| Growing revenue, operating profit and operating margin; announcing a €350 million share buyback |
| Highlights |
| • Executing our strategy has driven very strong financial performance in the quarter: |
| • Increase in total revenue by 7.9% |
| • Increase in operating profit by 15.4% to €2,013 million |
| • Increase in operating margin by 1.4 percentage points to 21.6% |
| • Demand remains strong in all our core markets, supporting a 1.2% increase in passenger unit revenue |
| • Ongoing focus on improving our customer propositions and operational resilience |
| • Increased profitability supports significant free cash flow generation, investment and an increasingly strong balance sheet |
| • We are pleased to announce a €350 million share buyback |
| • We expect our strong financial performance to continue for the rest of the year |
| Luis Gallego, IAG Chief Executive Officer, said: |
| “We achieved a very strong financial performance in Q3 2024, with a 15.4% increase in operating profit compared to the same period last year and improving our margin to 21.6%. This is due to the effectiveness of our strategy and Group-wide transformation. |
| “We are also delivering on our commitment to provide sustainable returns for shareholders. “Demand remains strong across our airlines and we expect a good final quarter of 2024 financially.” |
| Financial highlights for the third quarter of 2024 |
| • Total revenue growth of 7.9% mainly due to higher passenger revenue, with an improvement in Cargo revenue and Maintenance, Repair and Overhaul (MRO) revenue at Iberia |
| • Passenger revenue per available seat kilometre (‘ASK’) for the third quarter was 1.2% higher than in the third quarter of 2023, despite an exceptionally strong comparative quarter in 2023. For the nine months to 30 September, it has increased by 2.2% |
| • Non-fuel unit costs increased by 2.2%, as the benefits of transformation and capacity growth partially offset wage settlements and supplier inflation |
| • Fuel unit cost was down by 4.2% compared to the third quarter of 2023, reflecting the lower effective fuel prices net of hedging and the benefit of IAG’s ongoing deliveries of more efficient aircraft |
| • Operating margin for the third quarter was 21.6%, a 1.4 percentage point increase compared with the third quarter in 2023, with a |
| 5.4 percentage point improvement in the British Airways margin |
| • Profit after tax of €1,435 million for the third quarter, an increase of 17% compared to €1,230 million in Q3 2023 |
| • Net debt on 30 September was reduced to €6,189 million (31 December 2023: €9,245 million; 30 September 2023: €8,009 million) and net debt to EBITDA before exceptional items was reduced to 1.0 times |
| Delivering our strategy |
| Trading and network |
| IAG’s strategy is based on growing its global leadership positions, with a particular focus on its core markets of the North Atlantic, Latin America and intra-Europe. |
| |
Proportion of total ASKs |
ASKs
higher/(lower) |
Passenger load |
Passenger
load factor higher/(lower) |
Passenger
revenue per ASK higher/(lower) |
| Three months to 30 September 2024 |
2024 |
v2023 |
factor (%) |
v2023 |
v20231 |
| North Atlantic |
31.7 % |
3.9 % |
89.1 |
2.2pts |
3.5 % |
| Latin America and the Caribbean |
17.7 % |
10.7 % |
91.1 |
0.6pts |
(2.8)% |
| Europe |
28.1 % |
5.3 % |
89.7 |
0.2pts |
1.4 % |
| Domestic (Spain and UK) |
7.7 % |
4.1 % |
93.4 |
0.2pts |
(0.4)% |
| Africa, the Middle East and South Asia |
10.7 % |
1.4 % |
87.3 |
(0.2)pts |
(2.3)% |
| Asia Pacific |
4.1 % |
17.6 % |
92.3 |
1.6pts |
(15.0)% |
| Total network |
100.0 % |
5.7 % |
89.9 |
1.0pts |
1.2 % |
|
| 1 Passenger revenue per ASK for the total network is based on total passenger revenue divided by ASKs. For the analysis by region, passenger revenue excludes certain items that are not directly assigned at a route level, including joint business payments or receipts, foreign exchange hedging gains or losses, EC261 compensation and adjustments to assumptions for unused tickets. |
| The North Atlantic region continues to be a major area of strength for IAG. IAG increased its capacity for the North Atlantic region by 3.9% in the quarter and passenger unit revenue increased by 3.5%. Within this, unit revenue at British Airways was particularly strong whilst Aer Lingus saw a negative impact from the pilots’ strike as well as increased competitor capacity to Dublin. |
| IAG is also investing in the structurally growing Latin America market, in particular through Iberia and LEVEL. Capacity growth in the quarter continues to be elevated, at 10.7%, as Iberia in particular continues to add frequencies into its core cities. Passenger unit revenue decreased by 2.8%, as strong underlying demand mitigated the impact of the capacity growth. |
| We continue to see strong customer demand in our intra-European network, where capacity increased by 5.3% in the quarter and passenger unit revenue increased by 1.4%. All of our short-haul airlines saw good demand and revenue performance across Europe in the quarter. |
| Our capacity growth in the Domestic region (Spain and the UK) was 4.1% in the third quarter, with good performance in particular from our short-haul airlines Vueling and Iberia Express. Passenger unit revenue was reduced slightly by 0.4%. |
| The rest of the world continues to be more challenging, albeit as a smaller part of IAG’s total capacity (c.15%). Whilst IAG has grown capacity by 17.6% in Asia Pacific, this reflects the restoration of pre-COVID-19 network points and frequencies, which our airlines will continue to review to ensure disciplined capital allocation. Passenger unit revenue decreased by 15.0% in the third quarter. |
| Our Loyalty business has continued to grow both revenue and profit as it increases ways for customers to earn and spend Avios. |
| Capital allocation |
| We have announced a share buyback programme of €350 million, reflecting our confidence in the strategy and business model, as well as the long-term prospects of the business. |
| As we execute our transformation programme, this is delivering good progress towards the world-class margins, significant free cash flow and increasingly strong balance sheet that we have targeted. |
| Based on our capital allocation framework we are now demonstrating our commitment to our shareholders. We reinstated a dividend at our half-year results and have now started to return excess cash to shareholders. |
| Outlook for 2024 |
| • Planned capacity growth for the fourth quarter is around 5% and for the full year it is now around 6% |
| • Non-fuel cost is expected to be up around 2% for the year, reflecting the lower capacity growth due mainly to the impact of disruption and aircraft availability across the Group |
| • Taking into consideration the 76% of hedging we have in place for the fourth quarter, total fuel cost for the full year is expected to be around €7.7 billion, based on jet fuel forward prices on 7 November 2024 |
| • We expect capital expenditure in 2024 to be around €3.1 billion, with 20 aircraft to be delivered in the year, including four in the fourth quarter |
| • Leverage to increase modestly by 31 December 2024 |
| • We expect our strong financial performance to continue for the rest of the year |
| Summary |
| • Longer term we see positive, sustainable demand for travel |
| • We remain focused on executing our strategy to deliver world-class margins and returns |
| • We take a disciplined approach to capital allocation. We expect to generate significant free cash flow, invest in the business and maintain a strong balance sheet |
| • We are pleased to announce a €350 million share buyback |
| • For our shareholders we are committed to sustainable value creation and cash returns |
| For the full document click the link below: |
| International Airlines Group |
| Stay ahead of the curve! Subscribe to InsidEntity for daily updates on all your favourite companies. |
