3rd Quarter Results

RNS Number : 4897R

International Cons Airlines Group

04 November 2011

 



NINE MONTHS RESULTS ANNOUNCEMENT

International Airlines Group today (November 4) presented Group results for the three and nine months ended September 30, 2011. In addition, IAG presented combined results for the nine months ended September 30, 2011 including Iberia's first 21 days of January.

IAG period highlights on combined results:

·      Third quarter operating profit of €363 million, before exceptional items (2010: €528 million)

·      Operating profit for the nine months to September 30, 2011 of €451 million, before exceptional items (2010: €219 million)

·      Profit before tax for the nine months of €355 million after exceptional items (2010: €63 million)

·      Revenue for the nine months up 11.6 per cent to €12,263 million (2010: €10,986 million), including €146 million or 1.3 per cent of adverse currency translation

·      Passenger unit revenue for the nine months up 4.1 per cent (6.7 per cent at constant currency), on top of capacity increases of 7.7 per cent

·      Fuel costs for the nine months up 28.5 per cent to €3,751 million, before exceptional items (2010: €2,919 million)

·      Other operating costs up 2.7 per cent at €8,061 million, before exceptional items, including €122 million or 1.0 per cent of favourable currency translation. Non fuel unit costs down 4.7 per cent, or 3.4 per cent at constant currency

·      Cash down €200 million to €4,152 million (December 2010: €4,352 million)

·      Group net debt down €293 million to €602 million (December 2010: €895 million)

Performance summary:

	Combined nine months to September 30			Excludes 21 days Iberia pre-merger
Financial data (€ million) unaudited	2011 (1)	2010 (1)	Higher /  (lower)	Nine months to September 30, 2011 (2)	Nine months to September 30, 2010 (2)
Passenger revenue	10,261	9,139	12.3 %	10,082	6,439
Total revenue	12,263	10,986	11.6 %	12,027	7,374
Operating profit/(loss) before exceptional items	451	219	232	488	203
Exceptional items	(68)	-	(68)	(68)	-
Operating profit/(loss) after exceptional items	383	219	164	420	203
Profit/(loss) after exceptional items before tax	355	63	292	394	(9)
Profit/(loss) after exceptional items after tax	338	10	328	365	(52)
Basic earnings per share				18.9	(5.9)
Operating figures	2011 (1)	2010 (1)	Higher /  (lower)
Available seat kilometres (ASK million)	160,204	148,700	7.7 %
Revenue passenger kilometres (RPK million)	127,425	118,118	7.9 %
Seat factor (per cent)	79.5%	79.4%	0.1 pt
Passenger yield per RPK (€cents)	8.05	7.74	4.0 %
Passenger unit revenue per ASK (€cents)	6.40	6.15	4.1 %
Total costs excluding fuel per ASK (€cents)	5.03	5.28	(4.7)%
(€ million) unaudited	At September 30, 2011 (2)	At December 31, 2010 (1)	Higher / (lower)
Cash, cash equivalents and interest bearing deposits	4,152	4,352	(4.6)%
Net debt	602	895	(32.7)%
Equity	5,218	4,670	11.7 %
Adjusted gearing(3)	42%	47%	(5pts)

Willie Walsh, International Airlines Group chief executive, said: "Our revenue is up 2.2 per cent in the quarter driven primarily by volume. However, high fuel costs continue to have a significant impact on our business.  This quarter fuel costs are up 23.7 per cent, compared to last year, while non- fuel costs are flat. 

"The competitiveness of the UK economy and the aviation industry has been damaged by Air Passenger Duty with UK airlines facing the highest tax levels in the world.  Unless the British chancellor reverses this, even more passengers and businesses will avoid the UK and further undermine the economy.

"The main challenge for 2012 will be to offset increased fuel costs, as our hedges unwind, against a background of potentially weaker demand".

(1)    This financial data is based on the combined results of operations of British Airways, Iberia and IAG the company for the nine month period ended September 30, 2011 and 2010, and the balance sheet as at December 31, 2010.  These combined financial statements eliminate cross holdings and related party transactions, however the comparatives do not reflect any adjustments required to account for the merger transaction. Financial ratios are before exceptional items.

