3rd Quarter Results

RNS Number : 7747V

International Cons Airlines Group

31 October 2014

 



NINE MONTHS RESULTS ANNOUNCEMENT

International Consolidated Airlines Group (IAG) today (October 31, 2014) presented Group consolidated results for the nine months to September 30, 2014.

IAG period highlights on results:

·      Third quarter operating profit €900 million (2013: €690 million) before exceptional items, €210 million better than last year

·      At constant currency, third quarter passenger unit revenue down 0.9 per cent and non-fuel unit costs down 4.5 per cent

·      Revenue for the quarter up 8.5 per cent to €5,866 million, up 6.9 per cent at constant currency

·      Fuel unit costs for the quarter down 7.5 per cent at constant currency

·      Operating profit for the nine months €1,130 million (2013: €657 million) before exceptional items, €473 million better than last year

·      Exceptional charge of €82 million for currency re-evaluation

·      Cash of €5,064 million at September 30, 2014, up €1,431 million on 2013 year end

·      Adjusted gearing down 4 points to 46 per cent

Performance summary:

	Nine months to September 30
Financial data € million	2014	2013	Higher / (lower)
Passenger revenue	13,435	12,299	9.2 %
Total revenue	15,155	14,113	7.4 %
Operating profit before exceptional items	1,130	657
Exceptional items	(82)	(309)
Operating profit after exceptional items	1,048	348
Profit after tax and exceptional items	694	77
Basic earnings per share (€ cents)	33.4	3.2
Operating figures	2014	2013	Higher / (lower)
Available seat kilometres (ASK million)	190,234	172,234	10.5 %
Revenue passenger kilometres (RPK million)	153,537	140,220	9.5 %
Seat factor (per cent)	80.7	81.4	(0.7pts)
Passenger revenue per RPK (€ cents)	8.75	8.77	(0.2)%
Passenger unit revenue per ASK (€ cents)	7.06	7.14	(1.1)%
Non-fuel unit costs per ASK (€ cents)	5.00	5.21	(4.0)%
€ million	At September 30,	At December 31,	Higher / (lower)
	2014	2013
Cash and interest-bearing deposits	5,064	3,633	39.4 %
Adjusted net debt(1)	5,547	5,701	(2.7)%
Adjusted gearing(2)	46%	50%	(4pts)

⁽¹⁾ Adjusted net debt is net debt plus capitalised operating aircraft lease costs.

⁽²⁾ Adjusted gearing is adjusted net debt, divided by adjusted net debt and adjusted equity.

Willie Walsh, IAG Chief Executive Officer, said:

"This quarter we are reporting an operating profit before exceptional items of €900 million. At constant currency, revenue was up 6.9 per cent with non-fuel unit costs down 4.5 per cent and fuel unit costs down 7.5 per cent.

"We continued to grow capacity efficiently and both our non-fuel and fuel unit cost performances were strong with the latter boosted by the introduction of new, more efficient aircraft into our fleet.

"British Airways made an operating profit of €607 million, compared to €477 million last year, and grew capacity while retaining its focus on cost control. Iberia's operating profit increased to €162 million from €74 million last year highlighting its strong cost discipline combined with the continued benefits of restructuring. Vueling continued to grow, developing new bases in Italy and Belgium, with an operating profit of €140 million compared to €139 million last year.

"In the nine months, we made an operating profit of €1,130 million before exceptional items, up by €473 million from last year".

Trading outlook

For the full year 2014, we expect to produce an improvement in operating profit before exceptional items in the range of €550 million to €600 million, from a base of €770 million in 2013.

Forward-looking statements:

Certain statements included in this report are forward-looking and involve risks and uncertainties that could cause actual results to differ materially from those expressed or implied by such forward-looking statements.

Forward-looking statements can typically be identified by the use of forward-looking terminology, such as "expects", "may", "will", "could", "should", "intends", "plans", "predicts", "envisages" or "anticipates" and include, without limitation, any projections relating to results of operations and financial conditions of International Consolidated Airlines Group S.A. and its subsidiary undertakings from time to time (the 'Group'), as well as plans and objectives for future operations, expected future revenues, financing plans, expected expenditures and divestments relating to the Group and discussions of the Group's Business plan. All forward-looking statements in this report are based upon information known to the Group on the date of this report. The Group undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.

