TIDMIAG
RNS Number : 8963X
International Cons Airlines Group
07 May 2021
THREE MONTHS RESULTS ANNOUNCEMENT
International Consolidated Airlines Group (IAG) today (May 7,
2021) presented Group consolidated results for the three months to
March 31, 2021.
COVID-19 situation and management actions:
-- Passenger capacity in quarter 1 was 19.6 per cent of 2019 and
continues to be adversely affected by the COVID-19 pandemic,
together with government restrictions and quarantine
requirements
-- Current passenger capacity plans for quarter 2 are for around
25 per cent of 2019 capacity, but remain uncertain and subject to
review
-- 1,306 cargo-only flights operated in quarter 1, up from 969 in quarter 4, 2020
-- Strong liquidity, increased to EUR10.5 billion at the end of
the quarter (from total pro-forma liquidity of EUR10.3 billion at
December 31, 2020), driven by successful conclusion of financing
initiatives in the quarter, together with cost actions and UK
pension contribution deferral. These included:
-- Drawdown of previously committed borrowing for British
Airways (GBP2.0 billion UK Export Finance) and Aer Lingus (EUR75
million drawn against Ireland Strategic Investment Fund
facility)
-- Additional EUR1.2 billion of IAG Senior Unsecured Bonds
issued, with issue heavily oversubscribed
-- New 3-year $1.755 billion committed, secured revolving credit
facility concluded for Aer Lingus, British Airways and Iberia and
which remains undrawn; cancellation of British Airways' previous
revolving credit facility scheduled to mature in June 2021 (value
at December 31, 2020: $0.8 billion)
-- Agreement for British Airways to defer monthly pension
deficit contributions totalling GBP450 million between October 2020
and September 2021
-- Cash operating costs for the quarter reduced to EUR175 million per week
IAG period highlights on results:
-- First quarter operating loss EUR1,068 million (2020:
operating loss EUR1,860 million) and operating loss before
exceptional items EUR1,135 million (2020: operating loss before
exceptional items EUR535 million)
-- Exceptional credit before tax in the quarter of EUR67 million
on discontinuance of fuel and foreign exchange hedge accounting
(2020: exceptional charge before tax of EUR1,325 million on
discontinuance of fuel and foreign exchange hedge accounting)
-- Loss after tax and exceptional items for the quarter EUR1,067
million (2020: loss EUR1,683 million) and loss after tax before
exceptional items: EUR1,124 million (2020: loss EUR556 million)
-- Cash of EUR8.0 billion at March 31, 2021 up EUR2.1 billion on
December 31, 2020. Committed and undrawn general and aircraft
facilities of EUR2.5 billion, bringing total liquidity to EUR10.5
billion.
Performance summary:
Three months to March 31
----------------------------
Higher
/
Reported results (EUR million) 2021 2020 (lower)
Passenger revenue 459 3,953 (88.4)%
Total revenue 968 4,585 (78.9)%
Operating loss (1,068) (1,860) (42.6)%
Loss after tax (1,067) (1,683) (36.6)%
Basic loss per share (EUR cents) (1) (21.5) (55.1) (61.0)%
--------------------------------------------------- --------- ------- --------
Cash and interest-bearing deposits (2) 7,975 5,917 34.8 %
Interest-bearing borrowings (2) 19,539 15,679 24.6 %
--------------------------------------------------- --------- ------- --------
Higher
/
Alternative performance measures (EUR million) 2021 2020 (lower)
Passenger revenue before exceptional items 454 3,953 (88.5)%
Total revenue before exceptional items 963 4,585 (79.0)%
Operating loss before exceptional items (1,135) (535) nm
Loss after tax before exceptional items (1,124) (556) nm
Adjusted loss per share (EUR cents) (1) (22.6) (18.2) 24.2 %
--------------------------------------------------- --------- ------- --------
Net debt(2) 11,564 9,762 18.5 %
Net debt to EBITDA(2) nm nm nm
--------------------------------------------------- --------- ------- --------
Available seat kilometres (ASK million) 14,796 67,522 (78.1)%
Passenger revenue per ASK (EUR cents) 3.07 5.85 (47.6)%
Non-fuel costs per ASK (EUR cents) 12.23 5.79 nm
--------------------------------------------------- --------- ------- --------
For definitions refer to the IAG Annual report and accounts 2020.
