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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| International Consolidated Airlines Group S.a. | LSE:IAG | London | Ordinary Share | ES0177542018 | ORD EUR0.10 (CDI) |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| -3.70 | -1.22% | 298.90 | 298.20 | 298.30 | 304.80 | 295.90 | 303.80 | 76,337,831 | 16:35:09 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| Air Transport, Scheduled | 29.45B | 2.66B | - | N/A | 15.04B |
From Jan 2020 to Jan 2025
TIDMIAG
RNS Number : 3284Y
International Cons Airlines Group
29 February 2012
FULL YEAR RESULTS ANNOUNCEMENT
International Airlines Group today (February 29, 2012) presented Group consolidated results for the year ended December 31, 2011. In addition, IAG presented combined results for the year ended December 31, 2011 including Iberia's first 21 days of January.
IAG period highlights on combined results:
-- Fourth quarter operating profit of EUR34 million, before exceptional items (2010: EUR6 million)
-- Operating profit for the year to December 31, 2011 of EUR485 million, before exceptional items (2010: EUR225 million)
-- Profit before tax for the year of EUR503 million after exceptional items (2010: EUR84 million)
-- Revenue for the year up 10.4 per cent to EUR16,339 million (2010: EUR14,798 million), including EUR317 million or 2.1 per cent of adverse currency impact
-- Passenger unit revenue for the year up 3.6 per cent (5.8 per cent at constant currency), on top of capacity increases of 7.1 per cent
-- Fuel costs for the year up 29.7 per cent to EUR5,068 million, before exceptional items (2010: EUR3,907 million), fuel unit costs were up 21.4 per cent
-- Other operating costs up 1.1 per cent at EUR10,786 million, before exceptional items, including EUR165 million or 1.5 per cent of favourable currency impact. Non-fuel unit costs down 5.6 per cent, or 4.1 per cent at constant currency
Hot Features
Premium
-- Cash down EUR617 million for the year to EUR3,735 million
-- Group net debt up EUR253 million in the year to EUR1,148 million
Performance summary: Consolidated
Combined (excludes
Full year to December 21 days
31 Iberia
pre-merger)
---------------------------
Financial data EUR million 2011(1) 2010(1) Higher / Full year Nine months
(unaudited) (lower) to December to December
31, 2011(2) 31, 2010(2)
Passenger revenue 13,675 12,322 11.0 % 13,496 6,885
Total revenue 16,339 14,798 10.4 % 16,103 7,889
------------------------------ ------------ ------------- --------- ------------- -------------
Operating profit before
exceptional items 485 225 116 % 522 418
Exceptional items (78) - nm (78) -
------------------------------ ------------ ------------- --------- ------------- -------------
Operating profit after
exceptional items 407 225 81 % 444 418
Profit before tax 503 84 499 % 542 201
Profit after tax 555 100 455 % 582 212
------------------------------ ------------ ------------- --------- ------------- -------------
Basic earnings per share
(EUR cents) 31.1 17.1
------------- -------------
Operating figures 2011(1) 2010(1) Higher /
(lower)
Available seat kilometres
(ASK million) 213,193 199,032 7.1 %
Revenue passenger kilometres
(RPK million) 168,617 157,323 7.2 %
Seat factor (per cent) 79.1 79.0 0.1pt
------------------------------ ------------ ------------- ---------
Passenger yield per RPK
(EUR cents) 8.11 7.83 3.6 %
Passenger unit revenue
per ASK (EUR cents) 6.41 6.19 3.6 %
Non-fuel unit costs per
ASK (EUR cents) 5.06 5.36 (5.6)%
------------------------------ ------------ ------------- ---------
EUR million (unaudited) At December At December Higher /
31, 31, 2010(1)
2011(2) (lower)
Cash and interest bearing
deposits 3,735 4,352 (14.2)%
Net debt 1,148 895 28.3 %
Equity 5,686 4,670 21.8 %
Adjusted gearing(3) 44% 47% (3pts)
------------------------------ ------------ ------------- ---------
(1) This financial data is based on the combined results of operations of British Airways Plc ('BA'), Iberia Lineas Aereas de Espana S.A. ('Iberia') and IAG the Company for the full year to December 31, 2011 and 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 December 31, 2011 Income statement is the consolidated results of BA and IAG the Company for the full year to December 31, 2011 and Iberia from January 22, 2011 to December 31, 2011. The IAG December 31, 2010 comparative is solely the statutory results of BA for the nine months to December 31, 2010.
(3) Adjusted gearing is net debt plus capitalised operating aircraft lease costs, divided by net debt plus capitalised operating aircraft lease costs and equity.
nm = not meaningful
Willie Walsh, IAG chief executive, said:
"We're reporting a strong full year performance with total revenue up 10.4 per cent, boosted by unit revenue improvements with good premium traffic growth. Operating profit has more than doubled to EUR485 million. While there is disruption in the base figures, capacity this year was up 7.1 per cent but we remained focused on expanding profitably. This is reflected in the 3.6 per cent increase in passenger unit revenue and 5.6 per cent reduction in non-fuel unit costs. Fuel costs, however, remain a significant issue, up 29.7 per cent with fuel unit costs up 21.4 per cent.
"Our performance has also been boosted by net cost and revenue synergies of EUR74 million, EUR64 million more than target, in our first year since the merger.
"In the quarter, revenue was up 6.9 per cent however the impact of fuel costs was even more severe, up 33.3 per cent, due to higher prices and the reduced impact of hedging. Despite this, we reported an improved operating profit of EUR34 million.
"The performance of our airlines reflects the different markets in which they operate. The north Atlantic market remains strong, benefitting British Airways. However, British aviation's competiveness is undermined by the UK government's determination to continually increase Air Passenger Duty with the latest rise due this April. In 2011 British Airways paid almost GBP500 million in APD. As a result of the latest increase, the airline is reducing by around half the number of new jobs it's creating this year and has postponed plans to bring an extra Boeing 747 back into service.
"Iberia's challenge is its exposure to financial uncertainty in the Eurozone in a highly competitive marketplace with no-frills airlines, high speed rail and growing competition from more efficient longhaul airlines. Its management has been focused in addressing this, however, the challenge remains for Iberia to become more competitive especially as it has a high cost base and outdated workplace practices. The launch of Iberia Express in late March, alongside the restructuring of its network and hub, will enable Iberia to become more customer focused and cost effective.
"In December, we signed a binding agreement with Lufthansa to buy bmi. While subject to regulatory approval, we plan to integrate bmi mainline into British Airways following agreement by BA pilots to make productivity changes that justify the integration. This deal gives us the ability to grow at Heathrow by launching new longhaul routes to growth economies and supporting our shorthaul network. We have already committed to continue flights from Heathrow to Belfast and will increase services to Scotland. Without this deal, links to the UK regions would not be safeguarded".
Trading outlook
The outlook for 2012 is subject to a number of uncertainties:
-- Demand in London remains strong, with the encouraging trends we saw in H2 2011 in our longhaul premium cabins, particularly on North Atlantic routes, continuing.
-- Ongoing developments in the Eurozone will be a major factor in our underlying demand growth, especially for our Spanish network.
