3rd Quarter Results

RNS Number : 9700D
International Cons Airlines Group
30 October 2015
 



NINE MONTHS RESULTS ANNOUNCEMENT

 

International Consolidated Airlines Group (IAG) today (October 30, 2015) presented Group consolidated results for the nine months to September 30, 2015.

 

IAG period highlights on results:

 

·      Third quarter operating profit €1,250 million before exceptional items (2014: €900 million), excluding Aer Lingus €1,205 million

·      Revenue for the quarter up 15.2 per cent to €6,756 million

·      Passenger unit revenue for the quarter up 6.5 per cent. Excluding Aer Lingus and at constant currency down 3.3 per cent

·      Fuel unit costs for the quarter down 8.6 per cent, down 19.7 per cent at constant currency

·      Non-fuel unit costs for the quarter up 5.6 per cent. Excluding Aer Lingus and at constant currency down 3.5 per cent

·      Operating profit for the nine months €1,805 million before exceptional items (2014: €1,130 million), up 59.7 per cent, excluding Aer Lingus and exceptional items €1,760 million

·      Cash of €6,786 million at September 30, 2015 was up €1,842 million on 2014 year end, including €958 million from Aer Lingus

·      Adjusted gearing down 2 points to 49 per cent and adjusted net debt to EBITDAR improved 0.1 to 1.8 times

 

Performance summary:

 

  




  

Nine months to September 30


Financial data € million  

2015 

2014 

Higher / (lower)

Passenger revenue

15,260 

13,435 

13.6 %

Total revenue

17,119 

15,155 

13.0 %

Operating profit before exceptional items

1,805 

1,130 

59.7 %

Exceptional items

(38)

(82)

53.7 %

Operating profit after exceptional items

1,767 

1,048 

68.6 %

Profit after tax

1,180 

694 

70.0 %

Basic earnings per share (€ cents)

57.1 

33.4 

23.7pts

Operating figures  

2015 

2014 

Higher / (lower)

Available seat kilometres (ASK million)

203,381 

190,234 

6.9 %

Seat factor (per cent)

81.7 

80.7 

1.0pts

Passenger unit revenue per ASK (€ cents)

7.50 

7.06 

6.2 %

Non-fuel unit costs per ASK (€ cents)

5.24 

5.00 

4.8 %

€ million

September 30,

December 31,

Higher / (lower)

2015

2014

Cash and interest-bearing deposits

6,786 

4,944 

37.3 %

Adjusted net debt(1)

7,161 

6,081 

17.8 %

Adjusted net debt to EBITDAR

1.8 

1.9 

(0.1pt)

Adjusted gearing(2)

49%

51%

(2.0pts)

 

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

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

 

Willie Walsh, IAG Chief Executive Officer, said:

 

"We're reporting strong quarter results with a positive contribution from all of our airlines. IAG made an operating profit before exceptional items of €1,250 million, up from €900 million last year.

 

"Our passenger unit revenue showed a better trend than in the second quarter of the year and our cost performance remained strong.

"We're delighted to announce IAG's first dividend payment of 10 euro cents per share. For the full year we expect to pay out 25 per cent of our underlying profit after tax in dividends and plan to announce a proposal for a final dividend for 2015 when the full year results are published.

"Aer Lingus made an operating profit of €45 million since it joined IAG on August 18. While the airline's profitability is seasonal, Aer Lingus is cost-effective and provides a natural gateway to build our business between Europe and North America. It's a great asset for the Group."

 

 

Trading outlook

 

At current fuel prices and exchange rates, IAG expects to generate an operating profit between €2.25 billion and €2.3 billion for the full year, excluding Aer Lingus.