Cash comprises cash, cash equivalents and interest-bearing deposits.
(1) The loss per share information for the three months to March 31, 2020
has been restated to reflect the impact of the rights issue.
(2) The prior year comparative is December 31, 2020.
Luis Gallego, IAG Chief Executive Officer, said:
"In quarter 1, we're reporting an operating loss of EUR1,135
million before exceptional items compared to an operating loss of
EUR535 million last year.
"We've acted decisively to build resilience by boosting
liquidity and reducing our cost base. At March 31, the Group's
liquidity increased to EUR10.5 billion which demonstrates IAG's
good access to capital markets.
"Cargo has enabled us to operate a more extensive passenger
longhaul network. In addition, we operated 1,306 cargo-only flights
and generated EUR350 million in revenue, a record for quarter
1.
"We're taking all necessary actions to ensure the financial
health of our business for the long-term, including last year's
successful EUR2.7 billion capital increase, and remain focused on
reducing our cost base and increasing efficiencies.
"Despite the challenges posed by the current pandemic, our focus
on the safety of our people and customers remains paramount
alongside our climate commitments. Our pledge to powering 10 per
cent of our flights with sustainable aviation fuel by 2030 shows
that we will not back down from our ambition to lead aviation's
efforts to reduce its carbon footprint.
"We're doing everything in our power to emerge in a stronger
competitive position. We're absolutely confident that a safe
re-start to travel can happen as shown by the scientific data.
We're ready to fly, but government action is needed through four
key measures:
-- Travel corridors without restrictions between countries with
successful vaccination rollouts and effective testing such us the
UK and the US.
-- Affordable, simple and proportionate testing to replace
quarantine and costly, multi-layered testing.
-- Well-staffed borders using contactless technology including
e-gates to ensure a safe, smooth flow of people and frictionless
travel.
-- Digital passes for testing and vaccination documentation to
facilitate international travel.
"These measures will enable a safe re-opening of our skies.
Travel underpins a global industry that supports 13 million jobs in
Europe alone. There's a high level of pent-up demand and aviation
will play a critical role in reconnecting people and getting
economies back up and running again."
Trading outlook
Given the uncertainty over the timing of the lifting of
government travel restrictions and the continued impact and
duration of COVID-19, IAG is not providing profit guidance for
2021.
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 and divestments relating to
the Group and discussions of the Group's business plan. 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 effects of the COVID-19 pandemic
and uncertainties about its 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 Annual Report and Accounts 2020; these
documents are 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 COVID-19 pandemic and any further
disruption to the global airline industry and economic environment
as a result.
IAG Investor Relations
Waterside (HAA2),
PO Box 365,
Harmondsworth,
Middlesex,
UB7 0GB
Tel: +44 (0)208 564 2990
Investor.relations@iairgroup.com
CONSOLIDATED INCOME STATEMENT
Three months to March
31
--------------------------
Higher/
EUR million 2021 2020 (lower)
Passenger revenue 459 3,953 (88.4)%
Cargo revenue 350 246 42.3 %
Other revenue 159 386 (58.8)%
---------------------------------------------------- ------- ------- --------
Total revenue 968 4,585 (78.9)%
---------------------------------------------------- ------- ------- --------
Employee costs 622 1,234 (49.6)%
Fuel, oil costs and emissions charges 226 2,534 (91.1)%
Handling, catering and other operating
costs 173 652 (73.5)%
Landing fees and en-route charges 127 451 (71.8)%
Engineering and other aircraft costs 207 504 (58.9)%
Property, IT and other costs 184 225 (18.2)%
Selling costs 70 211 (66.8)%
Depreciation, amortisation and impairment 470 570 (17.5)%
Currency differences (43) 64 nm
---------------------------------------------------- ------- ------- --------
Total expenditure on operations 2,036 6,445 (68.4)%
---------------------------------------------------- ------- ------- --------
Operating loss (1,068) (1,860) (42.6)%
Finance costs (177) (151) 17.2 %
Finance income 3 11 (72.7)%
Net financing (charge)/credit relating
to pensions (1) 1 nm
Net currency retranslation (charges)/credits (13) 77 nm
Other non-operating credits 40 40 -
---------------------------------------------------- ------- ------- --------
Total net non-operating costs (148) (22) nm
---------------------------------------------------- ------- ------- --------
Loss before tax (1,216) (1,882) (35.4)%
Tax 149 199 (25.1)%
---------------------------------------------------- ------- ------- --------
Loss after tax for the period (1,067) (1,683) (36.6)%
---------------------------------------------------- ------- ------- --------
ALTERNATIVE PERFORMANCE MEASURES
All figures in the tables below are before exceptional
items.
