impact had the sensitised rates been applied
through the duration of the years to December 31, 2022 and
2021.
Effect Effect Effect
on Strengthening/ on on
Strengthening/ result Effect (weakening) result Effect Strengthening/ result
(weakening) before on in pound before on (weakening) before Effect
in US dollar tax equity sterling tax equity in Japanese tax on equity
rate EUR EUR rate EUR EUR yen rate EUR EUR
per cent million million per cent million million per cent million million
===== ============== ======== ======== ============== ======== ======== ============== ======== =========
2022 20 904 1,299 20 (20) 241 20 (58) (70)
(20) (922) (1,161) (20) 18 (241) (20) 58 70
2021 10 255 523 10 (10) 134 10 (17) (41)
(10) (260) (481) (10) 10 (134) (10) 17 41
===== ============== ======== ======== ============== ======== ======== ============== ======== =========
1 The sensitivity analysis on equity, excludes the sensitivity
amounts recognised in the result before tax.
At December 31, 2022, the fair value of foreign currency net
asset derivative instruments was EUR108 million, representing a
decrease of EUR77 million since January 1, 2022. These comprise
both derivatives designated in hedge relationships and those
derivatives that are not designated into a hedge relationship at
inception. Those derivatives not designated in a hedge relationship
on inception have their mark-to-market movements recorded directly
in the Income statement and recognised within Net currency
retranslation (charges)/credits.
c Interest rate risk
The Group is exposed to changes in interest rates on debt and on
cash deposits. In order to mitigate the interest rate risk, the
Group's policies allow a variety of over the counter derivative
instruments to be entered into.
The following table demonstrates the sensitivity of the Group's
interest rate exposure to a reasonable possible change in the US
dollar, euro and sterling interest rates, based on expectations
regarding forward rate movements, on the result before tax and
equity(1) . The sensitivity analysis has been performed on interest
rate derivatives (both those designated in hedge relationships and
those not designated in hedge relationships) at the reporting date
only and is not reflective of the impact had the sensitised rates
been applied through the duration of the years to December 31, 2022
and 2021.
Effect Effect Effect
Strengthening/ on Strengthening/ on Strengthening/ on
(weakening) result Effect (weakening) result Effect (weakening) result
in before on in before on in sterling before Effect
US interest tax equity euro interest tax equity interest tax on equity
rate EUR EUR rate EUR EUR rate EUR EUR
Basis points million million Basis points million million Basis points million million
===== ============== ======== ======== ============== ======== ======== ============== ======== =========
2022 150 - 6 150 5 17 150 (35) -
(150) - (7) (150) (4) (17) (150) 35 -
2021 50 - - 50 3 10 50 (2) -
(50) - - (50) (3) (9) (50) 2 -
===== ============== ======== ======== ============== ======== ======== ============== ======== =========
1 The sensitivity analysis on equity excludes the sensitivity
amounts recognised in the result before tax.
For details regarding the Group's management of interest rate
benchmark reform, refer to note 27i.
d Credit risk
Credit risk is the risk that a counterparty will not meet its
obligations under a financial instrument or customer contract,
leading to a financial loss. The Group is exposed to credit risk
from its financing activities, including deposits with banks and
financial institutions, foreign exchange transactions and other
financial instruments. The Group has policies and procedures to
monitor the risk by assigning limits to each counterparty by
underlying exposure and by operating company and by only entering
into transactions with counterparties with a very low credit
risk.
At each period end, the Group assesses the effect of
counterparties' and the Group's own credit risk on the fair value
of derivatives and any ineffectiveness arising is immediately
recognised in the Income statement within Other non-operating
expenses.
e Counterparty risk
The Group is exposed to the non-performance by its
counterparties in respect of financial assets receivable. The Group
has policies and procedures to monitor the risk by assigning limits
to each counterparty by underlying exposure and by operating
company. The underlying exposures are monitored on a daily basis
and the overall exposure limit by counterparty is periodically
reviewed by using available market information.
The financial assets recognised in the financial statements, net
of impairment losses (if any), represent the Group's maximum
exposure to credit risk, without taking into account any guarantees
in place or other credit enhancements.
At December 31, 2022 the Group's credit risk position, allocated
by region, in respect of treasury managed cash and derivatives was
as follows:
Mark-to-market
of treasury controlled
financial
instruments allocated
by geography
=========================
Region 2022 2021
================= ============ ===========
United Kingdom 51% 44%
Spain 1% -
Ireland 20% 18%
Rest of eurozone 27% 34%
Rest of world 1% 4%
================= ============ ===========
f Liquidity risk
The Group invests cash in interest-bearing accounts, time
deposits and money market funds, choosing instruments with
appropriate maturities or liquidity to retain sufficient headroom
to readily generate cash inflows required to manage liquidity risk.
The Group has also committed revolving credit facilities.
At December 31, 2022 the Group had undrawn overdraft facilities
of EUR53 million (2021: EUR53 million).
The Group held the following undrawn general and committed
aircraft financing facilities:
2022
========================
Million Currency EUR equivalent
============================================================= ======== ==============
General facilities(1)
Euro facilities expiring between January and March 2023 EUR87 87
US dollar facility expiring November 2023 $50 47
Euro facility expiring March 2025 EUR300 300
US dollar facility expiring March 2025 $1,755 1,654
Pound sterling facility expiring November 2025 GBP1,000 1,143
============================================================= ======== ==============
3,231
Committed aircraft facilities
US dollar facilities expiring between February and September
2023 (2) $386 364
US dollar facility expiring April 2023(2) $273 257
US dollar facilities expiring between October 2023 and
March 2024(3) $525 495
============================================================= ======== ==============
1,116
============================================================= ======== ==============
2021
========================
Million Currency EUR equivalent
======================================================= ======== ==============
General facilities(1)
Euro facilities expiring between January and July 2022 EUR27 27
Euro facilities expiring March 2023 EUR60 60
US dollar facility expiring May 2022 $50 44
US dollar facility expiring March 2024 $1,755 1,556
Pound sterling facility expiring November 2025 GBP1,000 1,177
======================================================= ======== ==============
2,864
Committed aircraft facilities
US dollar facility expiring September 2022(2) $635 563
US dollar facilities expiring March 2024(3) $635 563
======================================================= ======== ==============
1,126
======================================================= ======== ==============
1 The general facilities can be drawn at any time at the
discretion of the Group subject to the provision of up to three
days' notice of the intended utilisation, depending on the
facility.
2 The aircraft facilities maturing in 2023 are available for
specific committed aircraft deliveries.
3 The aircraft facilities maturing between October 2023 and
March 2024 (2021: maturing in March 2024) are available for
specific committed aircraft deliveries and require the Group to
give three months' notice to the counterparty of its intention to
utilise the facilities.
The following table analyses the Group's (outflows) and inflows
in respect of financial liabilities and derivative financial
instruments into relevant maturity groupings based on the remaining
period at December 31 to the contractual maturity date. The amounts
disclosed in the table are the contractual undiscounted cash flows
and include interest.
Within 6-12 1-2 2-5 More than Total
EUR million 6 months months years years 5 years 2022
======================================= ========= ======= ======= ======= ========= ========
Interest-bearing loans and borrowings:
Asset financing liabilities (196) (190) (374) (1,081) (2,823) (4,664)
Lease liabilities (955) (1,050) (2,120) (3,374) (5,295) (12,794)
Fixed rate borrowings (64) (523) (78) (1,242) (757) (2,664)
Floating rate borrowings (227) (146) (455) (3,191) - (4,019)
Trade and other payables (5,209) - (200) - - (5,409)
Derivative financial instruments
(assets):
Interest rate derivatives 42 9 12 9 - 72
Foreign exchange contracts 245 195 46 - - 486
Fuel derivatives 122 62 13 - - 197
Derivative financial instruments
(liabilities):
Interest rate derivatives (4) (1) (1) (3) - (9)
Foreign exchange contracts (185) (121) (68) - - (374)
Fuel derivatives (42) (59) (10) - - (111)
======================================= ========= ======= ======= ======= ========= ========
December 31, 2022 (6,473) (1,824) (3,235) (8,882) (8,875) (29,289)
======================================= ========= ======= ======= ======= ========= ========
Within 6-12 1-2 2-5 More than Total
EUR million 6 months months years years 5 years 2021
======================================= ========= ======= ======= ======= ========= ========
Interest-bearing loans and borrowings:
Asset financing liabilities (122) (116) (230) (678) (1,714) (2,860)
Lease liabilities (920) (854) (1,814) (3,839) (5,524) (12,951)
Fixed rate borrowings (151) (529) (578) (690) (2,094) (4,042)
Floating rate borrowings (129) (285) (428) (3,368) (16) (4,226)
Other financing liabilities (73) - - - - (73)
Trade and other payables (3,712) - (208) - - (3,920)
Derivative financial instruments
(assets):
Interest rate derivatives - 1 2 3 - 6
Foreign exchange contracts 227 52 46 1 - 326
Fuel derivatives 157 129 48 - - 334
Derivative financial instruments
(liabilities):
Interest rate derivatives (12) (10) (7) (3) - (32)
Foreign exchange contracts (67) (38) (33) (6) - (144)
Fuel derivatives (14) (13) (18) - - (45)
======================================= ========= ======= ======= ======= ========= ========
December 31, 2021 (4,816) (1,663) (3,220) (8,580) (9,348) (27,627)
======================================= ========= ======= ======= ======= ========= ========
g Offsetting financial assets and liabilities
The Group enters into derivative transactions under ISDA
(International Swaps and Derivatives Association) documentation. In
general, under such agreements the amounts owed by each
counterparty on a single day in respect of all transactions
outstanding are aggregated into a single net amount that is payable
by one party to the other.
The following financial assets and liabilities are subject to
offsetting, enforceable master netting arrangements and similar
agreements.
December 31, 2022
Gross Net amounts Related
amounts of financial amounts
Gross set off instruments not offset
value in the in the in the
of financial Balance Balance Balance
EUR million instruments sheet(1) sheet sheet(1) Net amount
================================= ============= ========= ============= =========== ==========
Financial assets
Derivative financial assets 760 (34) 726 (5) 721
Financial liabilities
Derivative financial liabilities 505 (34) 471 5 476
================================= ============= ========= ============= =========== ==========
1 The Group has pledged cash and cash equivalents as collateral
against certain of its derivative financial liabilities. As
December 31, 2022, the Group recognised EURnil of collateral (2021:
EURnil) offset in the balance sheet and EUR5 million (2021: EUR30
million) not offset in the Balance sheet.
December 31, 2021
Gross Net amounts Related
amounts of financial amounts
Gross set off instruments not offset
value in the in the in the
of financial Balance Balance Balance
EUR million instruments sheet sheet sheet Net amount
================================= ============= ======== ============= =========== ==========
Financial assets
Derivative financial assets 628 (8) 620 (30) 590
Financial liabilities
Derivative financial liabilities 181 (8) 173 30 203
================================= ============= ======== ============= =========== ==========
h Capital risk management
The Group's objectives when managing capital are to safeguard
the Group's ability to continue as a going concern, to maintain an
optimal capital structure, to reduce the cost of capital and to
provide returns to shareholders.
The Group monitors capital on the basis of the net debt to
EBITDA before exceptional items ratio. For the year to December 31,
2022, the net debt to EBITDA before exceptional items was 3.1 times
(2021: minus 11.5 times). The definition and calculation for this
performance measure is included in the Alternative performance
measures section.
Further detail on liquidity and capital resources and capital
risk management is disclosed in the going concern section in note
2.
i Managing interest rate benchmark reform and associated risks
Overview
A reform of major interest rate benchmarks is being undertaken
globally, including the replacement of certain interbank offered
rates (IBORs) with alternative nearly risk-free rates (referred to
as 'IBOR reform'). The Group has exposures to IBORs on its
financial instruments that are expected to mature subsequent to
December 31, 2022, and as such will be replaced as part of these
market-wide initiatives. The Group anticipates that IBOR reform
will impact its risk management and hedge accounting.
During 2020 the Group established an IBOR transition working
group and project plan, led by Group Treasury. This project has and
continues to consider the required changes to systems, processes,
risk management and valuation models, as well as managing any
accounting and tax implications. During the course of 2022, the
Group, and the counterparties to the financial instruments, have
transitioned the majority of such instruments to an alternative
benchmark rate and in order to enable such transitions, changes to
systems, processes and models have been implemented. Those
financial instruments that have not transitioned at December 31,
2022 relate to
those with a US dollar LIBOR component, which is not expected to
convert to an alternative risk-free rate until mid-2023, subject
to
further consultation.
Reforms to the Euro Interbank Offered Rate (EURIBOR) methodology
to enable it to meet the criteria of a risk-free rate were
completed in 2019. As such the Group expects to continue to utilise
financial instruments with a EURIBOR component without
transitioning to an alternative benchmark rate.
Derivative and non-derivative financial instruments and hedge
accounting
While the Group has transitioned a number of its derivative and
non-derivative financial instruments to an alternative benchmark
rate, certain interest rate swap derivative financial instruments
and non-derivative financial instruments continue to have their
floating legs indexed to US dollar LIBOR.
For derivative financial instruments there is no uncertainty
associated with IBOR reform as at December 31, 2022, as such
instruments either mature prior to the date of withdrawal of the US
dollar LIBOR, or where maturity is subsequent to the date of
withdrawal of the US dollar LIBOR, the final pricing date for such
instruments is prior to the date of withdrawal. Accordingly, the
Group does not intend to transition such instruments to an
alternative benchmark and these derivatives continue to be
recognised as hedging instruments in hedge relationships, with the
hedged item being those non-derivative financial instruments
indexed to US dollar LIBOR.
Non-derivative financial instruments predominantly relate to
those lease liabilities with a US dollar LIBOR component. The Group
has such leases with a limited number of counterparties for which
the Group expects to transition to an alternative benchmark by June
30, 2023.
The table below provides an overview of the IBOR-related
exposures as at December 31, 2022. Non-derivative financial
instruments are presented on the basis of their carrying values,
while derivative financial instruments are presented on the basis
of their nominal amounts.
Non-derivative Derivative
financial financial
instruments instruments
- carrying - nominal
EUR million value amount
================ ============== ============
US dollar LIBOR 461 305
================ ============== ============
28 Financial instruments
a Financial assets and liabilities by category
The detail of the Group's nancial instruments at December 31,
2022 and December 31, 2021 by nature and classi cation for
measurement purposes is as follows:
December 31, 2022
Financial assets
==========================================
Total
Fair value carrying
through Other Fair value amount by
Amortised comprehensive through Income Non-financial balance sheet
EUR million cost income statement assets item
=============================== ========= ============== =============== ============= ==============
Non-current assets
Other equity investments - 55 - - 55
Derivative financial
instruments - - 81 - 81
Other non-current assets 180 - - 182 362
=============================== ========= ============== =============== ============= ==============
Current assets
Trade receivables 1,330 - - - 1,330
Other current assets 308 - - 918 1,226
Derivative financial
instruments - - 645 - 645
Other current interest-bearing
deposits 403 - - - 403
Cash and cash equivalents 9,196 - - - 9,196
=============================== ========= ============== =============== ============= ==============
Financial liabilities
=============================================
Total
Fair value carrying
through Other Fair value amount by
Amortised comprehensive through Non-financial balance sheet
EUR million cost income Income statement liabilities item
============================= ========== ============== ================= ============= ==============
Non-current liabilities
Lease liabilities 7,853 - - - 7,853
Interest-bearing long-term
borrowings 8,692 - 596 - 9,288
Derivative financial
instruments - - 84 - 84
Other long-term liabilities 131 - - 69 200
============================= ========== ============== ================= ============= ==============
Current liabilities
Lease liabilities 1,766 - - - 1,766
Current portion of long-term
borrowings 1,068 - 9 - 1,077
Trade and other payables 4,898 - - 311 5,209
Derivative financial
instruments - - 387 - 387
============================= ========== ============== ================= ============= ==============
December 31, 2021
Financial assets
==========================================
Total
Fair value carrying
through Other Fair value amount by
Amortised comprehensive through Income Non-financial balance sheet
EUR million cost income statement assets item
=============================== ========= ============== =============== ============= ==============
Non-current assets
Other equity investments - 31 - - 31
Derivative financial
instruments - - 77 - 77
Other non-current assets 126 10 - 114 250
=============================== ========= ============== =============== ============= ==============
Current assets
Trade receivables 735 - - - 735
Other current assets 363 - - 597 960
Derivative financial
instruments - - 543 - 543
Other current interest-bearing
deposits 51 - - - 51
Cash and cash equivalents 7,892 - - - 7,892
=============================== ========= ============== =============== ============= ==============
Financial liabilities
=============================================
Total
Fair value carrying
through Other Fair value amount by
Amortised comprehensive through Non-financial balance sheet
EUR million cost income Income statement liabilities item
============================= ========== ============== ================= ============= ==============
Non-current liabilities
Lease liabilities 8,116 - - - 8,116
Interest-bearing long-term
borrowings 8,220 - 748 - 8,968
Derivative financial
instruments - - 47 - 47
Other long-term liabilities 132 - - 76 208
============================= ========== ============== ================= ============= ==============
Current liabilities
Lease liabilities 1,521 - - - 1,521
Current portion of long-term
borrowings 996 - 9 - 1,005
Trade and other payables 3,506 - - 206 3,712
Derivative financial
instruments - - 126 - 126
============================= ========== ============== ================= ============= ==============
b Fair value of financial assets and financial liabilities
The fair values of the Group's financial instruments are
disclosed in hierarchy levels depending on the nature of the inputs
used in determining the fair values and using the following methods
and assumptions:
Level 1: Quoted prices (unadjusted) in active markets for
identical assets and liabilities. A market is regarded as active if
quoted prices are readily and regularly available from an exchange,
dealer, broker, industry group, pricing service, or regulatory
agency, and those prices represent actual and regularly occurring
market transactions on an arm's length basis. Level 1 methodologies
(market values at the balance sheet date) were used to determine
the fair value of listed asset investments classified as equity
investments and listed interest-bearing borrowings. The fair value
of financial liabilities and financial assets incorporates own
credit risk and counterparty credit risk, respectively.