-- At the current oil price and euro/US dollar exchange rates, we would face a fuel cost increase this year of over EUR1 billion. The year-over-year impact would be particularly severe in Q1 and Q2, but less severe in H2.
-- We remain focused on maximising profits through efficiency improvements, and the launch of Iberia Express is a significant step in that direction. As a result, we are facing continuing industrial action from Iberia's pilots, with a negative impact of around EUR3 million per strike day. We are fully committed to the project, and believe its benefits will far outweigh the costs.
-- British Airways traffic this summer may be impacted by the Olympic games. While the Olympics will be positive for the long-term position of London as a global destination, past experience in other host cities suggests that demand could be dampened during the games.
Higher fuel costs, weaker European markets and labour unrest will imply, for the first part of the year, a reduction in operating results when compared with the first half of last year. We expect the year-over-year cost pressures to reduce as we move through the second half of the year.
Forward-looking statements:
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 International Consolidated 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: +44 (0)208 564 2900
Investor.relations@iairgroup.com
INCOME STATEMENT
------------- -------------
Consolidated
(excludes
21 days
Combined Iberia
Full year to December 31 pre-merger)
------------------------------------------------
EUR million (unaudited)
Before
exceptional Full year Nine months
items Exceptional Total 2010 Higher to December to December
2011 items 2011(1) (1) / (lower) 31, 2011(2) 31, 2010
11.0
Passenger revenue 13,675 13,675 12,322 % 13,496 6,885
8.6
Cargo revenue 1,190 1,190 1,096 % 1,176 625
6.8
Other revenue 1,474 1,474 1,380 % 1,431 379
------------------------- ------------- ------------ --------- -------- ----------- ------------- -------------
10.4
Total revenue 16,339 16,339 14,798 % 16,103 7,889
------------------------- ------------- ------------ --------- -------- ----------- ------------- -------------
2.1
Employee costs 3,870 3,870 3,790 % 3,799 1,829
32.0
Fuel and oil costs 5,068 89 5,157 3,907 % 5,088 2,204
Handling, catering and 2.2
other operating costs 1,545 1,545 1,512 % 1,522 902
Landing fees and
en-route 4.1
charges 1,200 1,200 1,153 % 1,175 547
Engineering and other 2.2
aircraft costs 1,099 1,099 1,075 % 1,074 485
Property, IT and other
costs 918 918 991 (7.4)% 903 497
11.3
Selling costs 756 756 679 % 740 277
Depreciation,
amortisation
and impairment 979 979 1,064 (8.0)% 969 671
Aircraft operating lease
costs 403 (11) 392 403 (2.7)% 375 60
Currency differences 16 16 (1) nm 14 (1)
------------------------- ------------- ------------ --------- -------- ----------- ------------- -------------
Total expenditure on 9.3
operations 15,854 78 15,932 14,573 % 15,659 7,471
------------------------- ------------- ------------ --------- -------- ----------- ------------- -------------
Operating profit 485 (78) 407 225 81 % 444 418
Net non-operating
income/(costs) 13 83 96 (141) nm 98 (217)
------------------------- ------------- ------------ --------- -------- ----------- ------------- -------------
499
Profit before tax 498 5 503 84 % 542 201
225
Tax 29 23 52 16 % 40 11
------------------------- ------------- ------------ --------- -------- ----------- ------------- -------------
455
Profit after tax 527 28 555 100 % 582 212
------------------------- ------------- ------------ --------- -------- ----------- ------------- -------------
Basic earnings per share
(EUR cents) 31.1 17.1
Diluted earnings per
share
(EUR cents) 29.7 17.1
------------------------- ------------- ------------ --------- -------- ----------- ------------- -------------
Operating figures 2011 (1) 2010 Higher
(1) / (lower)
Available seat
kilometres 7.1
(ASK million) 213,193 199,032 %
Revenue passenger
kilometres 7.2
(RPK million) 168,617 157,323 %
Seat factor (per cent) 79.1 79.0 0.1pt
Passenger numbers 2.1
(thousands) 51,687 50,600 %
Cargo tonne kilometres 4.2
(CTK million) 6,156 5,907 %
------------------------- ------------- ------------ --------- -------- -----------
3.6
Passenger yield per RPK 8.11 7.83 %
Passenger unit revenue 3.6
per ASK 6.41 6.19 %
4.2
Cargo yield per CTK 19.33 18.55 %
1.6
Total cost per ASK 7.44 7.32 %
21.4
Fuel cost per ASK 2.38 1.96 %
Total cost excluding
fuel
per ASK 5.06 5.36 (5.6)%
------------------------- ------------- ------------ --------- -------- -----------
Aircraft in service 348 352 nm
0.4
Average employee number 56,791 56,563 %
(1) See page 1 for full note reference.
(2) 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.
nm = not meaningful
INCOME STATEMENT
------------- -------------
Combined three months to December
31 Consolidated
------------------------------------------------
EUR million (unaudited) Before Three Three
exceptional months months
items Exceptional Total 2010 Higher to December to December
2011 items 2011(1) (1) / (lower) 31, 2011(2) 31, 2010(2)
7.3
Passenger revenue 3,414 3,414 3,183 % 3,414 2,283
3.3
Cargo revenue 310 310 300 % 310 212
7.0
Other revenue 352 352 329 % 352 119
------------------------- ------------- ------------ --------- -------- ----------- ------------- -------------
6.9
Total revenue 4,076 4,076 3,812 % 4,076 2,614
------------------------- ------------- ------------ --------- -------- ----------- ------------- -------------
Employee costs 1,014 1,014 1,023 (0.9)% 1,014 643
34.6
Fuel and oil costs 1,317 13 1,330 988 % 1,330 716
Handling, catering and
other operating costs 386 386 387 (0.3)% 386 303
Landing fees and
en-route 5.6
charges 301 301 285 % 301 177
Engineering and other
aircraft
costs 259 259 271 (4.4)% 259 157
Property, IT and other
costs 241 241 275 (12.4)% 241 184
7.4
Selling costs 189 189 176 % 189 105
Depreciation,
amortisation
and impairment 244 244 303 (19.5)% 244 257
Aircraft operating lease
costs 105 (3) 102 103 (1.0)% 102 20
Currency differences (14) (14) (5) nm (14) 2
------------------------- ------------- ------------ --------- -------- ----------- ------------- -------------
Total expenditure on 6.5
operations 4,042 10 4,052 3,806 % 4,052 2,564
------------------------- ------------- ------------ --------- -------- ----------- ------------- -------------
300
Operating profit 34 (10) 24 6 % 24 50
Net non-operating 727
income/(costs) 120 4 124 15 % 124 (52)
------------------------- ------------- ------------ --------- -------- ----------- ------------- -------------
605
Profit before tax 154 (6) 148 21 % 148 (2)
Tax 46 23 69 69 0 % 69 64
------------------------- ------------- ------------ --------- -------- ----------- ------------- -------------
141
Profit after tax 200 17 217 90 % 217 62
------------------------- ------------- ------------ --------- -------- ----------- ------------- -------------
Operating figures 2011 (1) 2010(1) Higher
/ (lower)
Available seat
kilometres 5.3
(ASK million) 52,989 50,332 %
Revenue passenger
kilometres 5.1
(RPK million) 41,192 39,205 %
Seat factor (per cent) 77.7 77.9 (0.2pts)
Passenger numbers 0.4
(thousands) 12,325 12,275 %
Cargo tonne kilometres 1.1
(CTK million) 1,596 1,578 %
------------------------- ------------- ------------ --------- -------- -----------
2.1
Passenger yield per RPK 8.29 8.12 %
Passenger unit revenue 1.9
per ASK 6.44 6.32 %
2.2
Cargo yield per CTK 19.42 19.01 %
0.9
Total cost per ASK 7.63 7.56 %
27.0
Fuel cost per ASK 2.49 1.96 %
Total cost excluding
fuel
per ASK 5.14 5.60 (8.2)%
------------------------- ------------- ------------ --------- -------- -----------
1.0
Average employee number 56,782 56,243 %
(1) See page 1 for full note reference
(2) 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.