Three months to March
31
------------------------------
Before exceptional items
------------------------------
Higher/
EUR million 2021 2020 (lower)(1)
Passenger revenue 454 3,953 (88.5)%
42.3
Cargo revenue 350 246 %
Other revenue 159 386 (58.8)%
------------------------------------------------- -------- ------- -----------
Total revenue before exceptional
items 963 4,585 (79.0)%
------------------------------------------------- -------- ------- -----------
Employee costs 622 1,234 (49.6)%
Fuel, oil costs and emissions
charges 288 1,209 (76.2)%
Handling, catering and other
operating costs 173 652 (73.5)%
Landing fees and en-route charges 127 451 (71.8)%
Engineering and other aircraft
costs 207 504 (58.9)%
Property, IT and other costs 184 225 (18.2)%
Selling costs 70 211 (66.8)%
Depreciation, amortisation and
impairment 470 570 (17.5)%
Currency differences (43) 64 nm
------------------------------------------------- -------- ------- -----------
Total expenditure on operations
before exceptional items 2,098 5,120 (59.0)%
------------------------------------------------- -------- ------- -----------
Operating loss before exceptional
items (1,135) (535) nm
17.2
Finance costs (177) (151) %
Finance income 3 11 (72.7)%
Net financing (charge)/credit
relating to pensions (1) 1 nm
Net currency retranslation (charges)/credits (13) 77 nm
Other non-operating credits 40 40 -
------------------------------------------------- -------- ------- -----------
Total net non-operating costs (148) (22) nm
------------------------------------------------- -------- ------- -----------
Loss before tax before exceptional
items (1,283) (557) nm
Tax 159 1 nm
------------------------------------------------- -------- ------- -----------
Loss after tax for the period
before exceptional items (1,124) (556) nm
------------------------------------------------- -------- ------- -----------
Higher/
Operating figures 2021 (1) 2020(1) (lower)
Available seat kilometres (ASK
million) 14,796 67,522 (78.1)%
Revenue passenger kilometres
(RPK million) 6,779 51,617 (86.9)%
Seat factor (per cent) 45.8 76.4 (30.6)pts
Passenger numbers (thousands) 2,612 19,877 (86.9)%
Cargo tonne kilometres (CTK million) 854 1,173 (27.2)%
Sold cargo tonnes (thousands) 117 148 (20.9)%
Sectors 27,700 143,969 (80.8)%
Block hours (hours) 108,908 434,244 (74.9)%
------------------------------------------------- -------- ------- -----------
Average manpower equivalent(2) 50,934 64,365 (20.9)%
Aircraft in service 531 595 (10.8)%
------------------------------------------------- -------- ------- -----------
Passenger revenue per RPK (EUR
cents) 6.70 7.66 (12.6)%
Passenger revenue per ASK (EUR
cents) 3.07 5.85 (47.6)%
95.4
Cargo revenue per CTK (EUR cents) 40.98 20.97 %
Fuel cost per ASK (EUR cents) 1.95 1.79 8.7 %
Non-fuel costs per ASK (EUR cents) 12.23 5.79 nm
87.0
Total cost per ASK (EUR cents) 14.18 7.58 %
------------------------------------------------- -------- ------- -----------
(1) Financial ratios are before exceptional items.
(2) Included in the average manpower equivalent are staff on
furlough, wage support and equivalent schemes, including the
Temporary Redundancy Plan arrangements in Spain.
ALTERNATIVE PERFORMANCE MEASURES continued
Loss after tax before exceptional items
Exceptional items 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. The exceptional
items include significant discontinuance of hedge accounting.