Level 2: Inputs other than quoted prices included within Level 1
that are observable for the asset or liability, either directly or
indirectly. The fair value of financial instruments that are not
traded in an active market is determined by valuation techniques.
These valuation techniques maximise the use of observable market
data where it is available and rely as little as possible on
entity-specific estimates.
Derivative instruments are measured based on the market value of
instruments with similar terms and conditions using forward pricing
models, which include forward exchange rates, forward interest
rates, forward fuel curves and corresponding volatility surface
data at the reporting date. The fair value of derivative financial
assets and liabilities are determined as follows, incorporating
adjustments for own credit risk and counterparty credit risk:
-- commodity reference contracts including swaps and options
transactions, referenced to (i) CIF NWE cargoes jet fuel; (ii) ICE
Gasoil; (iii) ICE Brent; (iv) ICE Gasoil Brent crack; (v) Jet
Differential and (vi) Jet fuel Brent crack - the mark-to-market
valuation prices are determined by reference to current forward
curve and standard option pricing valuation models, values are
discounted to the reporting date based on the corresponding
interest rate;
-- currency forward and option contracts - by reference to
current forward prices and standard option pricing valuation
models, values are discounted to the reporting date based on the
corresponding interest rate; and
-- interest rate swap contracts - by discounting the future cash
flows of the swap contracts at market interest rate valued with the
current forward curve.
The fair value of the Group's interest-bearing borrowings
including leases is determined by discounting the remaining
contractual cash flows at the relevant market interest rates at the
balance sheet date. The fair value of the Group's interest-bearing
borrowings is adjusted for own credit risk.
Level 3: Inputs for the asset or liability that are not based on
observable market data. The principal method of such valuation is
performed using a valuation model that considers the present value
of the dividend cash flows expected to be generated by the
associated assets. For the methodology in the determination of the
fair value of the investment in Air Europa Holdings, refer to note
19.
The fair value of cash and cash equivalents, other current
interest-bearing deposits, trade receivables, other current assets
and trade and other payables approximate their carrying value
largely due to the short-term maturities of these instruments.
The carrying amounts and fair values of the Group's financial
assets and liabilities at December 31, 2022 are as follows:
Carrying
Fair value value
========================== ========
Level Level Level
EUR million 1 2 3 Total Total
======================================= ===== ===== ===== ===== ========
Financial assets
Other equity investments - - 55 55 55
Other non-current financial assets - 20 - 20 31
Derivative financial assets:
Interest rate swaps(1) - 66 - 66 66
Foreign exchange contracts(1) - 467 - 467 467
Fuel derivatives(1) - 193 - 193 193
Financial liabilities
Interest-bearing loans and borrowings:
Asset financed liabilities - 2,925 - 2,925 3,819
Fixed rate borrowings 2,538 72 - 2,610 2,967
Floating rate borrowings - 3,419 - 3,419 3,579
Derivative financial liabilities:
Interest rate derivatives(2) - 6 - 6 6
Foreign exchange contracts(2) - 386 - 386 386
Fuel derivatives(2) - 79 - 79 79
======================================= ===== ===== ===== ===== ========
1 Current portion of derivative financial assets is EUR645 million.
2 Current portion of derivative financial liabilities is EUR387 million.
The carrying amounts and fair values of the Group's financial
assets and liabilities at December 31, 2021 are set out below:
Carrying
Fair value value
========================== ========
Level Level Level
EUR million 1 2 3 Total Total
======================================= ===== ===== ===== ===== ========
Financial assets
Other equity investments - - 31 31 31
Derivative financial assets:
Interest rate swaps(1) - 5 - 5 5
Foreign exchange contracts(1) - 314 - 314 314
Fuel derivatives(1) - 301 - 301 301
Financial liabilities
Interest-bearing loans and borrowings:
Asset financed liabilities - 2,583 - 2,583 2,415
Fixed rate borrowings 3,492 265 - 3,757 3,863
Floating rate borrowings - 3,622 - 3,622 3,622
Other financing liabilities - 73 - 73 73
Derivative financial liabilities:
Interest rate derivatives(2) - 31 - 31 31
Foreign exchange contracts(2) - 129 - 129 129
Fuel derivatives(2) - 13 - 13 13
======================================= ===== ===== ===== ===== ========
1 Current portion of derivative financial assets is EUR543 million.
2 Current portion of derivative financial liabilities is EUR126 million.
On June 15, 2022, the Group entered into a financing arrangement
with Globalia, which was classified as a Level 2 financial asset.
On August 16, 2022, the Group exercised the conversion option
within the financing arrangement leading to the de-recognition of
the Level 2 financial asset and the recognition of an Other equity
investment in Air Europa Holdings, which was recorded as an
addition to a Level 3 financial asset. Refer to note 19 for further
details. There have been no other transfers between levels of the
fair value hierarchy during the year.
Financial assets, other equity instruments, financial
liabilities and derivative financial assets and liabilities are all
measured at fair value in the consolidated financial statements.
Interest-bearing borrowings, with the exception of the EUR825
million convertible bond due 2028 which is measured at fair value,
are measured at amortised cost.
c Level 3 financial assets reconciliation
The following table summarises key movements in Level 3
financial assets:
EUR million 2022 2021
=============================================== ==== ====
Opening balance for the year 31 29
=============================================== ==== ====
Addition of Air Europa Holdings 22 -
Additions - other 2 2
Losses recognised in Income statement (2) -
Gains recognised in Other comprehensive income 2 -
=============================================== ==== ====
Closing balance for the year 55 31
=============================================== ==== ====
For details regarding the valuation of Air Europa Holdings,
refer to note 19.
d Hedges
Cash flow hedges
At December 31, 2022 the Group's principal risk management
activities that were hedging future forecast transactions were:
-- foreign exchange contracts, hedging foreign currency exchange
risk on cash inflows and certain operational payments.
Remeasurement gains and losses on the derivatives are (i)
recognised in equity and transferred to the Income statement, where
the hedged item is recorded directly in the Income statement, to
the same caption as the underlying hedged item is classified; (ii)
recognised in equity and transferred to the Balance sheet, where
the hedged item is a non-financial asset or liability, are recorded
to the Balance sheet to the same caption as the hedged item is
recognised; and (iii) recognised in equity and transferred to the
Income statement, where the hedged item is a financial asset or
liability, at the same time as the financial asset or liability is
recorded in the Income statement. Reclassification gains and losses
on derivatives, arising from the discontinuance of hedge
accounting, are recognised in the Income statement when the future
transaction is no longer expected to occur and recorded in the
relevant Income statement caption to which the hedged item is
classified;
-- forward crude, gas oil and jet kerosene derivative contracts,
hedging price risk on fuel expenditure. Remeasurement gains and
losses on the derivatives are (i) recognised in equity and
transferred to the Income statement within Fuel, oil costs and
emissions charges to match against the related fuel cash outflow,
where the underlying hedged item does not give rise to the
recognition of fuel inventory; and (ii) recognised in equity and
transferred to the Balance sheet within Inventory, where the
underlying hedged item is fuel inventory. Gains and losses recorded
within Inventory are recognised in the Income statement when the
underlying fuel inventory is consumed, within Fuel, oil costs and
emission charges. Reclassification gains and losses on derivatives,
arising from the discontinuance of hedge accounting, are recognised
in the Income statement within Fuel, oil costs and emissions
charges when the future transaction is no longer expected to
occur;
-- interest rate contracts, hedging interest rate risk on
floating rate debt and certain operational payments. Remeasurement
gains and losses on the derivatives are recognised in equity and
transferred to the Income statement within Interest expense;
and
-- future loan repayments denominated in foreign currency are
designated in a hedge relationship hedging foreign exchange
fluctuations on revenue cash inflows. Remeasurement gains and
losses on the associated loans are recognised in equity and
transferred to the Balance sheet, where the hedged item is a
non-financial asset or liability when the loan repayments are made
(generally in instalments over the life of the loan).
The amounts included in equity are summarised below:
(Gains)/losses in respect of cash flow hedges included within
equity
EUR million 2022 2021
============================================================ ===== =====
Loan repayments to hedge future revenue 87 98
Foreign exchange contracts to hedge future revenue and
expenditure(1) (178) 25
Crude, gas oil and jet kerosene derivative contracts(1) (127) (276)
Derivatives used to hedge interest rates(1) (46) 58
Instruments for which hedge accounting no longer applies(1,
2) 213 247
============================================================ ===== =====
(51) 152
Related deferred tax charge/(credit) 20 (24)
============================================================ ===== =====
Total amount included within equity (31) 128
============================================================ ===== =====
1 The carrying value of derivative instruments recognised in
assets and liabilities is analysed in parts a and b above.
2 Relates to previously terminated hedge relationships for which
the underlying forecast transactions remain expected to occur.
The notional amounts of significant financial instruments used
as cash flow hedging instruments are set out below, with the prior
period presentation amended to reflect the current
presentation:
Average Total
Notional principal amounts hedge Within December
(EUR million) rate Hedge range 1 year 1-2 years 2-5 years 5+ years 31, 2022
============================================ ======= =========== ======= ========= ========= ======== =========
Foreign exchange contracts to hedge future
revenue and expenditure from US dollars to
pound 1.05 to
sterling(1) 1.23 1.45 3,582 1,355 - - 4,937
Foreign exchange contracts to hedge future
revenue and expenditure from US dollars to 0.91 to
euros(1) 1.08 1.26 2,578 1,318 - - 3,896
Foreign exchange contracts to hedge future
revenue and expenditure from euros to pound 1.00 to
sterling(1) 1.23 1.42 371 406 458 14 1,249
Fuel commodity price contracts to hedge 416 to
future US dollar fuel expenditure(2) 718 2,200 2,935 331 - - 3,266
Interest rate contracts to hedge future (0.03)
interest expenditure(3) 1.04 to 3.13 2,360 504 238 9 3,111
============================================ ======= =========== ======= ========= ========= ======== =========
1 Expenditure includes both operating and capital expenditure.
2 Notional amounts of fuel commodity price hedging instruments
represent 5.4 million metric tonnes of jet fuel equivalent and the
hedge range is expressed as the US dollar price per metric tonne,
which for those products typically priced in barrels, has been
determined using a conversion factor of 7.88.
3 The hedge range for interest rate contracts is expressed as a percentage.
Average Total
Notional principal amounts hedge Within December
(EUR million) rate Hedge range 1 year 1-2 years 2-5 years 5+ years 31, 2021
============================================ ======= =========== ======= ========= ========= ======== =========
Foreign exchange contracts to hedge future
revenue and expenditure from US dollars to
pound 1.15 to
sterling(1) 1.31 1.45 2,606 1,030 42 - 3,678
Foreign exchange contracts to hedge future
revenue and expenditure from US dollars to 1.08 to
euros(1) 1.18 1.32 1,632 735 26 - 2,393
Foreign exchange contracts to hedge future
revenue and expenditure from euros to pound 1.08 to
sterling(1) 1.23 1.42 396 334 543 166 1,439
Fuel commodity price contracts to hedge 395 to
future US dollar fuel expenditure(2) 649 737 2,386 826 - - 3,212
Interest rate contracts to hedge future (0.03)
interest expenditure(3) 1.40 to 3.13 3,099 1,080 738 60 4,977
============================================ ======= =========== ======= ========= ========= ======== =========
1 Expenditure includes both operating and capital expenditure.
2 Notional amounts of fuel commodity price hedging instruments
represent 5.8 million metric tonnes of jet fuel equivalent and the
hedge range is expressed as the US dollar price per metric tonne,
which for those products typically priced in barrels, has been
determined using a conversion factor of 7.88.
3 The hedge range for interest rate contracts is expressed as a percentage.
Amounts recognised in the Income
statement
===========================================================
For the year to December
31, 2022
Fair value
movements Amounts
Recycling recognised reclassified
Discontinuance to the Total in Other to the
of hedge Income recognised comprehensive Balance
(EUR million) Ineffectiveness(1) accounting Statement movements income(2) sheet
========================== ================== ============== ========== =========== ============== =============
Foreign exchange contracts
to hedge future revenue
and
expenditure - 29 228 257 (525) 43
Crude, gas oil and jet
kerosene
derivative contracts 19 - 1,299 1,318 (1,249) 66
Derivatives used to hedge
interest rates - - (12) (12) (95) -
Loan repayments to hedge
future revenue - - - - (1) (7)
Instruments for which
hedge
accounting no longer
applies - - - - - (27)
========================== ================== ============== ========== =========== ============== =============
19 29 1,515 1,563 (1,870) 75
========================== ================== ============== ========== =========== ============== =============
Related deferred tax (330) 398 (1)
========================== ================== ============== ========== =========== ============== =============
Total movements recorded
in the cash flow hedge
reserve 1,233 (1,472) 74
========================== ================== ============== ========== =========== ============== =============
1 Ineffectiveness recognised in the Income statement is
presented as Realised and Unrealised gains and losses on
derivatives not qualifying for hedge accounting within
non-operating items.
2 Amounts recognised in Other comprehensive income represent
gains and losses on the hedging instrument.
Amounts recognised in the Income
statement
===========================================================
For the year to December
31, 2021
Fair value
movements Amounts
Recycling recognised reclassified
Discontinuance to the Total in Other to the
of hedge Income recognised comprehensive Balance
(EUR million) Ineffectiveness(1) accounting Statement movements income(2) sheet
========================== ================== ============== ========== =========== ============== =============
Foreign exchange contracts
to hedge future revenue
and
expenditure - 4 39 43 (178) (24)
Crude, gas oil and jet
kerosene
derivative contracts (1) 73 88 160 (737) -
Derivatives used to hedge
interest rates - - (29) (29) 21 -
Loan repayments to hedge
future revenue - - (15) (15) (120) -
Instruments for which
hedge
accounting no longer
applies - - (54) (54) - -
========================== ================== ============== ========== =========== ============== =============
(1) 77 29 105 (1,014) (24)
========================== ================== ============== ========== =========== ============== =============
Related deferred tax (24) 166 3
========================== ================== ============== ========== =========== ============== =============
Total movements recorded
in the cash flow hedge
reserve 81 (848) (21)
========================== ================== ============== ========== =========== ============== =============
1 Ineffectiveness recognised in the Income statement is
presented as Realised and Unrealised gains and losses on
derivatives not qualifying for hedge accounting within
non-operating items.
2 Amounts recognised in Other comprehensive income represent
gains and losses on the hedging instrument.