Financial review
In 2011 IAG increased its traffic (RPKs) by 7.2 per cent against a capacity increase of 7.1 per cent resulting in an increase in seat factor of 0.1 point to 79.1 per cent.
Results including Iberia from the acquisition date - January 21, 2011
The consolidated performance (comparing IAG with British Airways stand-alone last year) shows revenue up EUR8,214 million or 104 per cent to EUR16,103 million and costs up EUR8,188 million or 110 per cent to EUR15,659 million, principally as a result of:
-- the inclusion of Iberia within the Group; -- the accounting period being a full year versus the comparative nine months; and -- the non-repetition of the significant disruption in 2010.
The consolidated results including Iberia from the acquisition date of January 21, 2011, show an operating profit of EUR444 million (2010: EUR418 million); a profit before tax of EUR542 million (2010: EUR201 million); and a profit after tax of EUR582 million (2010: EUR212 million).
Line by line comparatives are not meaningful due to the Iberia acquisition. Therefore, this financial review comments on the full year to December 31, 2011 of IAG excluding exceptional items compared to the combined performance of IAG for the prior year.
Full year performance of IAG versus last year
Exchange rates
Exchange rates can have a substantial impact on the performance of the Group. There are two elements to these exchange rate impacts. Firstly there are the transactional exchange rate differences that occur within each of the Group companies and ultimately reflect cash-flow impacts. Secondly there is the exchange rate impact of translating British Airways' results from its functional currency of sterling into the Group reporting currency of the euro.
The three major currencies that impact the Group and their rates for 2011 compared to 2010 are as follows:
Full year average December 31
rate
2011 2010 2011 2010
$ to EUR 1.39 1.33 1.31 1.32
---------- --------- --------- ------- ------
$ to GBP 1.60 1.55 1.56 1.55
---------- --------- --------- ------- ------
EUR to
GBP 1.15 1.17 1.20 1.18
As the Group has more costs in the US dollar than revenues the weakening of the dollar to the euro has resulted in an overall benefit to the operating result of the Group. The impact of transactional exchange rates across the Group for the year saw a negative impact on revenue but a larger favourable impact on costs leading to a net benefit of EUR132 million. This was mainly due to the weakening of the US dollar to pound sterling and our higher US dollar cost base to revenue base.
For the full year, the translation of British Airways from sterling functional currency into euro reporting currency has resulted in a EUR25 million adverse impact on operating profit due to a 1.3 per cent strengthening of the euro against sterling.
Therefore year over year changes in exchange rates had a EUR107 million favourable impact on operating profit.
Passenger revenue
Passenger revenue increased by EUR1,353 million or 11.0 per cent compared to the prior year. This reflected increased capacity (ASKs) up 7.1 per cent and increased traffic (RPKs) of 7.2 per cent.
The translation impact at the Group level from converting British Airways' passenger revenue from sterling to the euro reduced the Group passenger revenue by 1.3 per cent. Group passenger revenue at constant exchange rates would have been up 13.2 per cent.
Unit passenger revenue (per ASK) was up 3.6 per cent and passenger yield (per RPK) was also up 3.6 per cent. At constant exchange rates unit passenger revenue was up 5.8 per cent and passenger yield up 5.7 per cent. The focus for 2011 was on volume recovery and market growth whilst also improving unit revenues and yields.
Market growth was stronger across the North Atlantic than in continental Europe. Volume growth was also driven from both the recapture of lost activity due to the volcanic ash cloud and industrial disruption of 2010 and market increases in 2011.
Market Segments
Longhaul
North America capacity increased by 12.3 per cent, whilst traffic improved by 13.0 per cent, resulting in a small seat factor increase of 0.5 points to 81.5 per cent. We began new routes from Madrid to Los Angeles and London to San Diego for example as well as increasing frequency on a number of other routes. The Joint Business between British Airways, Iberia and American Airlines had its first full year impact this year providing increased customer choice and destinations across the North Atlantic.
Latin America and Caribbean capacity grew by 12.6 per cent and traffic by 10.8 per cent such that seat factor declined 1.3 points to 82.7 per cent. This remains the highest seat factor on the network.
Africa, Middle East and South Asia saw a moderate capacity decrease of 0.2 per cent, but traffic increased by 0.4 per cent leading to a seat factor increase of 0.4 points to 75.2 per cent.
Asia Pacific capacity grew by 11.6 per cent with some frequency increases and the London to Haneda route commencing. Traffic grew only by 7.8 per cent, which resulted in a seat factor decline of 2.8 points to 79.6 per cent.
Shorthaul
Domesticcapacity decreased by 12.9 per cent and traffic was down 11.7 per cent leading to a seat factor improvement of 1.0 points to 73.7 per cent.
Europe saw capacity growth of 2.8 per cent and traffic improvement of 3.5 per cent leading to a seat factor increase of 0.4 points to 74.6 per cent. The European market has continued to be very competitive particularly in the southern Europe region. This has seen reductions in Iberia's capacity partly through moving some flights to Air Nostrum and Vueling.
Premium traffic (RPKs) increased substantially more than non-premium in the year with a positive mix impact on unit revenues and yields. However significant stage length growth (particularly at Iberia, where shorthaul capacity was substantially reduced whilst at the same time longhaul was increased) has reduced headline unit revenues and yields.
Joint Business
Offering approximately 100 daily flights with an extensive network built around the key strategic hubs of London, Madrid, New York, Miami, Dallas and Chicago the Joint Business has been a winning success with our customers. The North Atlantic Joint Business of American Airlines, British Airways and Iberia has gone from strength to strength during this first full year of operation. Revenues grew to just over $8 billion with market share growing in both the premium and non-premium segments. American Airlines filing for Chapter 11 restructuring has had no impact on the performance of the Joint Business to date.
Cargo
Cargo revenue was up EUR94 million or 8.6 per cent to EUR1,190 million for the year, reflecting volume increases (cargo tonne kilometres) of 4.2 per cent (set against an industry volume reduction of 0.7 per cent, IATA December 2011 Air Transport Market Analysis) and yield increases of 4.2 per cent.
Other revenue
Other revenue increased by EUR94 million or 6.8 per cent to EUR1,474 million for the year. The main increases were in the Maintenance, Repair and Overhaul (MRO) business with revenue growing by 11.0 per cent and airport handling which was up 7.4 per cent. Last year included a EUR33 million benefit for Iberia from the recovery of provisions in the wake of four Supreme Court rulings accepting Iberia's appeals and absolving the company from paying several settlements of customs duties for the period from 1998 to 2000. The 2011 full year included a benefit of EUR35 million in respect of a change in estimate on some elements of deferred revenue.