The table below reconciles the reported income statement to the
alternative performance measures statement above:
Three months to March 31
------------------------------------------------------------------------
Before Before
Reported Exceptional exceptional Reported Exceptional exceptional
EUR million 2021 items items 2021 2020 items items 2020
---------------------------------- -------- ----------- ------------ -------- ----------- ------------
Passenger revenue(1) 459 5 454 3,953 3,953
Cargo revenue 350 350 246 246
Other revenue 159 159 386 386
---------------------------------- -------- ----------- ------------ -------- ----------- ------------
Total revenue 968 5 963 4,585 4,585
---------------------------------- -------- ----------- ------------ -------- ----------- ------------
Employee costs 622 622 1,234 1,234
Fuel, oil costs and emissions
charges(1) 226 (62) 288 2,534 1,325 1,209
Handling, catering and other
operating costs 173 173 652 652
Landing fees and en-route charges 127 127 451 451
Engineering and other aircraft
costs 207 207 504 504
Property, IT and other costs 184 184 225 225
Selling costs 70 70 211 211
Depreciation, amortisation
and impairment 470 470 570 570
Currency differences (43) (43) 64 64
---------------------------------- -------- ----------- ------------ -------- ----------- ------------
Total expenditure on operations 2,036 (62) 2,098 6,445 1,325 5,120
---------------------------------- -------- ----------- ------------ -------- ----------- ------------
Operating loss (1,068) 67 (1,135) (1,860) (1,325) (535)
Finance costs (177) (177) (151) (151)
Finance income 3 3 11 11
Net financing (charge)/credit
relating to pensions (1) (1) 1 1
Net currency retranslation
(charges)/credits (13) (13) 77 77
Other non-operating credits 40 40 40 40
---------------------------------- -------- ----------- ------------ -------- ----------- ------------
Total net non-operating costs (148) (148) (22) (22)
---------------------------------- -------- ----------- ------------ -------- ----------- ------------
Loss before tax (1,216) 67 (1,283) (1,882) (1,325) (557)
Tax 149 (10) 159 199 198 1
Loss after tax for the period (1,067) 57 (1,124) (1,683) (1,127) (556)
---------------------------------- -------- ----------- ------------ -------- ----------- ------------
(1) Discontinuation of hedge accounting
The exceptional credit to Fuel, oil costs and emissions charges
of EUR62 million (three months to March 31, 2020: charge of
EUR1,325 million) is represented by a credit of EUR61 million
(three months to March 31, 2020: charge of EUR1,350 million)
relating to fuel derivatives and a credit of EUR1 million (three
months to March 31, 2020: credit of EUR25 million) related to the
associated fuel foreign currency derivatives, and the exceptional
credit to Passenger revenue of EUR5 million (three months to March
31, 2020: EURnil) relates to the derecognition of hedge accounting
of the associated fuel derivatives and the foreign currency
derivatives on forecast revenue and fuel consumption. These amounts
have arisen from the substantial deterioration in demand for air
travel caused by COVID-19, which has caused a significant level of
hedged fuel purchases in US dollars and hedged passenger revenue
transactions in a variety of foreign currencies to no longer be
expected to occur, based on the Group's operating forecasts
prevailing at the balance sheet date. The Group's risk management
strategy has been to build up these hedges gradually over a
three-year period when the level of forecast fuel consumption and
passenger revenues were higher than current expectations.
Accordingly, the hedge accounting for these transactions has been
derecognised and the credits recognised in the Income statement.
The credit relating to revenue derivatives and fuel derivatives has
been recorded in the Income statement within Passenger revenue and
Fuel, oil and emission charges, respectively.
The related tax charge was EUR10 million (three months to March
31, 2020: credit of EUR198 million).
COVID-19 Summary - Quarter 1
The Group's results continue to be impacted by COVID-19 and the
related restrictions on travel. A detailed review of the impact of
COVID-19 on the Group in 2020 was provided in the 2020 Annual
Report and Accounts. This review focuses on further impacts during
2021.
In the first quarter of 2021, due to the continuing impact of
the virus worldwide and the associated travel and border
restrictions applying in many countries, the Group was only able to
operate a limited passenger schedule, with capacity operated only
19.6 per cent of that operated in quarter 1, 2019 and 21.9 per cent
of quarter 1, 2020. The Group operated 1,306 additional cargo
flights, leading to record cargo revenue for the quarter.