The losses associated with the discontinuance of hedge
accounting recognised in the Income statement and the subsequent
fair value movements of those derivative instruments recorded in
the Income statement through to the earlier of the reporting date
and the maturity date of the derivative are set out below:
EUR million 2022 2021
============================================================= ==== =====
Gains associated with the discontinuance of hedge accounting
recognised in the Income statement (29) (77)
Fair value movements subsequently recorded in the Income
statement - (82)
============================================================= ==== =====
Total effect of discontinuance of hedge accounting in the
Income statement (29) (159)
============================================================= ==== =====
The Group has no significant fair value hedges at December 31,
2022 and 2021.
29 Share capital, share premium and treasury shares
Ordinary
Number share Share
of shares capital premium
Allotted, called up and fully paid '000s EUR million EUR million
=================================================== ========== ============ ============
December 31, 2021: Ordinary shares of EUR0.10 each 4,971,476 497 7,770
=================================================== ========== ============ ============
December 31, 2022: Ordinary shares of EUR0.10 each 4,971,476 497 7,770
=================================================== ========== ============ ============
a Treasury shares
The treasury shares balance consists of shares held directly by
the Group. During the year to December 31, 2022, the Group
purchased 15.0 million shares at a weighted average share price of
EUR1.51 per share totalling EUR23 million, which are held as
Treasury shares. A total of 8.1 million shares (2021: 5.4 million)
were issued to employees during the year as a result of vesting of
employee share schemes. At December 31, 2022 the Group held 17.1
million shares (2021: 10.2 million) which represented 0.34 per cent
(2021: 0.20 per cent) of the issued share capital of the
Company.
30 Share-based payments
The Group operates share-based payment schemes as part of the
total remuneration package provided to employees. These schemes
comprise both share option schemes where employees acquire shares
at an option price and share award plans whereby shares are issued
to employees at no cost, subject to the achievement by the Group of
specified performance targets.
a IAG Performance Share Plan
The IAG Performance Share Plan (PSP) is granted to senior
executives and managers of the Group who are most directly involved
in shaping and delivering business success over the medium to long
term. Since 2015, awards have been made as nil-cost options, with a
two-year holding period following the three-year performance
period, before options can be exercised. All awards since 2015 have
three independent performance measures with equal weighting: Total
Shareholder Return (TSR) relative to the STOXX Europe 600 Travel
and Leisure Index (for 2020 awards) or MSCI European Transportation
Index (for prior to 2020 awards), earnings per share, and Return on
Invested Capital.
b IAG Restricted Share Plan
During 2021, the Group revised its approach to long-term
incentives, replacing the existing PSP with a Restricted Share Plan
(RSP) proposal under the new Executive Share Plan approved by
shareholders in June 2021. The RSP was introduced to increase the
alignment of both interests and outcomes between the Group's senior
management and shareholders through the build-up and maintenance of
senior management shareholdings and an increased focus on the
long-term, sustainable performance of the Group. Awards have been
made as nil-cost options, with a two-year holding period following
the three-year performance period, before options vest. There are
no performance measures associated with the awards, although
approval at the end of the vesting period will be at the discretion
of the Remuneration Committee, considering the Group's overall
performance, including financial and non-financial performance
measures over the course of the vesting period, as well as any
material risk or regulatory failures identified.
c IAG Full Potential Incentive Plan
During 2021, the Group launched the new Full Potential Incentive
Plan (FPIP), which is granted to key individuals involved in the
delivery of a series of transformation projects that will enable
the Group to deliver business success over the medium to long term.
The awards have been made as nil-cost options, vesting in 2025 and
dependent on stretch performance targets for 2024 and the approval
of the Board.
d IAG Incentive Award Deferral Plan
The IAG Incentive Award Deferral Plan (IADP) is granted to
qualifying employees based on performance and service tests. It
will be awarded when an incentive award is triggered subject to the
employee remaining in employment with the Group for three years
after the grant date. The relevant population will receive 50 per
cent of their incentive award up front in cash, and the remaining
50 per cent in shares after three years through the IADP.
e Share-based payment schemes summary
Outstanding Outstanding Exercisable
at January Granted Lapsed Vested at December December
1, 2022 number number number 31, 2022 31, 2022
'000s '000s '000s '000s '000s '000s
============================== =========== ======= ======= ======= ============ ===========
Performance Share Plan 24,706 - 5,273 3,094 16,339 3,683
Restricted Share Plan 16,198 26,796 1,911 749 40,334 -
Full Potential Incentive Plan 27,879 2,386 2,560 - 27,705 -
Incentive Award Deferral Plan 5,359 111 96 2,963 2,411 -
============================== =========== ======= ======= ======= ============ ===========
74,142 29,293 9,840 6,806 86,789 3,683
============================== =========== ======= ======= ======= ============ ===========
The weighted average share price at the date of exercise of
options exercised during the year to December 31, 2022 was GBP1.35
(2021: GBP1.78).
The Group recognised a share-based payment charge of EUR39
million for the year to December 31, 2022 (2021: EUR23
million).
31 Other reserves and non-controlling interests
For the year to December 31, 2022
Other reserves
======================================================================================
Equity
Unrealised portion
gains Cost of Total
and of hedging Currency convertible Merger Capital other Non-controlling
EUR million losses(1) reserve(2) translation(3) bond(4) reserve(5) reserves(6) reserves interest
================== ========== ========== ============== =========== ========== =========== ======== ===============
January 1, 2022 (94) 24 (65) 62 (2,467) 867 (1,673) 6
Other
comprehensive
income
for the year
Cash flow hedges
reclassified
and reported in
net profit:
Fuel and oil
costs (1,115) - - - - - (1,115) -
Currency
differences (90) - - - - - (90) -
Finance costs 10 - - - - - 10 -
Discontinuance
of hedge
accounting (22) - - - - - (22) -
Ineffectiveness
recognised
in other
non-operating
costs (16) - - - - - (16) -
Net change in fair
value
of cash flow
hedges 1,472 - - - - - 1,472 -
Net change in fair
value
of other equity
investments 2 - - - - - 2 -
Net change in fair
value
of cost of
hedging - (115) - - - - (115) -
Cost of hedging
reclassified
and reported in
net profit - 38 - - - - 38 -
Fair value
movements
on liabilities
attributable
to credit risk
changes (6) - - - - - (6) -
Currency
translation
differences - - (53) - - - (53) -
Hedges
reclassified and
reported in
property,
plant and
equipment (51) (14) - - - - (65) -
Hedges
reclassified and
reported in sales
in
advance of
carriage 35 1 - - - - 36 -
Hedges
reclassified and
reported in
inventory (58) - - - - - (58) -
Redemption of
convertible
bond - - - (62) - - (62) -
================== ========== ========== ============== =========== ========== =========== ======== ===============
December 31, 2022 67 (66) (118) - (2,467) 867 (1,717) 6
================== ========== ========== ============== =========== ========== =========== ======== ===============
Other reserves
=====================================================================================
Equity
Unrealised portion
gains Cost of Redeemed Total
and of hedging Currency convertible Merger capital other Non-controlling
EUR million losses(1) reserve(2) translation(3) bond(4) reserve(5) reserve(6) reserves interest
================= ========== ========== ============== =========== ========== ========== ======== ===============
January 1, 2021 (867) 38 (53) 62 (2,467) 867 (2,420) 6
Other
comprehensive
income for the
year
Cash flow hedges
reclassified
and reported in
net
loss:
Passenger
revenue 18 - - - - - 18 -
Fuel and oil
costs (45) - - - - - (45) -
Currency
differences (15) - - - - - (15) -
Finance costs 23 - - - - - 23 -
Discontinuance
of hedge
accounting (62) - - - - - (62) -
Net change in
fair value
of cash flow
hedges 848 - - - - - 848 -
Net change in
fair value
of cost of
hedging - 10 - - - - 10 -
Cost of hedging
reclassified
and reported in
net
profit - (12) - - - - (12) -
Fair value
movements
on liabilities
attributable
to credit risk
changes (15) - - - - - (15)
Currency
translation
differences - - (12) - - - (12) -
Hedges
reclassified
and reported in
property,
plant and
equipment 21 (12) - - - - 9 -
================= ========== ========== ============== =========== ========== ========== ======== ===============
December 31, 2021 (94) 24 (65) 62 (2,467) 867 (1,673) 6
================= ========== ========== ============== =========== ========== ========== ======== ===============
1 The unrealised gains and losses reserve records fair value
changes on equity investments and the portion of the amounts on
hedging instruments in cash flow hedges that are determined to be
effective hedges. The amounts at December 31, 2022 that relate to
the fair value changes on equity instruments and to the cash flow
hedge reserve were EUR11 million credit and EUR56 million credit,
respectively.
2 The cost of hedging reserve records, amongst others, changes on the time value of options.
3 The currency translation reserve records exchange differences
arising from the translation of the financial statements of
non-euro functional currency subsidiaries and investments accounted
for under the equity method into the Group's reporting currency of
euros. The movement through this reserve is affected by the
fluctuations in the pound sterling to euro foreign exchange
translation rate.
4 At December 31, 2021 the equity portion of convertible bond
reserve represented the equity portion of the EUR500 million fixed
rate 0.625 per cent convertible bond that matured in 2022. During
2022 the Group redeemed the EUR500 million convertible bond with no
conversion into ordinary shares. On redemption, an amount of EUR62
million was transferred to Retained earnings.
5 The merger reserve originated from the merger transaction
between British Airways and Iberia. The balance represents the
difference between the fair value of the Group on the transaction
date, and the fair value of Iberia and the book value of British
Airways (including its reserves).
6 Capital reserves include a Redeemed capital reserve of EUR70
million (2021: EUR70 million) associated with the decrease in share
capital relating to cancelled shares and a Share capital reduction
reserve of EUR797 million (2021: EUR797 million) associated with a
reduction in the nominal value of the Company's share capital (note
29).
32 Employee benefit obligations
The Group operates a variety of post-employment benefit
arrangements, covering both defined contribution and defined
benefit schemes. The Group also has a scheme for flight crew who
meet certain conditions and therefore have the option of being
placed on reserve and retaining their employment relationship until
reaching the statutory retirement age, or taking early retirement
(note 26).
Defined contribution schemes
The Group operates a number of defined contribution schemes for
its employees.
Costs recognised in respect of defined contribution pension
plans in Spain, UK and Ireland for the year to December 31, 2022
were EUR251 million (2021: EUR200 million).
Defined benefit schemes
The principal funded defined benefit pension schemes within the
Group are the Airways Pension Scheme (APS) and the New Airways
Pension Scheme (NAPS), both of which are in the UK and are closed
to new members.
APS has been closed to new members since 1984, but remains open
to future accrual. The benefits provided under APS are based on
final average pensionable pay and, for the majority of members, are
subject to inflationary increases in payment.
NAPS has been closed to new members since 2003 and closed to
future accrual since 2018. Following closure, members' deferred
pensions are increased annually by inflation up to five per cent
per annum (measured using the Government's annual Pension Increase
(Review) Orders, which since 2011 have been based on CPI).
APS and NAPS are governed by separate Trustee Boards. Although
APS and NAPS have separate Trustee Boards, certain aspects of the
business of the two schemes are common. APS and NAPS have developed
certain joint working groups that are attended by the Trustee Board
members of each scheme although each Trustee Board reaches its
decisions independently. There are sub committees which are
separately responsible for the governance, operation and
investments of each scheme. British Airways Pension Trustees
Limited holds the assets of both schemes on behalf of their
respective Trustees.
Triennially, the Trustees of APS and NAPS undertake actuarial
valuations, which are subsequently agreed with British Airways to
determine the cash contributions and any deficit payment plans
through to the next valuation date, as well as ensuring that the
schemes have sufficient funds available to meet future benefit
payments to members. These actuarial valuations are prepared using
the principles set out in UK Pension legislation. This differs from
the IAS 19 'Employee benefits' valuation, which is used for
deriving the Income statement and Balance sheet positions and uses
a best-estimate approach overall. The different purpose and
principles lead to different assumptions being used, and therefore
a different estimate for the liabilities and funding levels.
During 2022, the triennial valuations, as at March 31, 2021,
were finalised for APS and NAPS which resulted in a technical
surplus of EUR343 million (GBP295 million) for APS and a technical
deficit of EUR1,887 million (GBP1,650 million) for NAPS. The
actuarial valuations performed for APS and NAPS are different to
the valuation performed as at December 31, 2022 under IAS 19
'Employee Benefits' mainly due to timing differences of the
measurement dates and to the specific scheme assumptions in the
actuarial valuation performed as at March 31, 2021 compared with
IAS 19 requirements used in the accounting valuation assumptions as
at the reporting date. The triennial actuarial valuation of neither
APS and NAPS is updated outside of the triennial valuations, making
comparability between the scheme liabilities applying the
principles set out in the UK Pension legislation and the
requirements of IAS 19 not possible. The principal difference
relates to the discount rate applied, which under the triennial
actuarial valuation, aligns with a prudent estimate of the future
investment returns on the assets of the respective schemes,
whereas, under IAS 19, the rates are based on high quality
corporate bond yields, regardless of how the assets are
invested.
The triennial valuation as at March 31, 2021 for NAPS supersedes
the previous agreements reached in 2020 and 2021 between British
Airways and the Trustee of NAPS relating to the deferral of deficit
contributions. The deferred deficit contributions have been
incorporated into the deficit payment plan agreed as part of the
triennial valuation as at March 31, 2021.
As part of the triennial valuation as at March 31, 2021 for
NAPS, British Airways has agreed to provide certain property assets
as security, which will remain in place until September 30,
2028.
Other plans
British Airways also operates post-retirement schemes in a
number of jurisdictions outside of the UK. The principal scheme is
the British Airways Plc Pension Plan (USA) based in the United
States and referred to as the 'US Plan'. The US Plan is considered
to be a defined benefit scheme and is closed to new members and to
future accrual.
The majority of British Airways' other plans are fully funded,
but there are also a number of unfunded plans, for which the Group
meets the benefit payment obligations as they fall due.
In addition, Aer Lingus operates certain defined benefit plans,
both funded and unfunded.
Risk associated with the defined benefit schemes
The defined benefit schemes expose the Group to a range of
risks, with the following being the most significant:
-- asset volatility risk - the scheme obligations are calculated
using a discount rate set with reference to high quality corporate
bond yields. If scheme assets underperform this yield, this will
reduce the surplus / increase the deficit, depending on the scheme.
Certain of the schemes hold a significant proportion of equities,
which are expected to outperform corporate bonds in the long term
while creating volatility and risk in the short term;
-- longevity risk - the majority of the scheme obligations are
to provide benefits over the life of the scheme members. An
increase in life expectancy will result in a corresponding increase
in the defined benefit obligation;
-- interest rate risk - a decrease in interest rates will
increase plan liabilities, although this will be partially offset
by an increase in the value of certain of the scheme assets;
-- inflation risk - a significant proportion of the scheme
obligations are linked to inflation, such that any increase in
inflation will cause an increase in the obligations. While certain
of the scheme assets are indexed to inflation, any expected
increase in the scheme assets from inflation would be
disproportionately lower than the increase in the scheme
obligations; and
-- currency risk - a number of scheme assets are denominated in
currencies other than the pound sterling. Weakening of those
currencies, or strengthening of the pound sterling, in the long
term, will have the effect of reducing the value of scheme
assets.
a Cash payments and funding arrangements
Cash payments in respect to pension obligations comprise normal
employer contributions by the Group and deficit contributions based
on the agreed deficit payment plan with NAPS. Total payments for
the year to December 31, 2022 net of service costs made by the
Group were EUR20 million (2021: EUR38 million) being the employer
contributions of EUR22 million (2021: EUR41 million) less the
current service cost of EUR2 million (2021: EUR3 million) (note
32b,c).
Future funding arrangements
Pension contributions for APS and NAPS were determined by
actuarial valuations made at March 31, 2021, using assumptions and
methodologies agreed between the Group and Trustee of each
scheme.
In total, the Group expects to pay EUR1 million in employer
contributions to APS and NAPS in 2023.
The following graph provides the undiscounted benefit payments
to be made by the Trustees of APS and NAPS over the remaining
expected duration of the schemes:
Projected benefit payments from the reporting date (EUR million,
unaudited)
The amounts and timing of these projected benefit payments are
subject to the aforementioned risks to the schemes.
Deficit contributions
At the date of the actuarial valuation, the actuarial deficit of
NAPS amounted to EUR1,887 million. In order to address the deficit
in the scheme, the Group has also committed to deficit contribution
payments through to June 30, 2023, amounting to approximately EUR58
million per year, increasing by EUR58 million each year up to June
30, 2026 and subsequently capped at EUR257 million per year through
to May 31, 2032. The deficit contribution plan includes an
over-funding protection mechanism, based on the triennial valuation
methodology for measuring the deficit, whereby deficit
contributions are suspended if the funding position reaches 100 per
cent, with a mechanism for contributions to resume if the
contribution level subsequently falls below 100 per cent, or until
such point as the scheme funding level reaches 100 per cent.