Exceptional items
As a result of British Airways' initial investment in Iberia, the Business combination of the Group was achieved in stages. Therefore, the Group revalued its initial investment in Iberia to fair value at the acquisition date resulting in a non-cash gain of EUR83 million.
In accordance with the Business combinations accounting standard, the Group cannot recycle the pre-acquisition cash flow hedge net benefits through the Income statement, resulting in fuel and aircraft operating lease costs gross of the pre-acquisition cash flow hedges. For the year this has resulted in an increase in reported fuel expense of EUR89 million, a decrease in reported aircraft operating lease costs of EUR11 million and a tax credit of EUR23 million.
The commentary on operating costs below is prior to the inclusion of exceptional items. For non-operating costs and results exceptional items are included.
Expenditure
Total costsexcluding exceptional items were up EUR1,281 million or 8.8 per cent to EUR15,854 million. Total unit costs were up 1.6 per cent mainly as a result of increased fuel unit costs. Non fuel unit costs were down 5.6 per cent, and 4.1 per cent at constant exchange rates. Reductions in non-fuel unit costs benefited from continued cost control across the Group as well as the non-repeat of disruption in the prior year.
Employee costsrose by 2.1 per cent to EUR3,870 million, reflecting wage awards and increased volumes. Together these accounted for a 3.8 per cent year on year increase, but were partially offset by exchange rate benefits of 1.2 per cent and efficiencies. Average manpower for the year increased by only 0.4 per cent, when capacity in ASKs grew by 7.1 per cent resulting in productivity (ASKs per average employee) improving by 6.7 per cent. Employee unit costs were down 4.2 per cent.
Fuel costswere up EUR1,161 million or 29.7 per cent to EUR5,068 million. Fuel unit costs were up 21.4 per cent, as a result of increased commodity price, net of hedging benefits; this was partly offset by exchange rate benefits as the dollar weakened against the euro (4.7 per cent). Fuel unit costs were up 27.6 per cent at constant exchange rates.
Handling charges, catering and other operating costs were up 2.2 per cent to EUR1,545 million. Volume related costs increased by approximately half of the 7.1 per cent capacity increase, whilst inflation added a further 2.4 per cent. Offsetting these cost increases were benefits from exchange rates and from a number of management actions, including joint airport handling procurement and reduction of crew hotel costs under the Group synergy programme.
Landing fees and en-route charges rose by 4.1 per cent to EUR1,200 million, mostly as a result of increased volume related costs of 4.9 per cent, but also price increases of 4.2 per cent which outstripped inflation in many markets, particularly at London Heathrow. Exchange rate benefits and some rebates helped reduce these costs.
Engineering and other aircraft costs were up 2.2 per cent to EUR1,099 million, partly reflecting increased volume of flying across the Group, but also increased materials for the MRO business. Exchange rate benefits more than offset inflation increases and some synergy benefits for line maintenance have already helped reduce costs.
Property, IT and other costs were down 7.4 per cent to EUR918 million, mainly reflecting the non-repeat of merger costs incurred in the prior year.
Selling costsincreased by 11.3 per cent to EUR756 million. This reflected increased volume costs due to the higher revenue which was up 10.4 per cent, and a change in accounting for certain incentive commissions previously netted off passenger revenue, now increasing costs. Investments in brand campaigns also increased costs but were offset by benefits from exchange rates.
Depreciation, amortisation and impairment was down 8.0 per cent to EUR979 million, reflecting non repeat of impairment charges of EUR42 million in 2010, exchange rate benefits and a reduction in the level of assets held such as the retirement of Boeing 757s in 2010.
Aircraft operating lease costs were flat at EUR403 million.
Currency differences resulted in a EUR16 million charge for 2011 compared to a EUR1 million credit in 2010.
Synergies
We have made significant progress in the delivery of both our first year synergies and the planning and commencement of the longer term changes required across the Group to deliver our five year target. During the year we raised our expected revenue and costs benefits value from EUR400 million to EUR500 million. By December 31, 2011 our synergy benefits were EUR134 million and costs of implementation were EUR60 million, resulting in Income statement benefits to date of EUR74 million compared to our original targets of EUR10 million.
Key areas already achieved include:
Revenue synergies
-- Fare combinability across British Airways and Iberia's longhaul networks, customers can combine British Airways' and Iberia's fares on cross airline journeys such as London - Buenos Aires - Madrid - London;
-- Codeshares in 33 destinations across Latin America, Africa and Europe and a broad programme between Europe and North America as part of the Joint Business with American Airlines;
-- Cross selling through airline channels such as ba.com and Iberia.com;
-- Cargo - single business with increased network, greater capacity and single strategy including increased cargo capacity on the London - Madrid air bridge;
-- Cargo has introduced joint trucking deals, joint customer incentives and single commercial teams;
-- Avios single currency customer loyalty programme introduced; 5.7 million active members with more ways for customers to collect and redeem points.
Cost synergies
-- Sales force integration in British Airways and Iberia home markets as well as USA, South Africa, Egypt, Russia, Chile, Switzerland and Nigeria;
-- A number of joint purchases have been made using the economies of scale of the Group; -- Joint crew hotel accommodation and night stop reduction at the London and Madrid hubs; -- Single management teams in a number of airports such as Orly, Los Angeles, and Luanda;
-- Sharing of customer lounge facilities, as well as shared offices and ticket desks at selected airports;
-- Benefits from engineering services including a joint team for third party commercial contracts, insourcing work where beneficial, and single line maintenance and inventory at certain airports;
-- Restructuring of IT departments and teams to optimise resource across the Group.
Operating profit
IAG operating profit was EUR485 million, excluding the exceptional items, compared to a profit of EUR225 million for 2010.
Non-operating items
Non-operating items for the year amounts to a credit of EUR96 million (2010: charge of EUR141 million). The year over year change of EUR237 million principally reflects a EUR241 million movement in net financing mainly relating to the British Airways defined benefit pension schemes with lower interest costs on scheme liabilities, higher than expected returns on scheme assets and a significant reduction in the amortisation of actuarial losses in excess of the corridor. The step acquisition of Iberia resulted in a profit of EUR83 million; this was more than offset by the non-repeat of a 1.5 per cent disposal by Iberia of Amadeus IT Holding, S.A. in 2010 for a profit of EUR90 million.
Profit before tax
IAG profit before tax was EUR503 million, compared to EUR84 million for 2010.
Taxation
Despite a profit before tax of EUR503 million there was a tax credit for the year of EUR52 million. This credit mainly arose on deferred tax adjustments related to the adjustment on the British Airways pension fund accounting and the impact of substantively enacted lower tax rates in the UK.
Profit after tax
Profit after tax was EUR555 million, compared to EUR100 million for 2010.
Earnings per share
The basic earnings per share for the year was 31.1 EURcents per share (2010 17.1 EURcents) and the fully diluted earnings per share for the year was 29.7 EURcents (nine months to December 31, 2010: 17.1 EURcents)
Dividends
The Board has decided not to recommend the payment of a dividend.