The Group seeks to reduce the impact of volatile commodity
prices by hedging fuel purchases in advance, based on expected
capacity levels. The Group also hedges foreign exchange rates. The
impact of COVID-19 has led to a significant reduction in the
requirement to purchase jet fuel, due to the significantly reduced
flying programme. As a consequence, the Group has derivative
contracts for which there was no corresponding purchase of jet
fuel, leading to discontinuance of hedge accounting for these fuel
derivatives, together with the related foreign exchange
derivatives. In aggregate there is a net loss on these derivate
contracts, as whilst the commodity fuel price has risen in recent
months it is still below levels seen before COVID-19, when these
derivative contracts were taken out. The credit in the quarter is
mainly due to reduced losses on these contracts, due to rising fuel
prices, net of an adjustment for the latest assessment of capacity
for 2021 and foreign exchange movements.
In May, the Board approved a revised fuel hedging policy, which
is designed to provide flexibility to both significant unexpected
reductions in travel demand or capacity and/or material or sudden
changes in jet fuel prices. The revised policy allows for
differentiation within the Group, to match the nature of each
operating company, including greater use of call options. The
revised policy will operate on a two-year rolling basis, with
hedging up to 60 per cent of anticipated requirements in the first
twelve months and up to 30 per cent in the following twelve months
and with flexibility for low cost airlines within the Group to
adopt hedging up to 75 per cent in the first twelve months. For all
Group airlines, hedging between 25 and 36 months ahead will only be
undertaken in exceptional circumstances.
The Group continues to take action to preserve cash and boost
liquidity. In the quarter the Group drew down on debt facilities
agreed in 2020, namely GBP2.0 billion for British Airways from UK
Export Finance and EUR75 million for Aer Lingus from the Ireland
Strategic Investment Fund. IAG closed a dual-tranche senior
unsecured bond issuance in the quarter, raising EUR1.2 billion,
with EUR500 million maturing in 2025 and EUR700 million maturing in
2029. The Group also signed a Committed Secured Revolving Credit
Facility with a syndicate of banks for $1.755 billion, available
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 take-off and landing rights at both London Heathrow and
London Gatwick airports. The facility remained undrawn at the end
of the quarter. Simultaneous with entering into this new Revolving
Credit Facility, British Airways cancelled its US dollar facility
that was due to expire on June 23, 2021 and which had $786 million
undrawn and available at December 31, 2020. Approximately EUR400
million of facilities expired undrawn by the end of March. Total
liquidity at the end of quarter remained strong at EUR10.5 billion,
including cash, cash equivalents and current interest-bearing
deposits of EUR8.0 billion and committed and undrawn general and
aircraft facilities of EUR2.5 billion.
The Group expects that it will take until at least 2023 for
passenger demand to reach the levels of 2019. As a result the Group
is actively involved in restructuring its cost base to adjust to
significantly lower levels of demand, including actions to reduce
fixed costs and to increase the variable proportion of the cost
structure.
Basis of preparation
Based on the extensive modelling the Group has undertaken in
light of the COVID-19 pandemic, the Directors have a reasonable
expectation that the Group has sufficient liquidity for the
foreseeable future and accordingly the Directors have adopted the
going concern basis in preparing the consolidated results for the
three months to March 31, 2021.
There are a number of significant factors related to COVID-19
that are outside of the control of the Group, including the status
and impact of the pandemic worldwide, including the emergence of
new variants of the virus and potential resurgence of existing
strains of the virus; the availability of vaccines worldwide,
together with the speed at which they are deployed; the efficacy of
those vaccines; and the restrictions imposed by national
governments in respect of the freedom of movement and travel. Due
to the uncertainty that these factors create, the Group is not able
to provide certainty that there could not be more severe downside
scenarios than those it has considered in its modelling, including
the sensitivities it has considered in relation to factors such as
the impact on yield, capacity operated, cost mitigations achieved
and the availability of aircraft financing to offset capital
expenditure. In the event that such a scenario were to occur, the
Group would need to implement additional mitigation measures and
would likely need to secure additional funding over and above that
which is contractually committed at May 6, 2021.
The Group has been successful in raising liquidity in the first
quarter, including an additional EUR3.6 billion of non-aircraft
debt and a new $1.755 billion Revolving Credit Facility, committed
for three years. However, the Group cannot provide certainty that
it will be able to secure additional funding, if required, in the
event that a more severe downside scenario than those it has
considered were to occur.