During the year ended and as at December 31, 2022, given the
funding level of the scheme, the NAPS funding position exceeded 100
per cent and accordingly deficit contributions were suspended. At
December 31, 2022, the valuation of the funding level incorporates
significant forward-looking assumptions, such that the Group
currently does not expect to make further deficit contributions.
Given the long-term nature of the NAPS scheme, these assumptions
are subject to uncertainty and there can be no guarantee that
deficit contributions will not resume in the future or that
additional deficit contributions will not need to be incorporated
into future triennial actuarial valuations.
At December 31, 2022, had the over-funding protection mechanism
not been applied, then the asset ceiling adjustment (as detailed in
note 32c) would have been EUR661 million higher.
At December 31, 2022, the Group is committed to the following
undiscounted deficit payments, which are deductible for tax
purposes at the statutory rate of tax:
Other
EUR million NAPS(1) schemes
================================ ======= ========
Within 12 months - 49
1-2 years - 44
2-5 years - 44
Greater than 5 years - -
================================ ======= ========
Total expected deficit payments - 137
================================ ======= ========
1 Committed deficit contributions for NAPS are stated after the
effect of the over-funding protection mechanism.
Deficit payments in respect of local arrangements outside of the
UK have been determined in accordance with local practice.
Under the triennial valuation of NAPS as at March 31, 2021, in
the period up to December 31, 2023, no dividend payment is
permitted from British Airways to IAG. In the period from January 1
to December 31, 2024, any dividends paid by British Airways will be
matched by contributions to NAPS of 50 per cent of the value of
dividends paid. In the period from January 1 to September 30, 2025,
any dividend payment from British Airways to IAG that exceeds 50
per cent of the pre-exceptional profit after tax in each financial
year will require additional payments to be made to NAPS if the
scheme is not at least 100 per cent funded. All dividend
restrictions cease from October 1, 2025, onwards. British Airways
must maintain a minimum cash level of EUR1,829 million (GBP1,600
million) as at the date of the declaration of any dividends as well
as immediately following the payment of any dividends to IAG and
the associated matching contributions to NAPS. The amount of any
deficit contributions and dividend matching contributions in a
single financial year is limited to EUR343 million (GBP300
million).
b Employee benefit scheme amounts recognised in the financial statements
i Amounts recognised on the Balance sheet
2022
==================================
EUR million APS NAPS Other Total
======================================= ======= ======== ===== ========
Scheme assets at fair value(1) 6,283 17,029 356 23,668
Present value of scheme liabilities(1) (6,052) (13,692) (548) (20,292)
======================================= ======= ======== ===== ========
Net pension asset/(liability) 231 3,337 (192) 3,376
Effect of the asset ceiling(2) (80) (1,168) - (1,248)
Other employee benefit obligations - - (11) (11)
======================================= ======= ======== ===== ========
December 31, 2022 151 2,169 (203) 2,117
======================================= ======= ======== ===== ========
Represented by:
Employee benefit asset 2,334
Employee benefit obligation (217)
======================================= ======= ======== ===== ========
Net employee benefit asset(3) 2,117
======================================= ======= ======== ===== ========
2021
==================================
EUR million APS NAPS Other Total
======================================= ======= ======== ===== ========
Scheme assets at fair value(1) 8,869 25,055 446 34,370
Present value of scheme liabilities(1) (8,333) (22,583) (706) (31,622)
======================================= ======= ======== ===== ========
Net pension asset/(liability) 536 2,472 (260) 2,748
Effect of the asset ceiling(2) (186) (1,061) - (1,247)
Other employee benefit obligations - - (11) (11)
======================================= ======= ======== ===== ========
December 31, 2021 350 1,411 (271) 1,490
======================================= ======= ======== ===== ========
Represented by:
Employee benefit asset 1,775
Employee benefit obligation (285)
======================================= ======= ======== ===== ========
Net employee benefit obligation(3) 1,490
======================================= ======= ======== ===== ========
1 Includes Additional Voluntary Contributions (AVCs), which the
Trustees hold as assets to secure additional benefits on a defined
contribution basis for those members who elect to make such AVCs.
At December 31, 2022, such assets were EUR320 million (2021: EUR391
million) with a corresponding amount recorded in the scheme
liabilities.
2 APS and NAPS have an accounting surplus under IAS 19, which
would be available to the Group as a refund upon wind up of the
scheme. This refund is restricted due to withholding taxes that
would be payable by the Trustee arising on both the net pension
asset and the future contractual minimum funding requirements.
3 The net deferred tax asset recognised on the net employee
benefit asset (2021: asset) was EUR54 million at December 31, 2022
(2021: EUR62 million). The defined benefit obligation includes
EUR21 million (2021: EUR25 million) arising from unfunded
plans.
ii Amounts recognised in the Income statement
Pension costs charged to operating result are:
EUR million 2022 2021
========================================= ==== ====
Defined benefit plans:
Current service cost 2 3
Administrative expenses 19 29
========================================= ==== ====
21 32
Defined contribution plans 251 200
========================================= ==== ====
Pension costs recorded as employee costs 272 232
========================================= ==== ====
EUR million 2022 2021
=================================================== ===== =====
Interest income on scheme assets (633) (432)
Interest expense on scheme liabilities 584 425
Interest expense on asset ceiling 23 9
=================================================== ===== =====
Net financing (credit)/charge relating to pensions (26) 2
=================================================== ===== =====
iii Amounts recognised in the Statement of other comprehensive income
EUR million 2022 2021
============================================================== ======== =======
Return on plan assets excluding interest income 9,360 (2,495)
Remeasurement of plan liabilities from changes in financial
assumptions(1) (10,476) 95
Remeasurement of plan liabilities from changes in demographic
assumptions(1) (202) (49)
Remeasurement of experience losses 627 427
Remeasurement of the APS and NAPS asset ceilings 14 419
Exchange movements 6 (14)
============================================================== ======== =======
Pension remeasurements charged to Other comprehensive income (671) (1,617)
============================================================== ======== =======
Deferred tax arising on pension remeasurements 9 217
============================================================== ======== =======
Pension remeasurements charged to Other comprehensive income,
net of tax (662) (1,400)
============================================================== ======== =======
1 The prior year figures include a reclassification between
remeasurements of plan liabilities from changes in financial
assumptions to remeasurement of plan liabilities from changes in
demographic assumptions to align with the current year
presentation. There is no change in the total pension
remeasurements charged to Other comprehensive income.
c Fair value of scheme assets
i Investment strategies
For both APS and NAPS, the Trustee has ultimate responsibility
for decision making on investments matters, including the
asset-liability matching strategy. The latter is a form of
investing designed to match the movement in pension plan assets
with the movement in the projected benefit obligation over time.
The Trustees' investment committee adopts an annual business plan
which sets out investment objectives and work required to support
achievement of these objectives. The committee also deals with the
monitoring of performance and activities, including work on
developing the strategic benchmark to improve the risk return
profile of the scheme where possible, as well as having a
trigger-based dynamic governance process to be able to take
advantage of opportunities as they arise. The investment committee
reviews the existing investment restrictions, performance
benchmarks and targets, as well as continuing to develop the
de-risking and liability hedging portfolio.
Both schemes use derivative instruments for investment purposes
and to manage exposures to financial risks, such as interest rate,
foreign exchange, longevity and liquidity risks arising in the
normal course of business. Exposure to interest rate risk is
managed through the use of Inflation-Linked Swap contracts. Foreign
exchange forward contracts are entered into to mitigate the risk of
currency fluctuations. Longevity risk is managed through the use of
buy-in insurance contracts, asset swaps and longevity swaps.
Along with existing contracts with Rothesay Life (as detailed in
note 32c(iii)), APS is 90 per cent protected against all longevity
risk and fully protected in relation to all pensions that were
already being paid as at March 31, 2018. It is also more than 90
per cent protected against interest rates and inflation (on a
Retail Price Index basis).
The strategic benchmark for asset allocations differentiates
between 'return seeking assets' and 'liability matching assets'
depending on the maturity of each scheme. At December 31, 2022, the
benchmark for NAPS was 31 per cent (2021: 37 per cent) in return
seeking assets and 69 per cent (2021: 63 per cent) in liability
matching investments. Bandwidths are set around these strategic
benchmarks that allow for tactical asset allocation decisions,
providing parameters for the investment committee and their
investment managers to work within. APS no longer has a 'strategic
benchmark' as instead, APS now runs off its liquidation portfolio
to a liability matching portfolio of bonds and cash. The actual
asset allocation for APS at December 31, 2022 was 1 per cent (2021:
1 per cent) in return seeking assets and 99 per cent (2021: 99 per
cent) in liability matching investments. NAPS uses Liability Driven
Investments (LDIs) to effectively hedge volatility in the scheme
liabilities. This is achieved through direct bond holdings as
opposed to the use of derivatives and as such leverage is low.
Accordingly, as at December 31, 2022, NAPS has not been required to
raise additional cash or liquidate existing assets in order to fund
derivative positions.
ii Movement in scheme assets
A reconciliation of the opening and closing balances of the fair
value of scheme assets is set out below:
EUR million 2022 2021
================================================ ======= =======
January 1 34,370 31,185
Interest income 633 432
Administrative expenses (13) (21)
Return on plan assets excluding interest income (9,360) 2,495
Employer contributions(1) 22 41
Employee contributions 6 13
Benefits paid (1,301) (1,930)
Exchange movements (689) 2,155
================================================ ======= =======
December 31 23,668 34,370
================================================ ======= =======
1 Includes employer contributions to APS of EUR1 million (2021:
EUR1 million) and to NAPS of EURnil (2021: EURnil) of which
deficit-funding payments represented EURnil for APS (2021: EURnil)
and EURnil for NAPS (2021: EURnil).
iii Composition of scheme assets
Scheme assets held by the Group at December 31 comprise:
2022
==============================
EUR million APS NAPS Other Total 2021
===================================== ===== ======= ===== ======= =======
Return seeking investments
Listed equities - UK 8 125 6 139 224
Listed equities - Rest of world 1 883 163 1,047 4,441
Private equities 38 1,518 10 1,566 1,643
Properties 2 2,124 16 2,142 2,481
Alternative investments 41 1,837 3 1,881 1,925
===================================== ===== ======= ===== ======= =======
90 6,487 198 6,775 10,714
Liability matching investments
Government issued fixed bonds 790 4,390 99 5,279 10,681
Government issued index-linked bonds 860 7,225 8 8,093 8,511
Asset and longevity swaps(1) 1,114 - - 1,114 1,716
Insurance contract(1) 3,356 - 36 3,392 4,662
===================================== ===== ======= ===== ======= =======
6,120 11,615 143 17,878 25,570
Other
Cash and cash equivalents 117 563 4 684 1,139
Derivative financial instruments (47) (1,650) 9 (1,688) (3,135)
Other investments 3 14 2 19 82
===================================== ===== ======= ===== ======= =======
73 (1,073) 15 (985) (1,914)
===================================== ===== ======= ===== ======= =======
Total scheme assets 6,283 17,029 356 23,668 34,370
===================================== ===== ======= ===== ======= =======
1 The prior year scheme asset balances split between Asset and
longevity swaps and Insurance contracts have been updated to
reflect the current year presentation. There is no change in total
scheme assets.
The fair values of the Group's scheme assets, which are not
derived from quoted prices on active markets, are determined
depending on the nature of the inputs used in determining the fair
values (see note 28b for further details) and using the following
methods and assumptions:
-- private equities are valued at fair value based on the most
recent transaction price or third-party net asset, revenue or
earnings-based valuations that generally result in the use of
significant unobservable inputs. The dates of these valuations
typically precede the reporting date and have been adjusted for any
cash movements between the date of the valuation and the reporting
date. Typically, the valuation approach and inputs for these
investments are not updated through to the reporting date unless
there are indications of significant market movements.
-- properties are valued based on an analysis of recent market
transactions supported by market knowledge derived from third-party
professional valuers that generally result in the use of
significant unobservable inputs.
-- alternative investments fair values, which predominantly
include holdings in investment and infrastructure funds are
determined based on the most recent available valuations applying
the Net Asset Value methodology and issued by fund administrators
or investment managers and adjusted for any cash movements having
occurred from the date of the valuation to the reporting date. The
dates of these valuations typically precede the reporting date and
have been adjusted for any cash movements between the date of the
valuation and the reporting date. Typically, the valuation approach
and inputs for these investments are not updated through to the
reporting date unless there are indications of significant market
movements.
-- other investments predominantly includes: interest receivable
on bonds; dividends from listed and private equities that have been
declared but not received at the balance sheet date; receivables
from the sale of assets for which the proceeds have not been
collected at the balance sheet date; and payables for the purchase
of assets which have not been settled at the balance sheet
date.
-- asset and longevity swaps - APS has a contract with Rothesay
Life, entered into in 2010 and extended in 2013, which covers 25
per cent (2021: 25 per cent) of the pensioner liabilities for an
agreed list of members. Under the contract, to reduce the risk of
long-term longevity risk, Rothesay Life makes benefit payments
monthly in respect of the agreed list of members in return for the
contractual return receivable on a portfolio of assets (made up of
quoted government debt) held by the scheme and the contractual
payments made by APS to Rothesay Life on the longevity swaps. The
Group holds the portfolio of assets at their fair value, with the
government debt held at their quoted market price and the swaps
accounted for at their estimated discounted future cash flows.
During 2011, APS entered into a longevity swap with Rothesay
Life, which covers an additional 21 per cent (2021: 21 per cent) of
the pensioner liabilities for the same agreed list of members as
the 2010 contract. Under the longevity swap, to reduce the risk of
long-term longevity risk, APS makes a fixed payment to Rothesay
Life each month reflecting the prevailing mortality assumptions at
the inception of the contract, and Rothesay Life make a monthly
payment to APS reflecting the actual monthly benefit payments to
members. The cash flows are settled net each month. If pensioners
live longer than expected at inception of the longevity swap,
Rothesay Life will make payments to the scheme to offset the
additional cost of paying pensioners and if pensioners do not live
as long as expected, then the scheme will make payments to Rothesay
Life. The Group holds the longevity swap at fair value, determined
at the estimated discounted future cash flows.
-- insurance contract - During 2018 the Trustee of APS secured a
buy-in contract with Legal & General. The buy-in contract
covers all members in receipt of pensions from APS at March 31,
2018, excluding dependent children, receiving a pension at that
date and members in receipt of equivalent pension only benefits,
who were alive on October 1, 2018. Benefits coming into payment for
retirements after March 31, 2018 are not covered. The contract
covers benefits payable from October 1, 2018 onwards. The policy
covers approximately 60 per cent of all benefits APS expects to pay
out in future.
iv Effect of the asset ceiling
In measuring the valuation of the net defined benefit asset for
each scheme, the Group limits such measurement to the lower of the
surplus in each scheme and the respective asset ceiling. The asset
ceiling represents the present value of the economic benefits
available in the form of a refund or a reduction in future
contributions after they are paid into the plan. The Group has
determined that the recoverability of such surpluses, including
minimum funding requirements, will be subject to withholding taxes
in the UK, payable by the Trustee, of 35 per cent.
The future committed NAPS deficit contributions, as detailed in
note 32a, are treated as minimum funding requirements under IAS 19
and are not recognised as part of the scheme assets or liabilities.
The Group has determined that upon the wind up of the scheme, that
if the scheme is in surplus, including the incorporation of the
minimum funding requirements, then the surplus will be available as
a refund or a reduction in future contributions after they are paid
into the scheme. The recovery of such amounts are subject to UK
withholding tax payable by the Trustee. In measuring the
recoverability of the surplus for each scheme, the Group limits
such measurement to the lower of the surplus in each scheme and the
respective asset ceiling. The asset ceiling represents the present
value of the economic benefits available upon wind up of the
scheme, less the application of withholding taxes in the UK,
payable by the Trustee, at 35 per cent.