 

 

 

 

 

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 2014; 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: +44 (0)208 564 2900

Investor.relations@iairgroup.com



 

 CONSOLIDATED INCOME STATEMENT


  




  

  



  




  

Nine months to September 30


 € million

Before exceptional items

Exceptional items

Total 2015

Before exceptional items

Exceptional items

Total 2014

Higher/ (lower)

2015

2014

  

  



  




Passenger revenue

15,260 


15,260 

13,435 

 

13,435 

13.6 %

Cargo revenue

743 

 

743 

724 

 

724 

2.6 %

Other revenue

1,116 

 

1,116 

996 

 

996 

12.0 %

Total revenue

17,119 

 

17,119 

15,155 

 

15,155 

13.0 %

Employee costs

3,599 

 

3,599 

3,182 

 

3,182 

13.1 %

Fuel, oil costs and emissions charges

4,653 

(24)

4,629 

4,517 

 

4,517 

3.0 %

Handling, catering and other operating costs

1,715 

 

1,715 

1,542 

 

1,542 

11.2 %

Landing fees and en-route charges

1,387 

 

1,387 

1,185 

 

1,185 

17.0 %

Engineering and other aircraft costs

1,089 

 

1,089 

938 

 

938 

16.1 %

Property, IT and other costs

711 

62 

773 

698 

 

698 

1.9 %

Selling costs

696 

 

696 

670 

 

670 

3.9 %

Depreciation, amortisation and impairment

937 

 

937 

870 

 

870 

7.7 %

Aircraft operating lease costs

481 

 

481 

405 

 

405 

18.8 %

Currency differences

46 

 

46 

18 

82 

100 

155.6 %

Total expenditure on operations

15,314 

38 

15,352 

14,025 

82 

14,107 

9.2 %

Operating profit

1,805 

(38)

1,767 

1,130 

(82)

1,048 

59.7 %

Net non-operating costs

(249)

 

(249)

(178)

30 

(148)

39.9 %

Profit before tax

1,556 

(38)

1,518 

952 

(52)

900 

63.4 %

Tax

(341)

(222)

16 

(206)

53.6 %

Profit after tax for the period

1,215 

(35)

1,180 

730 

(36)

694 

66.4 %

  

  



  




Operating figures

2015 (1)



2014 (1)



Higher/ (lower)

Available seat kilometres (ASK million)

203,381 



190,234 



6.9 %

Revenue passenger kilometres (RPK million)

166,147 



153,537 



8.2 %

Seat factor (per cent)

81.7 



80.7 



1.0pt

Cargo tonne kilometres (CTK million)

3,876 



4,023 



(3.7)%

Passenger numbers (thousands)

66,202 



58,907 



12.4 %

Tonnes of cargo carried (thousands)

639 



660 



(3.2)%

Sectors

493,737 



455,637 



8.4 %

Block hours (hours)

1,395,281 



1,298,837 



7.4 %

Average manpower equivalent

60,097 



59,711 



0.6 %

Aircraft in service

525 



459 



14.4 %

Passenger revenue per RPK (€ cents)

9.18 



8.75 



4.9 %

Passenger unit revenue per ASK (€ cents)

7.50 



7.06 



6.2 %

Cargo revenue per CTK (€ cents)

19.17 



18.00 



6.5 %

Fuel cost per ASK (€ cents)

2.29 



2.37 



(3.4)%

Non-fuel unit costs per ASK (€ cents)

5.24 



5.00 



4.8 %

Total cost per ASK (€ cents)

7.53 



7.37 



2.2 %

  

  



  




(1)Financial ratios are before exceptional items.