It is not reasonably possible to itemise all of the many factors and specific events that could cause the forward-looking statements in this report to be incorrect or that could otherwise have a material adverse effect on the future operations or results of an airline operating in the global economy. Further information on the primary risks of the business and the risk management process of the Group is given in the Annual Report and Accounts 2013; these documents are available on www.iagshares.com.

IAG Investor Relations

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CONSOLIDATED INCOME STATEMENT
	Nine months to September 30
€ million	Before exceptional items	Exceptional items	Total 2014	Before exceptional items	Exceptional items	Total 2013	Higher / (lower)
	2014			2013
Passenger revenue	13,435		13,435	12,299		12,299	9.2 %
Cargo revenue	724		724	797		797	(9.2)%
Other revenue	996		996	1,017		1,017	(2.1)%
Total revenue	15,155		15,155	14,113		14,113	7.4 %
Employee costs	3,182		3,182	3,075	268	3,343	3.5 %
Fuel, oil costs and emissions charges	4,517		4,517	4,475	(5)	4,470	0.9 %
Handling, catering and other operating costs	1,542		1,542	1,442		1,442	6.9 %
Landing fees and en-route charges	1,185		1,185	1,058		1,058	12.0 %
Engineering and other aircraft costs	938		938	976	15	991	(3.9)%
Property, IT and other costs	698		698	684	5	689	2.0 %
Selling costs	670		670	609		609	10.0 %
Depreciation, amortisation and impairment	870		870	744	8	752	16.9 %
Aircraft operating lease costs	405		405	355	18	373	14.1 %
Currency differences	18	82	100	38		38
Total expenditure on operations	14,025	82	14,107	13,456	309	13,765	4.2 %
Operating profit	1,130	(82)	1,048	657	(309)	348
Net non-operating costs	(178)	30	(148)	(228)	(17)	(245)
Profit before tax	952	(52)	900	429	(326)	103
Tax	(222)	16	(206)	(24)	(2)	(26)
Profit after tax for the period	730	(36)	694	405	(328)	77
Operating figures	2014 (1)			2013 (1)			Higher / (lower)
Available seat kilometres (ASK million)	190,234			172,234			10.5 %
Revenue passenger kilometres (RPK million)	153,537			140,220			9.5 %
Seat factor (per cent)	80.7			81.4			(0.7pts)
Cargo tonne kilometres (CTK million)	4,023			4,150			(3.1)%
Passenger numbers (thousands)	58,907			50,454			16.8 %
Tonnes of cargo carried (thousands)	660			683			(3.4)%
Sectors (thousands)	455,637			403,025			13.1 %
Block hours (hours)	1,298,837			1,177,347			10.3 %
Average manpower equivalent	59,711			60,470			(1.3)%
Aircraft in service	464			437			6.2 %
Passenger revenue per RPK (€ cents)	8.75			8.77			(0.2)%
Passenger unit revenue per ASK (€ cents)	7.06			7.14			(1.1)%
Cargo revenue per CTK (€ cents)	18.00			19.20			(6.3)%
Fuel cost per ASK (€ cents)	2.37			2.60			(8.8)%
Total cost excluding fuel per ASK (€ cents)	5.00			5.21			(4.0)%
Total cost per ASK (€ cents)	7.37			7.81			(5.6)%
(1)Financial ratios are before exceptional items.