Principal risks and uncertainties
The Group has continued to maintain and operate its framework
and processes to identify, assess and manage risks. The principal
risks and uncertainties affecting the Group are detailed on pages
78 to 88 of the 2020 Annual Report and Accounts and remain
relevant. The Board has continued to monitor and assess risks
across the Group, in the light of changes that influence the Group
and its operations and the related ongoing regulatory and
governmental responses in the Group's markets, including in respect
of COVID-19. Mitigating actions have been identified to enable the
Group to continue to respond as necessary to the uncertain risk
environment.
Operating and market environment
Average commodity fuel prices for the three months to March 31,
2021 were approximately 20 per cent lower than the equivalent
period in 2020, although prices rose over the course of the quarter
in 2021, in contrast to the significant fall in March 2020 as
COVID-19 took hold. The foreign exchange rate for the euro against
the US dollar was approximately ten per cent higher than the same
period last year, with the pound sterling five per cent higher
against the US dollar.
IAG's results are impacted by exchange rates used for the
translation of British Airways' and IAG Loyalty's financial results
from pound sterling to the Group's reporting currency of euro. For
the three months to March 31, 2021 the net impact of translation on
the operating result before exceptional items was EUR35 million
favourable.
From a transactional perspective, the Group's financial
performance is impacted by fluctuations in exchange rates,
primarily from the US dollar, euro and pound sterling. The Group
normally generates a surplus in most currencies in which it does
business, except for the US dollar, as capital expenditure, debt
repayments and fuel purchases typically create a deficit. The Group
hedges a portion of its transaction exposures. The net transaction
impact on the operating result before exceptional items was
favourable by EUR142 million for the period, increasing revenues by
EUR2 million and reducing costs by EUR140 million.
The net impact of translation and transaction exchange on the
operating result before exceptional items for the Group was EUR177
million favourable.
Capacity
In the first three months of 2021, IAG capacity, measured in
available seat kilometres (ASKs), was lower by 78.1 per cent versus
2020 and by 80.4 per cent versus 2019, with reductions across all
regions. Capacity continues to be significantly affected by the
travel restrictions put in place by national governments in
response to the COVID-19 pandemic, including new national lockdowns
in the UK and Ireland in response to the third wave of infections
at the start of the year.
British Airways capacity was adversely impacted by the UK-wide
lockdown imposed in January and associated international travel
ban. Longhaul routes operated primarily for cargo purposes with a
number of daily flights to US cities including New York, JFK,
Washington and Los Angeles. Shorthaul operations were severely
impacted by UK and European travel restrictions, but regular
operations connected the main cities and saw steady business travel
demand.
Iberia's longhaul operations were focussed on Latin America and
Caribbean (LACAR) routes given the continued restrictions on entry
to the US. Routes benefitted from Visiting Friends and Relatives
(VFR) travel over Christmas and the new year and in the lead up to
Easter, although the EU restrictions introduced in response to the
identification of the Brazil COVID-19 variant adversely impacted
passenger numbers. Shorthaul operations benefitted from significant
transfer traffic but were still limited due to European travel
restrictions.
Vueling operations were focussed on Domestic markets connecting
the Spanish peninsula with the Canary and Balearic Islands.
However, regional travel restrictions within Spain, and Catalonia
in particular, continue to supress passenger demand.
Aer Lingus capacity continues to be driven by cargo needs, with
flights operating regularly to New York, JFK, Chicago and Boston
with very low passenger load factors. The Domestic route between
London Heathrow and Belfast performed well with sustained business
traveller demand.
LEVEL longhaul operations out of Barcelona have been limited
with only regular flights to Buenos Aires in quarter 1. The route
to Santiago de Chile operated in January but was subsequently
cancelled in February.
Revenue
Passenger revenue for the three months to March 31, 2021 fell
88.4 per cent from the previous year; in 2020 the impact of
COVID-19 was mainly limited to March. Passenger unit revenue
(passenger revenue per ASK) for the quarter decreased 49.7 per cent
at constant currency ('ccy'), due primarily to lower passenger seat
factors, together with lower passenger yields (passenger revenue
per revenue passenger kilometre), associated with the impact of
COVID-19.