 

 CONSOLIDATED INCOME STATEMENT


  

  


  


  

Three months to September 30


€ million

Before exceptional items

2015

Exceptional items

Total 2015

  

Before exceptional items

2014

Exceptional items

Total 2014

Higher/

(lower)

  

Passenger revenue

6,141 

 

6,141 

  

5,258 

 

5,258 

16.8 %

Cargo revenue

238 

 

238 

  

236 

 

236 

0.8 %

Other revenue

377 

 

377 

  

372 

 

372 

1.3 %

Total revenue

6,756 

 

6,756 

  

5,866 

 

5,866 

15.2 %

Employee costs

1,271 

 

1,271 

  

1,086 

 

1,086 

17.0 %

Fuel, oil costs and emissions charges

1,620 

(24)

1,596 

  

1,619 

 

1,619 

0.1 %

Handling, catering and other operating costs

654 

 

654 

  

560 

 

560 

16.8 %

Landing fees and en-route charges

560 

 

560 

  

451 

 

451 

24.2 %

Engineering and other aircraft costs

389 

 

389 

  

332 

 

332 

17.2 %

Property, IT and other costs

245 

62 

307 

  

212 

 

212 

15.6 %

Selling costs

237 

 

237 

  

233 

 

233 

1.7 %

Depreciation, amortisation and impairment

317 

 

317 

  

299 

 

299 

6.0 %

Aircraft operating lease costs

176 

 

176 

  

145 

 

145 

21.4 %

Currency differences

37 

 

37 

  

29 

82 

111 

27.6 %

Total expenditure on operations

5,506 

38 

5,544 

  

4,966 

82 

5,048 

10.9 %

Operating profit

1,250 

(38)

1,212 

  

900 

(82)

818 

38.9 %

Net non-operating costs

(106)

 

(106)

  

(103)

30 

(73)

2.9 %

Profit before tax

1,144 

(38)

1,106 

  

797 

(52)

745 

43.5 %

Tax

(261)

(258)

  

(163)

16 

(147)

60.1 %

Profit after tax for the period

883 

(35)

848 

  

634 

(36)

598 

39.3 %

  

  



  

  


  


  

  



  

  


  


 Operating figures

2015 



  

2014 


  

Higher/

(lower)

Available seat kilometres (ASK million)

76,138  



  

69,342  


  

9.8 %

Revenue passenger kilometres (RPK million)

65,272  



  

58,206  


  

12.1 %

Seat factor (per cent)

85.7  



  

83.9  


  

1.8pts

Cargo tonne kilometres (CTK million)

1,269  



  

1,331  


  

(4.7)%

Passenger numbers (thousands)

27,564  



  

23,427  


  

17.7 %

Tonnes of cargo carried (thousands)

207  



  

219  


  

(5.5)%

Sectors

192,790  



  

172,120  


  

12.0 %

Block hours (hours)

534,842  



  

479,372  


  

11.6 %

Average manpower equivalent

62,387  



  

60,852  


  

2.5 %

Passenger revenue per RPK (€ cents)

9.41  



  

9.03  


  

4.2 %

Passenger unit revenue per ASK (€ cents)

8.07  



  

7.58  


  

6.5 %

Cargo revenue per CTK (€ cents)

18.75  



  

17.73  


  

5.8 %

Fuel cost per ASK (€ cents)

2.13  



  

2.33  


  

(8.6)%

Non-fuel unit costs per ASK (€ cents)

5.10  



  

4.83  


  

5.6 %

Total cost per ASK (€ cents)

7.23  



  

7.16  


  

1.0 %

  

  

  



  

  


  




 

Financial review:

 

Quarter 3 operating profit overview:

 

IAG's operating profit for the quarter to September 30, 2015 was €1,250 million, an improvement from last year of €350 million including Aer Lingus and €305 million better excluding Aer Lingus. British Airways made a profit of €825 million (2014: €607 million); Iberia made a profit of €200 million (2014: €162 million) and Vueling's profit was €178 million (2014: €140 million). Aer Lingus operating profit was €45 million from August 18, the date of acquisition.

 

Strategic development

 

On May 26, 2015 IAG and the independent directors of Aer Lingus Group plc ('Aer Lingus') reached agreement on the terms of a recommended cash offer for the entire issued ordinary share capital of Aer Lingus to be made by AERL Holding Limited, a wholly owned subsidiary of IAG. The offer was declared wholly unconditional on August 18, 2015 and Aer Lingus joined the Group on this date. The offer was for €2.55 per Aer Lingus share, comprising a cash payment of €2.50 per Aer Lingus share and the payment of a cash dividend of €0.05 per Aer Lingus share (paid by Aer Lingus on May 29, 2015 to Aer Lingus shareholders on the register of members on May 1, 2015). The transaction values Aer Lingus' entire issued ordinary share capital at approximately €1.4 billion.