Cash
On a combined basis, cash at December 31, 2011 was EUR3,735 million, down EUR617 million from December 31, 2010. This reflects the strong operating performance offset by the acquisition of assets through cash over debt and two significant one off payments, one in relation to the British Airways competition fines provisions of EUR168 million and a further EUR157 million payment to the British Airways pension fund as part of the 2010 agreement with the trustees. The cash and cash equivalents balance at December 31, 2011 comprised EUR2,190 million held by British Airways, EUR1,518 million held by Iberia and EUR27 million held by IAG.
Net debt
The net debt of the Group on a combined basis increased by EUR253 million in the year to EUR1,148 million. Adjusted gearing has fallen to 44 per cent, from 47 per cent in the prior year.
Business review
Our mission is to be the leading international airline Group. This means we will:
-- win the customer through service and value across our global network;
-- deliver higher returns to our shareholders through leveraging cost and revenue opportunities across the Group;
-- attract and develop the best people in the industry;
-- provide a platform for quality international airlines, leaders in their markets, to participate in consolidation;
-- retain the distinct cultures and brands of individual airlines.
By accomplishing our mission, IAG will help to shape the future of the industry, set new standards of excellence and provide sustainability, security and growth.
Our 6 key aims...
-- Leadership in our main hubs; -- Leadership across the Atlantic; -- Stronger Europe-to-Asia position in critical markets; -- Grow share of Europe-to-Africa routes; -- Stronger intra-Europe network; -- Competitive cost positions across our businesses.
Principal risks and uncertainties
The highly regulated and commercially competitive environment, together with operational complexity, leave us exposed to a number of significant risks. We remain focused on mitigating these risks at all levels in the business although many remain outside our control; for example changes in government regulation, taxes, terrorism, adverse weather, pandemics and availability of funding from the financial markets.
The Directors of the Group believe that the risks and uncertainties described below are the ones that may have the most significant impact on the long-term value of IAG. The list is not intended to be exhaustive. The Group carries out detailed risk management reviews to ensure that the risks are mitigated where possible.
Strategic
Competition
The markets in which we operate are highly competitive. We face direct competition from other airlines on our routes, as well as from indirect flights, charter services and from other modes of transport. Competitor capacity growth in excess of demand growth could materially impact our margins.
Some competitors have cost structures that are lower than ours or have other competitive advantages such as being supported by government intervention or benefiting from insolvency protection.
Fare discounting by some competitors has historically had a negative effect on our results because in some cases we are required to respond to competitors' fares to maintain passenger traffic.
Our strong global market positioning, leadership in strategic markets, alliances and diverse customer base continue to address this risk.
Consolidation and deregulation
As noted above the airline market is fiercely competitive and will need to rationalise given current market conditions. This will involve further airline failures and consolidation leading to opportunities to capture market share and expand the Group. Mergers and acquisitions amongst competitors have the potential to adversely affect our market position and revenue.
The merger between British Airways and Iberia and the Joint Business between American Airlines, British Airways and Iberia for transatlantic routes include delivery risks such as realising planned revenue and cost synergies. American Airlines have remained committed to the Joint Business through their Chapter 11 restructuring process. The delivery of synergies is inherently subject to industrial relations, revenue leakage and programme management risks. The Management Team has robust merger integration and Joint Business programmes which address these risks.
Any additional consolidation by the Group, such as bmi, adds to existing integration risks, including delivering value from the transactions. The airline industry is increasingly dependent on alliances and IAG is no exception to this. Maintaining a leading presence in oneworld and ensuring the alliance itself performs as expected by the members is key to safeguarding the network.
Some of the markets in which we operate remain regulated by governments, in some instances controlling capacity and/or restricting market entry. Relaxation of such restrictions, whilst creating growth opportunities for us, may have a negative impact on our margins.
Government intervention
Regulation of the airline industry covers many of our activities including route flying rights, airport slot access, security and environmental controls. Our ability to both comply with and influence any changes in these regulations is key to maintaining our operational and financial performance.
Plans by governments to significantly increase environmental taxes such as the UK Air Passenger Duty, the commencement of the European Union Emissions Trading scheme and the potential for other environmental taxes may have an adverse impact upon demand for air travel and/or reduce the profit margin per ticket. These taxes may also benefit our competitors by reducing the relative cost of doing business from their hubs. We continue to focus our communications and government relations activity on highlighting the increasing tax burden on the UK aviation industry.
Infrastructure constraints
IAG is dependent on and may be affected by infrastructure decisions or changes in infrastructure policy by governments, regulators or other entities, which are often outside the Group's control. London Heathrow has no spare runway capacity and has operated on the same two main runways since it opened over 60 years ago. As a result, we are vulnerable to short-term operational disruption and there is little we can do to mitigate this. We continue to promote the expansion of the airport to create cost effective extra capacity and reduce delays, enabling London Heathrow to compete more effectively against European hubs such as Paris, Amsterdam and Frankfurt.
Business and operational
Brand reputation
The Group's brands have significant commercial value. Erosion of the brands, through either a single event, or series of events, may adversely impact our leadership position with customers and ultimately affect our future revenue and profitability. The Group has committed to substantial investment in on-board product and new aircraft to maintain its market position.
Economic conditions
Our revenue is highly sensitive to economic conditions in the markets in which we operate. Deterioration in either the domestic and/or global economy may have a material impact on our financial position. Iberia is particularly exposed to the Spanish economy which grew slowly in 2011 but is widely expected to contract in 2012. The Eurozone fiscal crisis increases the risk to economic conditions and stability.
The Management Committee reviews the financial outlook of the Group through the financial planning process and regular forecasts. These reviews are used to drive the Group's financial performance through the management of capacity; the deployment of that capacity in geographic markets; together with cost control including management of capital expenditure and the reduction of operational leverage.
Employee relations
We have a large unionised workforce represented by a number of different trade unions. Collective bargaining takes place on a regular basis and breakdowns in the bargaining process disrupt operations and adversely affect business performance. Initiatives aimed at improving competitiveness, such as establishing Iberia Express, have led to strike action amongst Iberia pilots.
Failure of a critical IT system
We are dependent on IT systems for most of our principal business processes. The failure of a key system may cause significant disruption to our operation and/or lost revenue. System controls, disaster recovery and business continuity arrangements exist to mitigate the risk of a critical system failure.
Pandemic
If there is a significant outbreak of infectious disease such as swine flu, staff absence will increase which may seriously impact the operation. Key corporate clients may discourage travel, significantly impacting sales. We have comprehensive pandemic business continuity plans that were last used during the 2009 swine flu outbreak.
Landing fees and security charges
Airport, transit and landing fees and security charges or initiatives represent a significant operating cost to British Airways and Iberia and have an impact on operations. Whilst certain airport and security charges are passed on to passengers by way of surcharges, others are not.
There can be no assurance that such costs will not increase or that the Group will not incur new costs in the UK, Spain or elsewhere. There is a risk that charges and development plans agreed during the ongoing Quinquennial review significantly increase the cost of operating at our London hubs, or commit to future infrastructure investment in a way that benefits other airport users ahead of the Group's interests. British Airways is constructively engaged as a major stakeholder in the Civil Aviation Authority's Quinquennial review process.