Cargo revenue for the quarter was 42.3 per cent higher versus
2020 and up 50.0 per cent at constant currency. The strong cargo
revenue performance was due to additional cargo flights, during the
quarter 1,306 cargo flights were operated. Cargo revenue for
quarter 1 was EUR350 million, a record for the period, and up from
EUR246 million versus last year. Despite an increase in load
factor, total cargo carried, measured in cargo tonne kilometres,
reduced by 27.2 per cent due to the reduction in passenger
schedules. Yields were significantly higher versus last year
reflecting the ongoing market supply and demand imbalance. During
this pandemic, cargo revenue has had to cover the entire cost of
operating a flight, without passenger revenue, on an aircraft
configured for passengers.
Other revenue fell by 58.8 per cent and by 52.1 per cent at ccy,
mainly due to the impact of COVID-19 on the Group's non-airline
businesses.
Costs
Employee costs for the quarter decreased by EUR612 million
compared with 2020, linked mainly to the restructuring programmes
implemented in 2020, together with furlough and equivalent
temporary cost reduction schemes, which account for approximately
one third of the reduction.
Fuel costs, including an exceptional credit related to
overhedging of EUR62 million, reduced by 91.1 per cent, reflecting
the reduced capacity operated. Excluding the exceptional
overhedging credit in the quarter and the overhedging charge in
quarter 1, 2020 fuel costs reduced by 76.2 per cent.
Supplier costs decreased by 65.9 per cent, linked to
volume-related savings due to the lower capacity operated, together
with a reduction in non-essential expenditure and negotiated
savings as a result of COVID-19.
Depreciation, amortisation and impairment costs decreased 17.5
per cent on the previous year, linked to the reduction in the
Group's fleet triggered by COVID-19, with the in-service fleet,
which includes those aircraft temporarily grounded due to COVID-19,
reduced from 595 aircraft at March 2020 to 531 aircraft at March
2021.
Total non-fuel costs were down 53.7 per cent on the previous
year and down 49.2 per cent at ccy.
Operating loss
The Group's operating loss for the three months to March 31,
2021 was EUR1,068 million (2020: operating loss of EUR1,860
million). The operating loss excluding exceptional credits and
charges related to overhedging was EUR1,135 million in quarter 1
2021, compared with an operating loss of EUR535 million in
2020.
Net non-operating costs, taxation and loss after tax
The tax credit for the period was EUR159 million before
exceptional items (2020: EUR1 million), with an effective tax rate
for the Group of 12 per cent (2020: zero per cent). The substantial
majority of the Group's activities are taxed where the main
operations are based, UK, Spain and Ireland, with corporation tax
rates during the period of 19 per cent, 25 per cent and 12.5 per
cent respectively, these result in an expected effective tax rate
of 20 per cent. The difference between the actual effective tax
rate of 12 per cent and the expected effective tax rate of 20 per
cent is primarily due to current period losses in Iberia, LEVEL
France and Vueling not being recognised.
On March 3, 2021 the UK Chancellor announced that legislation
will be introduced in Finance Bill 2021 to set the main rate of
corporation tax at 25 per cent from April 2023. This expected tax
rate change has not been reflected in these results because it has
not yet been substantively enacted.
The loss after tax and exceptional items for the quarter was
EUR1,067 million (2020: loss after tax EUR1,683 million), driven by
the impact of COVID-19 on the Group's operating results.
Cash and leverage
The Group's cash position at March 31, 2021 of EUR7,975 million
was EUR2,058 million higher than December 31, 2020, driven by the
additional liquidity actions taken in the quarter. Net debt at the
end of the period was EUR11,564 million compared with EUR9,762
million at December 31, 2020.
Other recent developments
IAG has become the first European airline group to commit to
powering 10 per cent of its flights with sustainable aviation fuel
by 2030. The Group will purchase one million tonnes of sustainable
jet fuel per year enabling it to cut its annual emissions by two
million tonnes by 2030. This equates to removing one million cars
from Europe's roads each year. In addition, IAG will become the
first airline group worldwide to extend its net zero commitment to
its supply chain. The Group will be working with its suppliers to
enable them to commit to achieving net zero emissions by 2050 for
the products and services they provide to IAG.
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