CONSOLIDATED INCOME STATEMENT
		Three months to September 30
€ million	Before exceptional items		Exceptional items		Total 2014		Before exceptional items		Exceptional items		Total 2013		Higher / (lower)
	2014						2013
Passenger revenue	5,258				5,258		4,801				4,801		9.5 %
Cargo revenue	236				236		256				256		(7.8)%
Other revenue	372				372		349				349		6.6 %
Total revenue	5,866				5,866		5,406				5,406		8.5 %
Employee costs	1,086				1,086		1,006				1,006		8.0 %
Fuel, oil costs and emissions charges	1,619				1,619		1,611		(2)		1,609		0.5 %
Handling, catering and other operating costs	560				560		518				518		8.1 %
Landing fees and en-route charges	451				451		403				403		11.9 %
Engineering and other aircraft costs	332				332		350				350		(5.1)%
Property, IT and other costs	212				212		227				227		(6.6)%
Selling costs	233				233		211				211		10.4 %
Depreciation, amortisation and impairment	299				299		246				246		21.5 %
Aircraft operating lease costs	145				145		140		(1)		139		3.6 %
Currency differences	29		82		111		4				4
Total expenditure on operations	4,966		82		5,048		4,716		(3)		4,713		5.3 %
Operating profit	900		(82)		818		690		3		693
Net non-operating costs	(103)		30		(73)		(84)				(84)
Profit before tax	797		(52)		745		606		3		609
Tax	(163)		16		(147)		(29)				(29)
Profit after tax for the period	634		(36)		598		577		3		580
Operating figures	2014						2013						Higher / (lower)
Available seat kilometres (ASK million)	69,342						63,594						9.0 %
Revenue passenger kilometres (RPK million)	58,206						53,842						8.1 %
Seat factor (per cent)	83.9						84.7						(0.8pts)
Cargo tonne kilometres (CTK million)	1,331						1,394						(4.5)%
Passenger numbers (thousands)	23,427						21,317						9.9 %
Tonnes of cargo carried (thousands)	219						227						(3.5)%
Sectors (thousands)	172,120						158,884						8.3 %
Block hours (hours)	479,372						445,278						7.7 %
Average manpower equivalent	60,852						60,384						0.8 %
Passenger revenue per RPK (€ cents)	9.03						8.92						1.2 %
Passenger unit revenue per ASK (€ cents)	7.58						7.55						0.4 %
Cargo revenue per CTK (€ cents)	17.73						18.36						(3.4)%
Fuel cost per ASK (€ cents)	2.33						2.53						(7.9)%
Total cost excluding fuel per ASK (€ cents)	4.83						4.88						(1.0)%
Total cost per ASK (€ cents)	7.16						7.42						(3.5)%

Financial review:

Acquisition

The performance for the nine month period to September 30, 2014 includes Vueling's operations; the comparative period includes Vueling from the acquisition date of April 26, 2013.

Capacity

Capacity was increased 10.5 per cent in the first nine months of the year and traffic increased 9.5 per cent, decreasing seat factor by 0.7 points to 80.7 per cent. 

Revenue

Passenger revenue increased 9.2 per cent compared to the prior nine months with 0.2 points of net adverse currency. Passenger unit revenue (passenger revenue per ASK) was down 1.0 per cent at constant currency ('ccy') from lower yields, but primarily from lower seat factor.

Cargo revenue for the period decreased by 6.3 per cent at ccy or 3.3 per cent based on revenue per cargo tonne kilometre driven by weaker yields versus last year. From April 30, 2014, IAG Cargo has significantly reduced its freighter programme resulting in less revenues and costs with a positive net contribution.

Other revenue is down 3.7 per cent at ccy adversely impacted by the elimination of Iberia's handling and maintenance revenue related to Vueling, which was included in the comparative period leading up to the acquisition. Other revenue also includes BA Holidays which has continued to see growth.

Costs

Employee unit costs improved 8.4 per cent at ccy reflecting efficient growth. The average number of employees was reduced by 1.3 per cent while productivity improved by 11.9 per cent. Employee unit cost and productivity improvements resulted from the addition of Vueling, the Iberia Transformation Plan, and British Airways' efficient capacity growth.

Fuel unit costs decreased 6.9 per cent at ccy, driven by lower average fuel prices net of hedging and better consumption with more efficient replacement aircraft such as the Boeing 787, the Airbus A330 and Airbus A380.  

Landing fees and en-route charges increased 12.0 per cent with approximately 0.5 per cent adverse currency impacts. Sectors flown are up 13.1 per cent, increasing landing fees and block hours are up 10.3 per cent, increasing en-route charges.