A reconciliation of the effect of the asset ceiling used in
calculating the IAS 19 irrecoverable surplus in APS and NAPS is set
out below:
EUR million 2022 2021
=================== ===== =====
January 1 1,247 761
Interest expense 23 9
Remeasurements 14 419
Exchange movements (36) 58
=================== ===== =====
December 31 1,248 1,247
=================== ===== =====
d Present value of scheme liabilities
i Movement in scheme liabilities
A reconciliation of the opening and closing balances of the
present value of the defined benefit obligations is set out
below:
EUR million 2022 2021
============================================= ======== =======
January 1 31,622 30,556
Current service cost 2 3
Interest expense 584 425
Remeasurements - financial assumptions(1, 2) (10,476) 95
Remeasurements - demographic assumptions(2) (202) (49)
Remeasurements of experience losses 627 427
Benefits paid (1,301) (1,930)
Employee contributions 6 13
Exchange movements (570) 2,082
============================================= ======== =======
December 31 20,292 31,622
============================================= ======== =======
1 Included in the remeasurements from financial assumptions is
an amount of EUR10,299 million (2021: reduction of EUR1,866
million) that reduces the scheme liabilities relating to changes in
the discount rates and EUR177 million (2021: increase of EUR1,961
million) that reduces the scheme liabilities relating to changes in
inflation rates.
2 The prior year figures include a reclassification between
remeasurements of plan liabilities from changes in financial
assumptions to remeasurement of plan liabilities from changes in
demographic assumptions to align with the current year
presentation. There is no change in total scheme liabilities.
ii Scheme liability assumptions
The principal assumptions used for the purposes of the IAS 19
valuations were as follows:
2022 2021
======================= =======================
Other Other
Per cent per annum APS NAPS schemes(4) APS NAPS schemes(4)
================================ ==== ==== =========== ==== ==== ===========
Discount rate(1) 4.85 4.80 0.8-7.2 1.80 1.90 0.3-6.5
Rate of increase in pensionable
pay(2) 3.40 - 2.0-6.0 3.55 - 2.0-6.0
Rate of increase of pensions
in payment(3) 3.40 2.80 0.3-3.0 3.55 2.85 2.0-3.0
RPI rate of inflation 3.40 3.20 2.2-3.1 3.55 3.30 1.8-2.5
CPI rate of inflation 2.80 2.80 2.0-2.6 2.95 2.85 1.8-2.5
================================ ==== ==== =========== ==== ==== ===========
1 Discount rate is determined by reference to the yield on high
quality corporate bonds of currency and term consistent with the
scheme liabilities.
2 Rate of increase in pensionable pay, which reflects
inflationary increases, is assumed to be in line with increases in
RPI.
3 It has been assumed that the rate of increase of pensions in
payment, which reflects inflationary increases, will be in line
with CPI for NAPS and RPI for APS as at December 31, 2022.
4 The rate of increase in healthcare costs for schemes based in
the United States is based on medical trend rates of 6.25 per cent
grading down to 5.00 per cent over five years (2021: 6.00 per cent
to 5.00 per cent over five years).
The current longevities underlying the values of the scheme
liabilities were as follows:
Mortality assumptions 2022 2021
================================= ==== ====
Life expectancy at age 60 for a:
-- male currently aged 60 27.9 28.1
-- male currently aged 40 29.1 29.9
-- female currently aged 60 29.3 29.5
-- female currently aged 40 31.5 31.9
================================= ==== ====
For APS, the base mortality tables are based on the Agreed
Valuation Basis (AVB) as agreed between British Airways and the
trustees of APS. For NAPS, the base mortality tables are based on
the most recent model published by the UK actuarial profession's
Continuous Mortality Investigation (CMI), being their 2021 model.
These standard mortality tables, for both APS and NAPS, incorporate
adjustments specific to the demographics of scheme members,
including a long-term improvement parameter of 1.00 per cent per
annum (2021: 1.25 per cent). Allowance has been made with regard to
the long-term uncertainty arising from the effects of COVID-19.
For schemes in the United States, mortality rates were based on
the MP-2021 mortality tables incorporating adjustments for the
long-term impact COVID-19 is expected to have on mortality.
At December 31, 2022, the weighted-average duration of the
defined benefit obligation was 10 years for APS (2021: 12 years)
and 15 years for NAPS (2021: 19 years). The weighted average
duration of the defined benefit obligations was 3 to 19 years for
other schemes (2021: 11 to 23 years). The weighted average duration
represents a single figure for the average number of years over
which the employee benefit liability discounted cash flows is
extinguished and is highly dependent on movements in the
aforementioned discount rates, such that with an increase in the
discount rates experienced in 2022, the weighted-average duration
for both schemes has reduced.
iii Sensitivity analysis
Reasonably possible changes at the reporting date to significant
valuation assumptions, holding other assumptions constant, would
have affected the present value of scheme liabilities by the
amounts shown:
Increase in scheme
liabilities
======================
Other
EUR million APS NAPS schemes
======================================================= ==== ===== =========
Discount rate (decrease of 50 basis points)(1) 286 983 34
Future pension growth (increase of 50 basis points)(1) 252 949 5
Future mortality rate (one year increase in life
expectancy) 286 354 24
======================================================= ==== ===== =========
1 Sensitivities smaller than those disclosed can be
approximately interpolated from those sensitivities above.
Although the analysis does not take into account the full
distribution of cash flows expected under the plan, it does provide
an approximation of the sensitivity of the assumptions shown.
33 Contingent liabilities
There are a number of legal and regulatory proceedings against
the Group in a number of jurisdictions which at December 31, 2022,
where they could be reliably estimated, amounted to EUR11 million
(December 31, 2021: EUR22 million). The Group does not consider it
probable that there will be an outflow of economic resources with
regard to these proceedings and accordingly no provisions have been
recorded.
Contingent liabilities associated with income taxes, deferred
taxes and indirect taxes are presented in note 10.
34 Government grants and assistance
The Group has availed itself of government grants and assistance
as follows:
The Coronavirus Job Retention Scheme (CJRS) - recognised net
within Employee costs
The CJRS was implemented by the Government of the United Kingdom
from March 1, 2020 to August 30, 2020, where those employees
designated as being 'furloughed workers' were eligible to have 80
per cent of their wage costs paid up to a maximum of GBP2,500 per
month.
From September 1, 2020 to September 30, 2020, the level of
eligibility reduced to 70 per cent of wage costs and up to a
maximum of GBP2,197.50 per month. From October 1, 2020 to October
31, 2020, the level of eligibility reduced to 60 per cent of wage
costs and up to a maximum of GBP1,875 per month. Following the
introduction of further lockdown restrictions in the United Kingdom
in November 2020, the CJRS was extended from November 1, 2020 to
November 30, 2020 and then further to March 31, 2021 and then
further again to September 30, 2021 with the level of eligibility
increased to 80 per cent of wage costs and a maximum of GBP2,500
per month through to the end of June 2021. From July 1, 2021 the
eligibility decreased down each month to 60 per cent of wage costs
and a maximum of GBP1,875 per month by September 30, 2021, at which
time the CJRS ended.
Such costs were paid by the Government to the Group in arrears.
The Group was obliged to continue to pay the associated social
security costs and employer pension contributions.
The Temporary Wage Subsidy Scheme (TWSS) and the Employment Wage
Subsidy Scheme (EWSS) - recognised net within Employee costs
The TWSS was implemented by the government of Ireland from March
1, 2020 to August 30, 2020, where those employees designated as
being furloughed workers were eligible to have 85 per cent of their
wage costs paid up to a maximum of EUR410 per week. This scheme was
replaced with the EWSS from September 1, 2020 and ran through to
April, 2022. For those qualifying employees (earning less than
EUR1,462 per week), the government reimbursed wage costs up to a
maximum of EUR203 per week. Such costs were paid by the government
to the Group in arrears.
The total amount of the relief received under the CJRS, the TWSS
and the EWSS by the Group during 2022 amounted to EUR11 million
(2021: EUR286 million).
Temporary Redundancy Plan (ERTE) - no recognition in the
financial statements of the Group
The ERTE was implemented by the government of Spain from March
1, 2020 and ran through to February 28, 2022. Under this plan,
employment was temporarily suspended and those designated employees
were paid directly by the government and there was no remittance
made to the Group. The Group was obliged to continue to pay the
associated social security costs.
Had those designated employees not been temporarily suspended
during 2022, the Group would have incurred further employee costs
of EUR3 million (2021: EUR269 million).
The Ireland Strategic Investment Fund (ISIF) - recognised within
Long-term borrowings
On December 23, 2020, Aer Lingus entered into a financing
arrangement for EUR75 million. On March 27, 2021, Aer Lingus
entered into a further financing arrangement to extend the total
amount to EUR150 million. On March 4, 2022, Aer Lingus entered into
a financing arrangement with ISIF, which subsequently extinguished
the existing EUR150 million of facilities and replaced them with a
EUR350 million facility that matures in March 2025. On December 13,
2022, Aer Lingus repaid EUR100 million of this financing
arrangement with the amount repaid available to be redrawn through
to March 2025. The facility is secured on specific landing rights.
At December 31, 2022 EUR300 million of the facility remained
undrawn.
The UK Export Finance (UKEF) - recognised within Long-term
borrowings
On February 22, 2021, British Airways entered into a 5-year term
loan Export Development Guarantee Facility of EUR2.3 billion
(GBP2.0 billion) underwritten by a syndicate of banks, with 80 per
cent of the principal guaranteed by UKEF. The facility is
unsecured.
On November 1, 2021, British Airways entered into a further
5-year term loan Export Development Guarantee Facility of EUR1.1
billion (GBP1.0 billion) underwritten by a syndicate of banks, with
80 per cent of the principal guaranteed by UKEF. The facility is
unsecured. At December 31, 2022 the facility remained undrawn.
35 Related party transactions
The following transactions took place with related parties for
the financial years to December 31:
EUR million 2022 2021
=========================================== ==== ====
Sales of goods and services
Sales to associates(1) 5 6
Sales to significant shareholders(2) 141 16
Purchases of goods and services
Purchases from associates(3) 61 49
Purchases from significant shareholders(2) 113 69
=========================================== ==== ====
Receivables from related parties
Amounts owed by associates(4) 1 1
Amounts owed by significant shareholders(5) 25 5
Payables to related parties
Amounts owed to associates(6) - 3
Amounts owed to significant shareholders(5) 26 2
============================================
1 Sales to associates: Consisted primarily of sales for airline
related services to Dunwoody Airline Services (Holding) Limited
(Dunwoody) of EUR4 million (2021: EUR5 million) and EUR1 million
(2021: EUR1 million) to Serpista, S.A. and Multiservicios
Aeroportuarios.
2 Sales to and purchases from significant shareholders related
to interline services with Qatar Airways.
3 Purchases from associates: Consisted primarily of EUR35
million of airport auxiliary services purchased from Multiservicios
Aeroportuarios, S.A. (2021: EUR33 million), EUR14 million of
handling services provided by Dunwoody (2021: EUR8 million) and
EUR13 million of maintenance services received from Serpista, S.A.
(2021: EUR8 million).
4 Amounts owed by associates: Consisted primarily of EUR1
million of services provided to Multiservicios Aeroportuarios,
Serpista, Dunwoody and Empresa Hispano Cubana de Mantenimiento de
Aeronaves, Ibeca, S.A. (2021: EUR1 million).
5 Amounts owed by and to significant shareholders related to Qatar Airways.
6 Amounts owed to associates: EURnil (2021: EUR3 million).
During the year to December 31, 2022 British Airways met certain
costs of administering its retirement benefit plans, including the
provision of support services to the Trustees. Costs borne on
behalf of the retirement benefit plans amounted to EUR2 million
(2021: EUR6 million) in relation to the costs of the Pension
Protection Fund levy.
The Group has transactions with related parties that are
conducted in the normal course of the airline business, which
include the provision of airline and related services. All such
transactions are carried out on an arm's length basis.
During the course of 2022, the Group renewed its loyalty
currency exchange agreement with Qatar Airways, where Avios could
be exchanged for points within the Qatar Airways' loyalty
programme, the Privilege Club. In addition, in renewing the
agreement, IAG Loyalty licensed the Avios brand name for use within
the Privilege Club.
During the course of 2022, the Group provided a long-term
shareholder loan of EUR12 million ($14 million) to LanzaJet, Inc.,
a company which specialises in the generation of Sustainable
Aviation Fuels of which the Group has a 16.7 per cent equity
interest, classified as an associate and presented within
Investments accounted for using the equity method in the Balance
sheet.
For the year to December 31, 2022, the Group has not made any
provision for expected credit loss arising relating to amounts owed
by related parties (2021: EURnil).
Significant shareholders
In this instance, significant shareholders are those parties who
have the power to participate in the financial and operating policy
decisions of the Group, as a result of their shareholdings in the
Group, but who do not have control over these policies. At December
31, 2022, the only significant shareholder of the Group was Qatar
Airways.
At December 31, 2022 the Group had cash deposit balances with
shareholders holding a participation of between 3 to 5 per cent, of
EURnil (2021: EURnil).
Board of Directors and Management Committee remuneration
Compensation received by the Group's Board of Directors and
Management Committee, in 2022 and 2021 is as follows:
Year to December
31
==================
EUR million 2022 2021
=============================== ======== ========
Base salary, fees and benefits
Board of Directors
Short-term benefits 4 3
Share-based payments 1 -
Management Committee
Short-term benefits 15 11
Share-based payments 2 1
=============================== ======== ========
For the year to December 31, 2022 the Board of Directors
includes remuneration for one Executive Director (December 31,
2021: one Executive Director). The Management Committee includes
remuneration for 14 members (December 31, 2021: 14 members).
The Company provides life insurance for the Executive Director
and all members of the Management Committee. For the year to
December 31, 2022 the Company's obligation was EUR38,000 (2021:
EUR35,000).
At December 31, 2022 the transfer value of accrued pensions
covered under defined benefit pension obligation schemes, relating
to the current members of the Management Committee totalled EUR5
million (2021: EUR9 million).
No loan or credit transactions were outstanding with Directors
or officers of the Group at December 31, 2022 (2021: EURnil).
36 Post balance sheet events
On February 23, 2023, the Group entered into an agreement to
acquire the remaining eighty per cent of the share capital of Air
Europa Holdings that it had not previously owned. On successful
completion of the transaction, 54,064,575 ordinary shares of the
Company (which represented EUR100 million at the date of the
agreement) will be transferred to and EUR100 million in cash will
be paid to Globalia, with a further EUR100 million paid on both the
first and second anniversary of completion.
In addition, the Group has agreed to pay a break-fee to Globalia
of EUR50 million should: (i) the relevant approvals, detailed
below, not be forthcoming within 24 months of entering into the
agreement; or (ii) the Group terminates the agreement at any time
prior to completion.
The acquisition is conditional on Globalia receiving approval
from the syndicated banks that provide the loan agreements that are
partially guaranteed by the Instituto de Crédito Oficial (ICO) and
Sociedad Estatal de Participaciones Industriales (SEPI) in Spain.
The acquisition is also subject to approval by relevant competition
authorities. Until the completion of these approvals, the
acquisition does not meet the recognition criteria under IFRS 3
Business combinations, and no accounting has been made for the
transaction in these consolidated financial statements.
The execution of the agreement has not impacted the fair value
of the 20 per cent shareholding in Air Europa Holdings as detailed
in note 19. The fair value of the non-controlling equity interest
in Air Europa Holdings will be remeasured to reflect the
transaction price upon successful completion of the
transaction.
ALTERNATIVE PERFORMANCE MEASURES
The performance of the Group is assessed using a number of
alternative performance measures (APMs), some of which have been
identified as key performance indicators of the Group. These
measures are not defined under International Financial Reporting
Standards (IFRS), should be considered in addition to IFRS
measurements, may differ to definitions given by regulatory bodies
applicable to the Group and may differ to similarly titled measures
presented by other companies. They are used to measure the outcome
of the Group's strategy based on 'Unrivalled customer proposition',
'Value accretive and sustainable growth' and 'Efficiency and
innovation'.
During 2022, other than enhancing the definition and
reconciliation associated with the net debt to EBITDA before
exceptional items detailed in note e, the Group has made no changes
to its pre-existing disclosures and treatments of APMs compared to
those disclosed in the Annual Report and Accounts for the year to
December 31, 2021.
The impact of and the recovery from the COVID-19 pandemic has
significantly changed the basis on which the Board, Management
Committee and external parties monitor the performance of the
Group. In this regard measures relating to Levered free cash flow,
Net debt to EBITDA before exceptional items and Return on capital
employed do not provide the level of meaningful additional
information that they have done in the past. However, the Group
continues to present these APMs for consistency and they will
become more prominent and relevant subsequent to the recovery from
the COVID-19 pandemic.