(2)    The IAG September 30, 2011 income statement is the consolidated results of BA and IAG the company for the nine month period ended September 30, 2011 and Iberia from January 22, 2011 to September 30, 2011. The IAG September 30, 2010 comparative is solely the results of BA.

(3)    Adjusted gearing is net debt plus capitalised operating aircraft lease costs, divided by net debt plus capitalised operating aircraft lease costs and equity.

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Financial review:

Revenue for the nine months to September 30, 2011 rose by 11.6 per cent to €12,263 million (2010: €10,986 million). Passenger revenue was up 12.3 per cent on capacity growth (ASKs) of 7.7 per cent and improved unit passenger revenues (€cents/ASK) of 4.1 per cent. At constant exchange rates total revenue was up 14.1 per cent or €1,552 million with passenger revenue up 14.9 per cent and unit passenger revenues up 6.7 per cent.

Cargo revenue for the nine months was up 10.6 per cent with yield up 4.9 per cent and volume up 5.3 per cent.

Operating costs for the nine months were up 9.7 per cent to €11,812 million, before exceptional items, and up 13.0 per cent at constant currency, reflecting increased capacity of 7.7 per cent and significant fuel price increases, net of hedging.

Fuel costs for the nine months were up 28.5 per cent to €3,751 million, before exceptional items, reflecting mainly price increases and additional volume, partly offset by hedging benefits.

Non fuel costs for the nine months were up 2.7 per cent, before exceptional items; non-fuel unit costs (€cents/ASK) were down 4.7 per cent. Capacity, which was adversely impacted by disruption last year, has increased without additional aircraft, and unit costs reductions show the benefits of resource management flowing through from the prior year.

IAG operating profit for the nine months was €451 million, before exceptional items (€383 million after exceptional items), compared to a profit of €219 million for the 9 months of 2010. The consolidated results including Iberia from the acquisition date of January 21, 2011, show an operating profit of €420 million after exceptional items.

Non-operating results for the nine months improved by €128 million, after exceptional items. This reflected the step acquisition profit as part of the merger transaction of Iberia in IAG of €83 million; this will be a fixed item for the remainder of the year.

The profit before tax for the nine months was €355 million, after exceptional items, an improvement of €292 million on the previous year (2010: €63 million).

The tax charge for the nine months reflects no tax charge on the step acquisition profit, standard rate tax charge on the profits across the Group and a deferred tax credit benefit from the reduction in the UK corporation tax rates announced in the UK March budget.

The Group's cash position remains very strong with cash and cash equivalents at €4,152 million. The net debt of the Group has fallen by €293 million to €602 million compared to December 31, 2010. Adjusted gearing at September 30, 2011 improved by 5 points to 42 per cent.

Merger Transaction

The purchase price allocation will be completed within 12 months of the merger in accordance with the period allowed under IFRS3 Revised.  The fair values of the acquired assets, liabilities and goodwill have been determined on a provisional basis, as disclosed at June 30, 2011, pending the finalisation of the valuations of the tangible and intangible assets and the related deferred taxes.  Any movement in the provisional fair value of depreciable assets would result in an adjustment to the depreciation charge in the income statement from the date of acquisition. 

Trading Outlook:

Given the disruption and non-recurring accounting items in Q4 2010, we are confident of a higher level of profitability in Q4 this year, even after the negative impact of the high fuel price. We expect to deliver a 2011 full-year operating profit of around double the year 2010 profits.

Although we saw some demand softness in October, forward bookings for premium cabins are currently broadly in line with levels seen last year. Non-premium cabins are weaker than last year, particularly in the Spanish market. We remain ready to adjust our capacity quickly to respond to any sustained downturn.

Forward-looking statement

Certain information included in these statements is forward-looking and involves risks and uncertainties that could cause actual results to differ materially from those expressed or implied by the forward-looking statements.

Forward-looking statements include, without limitation, projections relating to results of operations and financial conditions and Consolidated International Airlines Group S.A. (the 'Group') plans and objectives for the future operations, including, without limitation, discussions of the Company's Business Plan, expected future revenues, financing plans and expected expenditures and divestments. All forward-looking statements in this report are based upon information known to the Company on the date of this report. The Company undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.