Handling, catering and other operating costs increased by 6.9 per cent with approximately 0.5 per cent of adverse currency impact. Handling, catering and other operating costs has been positively impacted by the elimination of Iberia's handling related to Vueling, which was included in the comparative period leading up to the acquisition. The underlying increases in Handling, catering and other operating costs reflect the increase in passengers carried during the period of 16.8 per cent and an increase in BA Holidays' activity. 

Engineering and other aircraft costs were down 3.9 per cent with approximately 1 per cent of favourable currency impact. In addition to the effect of consolidating Vueling, Engineering and other aircraft costs decreased reflecting the reduced freighter flying of IAG Cargo and less third party maintenance at Iberia.

Property, IT and other costs increased by 2.0 per cent, including approximately 1.5 per cent of adverse currency impacts, reflecting cost discipline during a period with capacity growth.

Selling costs increased 10.0 per cent with a negligible currency impact. Selling costs rose with the additional passengers carried, the investment in marketing at Iberia including the new brand, and costs associated with the launch of new routes.

Aircraft operating lease costs increased 14.1 per cent with approximately 1.5 points currency benefits. At September 30, 2014 the Group had 203 aircraft under operating lease, an increase of 22 (12.2 per cent) from September last year. The additional leased aircraft primarily relate to Airbus A320 aircraft for Vueling.

The Group depreciation charge increased by 16.9 per cent, reflecting an increase in owned aircraft, a change in the estimated residual value of the Boeing 747s and adverse currency impacts.

At constant currency non-fuel unit costs improved by 5.0 per cent, 1.6 points due to the impact of Vueling joining the Group. Underlying improvements include efficient growth at British Airways and Iberia, in addition to the continued benefits of the Iberia Transformation plan on employee and supplier costs.

Exceptional items

An exceptional charge of €82 million related to re-evaluation of cash has been recorded in the nine months to September 30, 2014 primarily related to cash in Venezuela. The prior period exceptional charge was €309 million related primarily to Iberia's Transformation Plan and the acquisition of Vueling. 

Operating profit

IAG's operating profit for the nine months was €1,130 million (2013: €657 million).

Non-operating items

Net non-operating costs were €178 million before exceptional items (2013: €228 million). The decrease primarily relates to a reduction in finance costs following the conversion of the £350 million bond last year and lower pension financing charges based on a lower net deficit, partially offset by retranslation credits on borrowings and derivatives not qualifying for hedge accounting.

An exceptional gain was recorded in non-operating costs on the partial sale of Iberia's investment in Amadeus of €30 million for the period. Remaining shares in Amadeus will be sold principally through quarter 4. In the prior period, an exceptional non-operating loss was recorded on the step acquisition of Vueling.

Taxation

For the nine months to September 30, 2014 and 2013, deferred taxes related to Iberia's results have not been recognised. The recognition of Iberia's tax assets will be reviewed in the last quarter as part of the annual Business planning process. The tax charge after exceptional items for the period was €206 million (22.9 per cent).

Profit after tax and exceptional items

The profit after tax and exceptional items for period was €694 million (2013: €77 million).

Exchange rates

The euro weakened 4.2 per cent versus the pound for the period. The impact of translating British Airways' results increased reported revenues by €455 million and reported operating expenses by €400 million. In addition, the Group realised transactional exchange losses of €475 million on revenues and exchange gains of €400 million on operating expenses. The net adverse impact of translation and transactional exchange ('constant currency') was €20 million.

Cash

The Group's cash position was €5,064 million, up €1,431 million from December 31, 2013. British Airways' cash position was €3,155 million, Iberia €931 million, Vueling €751 million and the remaining IAG companies €226 million. 

The Group has unrepatriated funds of €184 million recognised by Venezuela's Central Bank which relate to Venezuela sales from 2013. Iberia is continuing to work with the authorities regarding the timing and conditions applicable to the funds. While progress has been made and funds related to 2014 sales have been received, a charge against the 2013 historical balances has been recorded in the period.  

The adjusted net debt of the Group has decreased by €154 million to €5,547 million compared to December 31, 2013; adjusted gearing improved by four points to 46 per cent.

 

END

 

 

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