Safety/security incident
The safety and security of our customers and employees are fundamental values for us. Failure to prevent or respond effectively to a major safety or security incident may adversely impact our operations and financial performance. Our incident centres respond in a structured way in the event of a safety or security incident.
Event causing significant network disruption
Several possible events may cause a significant network disruption. Example scenarios include a major failure of the public transport system; the complete or partial loss of the use of terminals; adverse weather conditions such as snow, fog or volcanic ash; widespread or coordinated air traffic control industrial action; war; civil unrest or terrorism. Such a disruption may result in lost revenue and additional cost. Management has robust business continuity plans to mitigate these risks to the extent feasible. These contingency plans were tested in 2010 through the Japanese earthquake and civil unrest in the Middle East and North Africa.
Financial
Debt funding
We carry substantial debt that will need to be repaid or refinanced. Our ability to finance ongoing operations, committed aircraft orders and future fleet growth plans are vulnerable to various factors including financial market conditions and financial institutions' appetite for secured aircraft financing. The Group carries substantial cash reserves and committed financing facilities to mitigate the risk of short term interruptions to the aircraft financing market.
The IAG Finance Committee regularly reviews the Group's financial position and is seeking to diversify the sources of funding utilised by the Group.
Fuel price and currency fluctuation
We used approximately 7.4 million tonnes of jet fuel in 2011. Volatility in the price of oil and petroleum products can have a material impact on our operating results. This price risk is partially hedged through the purchase of oil derivatives in forward markets which can generate a profit or a loss.
The Group is exposed to currency risk on revenue, purchases and borrowings in foreign currencies. The Group seeks to reduce foreign exchange exposures arising from transactions in various currencies through a policy of matching, as far as possible, receipts and payments in each individual currency and actively managing the surplus or shortfall through treasury hedging operations. The approach to financial risk management was reviewed in detail by the Audit and Compliance Committee during the year and approved by the Board.
The Group is exposed to non-performance to financial contracts by counterparties, for activities such as money market deposits, fuel and currency hedging. Failure of counterparties may result in financial losses.
The Group's Hedging Committee regularly reviews the Group's fuel and currency positions. The results of these reviews are discussed with management and the appropriate action taken.
Compliance and regulatory
Governance
The governance structure the IAG Group put in place at the time of the merger has a number of complex features, including nationality structures to protect British Airways' and Iberia's route and operating licenses and assurances to preserve the specific interests of those companies. Although complex the structure worked well during 2011 and synergy targets have been exceeded.
Compliance with competition, bribery and corruption law
The Group is exposed to the risk of individual employee's or groups of employees' unethical behaviour resulting in fines or losses to the Group. The Group has comprehensive policies designed to ensure compliance, together with training schemes in place to educate staff on these matters.
INTERNATIONAL CONSOLIDATED AIRLINES GROUP S.A.
Unaudited Full Year Condensed Consolidated Financial Statements
January 1, 2011 - December 31, 2011
The IAG December 31, 2011 Consolidated income statement and cash flow statement are the consolidated results of British Airways and IAG the Company for the full year to December 31, 2011 and Iberia from January 22, 2011 to December 31, 2011; the IAG December 31, 2010 comparatives are solely the statutory results of British Airways for the nine months to December 31, 2010. The IAG December 31, 2011 Balance sheet is the consolidated financial position of British Airways, IAG the Company and Iberia; the IAG December 31, 2010 Balance sheet comparative is solely British Airways.
CONSOLIDATED INCOME STATEMENT
Full year to December
31
------------------------------------
EUR million (unaudited) Before
exceptional Nine months
items Exceptional Total to December
2011 items 2011 31, 2010
---------------------------------------------------- ------------- ------------ ------- -------------
Passenger revenue 13,496 13,496 6,885
Cargo revenue 1,176 1,176 625
Other revenue 1,431 1,431 379
---------------------------------------------------- ------------- ------------ ------- -------------
Total revenue 16,103 16,103 7,889
---------------------------------------------------- ------------- ------------ ------- -------------
Employee costs 3,799 3,799 1,829
Fuel and oil costs 4,999 89 5,088 2,204
Handling, catering and other operating costs 1,522 1,522 902
Landing fees and en-route charges 1,175 1,175 547
Engineering and other aircraft costs 1,074 1,074 485
Property, IT and other costs 903 903 497
Selling costs 740 740 277
Depreciation, amortisation and impairment 969 969 671
Aircraft operating lease costs 386 (11) 375 60
Currency differences 14 14 (1)
---------------------------------------------------- ------------- ------------ ------- -------------
Total expenditure on operations 15,581 78 15,659 7,471
---------------------------------------------------- ------------- ------------ ------- -------------
Operating profit 522 (78) 444 418
Finance costs (220) (220) (147)
Finance income 85 85 21
Retranslation charge on currency borrowings (8) (8) (14)
Fuel derivative losses (12) (12) (2)
Net charge relating to available-for-sale
financial assets (19) (19) (21)
Share of post-tax profits in associates accounted
for using the equity method 7 7 7
(Loss)/profit on sale of property, plant and
equipment and investments (2) 83 81 (4)
Net financing credit/(charge) relating to
pensions 184 184 (57)
---------------------------------------------------- ------------- ------------ ------- -------------
Profit before tax 537 5 542 201
Tax 17 23 40 11
---------------------------------------------------- ------------- ------------ ------- -------------
Profit after tax for the period 554 28 582 212
---------------------------------------------------- ------------- ------------ ------- -------------
Attributable to:
Equity holder of the parent 534 562 197
Non-controlling interest 20 20 15
---------------------------------------------------- ------------- ------------ ------- -------------
554 582 212
---------------------------------------------------- ------------- ------------ ------- -------------
Basic earnings per share 31.1 17.1
Diluted earnings per share 29.7 17.1
---------------------------------------------------- ------------- ------------ ------- -------------
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
EUR million (unaudited) 2011 2010
---------------------------------------------------- ------------- ------------ ------- -------------
Profit after tax for the period 582 212
Cash flow hedges:
Fair value movements in equity (106) 79
Reclassified and reported in net profit 54 20
Changes in the fair value of available-for-sale (66) -
financial assets
Share of other movements in reserves of associates - 57
Exchange gains 48 20
Total comprehensive income net of tax 512 388
---------------------------------------------------- ------------- ------------ ------- -------------
Total comprehensive income is attributable
to:
Equity holders of the parent 492 373
Non-controlling interest 20 15
---------------------------------------------------- ------------- ------------ ------- -------------
512 388
---------------------------------------------------- ------------- ------------ ------- -------------
Items in the consolidated Statement of comprehensive income
above are disclosed net of tax
CONSOLIDATED BALANCE SHEET
December December
31, 31,
EUR million (unaudited) 2011 2010
------------------------------------------ --------- ---------
Non-current assets
Property, plant and equipment 9,584 8,080
Intangible assets 1,724 336
Investments in associates 165 287
Available-for-sale financial assets 466 77
Employee benefit assets 1,317 676
Derivative financial instruments 37 22