 

Operating and market environment

 

The nine month period has seen decreasing fuel prices although partially offset by adverse exchange. The improvement in the pound sterling against the euro has generated translation benefits for the Group which have been partially offset by the US dollar strength.

 

Revenues in our domestic, LATAM and Asia Pacific markets were up 4 to 5 per cent at constant currency ('ccy') on capacity growth of about 8 per cent. The LATAM market has been impacted by weakness in Brazil and Venezuela. Revenues in our European markets rose 9 per cent at ccy while capacity for the Group was increased by 14 per cent partially through seat densification but also reflecting additional capacity in our low cost carriers, Iberia Express and Vueling. Capacity in the Africa, Middle East and South Asia region was reduced 3 per cent but revenues fell further impacted by weakening of oil routes. North Atlantic passenger unit revenues were broadly flat for the nine months, down 1 per cent.

 

 

Nine month financial review (including Aer Lingus):

 

The Group's performance for the nine month period to September 30, 2015 includes Aer Lingus operations from the acquisition date of August 18, 2015. During this period, Aer Lingus contributed 1.6 points of the Group's capacity increase, generated €262 million in revenues and earned an operating profit of €45 million reflecting a strong summer season. Aer Lingus operations are highly seasonal.

 

Capacity

Capacity was increased 6.9 per cent in the first nine months of the year and traffic increased 8.2 per cent, improving seat factor by 1.0 points to 81.7 per cent.

 

Revenue

Passenger revenue increased 13.6 per cent compared to the comparative nine months with 10.3 points of net currency benefits. Passenger unit revenue (passenger revenue per ASK) was down 3.4 per cent at constant currency ('ccy') from lower yields on higher seat factor. Excluding Aer Lingus, passenger unit revenue at ccy was down 3.7 per cent.

 

Cargo revenue for the period decreased by 8.3 per cent at ccy impacted by the reduction in the Cargo freighter programme included in the base. Revenue per cargo tonne kilometre decreased 4.8 per cent at ccy with weaker yields from market price pressures.

 

Other revenue is up 1.0 per cent at ccy with increases in BA Holidays and Avios loyalty programme offsetting decreases in third party maintenance.

 

Costs

Employee unit costs improved 2.4 per cent at ccy. The average number of employees increased 0.6 per cent while productivity improved by 6.2 per cent. Productivity improved across all the airlines.

 

Fuel costs increased 3.0 per cent with 11.6 points of net adverse currency. Fuel unit cost improved 14.3 per cent at ccy from lower average fuel prices net of hedging, more efficient aircraft and better operational procedures.

 

Handling, catering and other operating costs rose by 1.4 per cent at ccy. Costs increased with 12.4 per cent more passengers carried, from higher prices and with additional BA Holidays activity. These increases were partially offset by more efficient operations reducing overall unit costs.

 

Landing fees and en-route charges increased 11.0 per cent at ccy. The inclusion of Aer Lingus represents 4.2 points of the increase driven by its shorter stage length. The performance of the Group excluding Aer Lingus is up 6.8 per cent due to higher airport charges and additional volume, with ASKs up 5.3 per cent and sectors flown up 6.2 per cent.

 

Engineering and other aircraft costs were up 1.1 at ccy. Increases were from volume and price, offset by the reduced freighter flying of IAG Cargo and less third party maintenance.

 

Property, IT and other costs decreased by 5.7 per cent at ccy reflecting cost improvements partially offsetting inflationary increases.

 

Selling costs decreased 4.9 per cent at ccy due to the timing of promotions and from improvements in supplier contract terms. The reductions in selling costs were partially offset by volume increases with additional passengers carried of 12.4 per cent.