The definition of each APM, together with a reconciliation to
the nearest measure prepared in accordance with IFRS is presented
below.
a Profit/(loss) after tax before exceptional items
Exceptional items are those that in the Board's and management's
view need to be separately disclosed by virtue of their size or
incidence to supplement the understanding of the entity's financial
performance. The Management Committee of the Group uses financial
performance on a pre-exceptional basis to evaluate operating
performance and to make strategic, financial and operational
decisions, and externally because it is widely used by security
analysts and investors in evaluating the performance of the Group
between reporting periods and against other companies.
Exceptional items in the year to December 31, 2022 and 2021
include: significant changes in the long-term fleet plans that
result in the reversal of impairment of fleet assets, legal
re-imbursements, significant discontinuation of hedge accounting,
and reversal of significant restructuring events recorded in prior
reporting periods.
The table below reconciles the statutory Income statement to the
Income statement before exceptional items of the Group:
Year to December 31
==========================================================================
Before Before
exceptional exceptional
Statutory Exceptional items Statutory Exceptional items
EUR million 2022 items 2022 2021 items 2021
================================== ========= =========== ============ ========= =========== ============
Passenger revenue(3) 19,458 - 19,458 5,835 5 5,830
Cargo revenue 1,615 - 1,615 1,673 - 1,673
Other revenue 1,993 - 1,993 947 - 947
================================== ========= =========== ============ ========= =========== ============
Total revenue 23,066 - 23,066 8,455 5 8,450
================================== ========= =========== ============ ========= =========== ============
Employee costs(4) 4,647 - 4,647 3,013 (18) 3,031
Fuel, oil costs and emissions
charges(3) 6,120 - 6,120 1,781 (154) 1,935
Handling, catering and other
operating costs 2,971 - 2,971 1,308 - 1,308
Landing fees and en-route charges 1,890 - 1,890 923 - 923
Engineering and other aircraft
costs(5) 2,101 - 2,101 1,085 (7) 1,092
Property, IT and other costs(1) 950 (23) 973 758 - 758
Selling costs 920 - 920 434 - 434
Depreciation, amortisation
and impairment(2) 2,070 (8) 2,078 1,932 (21) 1,953
Currency differences 141 - 141 (14) - (14)
================================== ========= =========== ============ ========= =========== ============
Total expenditure on operations 21,810 (31) 21,841 11,220 (200) 11,420
================================== ========= =========== ============ ========= =========== ============
Operating profit/(loss) 1,256 31 1,225 (2,765) 205 (2,970)
Finance costs (1,017) - (1,017) (830) - (830)
Finance income 52 - 52 13 - 13
Net change in fair value of
financial instruments 81 - 81 89 - 89
Net financing credit/(charge)
relating to pensions 26 - 26 (2) - (2)
Net currency retranslation
charges (115) - (115) (82) - (82)
Other non-operating credits(6) 132 - 132 70 (75) 145
================================== ========= =========== ============ ========= =========== ============
Total net non-operating costs (841) - (841) (742) (75) (667)
================================== ========= =========== ============ ========= =========== ============
Profit/(loss) before tax 415 31 384 (3,507) 130 (3,637)
Tax 16 (2) 18 574 (25) 599
Profit/(loss) after tax for
the year 431 29 402 (2,933) 105 (3,038)
================================== ========= =========== ============ ========= =========== ============
Three months to December 31
==========================================================================
Before
exceptional Before
Statutory Exceptional items Statutory Exceptional exceptional
EUR million 2022 items 2022 2021 items items 2021
======================================= ========= =========== ============ ========= =========== ============
Passenger revenue (3) 5,438 - 5,438 2,695 - 2,695
Cargo revenue 399 - 399 499 - 499
Other revenue 549 - 549 340 - 340
======================================= ========= =========== ============ ========= =========== ============
Total revenue 6,386 - 6,386 3,534 - 3,534
======================================= ========= =========== ============ ========= =========== ============
Employee costs (4) 1,230 - 1,230 914 (18) 932
Fuel, oil costs and emissions
charges (3) 1,720 - 1,720 732 (1) 733
Handling, catering and other operating
costs 828 - 828 520 - 520
Landing fees and en-route charges 499 - 499 325 - 325
Engineering and other aircraft
costs (5) 594 - 594 383 - 383
Property, IT and other costs (1) 280 - 280 218 - 218
Selling costs 249 - 249 154 - 154
Depreciation, amortisation and
impairment (2) 539 - 539 548 (8) 556
Currency differences (39) - (39) 18 - 18
======================================= ========= =========== ============ ========= =========== ============
Total expenditure on operations 5,900 - 5,900 3,812 (27) 3,839
======================================= ========= =========== ============ ========= =========== ============
Operating profit/(loss) 486 - 486 (278) 27 (305)
Finance costs (294) - (294) (218) - (218)
Finance income 41 - 41 8 - 8
Net change in fair value of financial
instruments (51) - (51) 85 - 85
Net financing credit/(charge)
relating to pensions 7 - 7 (4) - (4)
Net currency retranslation charges 190 - 190 (19) - (19)
Other non-operating credits (6) (130) - (130) (31) (75) 44
======================================= ========= =========== ============ ========= =========== ============
Total net non-operating costs (237) - (237) (179) (75) (104)
======================================= ========= =========== ============ ========= =========== ============
Profit/(loss) before tax 249 - 249 (457) (48) (409)
Tax (17) - (17) 146 - 146
Profit/(loss) after tax for the
period 232 - 232 (311) (48) (263)
======================================= ========= =========== ============ ========= =========== ============
The rationale for each exceptional item is given below.
1 Partial reversal of historical fine
The exceptional credit of EUR23 million for the year to December
31, 2022 relates to the partial reversal of the fine, plus accrued
interest, initially issued by the European Commission, in 2010, to
British Airways regarding its involvement in cartel activity in the
air cargo sector and that had been recognised as an exceptional
charge. The exceptional credit has been recorded within Property,
IT and other costs in the Income statement with no resultant tax
charge arising. The cash inflow associated with the partial
reversal of the fine was recognised during 2022.
2 Impairment reversal of fleet and associated assets
The exceptional impairment reversal of EUR8 million for the year
to December 31, 2022 relates to six Airbus A320s in Vueling,
previously stood down in the fourth quarter of 2020 and
subsequently stood up in the second and third quarters of 2022. The
exceptional impairment reversal was recorded within Right of use
assets on the Balance sheet and within Depreciation, amortisation
and impairment in the Income statement.
The exceptional impairment reversal of EUR21 million, recorded
in 2021, includes an amount of EUR14 million relating to the
reversal of aircraft impairment and an amount of EUR7 million
relating to the reversal of engine impairment. The aircraft
impairment reversal relates to four Airbus A320 aircraft in
Vueling, previously permanently stood down in the fourth quarter of
2020, being stood up in the third quarter of 2021. The engine
impairment reversal relates to certain engines which had been fully
impaired during 2020 having been leased to a third party in the
fourth quarter of 2021. Of the exceptional impairment reversal,
EUR8 million was recorded within Property, plant and equipment
relating to owned aircraft and EUR12 million was recorded within
Right of use assets relating to leased aircraft. The exceptional
impairment reversal is recorded within Depreciation, amortisation
and impairment in the Income statement.
There is no cash flow impact and there has been a tax charge of
EUR2 million on the recognition of the impairment reversal (2021:
charge of EUR1 million).
In the year to December 31, 2021:
3 Discontinuation of hedge accounting
The exceptional credit of EUR159 million, recorded in 2021,
arose from a combination of the discontinuance of hedge accounting
in the year to December 31, 2021 and the fair value movement on
those relationships where hedge accounting was discontinued in the
year to December 31, 2020, but for which the underlying hedging
instrument had not matured at January 1, 2021. This was represented
by credit of EUR162 million relating to fuel derivatives and an
expense of EUR8 million related to the associated fuel foreign
currency derivatives. The credit to Passenger revenue of EUR5
million relates to the discontinuation of hedge accounting of the
associated foreign currency derivatives on forecast revenue.
The cash outflow impact associated with the discontinuance of
hedge accounting was EURnil in the year to December 31, 2022 (2021:
EUR338 million). The related tax charge in 2021 was EUR26
million.
4 Restructuring costs
The exceptional credit of EUR18 million, recorded in 2021,
relates to the reversal of restructuring provisions that have been
released unutilised. There was no cash flow impact relating to the
exceptional restructuring credit in 2021 and the related tax charge
was EUR3 million.
5 Engineering and other aircraft costs
The exceptional credit of EUR7 million, recorded in 2021,
relates to the reversal of contractual lease provisions for those
aircraft in Vueling that were stood up during 2021, where the
estimated costs to fulfil the hand back conditions will be
recognised over the remaining operating activity of the aircraft.
The exceptional credit was recorded within Engineering and other
aircraft costs. There was no cash flow impact relating to the
exceptional credit in 2021 and there was no tax impact on the
recognition of this credit.
6 Air Europa Holdings termination agreement
The exceptional charge of EUR75 million, recorded in 2021,
represents the amount agreed with Globalia to terminate the
agreements signed on November 4, 2019 and January 20, 2021 under
which Iberia had agreed to acquire the issued share capital of Air
Europa Holdings. The exceptional charge was recorded within Other
non-operating charges in the Income statement and was settled prior
to December 31, 2021. The related tax credit was EUR5 million. The
Group recognised the cash outflow impact of the termination
agreement in 2021.
The table below provides a reconciliation of the statutory to
pre-exceptional condensed alternative income statement by operating
segment for the years to December 31, 2022 and 2021:
Year to December 31, 2022
=======================================================================================================================================================================================
British Airways British Airways
(GBP) (EUR) Iberia Vueling Aer Lingus
=================================== =================================== =================================== =================================== ===================================
Before Before Before Before Before
Exceptional exceptional Exceptional exceptional Exceptional exceptional Exceptional exceptional Exceptional exceptional
EUR million Statutory items items Statutory items items Statutory items items Statutory items items Statutory items items
============== ========= =========== =========== ========= =========== =========== ========= =========== =========== ========= =========== =========== ========= =========== ===========
Passenger
revenue 9,215 - 9,215 10,790 - 10,790 4,042 - 4,042 2,584 - 2,584 1,679 - 1,679
Cargo revenue 1,060 - 1,060 1,245 - 1,245 347 - 347 - - - 80 - 80
Other revenue 755 - 755 886 - 886 1,122 - 1,122 14 - 14 10 - 10
============== ========= =========== =========== ========= =========== =========== ========= =========== =========== ========= =========== =========== ========= =========== ===========
Total revenue 11,030 - 11,030 12,921 - 12,921 5,511 - 5,511 2,598 - 2,598 1,769 - 1,769
============== ========= =========== =========== ========= =========== =========== ========= =========== =========== ========= =========== =========== ========= =========== ===========
Employee costs 2,100 - 2,100 2,464 - 2,464 1,161 - 1,161 370 - 370 393 - 393
Fuel, oil
costs
and emissions
charges 2,929 - 2,929 3,432 - 3,432 1,313 - 1,313 739 - 739 539 - 539
Depreciation,
amortisation
and
impairment 1,084 - 1,084 1,272 - 1,272 371 - 371 206 (8) 214 146 - 146
Other
operating
costs 4,595 (19) 4,614 5,391 (23) 5,414 2,284 - 2,284 1,088 - 1,088 646 - 646
============== ========= =========== =========== ========= =========== =========== ========= =========== =========== ========= =========== =========== ========= =========== ===========
Total
expenditure
on operations 10,708 (19) 10,727 12,559 (23) 12,582 5,129 - 5,129 2,403 (8) 2,411 1,724 - 1,724
============== ========= =========== =========== ========= =========== =========== ========= =========== =========== ========= =========== =========== ========= =========== ===========
Operating
profit 322 19 303 362 23 339 382 - 382 195 8 187 45 - 45
============== ========= =========== =========== ========= =========== =========== ========= =========== =========== ========= =========== =========== ========= =========== ===========
Operating
margin
(%) 2.9% 2.7% 6.9% 6.9% 7.5% 7.2% 2.6% 2.6%
============== ========= =========== =========== ========= =========== =========== ========= =========== =========== ========= =========== =========== ========= =========== ===========
Year to December 31, 2022
==========================================================================
IAG Loyalty IAG Loyalty
(GBP) (EUR)
==================================== ====================================
Before Before
Exceptional exceptional Exceptional exceptional
EUR million Statutory items items Statutory items items
========================================== ========= =========== ============ ========= =========== ============
Passenger revenue 569 - 569 676 - 676
Other revenue 274 - 274 325 - 325
========================================== ========= =========== ============ ========= =========== ============
Total revenue 843 - 843 1,001 - 1,001
========================================== ========= =========== ============ ========= =========== ============
Employee costs 50 - 50 56 - 56
Depreciation, amortisation and impairment 7 - 7 8 - 8
Other operating costs 546 - 546 655 - 655
========================================== ========= =========== ============ ========= =========== ============
Total expenditure on operations 603 - 603 719 - 719
========================================== ========= =========== ============ ========= =========== ============
Operating profit 240 - 240 282 - 282
========================================== ========= =========== ============ ========= =========== ============
Operating margin (%) 28.4% 28.4%
========================================== ========= =========== ============ ========= =========== ============
Year to December 31, 2021
=======================================================================================================================================================================================
British Airways (GBP) British Airways (EUR) Iberia Vueling Aer Lingus
=================================== =================================== =================================== =================================== ===================================
Before Before Before Before Before
Exceptional exceptional Exceptional exceptional Exceptional exceptional Exceptional exceptional Exceptional exceptional
EUR million Statutory items items Statutory items items Statutory items items Statutory items items Statutory items items
============== ========= =========== =========== ========= =========== =========== ========= =========== =========== ========= =========== =========== ========= =========== ===========
Passenger
revenue 2,321 5 2,316 2,715 6 2,709 1,724 - 1,724 1,011 - 1,011 307 (1) 308
Cargo revenue 1,097 - 1,097 1,275 - 1,275 394 - 394 - - - 65 - 65
Other revenue 281 - 281 328 - 328 666 - 666 5 - 5 4 - 4
============== ========= =========== =========== ========= =========== =========== ========= =========== =========== ========= =========== =========== ========= =========== ===========
Total revenue 3,699 5 3,694 4,318 6 4,312 2,784 - 2,784 1,016 - 1,016 376 (1) 377
============== ========= =========== =========== ========= =========== =========== ========= =========== =========== ========= =========== =========== ========= =========== ===========
Employee costs 1,471 (11) 1,482 1,708 (13) 1,721 723 (5) 728 200 - 200 180 - 180
Fuel, oil
costs and
emissions
charges 830 (109) 939 967 (125) 1,092 519 (9) 528 198 (9) 207 89 (10) 99
Depreciation,
amortisation
and
impairment 979 (6) 985 1,134 (7) 1,141 350 - 350 227 (13) 240 140 - 140
Other
operating
costs 2,188 - 2,188 2,550 - 2,550 1,412 - 1,412 624 (7) 631 305 - 305
============== ========= =========== =========== ========= =========== =========== ========= =========== =========== ========= =========== =========== ========= =========== ===========
Total
expenditure
on operations 5,468 (126) 5,594 6,359 (145) 6,504 3,004 (14) 3,018 1,249 (29) 1,278 714 (10) 724
============== ========= =========== =========== ========= =========== =========== ========= =========== =========== ========= =========== =========== ========= =========== ===========
Operating loss (1,769) 131 (1,900) (2,041) 151 (2,192) (220) 14 (234) (233) 29 (262) (338) 9 (347)
============== ========= =========== =========== ========= =========== =========== ========= =========== =========== ========= =========== =========== ========= =========== ===========
Operating
margin (%) (47.8)% (51.4)% (7.9)% (8.4)% (23.0)% (25.8)% (90.0)% (92.1)%
============== ========= =========== =========== ========= =========== =========== ========= =========== =========== ========= =========== =========== ========= =========== ===========
Year to December 31, 2021
==========================================================================
IAG Loyalty IAG Loyalty
(GBP) (EUR)
========================================== ==================================== ====================================
Before Before
Exceptional exceptional Exceptional exceptional
EUR million Statutory items items Statutory items items
========================================== ========= =========== ============ ========= =========== ============
Passenger revenue 215 - 215 252 - 252
Other revenue 162 - 162 186 - 186
========================================== ========= =========== ============ ========= =========== ============
Total revenue 377 - 377 438 - 438
========================================== ========= =========== ============ ========= =========== ============
Employee costs 33 - 33 37 - 37
Depreciation, amortisation and impairment 6 - 6 7 - 7
Other operating costs 225 - 225 263 - 263
========================================== ========= =========== ============ ========= =========== ============
Total expenditure on operations 264 - 264 307 - 307
========================================== ========= =========== ============ ========= =========== ============
Operating profit 113 - 113 131 - 131
========================================== ========= =========== ============ ========= =========== ============
Operating margin (%) 29.9% 29.9%
========================================== ========= =========== ============ ========= =========== ============
b Adjusted earnings/(loss) per share (KPI)
Adjusted earnings are based on results before exceptional items
after tax and adjusted for earnings attributable to equity holders
and interest on convertible bonds, divided by the weighted average
number of ordinary shares, adjusted for the dilutive impact of the
assumed conversion of the bonds and employee share schemes
outstanding.