It is not reasonably possible to itemise all of the many factors and specific events that could cause the Company's forward-looking statements to be incorrect or that could otherwise have a material adverse effect on the future operations or results of an airline operating in the global economy. Further information on some of the most important risks in this regard is given in the shareholder documentation in respect of the merger issued on October 26, 2010 and in the Securities Note and Summary issued on January 10, 2011; these documents are available on www.iagshares.com.

IAG Investor Relations

2 World Business Centre Heathrow

Newall Road, London Heathrow Airport

HOUNSLOW TW6 2SF

Tel: [phone]

[e-mail]

IAG INCOME STATEMENT:
	Combined nine months to September 30					Excludes 21 days Iberia pre-merger
(€ million) unaudited	Before exceptional items 2011	Exceptional Items (3)	Total 2011 (1)	2010 (1)	Higher / (lower)	Nine months to September 30, 2011 (2)	Nine months to September 30, 2010 (2)
Passenger revenue	10,261		10,261	9,139	12.3 %	10,082	6,439
Cargo revenue	880		880	796	10.6 %	866	582
Other revenue	1,122		1,122	1,051	6.8 %	1,079	353
Total revenue	12,263		12,263	10,986	11.6 %	12,027	7,374
Employee costs	2,856		2,856	2,767	3.2 %	2,785	1,739
Fuel and oil costs	3,751	76	3,827	2,919	31.1 %	3,758	2,121
Handling, catering and other operating costs	1,159		1,159	1,125	3.0 %	1,136	853
Landing fees and en-route charges	899		899	868	3.6 %	874	530
Engineering and other aircraft costs	840		840	804	4.5 %	815	479
Property, IT and other costs	677		677	716	(5.4)%	662	501
Selling costs	567		567	503	12.7 %	551	263
Depreciation, amortisation and impairment	735		735	761	(3.4)%	725	627
Aircraft operating lease costs	298	(8)	290	300	(3.3)%	273	60
Currency differences	30		30	4	nm	28	(2)
Total expenditure on operations	11,812	68	11,880	10,767	10.3 %	11,607	7,171
Operating profit/(loss)	451	(68)	383	219	74.9 %	420	203
Net non-operating income/(costs)	(107)	79	(28)	(156)	(82.1)%	(26)	(212)
Profit/(loss) before tax	344	11	355	63	463.5 %	394	(9)
Taxation	(17)		(17)	(53)	(67.9)%	(29)	(43)
Profit/(loss) after tax	327	11	338	10	nm	365	(52)
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Basic earnings per share						18.9	(5.9)
Diluted earnings per share						17.0	(5.9)
Operating figures	September 30, 2011 (1)			September 30, 2010(1)	Higher / (lower)
Available seat kilometres (ASK) (million)	160,204			148,700	7.7 %
Revenue passenger kilometres (RPK) (million)	127,425			118,118	7.9 %
Seat factor (per cent)	79.5%			79.4%	0.1 pt
Passenger numbers (thousands)	39,362			38,325	2.7 %
Cargo tonne kilometres (CTK) (million)	4,560			4,329	5.3 %
Passenger yield per RPK (€cents)	8.05			7.74	4.0 %
Passenger unit revenue per ASK (€cents)	6.40			6.15	4.1 %
Cargo yield per CTK (€cents)	19.30			18.39	4.9 %
Total cost per ASK (€cents)	7.37			7.24	1.8 %
Fuel cost per ASK (€cents)	2.34			1.96	19.4 %
Total cost excluding fuel per ASK (€cents)	5.03			5.28	(4.7)%
Aircraft in service	347			352	(1.4)%
Average employee number	56,798			56,670	0.2 %

(1)   Please see page 1 for full note reference.

(2)   Please see page 1 for full note reference. Note the 2011 consolidated results for the Group above are the consolidated results including the impact of the exceptional items.