 

Ownership costs are up 1.6 per cent at ccy, flat excluding Aer Lingus. At September 30, 2015 the Group had 525 aircraft, an increase of 61 from September 30, 2014. The acquisition of Aer Lingus contributed 48 aircraft to the Group's fleet, 40 from the Airbus A320 family and eight Airbus A330s. The remaining increase relates to 28 additional Airbus A320s at British Airways, Iberia and Vueling. The Group also reduced its fleet primarily through the retirement of its 13 Boeing 737s, nine of which were sold in September 2015.

 

At constant currency non-fuel unit costs improved by 4.2 per cent with benefits from the addition of Aer Lingus, exiting the Cargo freighter programme and seat densification at British Airways. Non-fuel unit costs improved at British Airways and Iberia, while adverse 2.2 per cent at Vueling from higher ownership and employee costs.

 

Exceptional items included in operations

Net exceptional charges of €38 million primarily related to the acquisition of Aer Lingus are recorded in the operating profit for the nine months to September 30, 2015. The charges include professional fees and stamp duty, recorded in Property, IT and other costs. Exceptional items recorded in Fuel, oil and emissions charges reflect the impact of unwinding the effective cash flow hedges from the date of acquisition to September 30, 2015. Under the Business combination standard, the gain or loss on cash flow hedges forms part of the net assets acquired and is not recycled to the Group's Income statement.

 

In the nine months to September 30, 2014 an exceptional charge of €82 million related to re-evaluation of cash held in Venezuela was recorded.

 

Operating profit

IAG's operating profit for the nine months was €1,805 million before exceptional items (2014: €1,130 million before exceptional items) an increase of €675 million from last year, including €45 million before exceptional items from Aer Lingus since the acquisition date.

 

Non-operating items

Net non-operating costs were €249 million before exceptional items (2014: €178 million). The €71 million increase reflects the loss on sale of the Boeing 737s of €13 million and higher net finance costs primarily from adverse translation currency with the weakening of the euro against the pound sterling.

 

In the prior period, an exceptional gain of €30 million was recorded in non-operating costs for the partial sale of Iberia's investment in Amadeus.

 

Taxation

The tax charge for the nine months to September 30, 2015 is €341 million (2014: €222 million charge) with an effective tax rate of 22 per cent. The tax charge after exceptional items for the period was €338 million (2014: €206 million charge).

 

Profit after tax and exceptional items

The profit after tax and exceptional items for period was €1,180 million (2014: €694 million).

 

Dividends

An interim dividend of 10 euro cents per share was approved by the Board of Directors on October 29, 2015. It is payable from December 7, 2015 to shareholders who are on the register at December 4, 2015. This interim dividend, amounting to €203 million (calculated based on the current treasury shares position), will be recognised in shareholders' equity in the year to December 31, 2015.

 



Exchange rates

For the nine months to September 30, 2015, the reported results are impacted by translation currency from converting the sterling denominated operating companies' results to the Group's reporting currency of euro. The net impact on operating profit was €162 million favourable, with an increase in reported revenues of €1,301 million and in operating expenses of €1,139 million, reflecting a weakening of the euro versus the pound sterling.

 

The transactional exchange rate impact across the Group was €272 million favourable on revenues and €308 million adverse on operating expenses with a net adverse impact of €36 million.

 

The net benefit of translation and transactional exchange ('constant currency') was €126 million.

 

Cash

The Group's cash position was €6,786 million, up €1,842 million from December 31, 2014. British Airways' cash position was €3,615 million, Iberia €1,058 million, Vueling €904 million, Aer Lingus €958 million and the remaining IAG companies €251 million. 

 

The adjusted net debt of the Group has increased by €1,080 million to €7,161 million compared to December 31, 2014; adjusted gearing improved by 2 points to 49 per cent.


This information is provided by RNS
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