EUR million Note 2022 2021
======================================================= ==== ===== =======
Profit/(loss) after tax attributable to equity holders
of the parent a 431 (2,933)
Exceptional items a 29 105
======================================================= ==== ===== =======
Profit/(loss) after tax attributable to equity holders
of the parent before exceptional items 402 (3,038)
======================================================= ==== ===== =======
Income statement impact of convertible bonds (104) -
======================================================= ==== ===== =======
Adjusted profit/(loss) 298 (3,038)
======================================================= ==== ===== =======
Weighted average number of shares used for basic
earnings/(loss) per share 11 4,958 4,964
Weighted average number of shares used for diluted
earnings/(loss) per share 11 5,344 4,964
Basic earnings/(loss) per share (EUR cents) 8.7 (59.1)
======================================================= ==== ===== =======
Basic earnings/(loss) per share before exceptional
items (EUR cents) 8.1 (61.2)
======================================================= ==== ===== =======
Adjusted earnings/(loss) per share before exceptional
items (EUR cents) 5.6 (61.2)
======================================================= ==== ===== =======
c Airline non-fuel costs per ASK
The Group monitors airline unit costs (per ASK, a standard
airline measure of capacity) as a means of tracking operating
efficiency of the core airline business. As fuel costs can vary
with commodity prices, the Group monitors fuel and non-fuel costs
individually. Within non-fuel costs are the costs associated with
generating Other revenue, which typically do not represent the
costs of transporting passengers or cargo and instead represent the
costs of handling and maintenance for other airlines, non-flight
products in BA Holidays and costs associated with other
miscellaneous non-flight revenue streams. Airline non-fuel costs
per ASK is defined as total operating expenditure before
exceptional items, less fuel, oil costs and emission charges and
less non-flight specific costs divided by total available seat
kilometres (ASKs), and is shown on a constant currency basis
(abbreviated to 'ccy').
2022
EUR million Note 2022 Reported ccy adjustment ccy 2021
=========================================== ===== ============= ============== ======= =======
Total expenditure on operations a 21,810 (1,104) 20,706 11,220
(Add)/less: exceptional items in operating
expenditure a (31) (31) (200)
Less: fuel, oil costs and emission
charges a 6,120 (505) 5,615 1,935
=========================================== ===== ============= ============== ======= =======
Non-fuel costs 15,721 (599) 15,122 9,485
Less: Non-flight specific costs 1,716 (84) 1,632 815
Airline non-fuel costs 14,005 (515) 13,490 8,670
================================================== ============= ============== ======= =======
ASKs (millions) 263,592 263,592 121,965
Airline non-fuel unit costs per ASK
(EUR cents) 5.31 5.12 7.11
================================================== ============= ============== ======= =======
d Levered free cash flow (KPI)
Levered free cash flow represents the cash generated, and the
financing raised, by the businesses before shareholder returns and
is defined as the net increase in cash and cash equivalents taken
from the Cash flow statement, adjusting for movements in Current
interest-bearing deposits and adding back the cash outflows
associated with dividends paid and the acquisition of treasury
shares. The Group believes that this measure is useful to the users
of the financial statements in understanding the cash generating
ability of the Group that is available to return to shareholders,
to improve leverage and/or to undertake inorganic growth
opportunities.
EUR million 2022 2021
========================================================== ===== =====
Net Increase in cash and cash equivalents 1,316 1,913
========================================================== ===== =====
Less: Decrease in other current interest-bearing deposits 351 (91)
========================================================== ===== =====
Levered free cash flow 1,667 1,822
========================================================== ===== =====
e Net debt to EBITDA before exceptional items (KPI)
To supplement total borrowings as presented in accordance with
IFRS, the Group reviews net debt to EBITDA before exceptional items
to assess its level of net debt in comparison to the underlying
earnings generated by the Group in order to evaluate the underlying
business performance of the Group. This measure is used to monitor
the Group's leverage and to assess financial headroom against
internal and external security analyst and investor benchmarks.
During 2022 the Group has amended the name of the APM to clarify
that the EBITDA element is before exceptional items, however the
determination of the calculation of the APM has not changed.
Net debt is defined as long-term borrowings (both current and
non-current), less cash, cash equivalents and current
interest-bearing deposits. Net debt excludes supply chain financing
arrangements which are classified within trade payables (note
22).
EBITDA before exceptional items is defined as operating result
before exceptional items, interest, taxation, depreciation,
amortisation and impairment.
The Group believes that this additional measure, which is used
internally to assess the Group's financial capacity, is useful to
the users of the financial statements in helping them to see how
the Group's financial capacity has changed over the year. It is a
measure of the profitability of the Group and of the core operating
cash flows generated by the business model.
EUR million Note 2022 2021
=================================================== ==== ======= =======
Interest-bearing long-term borrowings 25 19,984 19,610
Less: Cash and cash equivalents 21 (9,196) (7,892)
Less: Other current interest-bearing deposits 21 (403) (51)
=================================================== ==== ======= =======
Net debt 10,385 11,667
=================================================== ==== ======= =======
Operating profit/(loss) a 1,256 (2,765)
Add: Depreciation, amortisation and impairment a 2,070 1,932
=================================================== ==== ======= =======
EBITDA 3,326 (833)
=================================================== ==== ======= =======
Add: Exceptional items (excluding those reported
within Depreciation, amortisation and impairment) a (23) (184)
=================================================== ==== ======= =======
EBITDA before exceptional items 3,303 (1,017)
=================================================== ==== ======= =======
Net debt to EBITDA before exceptional items 3.1 (11.5)
=================================================== ==== ======= =======
f Return on invested capital (KPI)
The Group monitors return on invested capital (RoIC) as it gives
an indication of the Group's capital efficiency relative to the
capital invested as well as the ability to fund growth and to pay
dividends. RoIC is defined as EBITDA before exceptional items, less
fleet depreciation adjusted for inflation, depreciation of other
property, plant and equipment, and amortisation of software
intangibles, divided by average invested capital and is expressed
as a percentage.
Invested capital is defined as the average of property, plant
and equipment and software intangible assets over a 12-month period
between the opening and closing net book values. The fleet aspect
of property, plant and equipment is inflated over the average age
of the fleet to approximate the replacement cost of the associated
assets.
EUR million Note 2022(1) 2021
======================================================== ==== ======= =======
EBITDA before exceptional items e 3,303 (1,017)
Less: Fleet depreciation multiplied by inflation
adjustment (1,944) (1,777)
Less: Other property, plant and equipment depreciation (247) (257)
Less: Software intangible amortisation (210) (167)
======================================================== ==== ======= =======
902 (3,218)
======================================================== ==== ======= =======
Invested capital
Average fleet value(2) 13 15,717 15,241
Less: Average progress payments(3) 13 (910) (729)
======================================================== ==== ======= =======
Fleet book value less progress payments 14,807 14,512
Inflation adjustment(4) 1.18 1.16
======================================================== ==== ======= =======
17,435 16,893
Average net book value of other property, plant and
equipment(5) 13 2,037 2,106
Average net book value of software intangible assets(6) 17 640 640
======================================================== ==== ======= =======
Total invested capital 20,112 19,639
======================================================== ==== ======= =======
Return on Invested Capital 4.5 % (16.4)%
======================================================== ==== ======= =======
1 The 2022 RoIC calculation excludes the effect of the EUR29
million credit recorded in Depreciation, amortisation and
impairment in the Income statement relating to the de-designation
of hedge accounting (refer to note 6).
2 The average net book value of aircraft is calculated from an
amount of EUR15,116 million at December 31, 2021 and EUR16,317
million at December 31, 2022.
3 The average net book value of progress payments is calculated
from an amount of EUR748 million at December 31, 2021 and EUR1,071
million at December 31, 2022.
4 Presented to two decimal places and calculated using a 1.5 per
cent inflation (December 31, 2021: 1.5 per cent inflation) rate
over the weighted average age of the fleet at December 31, 2022:
11.3 years (December 31, 2021: 10.6 years).
5 The average net book value of other property, plant and
equipment is calculated from an amount of EUR2,045 million at
December 31, 2021 and EUR2,029 million at December 31, 2022.
6 The average net book value of software intangible assets is
calculated from an amount of EUR642 million at December 31, 2021
and EUR637 million at December 31, 2022.
g Results on a constant currency basis
Movements in foreign exchange rates impact the Group's financial
results. The Group reviews the results, including revenue and
operating costs at constant rates of exchange. The Group calculates
these financial measures at constant rates of exchange based on a
retranslation, at prior year exchange rates, of the current year's
results of the Group. Although the Group does not believe that
these measures are a substitute for IFRS measures, the Group does
believe that such results excluding the impact of currency
fluctuations year-on-year provide additional useful information to
investors regarding the Group's operating performance on a constant
currency basis. Accordingly, the financial measures at constant
currency within the discussion of the Group Financial review should
be read in conjunction with the information provided in the Group
financial statements.
The following table represents the main average and closing
exchange rates for the reporting periods. Where 2022 figures are
stated at a constant currency basis, they have applied the 2021
rates stated below:
Foreign exchange rates
Weighted average Closing
================== ==========
2022 2021 2022 2021
============================ ======== ======== ==== ====
Pound sterling to euro 1.17 1.15 1.14 1.18
Euro to US dollar 1.05 1.20 1.06 1.13
Pound sterling to US dollar 1.23 1.38 1.21 1.33
============================ ======== ======== ==== ====
h Liquidity
The Board and the Management Committee monitor liquidity in
order to assess the resilience of the Group to adverse events and
uncertainty and develop funding initiatives to maintain this
resilience.
Liquidity is used by analysts, investors and other users of the
financial statements as a measure to the financial health and
resilience of the Group.
Liquidity is defined as Cash and cash equivalents plus Current
interest-bearing deposits, plus Committed general undrawn
facilities and committed aircraft undrawn facilities.
EUR million Note 2022 2021
====================================== ==== ====== ======
Cash and cash equivalents 21 9,196 7,892
Current interest-bearing deposits 21 403 51
Committed general undrawn facilities 27f 3,231 2,864
Committed aircraft undrawn facilities 27f 1,116 1,126
Overdrafts and other facilities 27f 53 53
====================================== ==== ====== ======
Total liquidity 13,999 11,986
====================================== ==== ====== ======
Subsidiaries
British Airways
Percentage
Country of equity
Name and address Principal activity of Incorporation owned
============================================== ===================== ================== ==========
BA and AA Holdings Limited*
Waterside, PO Box 365, Harmondsworth, UB7
0GB Holding company England 100%
============================================== ===================== ================== ==========
BA Call Centre India Private Limited (callBA)
F-42, East of Kailash, New-Delhi, 110065 Call centre India 100%
============================================== ===================== ================== ==========
BA Cityflyer Limited*
Waterside, PO Box 365, Harmondsworth, UB7
0GB Airline operations England 100%
============================================== ===================== ================== ==========
BA Euroflyer Limited
Waterside, PO Box 365, Harmondsworth, UB7
0GB Airline operations England 100%
============================================== ===================== ================== ==========
BA European Limited
Waterside, PO Box 365, Harmondsworth, UB7
0GB Holding company England 100%
============================================== ===================== ================== ==========
BA Excepted Group Life Scheme Limited
Waterside, PO Box 365, Harmondsworth, UB7
0GB Life insurance England 100%
============================================== ===================== ================== ==========
BA Healthcare Trust Limited
Waterside, PO Box 365, Harmondsworth, UB7
0GB Healthcare England 100%
============================================== ===================== ================== ==========
BA Holdco Limited
Waterside, PO Box 365, Harmondsworth, UB7
0GB Holding company England 100%
============================================== ===================== ================== ==========
BA Number One Limited
Waterside, PO Box 365, Harmondsworth, UB7
0GB Dormant England 100%
============================================== ===================== ================== ==========
BA Number Two Limited
IFC 5, St Helier, JE1 1ST Dormant Jersey 100%
============================================== ===================== ================== ==========
Bealine Plc
Waterside, PO Box 365, Harmondsworth, UB7
0GB Dormant England 100%
============================================== ===================== ================== ==========
BritAir Holdings Limited*
Waterside, PO Box 365, Harmondsworth, UB7
0GB Holding company England 100%
============================================== ===================== ================== ==========
British Airways (BA) Limited
Waterside, PO Box 365, Harmondsworth, UB7
0GB Dormant England 100%
============================================== ===================== ================== ==========
British Airways 777 Leasing Limited*
Waterside, PO Box 365, Harmondsworth, UB7
0GB Aircraft leasing England 100%
============================================== ===================== ================== ==========
British Airways Associated Companies Limited
Waterside, PO Box 365, Harmondsworth, UB7
0GB Holding company England 100%
============================================== ===================== ================== ==========
British Airways Avionic Engineering Limited*
Waterside, PO Box 365, Harmondsworth, UB7
0GB Aircraft maintenance England 100%
============================================== ===================== ================== ==========
British Airways Capital Limited
Queensway House, Hilgrove Street, St Helier,
JE1 1ES Aircraft financing Jersey 100%
============================================== ===================== ================== ==========
British Airways Holdings B.V.
Strawinskylaan 3105, Atrium, Amsterdam,
1077ZX Holding company Netherlands 100%
============================================== ===================== ================== ==========
British Airways Holidays Limited*
Waterside, PO Box 365, Harmondsworth, UB7
0GB Tour operator England 100%
============================================== ===================== ================== ==========
British Airways Interior Engineering Limited*
Waterside, PO Box 365, Harmondsworth, UB7
0GB Aircraft maintenance England 100%
============================================== ===================== ================== ==========
British Airways Leasing Limited*
Waterside, PO Box 365, Harmondsworth, UB7
0GB Aircraft leasing England 100%
============================================== ===================== ================== ==========
British Airways Maintenance Cardiff Limited*
Waterside, PO Box 365, Harmondsworth, UB7
0GB Aircraft maintenance England 100%
============================================== ===================== ================== ==========
British Airways Pension Trustees (No 2)
Limited
Waterside, PO Box 365, Harmondsworth, UB7
0GB Trustee company England 100%
============================================== ===================== ================== ==========
British Midland Airways Limited
Waterside, PO Box 365, Harmondsworth, UB7
0GB Former airline England 100%
============================================== ===================== ================== ==========
British Midland Limited
Waterside, PO Box 365, Harmondsworth, UB7
0GB Dormant England 100%
============================================== ===================== ================== ==========
Flyline Tele Sales & Services GmbH
Hermann Koehl-Strasse 3, 28199, Bremen Call centre Germany 100%
============================================== ===================== ================== ==========
Gatwick Ground Services Limited
Waterside, PO Box 365, Harmondsworth, UB7
0GB Ground services England 100%
============================================== ===================== ================== ==========
Overseas Air Travel Limited
Waterside, PO Box 365, Harmondsworth, UB7
0GB Transport England 100%
============================================== ===================== ================== ==========
Speedbird Insurance Company Limited*
Canon's Court, 22 Victoria Street, Hamilton,
HM 12 Insurance Bermuda 100%
============================================== ===================== ================== ==========
Teleflight Limited
Waterside, PO Box 365, Harmondsworth, UB7
0GB Call centre England 100%
============================================== ===================== ================== ==========
British Mediterranean Airways Limited
Waterside, PO Box 365, Harmondsworth, UB7
0GB Former airline England 99%
============================================== ===================== ================== ==========
Avios Group (AGL) Limited* Management of
Waterside, PO Box 365, Harmondsworth, UB7 airline loyalty
0GB programmes England 86%(1)
============================================== ===================== ================== ==========
Iberia
Percentage
Country of equity
Name and address Principal activity of incorporation owned
=============================================== ======================= ================== ==========
Compañía Operadora de Corto y
Medio Radio Iberia Express, S.A.*
Calle Alcañiz 23, Madrid, 28006 Airline operations Spain 100%
=============================================== ======================= ================== ==========
Compañía Explotación Aviones
Cargueros Cargosur, S.A.