(3)   The business combination accounting principles require that the gain Iberia has recognised in the first nine months from the maturity of hedges that existed at January 21, 2011 (the merger date) are not allowed to be recognised by IAG. IFRS3 Revised limits IAG to recognising only post-acquisition benefits or losses upon re-designation of the hedges that existed at the date of the acquisition or new hedges. The mark to market value of these hedges at January 21, 2011 amounted to €78 million in reserves. The resultant cash gains have been included in Iberia's income statement, and are eliminated on consolidation at the IAG Group level.  Included within net non-operating income and costs is an €83 million non-cash gain resulting from the step acquisition of Iberia.

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IAG INCOME STATEMENT						Excludes 21 days Iberia pre-merger
	Combined three months to September 30
€ million (unaudited)	Before exceptional items 2011	Exceptional  Items (3)	Total 2011	2010 (1)	Higher / (lower)	Three months to September 30, 2011 (2)	Three months to September 30, 2010 (2)
Passenger revenue	3,813		3,813	3,704	2.9 %	3,813	2,686
Cargo revenue	288		288	287	0.3 %	288	213
Other revenue	389		389	401	(3.0)%	389	149
Total revenue	4,490		4,490	4,392	2.2 %	4,490	3,048
Employee costs	947		947	968	(2.2)%	947	606
Fuel and oil costs	1,373	15	1,388	1,110	25.0 %	1,388	808
Handling, catering and other operating costs	400		400	410	(2.4)%	400	319
Landing fees and en-route charges	310		310	314	(1.3)%	310	198
Engineering and other aircraft costs	287		287	299	(4.0)%	287	172
Property, IT and other costs	232		232	226	2.7 %	232	165
Selling costs	208		208	168	23.8 %	208	91
Depreciation, amortisation and impairment	244		244	262	(6.9)%	244	214
Aircraft operating lease costs	98	(3)	95	107	(11.2)%	95	21
Currency differences	28		28	-	nm	28	5
Total expenditure on operations	4,127	12	4,139	3,864	7.1 %	4,139	2,599
Operating profit/(loss)	363	(12)	351	528	(33.5)%	351	449
Net non-operating costs	(31)	(4)	(35)	(46)	(23.9)%	(35)	(57)
Profit/(loss) before tax	332	(16)	316	482	(34.4)%	316	392
Taxation	(49)		(49)	(120)	(59.2)%	(49)	(102)
Profit/(loss) after tax	283	(16)	267	362	(26.2)%	267	290
Operating figures	September 30, 2011 (1)			September 30, 2010 (1)	Higher / (lower)
Available seat kilometres (ASK) (million)	55,661			54,001	3.1 %
Revenue passenger kilometres (RPK) (million)	47,022			45,478	3.4 %
Seat factor (per cent)	84.5%			84.2%	0.3pts
Passenger numbers (thousands)	14,553			14,957	(2.7)%
Cargo tonne kilometres (CTK) (million)	1,494			1,476	1.2 %
Passenger yield per RPK (€cents)	8.11			8.14	(0.4)%
Passenger unit revenue per ASK (€cents)	6.85			6.86	(0.1)%
Cargo yield per CTK (€cents)	19.28			19.44	(0.8)%
Total cost per ASK (€cents)	7.41			7.16	3.5 %
Fuel cost per ASK (€cents)	2.47			2.06	19.9 %
Total cost excluding fuel per ASK (€cents)	4.95			5.10	(2.9)%
Average employee number	57,575			57,040	0.9 %

(1)   Please see page 1 for full note reference.

(2)   Please see page 1 for full note reference. Note the 2011 consolidated results for the Group above are the consolidated results including the impact of the exceptional items.

(3)   The business combination accounting principles require that the gain Iberia has recognised in the first nine months from the maturity of hedges that existed at January 21, 2011 (the merger date) are not allowed to be recognised by IAG. IFRS3 Revised limits IAG to recognising only post-acquisition benefits or losses upon re-designation of the hedges that existed at the date of the acquisition or new hedges. The mark to market value of these hedges at January 21, 2011 amounted to €78 million in reserves. The resultant cash gains have been included in Iberia's income statement, and are eliminated on consolidation at the IAG Group level.  Included within net non-operating income and costs is an €83 million non-cash gain resulting from the step acquisition of Iberia.

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END

 

 

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