Deferred tax assets 497 -
Other non-current assets 71 48
--------- ---------
13,861 9,526
------------------------------------------ --------- ---------
Current assets
Non-current assets held for sale 18 39
Inventories 400 115
Trade receivables 1,175 453
Other current assets 445 306
Derivative financial instruments 119 156
Other current interest-bearing deposits 1,758 1,381
Cash and cash equivalents 1,977 917
--------- ---------
5,892 3,367
------------------------------------------ --------- ---------
Total assets 19,753 12,893
------------------------------------------ --------- ---------
Shareholders' equity
Issued share capital 928 -
Share premium 5,280 -
Investment in own shares (17) (4)
Other reserves (805) 2,529
--------- ---------
Total shareholders' equity 5,386 2,525
------------------------------------------ --------- ---------
Non-controlling interest 300 300
--------- ---------
Total equity 5,686 2,825
------------------------------------------ --------- ---------
Non-current liabilities
Interest-bearing long-term borrowings 4,304 4,114
Employee benefit obligations 277 258
Deferred tax liability 1,274 928
Provisions for liabilities and charges 1,244 194
Derivative financial instruments 55 4
Other long-term liabilities 384 362
------------------------------------------ --------- ---------
7,538 5,860
------------------------------------------ --------- ---------
Current liabilities
Current portion of long-term borrowings 579 538
Trade and other payables 5,377 3,314
Derivative financial instruments 64 11
Current tax payable 157 12
Provisions for liabilities and charges 352 333
------------------------------------------ --------- ---------
6,529 4,208
------------------------------------------ --------- ---------
Total liabilities 14,067 10,068
------------------------------------------ --------- ---------
Total equity and liabilities 19,753 12,893
------------------------------------------ --------- ---------
CONSOLIDATED CASH FLOW STATEMENT
Full year Nine months
to December to December
31, 31,
EUR million (unaudited) 2011 2010
------------------------------------------------------------- ------------- -------------
Cash flows from operating activities
Operating profit 444 418
Depreciation, amortisation and impairment 969 671
Movement in working capital (115) (47)
Settlement of competition investigation (168) (3)
Cash payments to pension scheme (157) -
Other non-cash movements (12) -
Interest paid (186) (103)
Taxation (5) -
Net cash flows from operating activities 770 936
------------------------------------------------------------- ------------- -------------
Cash flows from investing activities
Acquisition of property, plant and equipment and intangible
assets (1,071) (641)
Sale of property, plant and equipment 65 50
Cash acquired on business combination 689 -
Interest received 78 20
Decrease/(increase) in other current interest-bearing
deposits 843 (302)
Acquisition of own shares (18) -
Dividends received 10 -
Other investing movements 5 (7)
------------------------------------------------------------- ------------- -------------
Net cash flows from investing activities 601 (880)
------------------------------------------------------------- ------------- -------------
Cash flows from financing activities
Proceeds from long-term borrowings 304 436
Repayment of borrowings (312) (118)
Repayment of finance leases (341) (414)
Distributions made to holders of perpetual securities (20) (15)
------------- -------------
Net cash flows from financing activities (369) (111)
------------------------------------------------------------- ------------- -------------
Net increase/(decrease) in cash and cash equivalents 1,002 (55)
Net foreign exchange differences 58 88
Cash and cash equivalents at 1 January 917 884
------------- -------------
Cash and cash equivalents at period end(1) 1,977 917
------------------------------------------------------------- ------------- -------------
Interest bearing deposits maturing after more than
three months 1,758 1,381
------------------------------------------------------------- ------------- -------------
Cash, cash equivalents and other interest bearing deposits 3,735 2,298
------------------------------------------------------------- ------------- -------------
(1) Restricted cash of EUR79 million (December 2010: EURnil) consists of cash deposited by British Airways in a bank account, which is not available for general use by the Group. The cash deposited will be used to satisfy the terms of a funding agreement with trustees of the British Airways defined benefit pension scheme with the balance returned to the Group. The final amount required to settle the agreement with the pension trustees is subject to uncertainty but will not be in excess of EUR79 million.
CONSOLIDATED STATEMENT OF CHANGES IN
EQUITY
For the full year to December 31, 2011
EUR million (unaudited) Issued Investment Total
share Share in own Other shareholder Non-controlling Total
capital premium shares reserves(1) equity interest equity
------------------------- --------- --------- ----------- ------------- ------------- ---------------- --------
At January 1, 2011 - - (4) 2,529 2,525 300 2,825
Total comprehensive
income
for the year (net of
tax) - - - 492 492 20 512
Shares issued during the
year 928 5,280 (14) (3,839) 2,355 - 2,355
Cost of share-based
payments - - - 18 18 - 18
Exercise of share
options - - 1 (5) (4) - (4)
Distributions made to
holders of perpetual
securities - - - - - (20) (20)
------------------------- --------- --------- ----------- ------------- ------------- ---------------- --------
At December 31, 2011 928 5,280 (17) (805) 5,386 300 5,686
------------------------- --------- --------- ----------- ------------- ------------- ---------------- --------
(1) Closing balance includes retained earnings of EUR1,662 million.
For the nine months to December
31, 2010
Issued Investment Total
share Share in own Other shareholder Non-controlling Total
capital premium shares reserves(1) equity interest equity
------------------------- --------- --------- ----------- ------------- ------------- ---------------- --------
At April 1, 2010 - - (5) 2,150 2,145 300 2,445
Total comprehensive
income
for the period (net of
tax) - - - 373 373 15 388
Cost of share-based
payments - - - 7 7 - 7
Exercise of share
options - - 1 (1) - - -
Distributions made to
holders of perpetual
securities - - - - - (15) (15)
------------------------- --------- --------- ----------- ------------- ------------- ---------------- --------
At December 31, 2010(2) - - (4) 2,529 2,525 300 2,825
------------------------- --------- --------- ----------- ------------- ------------- ---------------- --------
(1) Closing balance includes retained earnings of EUR1,087 million.
(2) The Issued share capital and Share premium at April 1, 2010 have been
retrospectively adjusted as a result of the merger (note 3) to represent the
share capital and share premium of the Company. The remaining reserves balances
relate to British Airways and the Company. The Issued share capital at April
1, 2010 was EUR15,000.
NOTES TO THE ACCOUNTS (unaudited)
For the full year to December 31, 2011
1. Corporate Information AND BASIS OF PREPARATION
On January 21, 2011 British Airways Plc and Iberia Lineas Aereas de Espana S.A. (hereinafter 'British Airways' and 'Iberia' respectively) completed a merger transaction of the two companies to create a new leading European airline group. As a result of the merger, International Consolidated Airlines Group S.A. (hereinafter 'International Airlines Group', 'IAG' or the 'Group') was formed to hold the interests of both the existing airline groups. IAG is a Spanish company registered in Madrid and was incorporated on April 8, 2010.
IAG shares are traded on the London Stock Exchange's main market for listed securities and also on the stock exchanges of Madrid, Barcelona, Bilbao and Valencia (the 'Spanish Stock Exchanges'), through the Spanish Stock Exchanges Interconnection System (Mercado Continuo Espanol).
The Group's summary condensed consolidated financial statements for the full year to December 31, 2011 were prepared in accordance with IAS 34 and authorised for issue by the Board of Directors on February 28, 2012. The condensed financial statements herein are not the Company's statutory accounts and are unaudited. IAG's prior period comparative for the condensed financial statements are the published financial statements of British Airways for the nine months to December 31, 2010, which have been translated into euros.