Calle Martínez Villergas 49, Madrid,
28027 Cargo transport Spain 100%
=============================================== ======================= ================== ==========
Iberia LAE México SA de CV Merchandise
Xochicalco 174, Col. Narvarte, Alcaldía storage, security
Benito Juárez, and custody
Mexico City, 03020 services Mexico 100%
=============================================== ======================= ================== ==========
Iberia Líneas Aéreas de España,
S.A. Operadora*
Calle Martínez Villergas 49, Madrid, Airline operations
28027 and maintenance Spain 100% (2)
=============================================== ======================= ================== ==========
Iberia México, S.A.*
Calle Montes Urales 424, Colonia Lomas
de Chapultepec V, Storage and
Mexico City, 11000 custody services Mexico 100%
=============================================== ======================= ================== ==========
Iberia Operadora UK Limited
Waterside, PO Box 365, Harmondsworth, UB7
0GB Dormant England 100%(1)
=============================================== ======================= ================== ==========
Iberia Tecnología, S.A.*
Calle Martínez Villergas 49, Madrid,
28027 Aircraft maintenance Spain 100%
=============================================== ======================= ================== ==========
Iberia Desarrollo Barcelona, S.L.*
Avenida de les Garrigues 38-44, Edificio
B, Airport infrastructure
El Prat de Llobregat, Barcelona, 08220 development Spain 75%
=============================================== ======================= ================== ==========
Avios Group (AGL) Limited* Management of
Waterside, PO Box 365, Harmondsworth, UB7 airline loyalty
0GB programmes England 14%(1)
=============================================== ======================= ================== ==========
Aer Lingus
Percentage
Country of equity
Name and address Principal activity of incorporation owned
======================================== ============================= ================== ==========
Provision of human resources
Aer Lingus (Ireland) Limited support to fellow group Republic
Dublin Airport, Dublin companies of Ireland 100%
======================================== ============================= ================== ==========
Aer Lingus 2009 DCS Trustee Limited Republic
Dublin Airport, Dublin Trustee of Ireland 100%
======================================== ============================= ================== ==========
Aer Lingus Beachey Limited
Penthouse Suite, Analyst House, Isle of
Peel Road, IM1 4LZ Dormant Man 100%
======================================== ============================= ================== ==========
Aer Lingus Group DAC* Republic
Dublin Airport, Dublin Holding company of Ireland 100% (3)
======================================== ============================= ================== ==========
Aer Lingus Limited* Republic
Dublin Airport, Dublin Airline operations of Ireland 100%
======================================== ============================= ================== ==========
Aer Lingus (UK) Limited
Aer Lingus Base, Belfast City Airport,
Sydenham Bypass, Belfast, Co. Antrim, Northern
BT3 9JH Airline operations Ireland 100%
======================================== ============================= ================== ==========
ALG Trustee Limited
33-37 Athol Street, Douglas, IM1 Isle of
1LB Trustee Man 100%
======================================== ============================= ================== ==========
Dirnan Insurance Company Limited
Canon's Court, 22 Victoria Street,
Hamilton, HM 12 Insurance Bermuda 100%
======================================== ============================= ================== ==========
Santain Developments Limited Republic
Dublin Airport, Dublin Dormant of Ireland 100%
======================================== ============================= ================== ==========
IAG Loyalty
Percentage
Country of equity
Name and address Principal activity of incorporation owned
=========================================== =================== ================== ==========
Avios South Africa Proprietary Limited
Block C, 1 Marignane Drive, Bonaero Park,
Gauteng, 1619 Dormant South Africa 100%
=========================================== =================== ================== ==========
IAG Loyalty Limited
Waterside, PO Box 365, Harmondsworth, UB7
0GB Dormant England 100%
=========================================== =================== ================== ==========
IAG Loyalty Retail Limited
Waterside, PO Box 365, Harmondsworth, UB7
0GB Retail services England 100%
=========================================== =================== ================== ==========
IAG Cargo
Percentage
Country of equity
Name and address Principal activity of Incorporation owned
========================================== =================== ================== ==========
Cargo Innovations Limited
Carrus Cargo Centre, PO Box 99, Sealand
Road, London Heathrow Airport, Hounslow,
Middlesex, TW6 2JS Dormant England 100%
========================================== =================== ================== ==========
Zenda Group Limited
Carrus Cargo Centre, PO Box 99, Sealand
Road, London Heathrow Airport, Hounslow,
Middlesex, TW6 2JS Dormant England 100%
========================================== =================== ================== ==========
Vueling
Percentage
Country of equity
Name and address Principal activity of incorporation owned
============================= =================== ================== ==========
Yellow Handling, S.L.U
Carrer de Catalunya 83 Ground handling
Viladecans, Barcelona 08840 services Spain 100%
============================= =================== ================== ==========
Vueling Airlines, S.A.*
Carrer de Catalunya 83
Viladecans, Barcelona 08840 Airline operations Spain 99.5%
============================= =================== ================== ==========
LEVEL
Percentage
Country of equity
Name and address Principal activity of incorporation owned
=========================================== =================== ================== ==========
FLYLEVEL UK Limited
Waterside, PO Box 365, Harmondsworth, UB7
0GB Airline operations England 100%
=========================================== =================== ================== ==========
Openskies SASU
3 Rue le Corbusier, Rungis, 94150 Airline operations France 100%
=========================================== =================== ================== ==========
International Consolidated Airlines Group, S.A.
Percentage
Country of equity
Name and address Principal activity of incorporation owned
================================================ =================== ================== ==========
AERL Holding Limited
Waterside, PO Box 365, Harmondsworth, UB7
0GB Holding company England 100%
================================================ =================== ================== ==========
British Airways Plc*
Waterside, PO Box 365, Harmondsworth, UB7
0GB Airline operations England 100% (4)
================================================ =================== ================== ==========
FLY LEVEL, S.L.
Camino de la Muñoza s/n, El Caserío,
Iberia Zona Industrial 2, Madrid, 28042 Airline operations Spain 100%
================================================ =================== ================== ==========
IAG Cargo Limited*
Carrus Cargo Centre, PO Box 99, Sealand
Road, London Heathrow Airport, Hounslow, Air freight
TW6 2JS operations England 100%
================================================ =================== ================== ==========
IAG Connect Limited
Waterside, PO Box 365, Harmondsworth, UB7 Inflight eCommerce Republic
0GB platform of Ireland 100%
================================================ =================== ================== ==========
IAG GBS Limited* IT, finance,
Waterside, PO Box 365, Harmondsworth, UB7 procurement
0GB services England 100%
================================================ =================== ================== ==========
IT, finance,
IAG GBS Poland sp z.o.o.* procurement
Ul. Opolska 114, Krakow, 31-323 services Poland 100%
================================================ =================== ================== ==========
IB Opco Holding, S.L.
Calle Martínez Villergas 49, Madrid,
28027 Holding company Spain 100% (2)
================================================ =================== ================== ==========
Veloz Holdco, S.L.U.
Carrer de Catalunya 83
Viladecans, Barcelona 08840 Holding company Spain 100%
================================================ =================== ================== ==========
* Principal subsidiaries
1 The Group holds 100% of both the nominal share capital and
economic rights in Avios Group (AGL) Limited, held directly by
British Airways Plc, which owns 86% and Iberia Operadora UK Limited
which owns 14%.
2 The Group holds 49.9% of both the total nominal share capital
and the total number of voting rights in IB Opco Holding, S.L. (and
thus, indirectly, in Iberia Líneas Aéreas de España, S.A.
Operadora), such stake having almost 100% of the economic rights in
these companies. The remaining shares, representing 50.1% of the
total nominal share capital and the total number of voting rights
belong to a Spanish company incorporated for the purposes of
implementing the Iberia nationality structure.
3 The Group holds 49.75% of the total number of voting rights
and the majority of the economic rights in Aer Lingus Group DAC.
The remaining voting rights, representing 50.25 per cent,
correspond to a trust established for implementing the Aer Lingus
nationality structure.
4 The Group holds 49.9% of the total number of voting rights and
99.65% of the total nominal share capital in British Airways Plc,
such stake having almost 100% of the economic rights. The remaining
nominal share capital and voting rights, representing 0.35% and
50.1% respectively, are held by a trust established for the
purposes of implementing the British Airways nationality
structure.
Associates
Percentage
Country of equity
Name and address of Incorporation owned
=========================================================== ================== ==========
Empresa Hispano Cubana de Mantenimiento de Aeronaves,
Ibeca, S.A.
Avenida de Vantroi y Final,
Jose Martí Airport, Havana Cuba 50%
=========================================================== ================== ==========
Empresa Logística de Carga Aérea, S.A.
Carretera de Wajay km 1 1/2 ,
Jose Martí Airport, Havana Cuba 50%
=========================================================== ================== ==========
Multiservicios Aeroportuarios, S.A.
Avenida de Manoteras 46, 2-- planta, Madrid, 28050 Spain 49%
=========================================================== ================== ==========
Dunwoody Airline Services Limited
Building 552 Shoreham Road East, London Heathrow Airport,
Hounslow, TW6 3UA England 40%
=========================================================== ================== ==========
Serpista, S.A.
Calle Cardenal Marcelo Spínola 10, Madrid, 28016 Spain 39%
=========================================================== ================== ==========
Air Miles España, S.A.
Avenida de Bruselas 20, Alcobendas, Madrid, 28108 Spain 26.7%
=========================================================== ================== ==========
Inloyalty by Travel Club, S.L.U.
Avenida de Bruselas 20, Alcobendas, Madrid, 28108 Spain 26.7%
=========================================================== ================== ==========
Viajes Ame, S.A.
Avenida de Bruselas 20, Alcobendas, Madrid, 28108 Spain 26.7%
=========================================================== ================== ==========
DeepAir Solutions Limited
Flat 10, 28 Cranley Gardens, London, SW7 3DD England 23%
=========================================================== ================== ==========
LanzaJet
520 Lake Cook Road, Suite 680, Deerfield, Illinois,
60015 USA 16.7%
=========================================================== ================== ==========
Joint ventures
Percentage
Country of equity
Name and address of incorporation owned
====================================================== ================== ==========
Sociedad Conjunta para la Emisión y Gestión
de Medios de Pago EFC, S.A.
Calle de O'Donnell 12, Madrid, 28009 Spain 50.5%
====================================================== ================== ==========
Other equity investments
The Group's principal other equity investments are as
follows:
Percentage Shareholder's Profit/(loss)
Country of equity funds before
Name and address of Incorporation owned Currency (million) tax (million)
============================================= ================== ========== ======== ============= ==============
Air Europa Holdings S.L.(1)
Carretera Arenal - Llucmajor, km 21.5
Llucmajor, 07620 Spain 20% EUR 24 -
============================================= ================== ========== ======== ============= ==============
Servicios de Instrucción de Vuelo,
S.L.
Camino de la Muñoza s/n, El
Caserío,
Iberia Zona Industrial 2, Madrid, 28042 Spain 19.9% EUR 73 2
============================================= ================== ========== ======== ============= ==============
The Airline Group Limited
5th Floor, Brettenham House South,
Lancaster Place, London,
WC2N 7EN England 16.7% GBP 208 -
============================================= ================== ========== ======== ============= ==============
Travel Quinto Centenario, S.A.
Calle Alemanes 3, Sevilla, 41004 Spain 10% EUR - -
============================================= ================== ========== ======== ============= ==============
i6 Group Limited
Farnborough Airport, Ively Road,
Farnborough,
Hampshire, GU14 6XA England 7.4% GBP 4 (1)
============================================= ================== ========== ======== ============= ==============
NAYAKJV1, S.L.
C/ d'Osona, 2, El Prat de Llobregat,
08820 Spain 5% EUR - -
============================================= ================== ========== ======== ============= ==============
Monese Limited
Eagle House 163 City Road, London,
EC1V 1NR England 4.8% GBP 18 (28)
============================================= ================== ========== ======== ============= ==============
1 The Shareholder funds and result before tax of Air Europa
Holdings S.L. represent the data for the year to December 31, 2021
and are prepared under Spanish GAAP. The Group does not have access
to any financial information
Statement of directors' responsibilities
LIABILITY STATEMENT OF DIRECTORS FOR THE PURPOSES ENVISAGED
UNDER ARTICLE 11.1.b OF SPANISH ROYAL DECREE 1362/2007 OF 19
OCTOBER (REAL DECRETO 1362/2007).
At a meeting held on February 23, 2023, the directors of
International Consolidated Airlines Group, S.A. state that, to the
best of their knowledge, the consolidated financial statements for
the year to December 31, 2022 prepared in accordance with the
applicable international accounting standards, offer a true and
fair view of the assets, liabilities, financial position and profit
or loss of the Company and the undertakings included in the
consolidation taken as a whole, and the interim consolidated
management report includes a fair review of the required
information.
February 23, 2023
Javier Ferrán Larraz Luis Gallego Martín
Chairman Chief Executive Officer
Giles Agutter Peggy Bruzelius
Eva Castillo Sanz Margaret Ewing
Maurice Lam Heather Ann McSharry
Robin Phillips Emilio Saracho Rodríguez de Torres
Lucy Nicola Shaw
AIRCRAFT FLEET
Number in service with Group companies(1)
Changes
Total Total since
December December December
31, 31, 31, Future
Finance Operating Options
Owned lease lease 2022 2021 2021 deliveries (2)
================= ===== ======= ========= ========= ========= ========= =========== =======
Airbus A319ceo 8 - 33 41 39 2 - -
Airbus A320ceo 42 21 136 199 190 9 - -
Airbus A320neo 2 35 23 60 50 10 45 50
Airbus A321ceo 11 3 30 44 51 (7) - -
Airbus A321neo - 2 14 16 14 2 46 -
Airbus A321
LR - - 8 8 8 - - -
Airbus A321
XLR - - - - - - 14 14
Airbus A330-200 - 1 15 16 18 (2) - -
Airbus A330-300 4 4 12 20 18 2 - -
Airbus A350-900 - 6 9 15 9 6 7 16
Airbus A350-1000 3 10 - 13 8 5 5 36
Airbus A380 2 10 - 12 12 - - -
Boeing 737-8200 - - - - - - 25 100
Boeing 737-10 - - - - - - 25 -
Boeing 777-200 38 2 3 43 43 - - -
Boeing 777-300 5 4 7 16 16 - - -
Boeing 777-9 - - - - - - 18 24
Boeing 787-8 - 10 2 12 12 - - -
Boeing 787-9 1 8 9 18 18 - - -
Boeing 787-10 - 4 - 4 2 2 7 6
Embraer E190 9 - 12 21 23 (2) - -
================= ===== ======= ========= ========= ========= ========= =========== =======
Group total 125 120 313 558 531 27 192 246
================= ===== ======= ========= ========= ========= ========= =========== =======
1 During the year to December 31, 2022, the Group has changed
the basis in which it presents the aircraft fleet table.
Aircraft are reported based on their contractual definitions as
opposed to their accounting determination. For accounting purposes,
while all operating leases are presented as lease liabilities,
finance leases are presented as either lease liabilities or asset
financed liabilities, depending on the nature of the individual
arrangement. Refer to note 2 for further information.
2 The options to purchase 100 Boeing 737 aircraft allow for flexibility in the choice of variant.
As well as those aircraft in service the Group also holds 18
aircraft (December 31, 2021: 29) not in service.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
RNS may use your IP address to confirm compliance with the terms
and conditions, to analyse how you engage with the information
contained in this communication, and to share such analysis on an
anonymised basis with others as part of our commercial services.
For further information about how RNS and the London Stock Exchange
use the personal data you provide us, please see our Privacy
Policy.
END
FR EAKALAAEDEEA
(END) Dow Jones Newswires
February 24, 2023 02:00 ET (07:00 GMT)
International Consolidat... (LSE:0A2L)
Gráfica de Acción Histórica
De Abr 2024 a May 2024
International Consolidat... (LSE:0A2L)
Gráfica de Acción Histórica
De May 2023 a May 2024