The basis of preparation and accounting policies set out in the British Airways Report and Accounts for the nine months ended December 31, 2010 have been applied in the preparation of these summary consolidated financial statements. British Airways' financial statements for nine months ended December 31, 2010 have been filed with the Registrar of Companies in England and Wales, and are in accordance with the International Financial Reporting Standards as adopted by the European Union (IFRSs as adopted by the EU) and with those of the Standing Interpretations issued by the International Financial Reporting Interpretations Committee (IFRIC) of the International Accounting Standards Board (IASB).
As a result of the business combination, the Group has enhanced the description of its accounting policy on Exceptional items.
On December 22, 2011, British Airways entered into a binding agreement with Deutsche Lufthansa AG (Lufthansa) for the acquisition of the shares of British Midland Limited (bmi) for consideration of EUR207 million (GBP172.5 million). Under the agreement EUR72 million (GBP60 million) of the purchase price will be paid in four instalments to Lufthansa pre-completion. At December 31, 2011 one instalment of EUR18 million (GBP15 million) has been paid, with the remaining three instalments totalling EUR54 million (GBP45 million) disclosed within capital commitments. The acquisition is expected to complete during the first quarter of 2012, subject to regulatory clearance from the European Commission and other bodies. Under the terms of the agreement British Airways is liable to pay a termination fee of EUR12 million (GBP10 million) if phase one EU regulatory approval is not achieved by March 31, 2012, and if either party elects to terminate the agreement.
2. Accounting Policies
The accounting policies and methods of calculation adopted are consistent with those of the annual financial statements for the period ended December 31, 2010, as described in the financial statements of British Airways, except as discussed below.
Change in presentation currency
A change in presentation currency is a change in accounting policy which is accounted for retrospectively. As the Group's presentation currency is euros, the comparative results included in the Group's consolidated financial statements previously reported in pounds sterling have been translated into euros using the procedures outlined below:
-- assets and liabilities are translated from their functional currency into the new presentation currency at the beginning of the comparative period using the opening exchange rate and retranslated at the closing rate;
-- income statement items are translated at an average rate for the period;
-- equity items are translated at either the historical rate or the closing rate, with the balancing amount being reported in currency translation reserve.
The Group has adopted the following standards, interpretations and amendments from January 1, 2011:
IFRS 3 (Amendment), 'Business Combinations'. The amendment clarifies guidance on the choice of measuring non-controlling interests at fair value or at the proportionate share of the acquiree's net assets, which applies only to instruments that present ownership interest and entitle their holders to a proportionate share of the net assets in the event of liquidation. This is not currently applicable to the Group.
IFRS 7 (Amendment) 'Financial Instruments: Disclosures'. The amendment includes multiple clarifications related to the disclosure of financial instruments. The standard requires a change in the presentation of the Group's notes to the financial statements but has no impact on reported profits.
IAS 1 (Amendment) 'Presentation of Financial Statements'. The amendment permits, for each component of equity, the presentation of the analysis by item to be included in either the statement of changes in equity or the notes to the financial statements. The standard requires a change in the format and presentation of the Group's primary statements but has no impact on reported profits or equity.
IAS 34 (Amendment) 'Interim Financial Reporting'. The amendment clarifies guidance on the disclosure principals involving significant events and transactions, including changes to fair value measurements, and the requirement to update relevant information from the most recent annual report. This standard represents a change in disclosure does not impact the financial statements for the year to December 31, 2011.
NOTES TO THE ACCOUNTS (unaudited)
For the full year to December 31, 2011
2. Accounting Policies continued
IAS 24 (Amendment) 'Related Party Transactions'. The amendment clarifies the definition of related party relationships, with particular emphasis on party relationships with persons and key management personnel. The amendment also permits that entities may be exempt from related party disclosure requirements for transactions with a government, where those entities are controlled, jointly controlled, or significantly influenced by that same government. The new definition of a related party does not impact the Group's disclosures.
IAS 32 (Amendment) 'Financial Instruments: Presentation'. The amendment permits that rights issues and certain options or warrants may be classified as equity instruments, provided that the rights are given pro rata to all existing owners of the same class of an entity's non-derivative equity instruments, to acquire a fixed number of the entity's own equity instruments for a fixed amount in any currency. The standard does not impact the Group's classification of equity instruments.
IFRIC 14 (Amendment) 'Prepayments of a Minimum Funding Requirement'. The amendment permits a prepayment of future service cost by the entity to be recognised as a pension asset, where the Group is not subject to minimum funding requirements. The standard does not affect the financial position of the Group.
Other amendments resulting from Improvements to IFRSs to standards did not have any impact on the accounting policies, financial position or performance of the Group. The Group has not early adopted any other standard, interpretation or amendment that has been issued but not yet effective.
Exceptional Items
Exceptional items are those that in management's view need to be separately disclosed by virtue of their size and incidence. The Exceptional items column in the Income statement relates primarily to the impact of business combination transactions that do not contribute to the on-going operating results of the Group.
Business combination transactions include cash items such as the costs incurred to effect the transaction and non-cash items such as accounting gains or losses recognised through the Income statement.
3. Business combinations
Under the terms of the merger, British Airways ordinary shareholders received one new ordinary share of IAG for every existing British Airways ordinary share and Iberia shareholders received 1.0205 new ordinary shares for every existing Iberia ordinary share. Upon completion of the transaction, British Airways' shareholders held 56 per cent of IAG and Iberia's shareholders 44 per cent.
Prior to January 21, 2011 British Airways owned 13.15 per cent of the issued share capital of Iberia (13.55 per cent after cancellation of Iberia treasury shares) and Iberia owned 9.98 per cent of the issued share capital of British Airways. Subsequent to the merger, the cross holdings between British Airways and Iberia were maintained or recreated with the same economic and voting rights.
For the purposes of accounting British Airways is deemed to be the acquirer of Iberia. IAG's value was determined based on British Airways' fair value, calculated from British Airways quoted market price at the close of business on January 20, 2011 of EUR3.346 (or GBP2.825) for its 1,154 million outstanding ordinary shares. The purchase price of Iberia was calculated based on the agreed merger ratios and IAG's value on the transaction date.
The Group is expecting to generate annual synergies of approximately EUR500 million by the end of its fifth year and benefit shareholders, customers and employees. IAG will combine the two companies' leading positions in the UK and Spain and enhance their strong presence in international longhaul markets, while retaining the individual brands and operations of bothairlines.
January
21,
EUR million 2011
----------------------------------------- --------
IAG value
British Airways fair value 3,862
Iberia stake in British Airways (385)
----------------------------------------- --------
3,477
British Airways' shareholders ownership
in IAG (per cent) 56
----------------------------------------- --------
IAG value 6,209
----------------------------------------- --------
Purchase price
IAG value 6,209
Iberia's shareholders ownership
in IAG (per cent) 44
----------------------------------------- --------
2,732
British Airways stake in Iberia 370
----------------------------------------- --------
Purchase price 3,102
----------------------------------------- --------
3. Business combinations continued
On January 21, 2011 the assets and liabilities arising from the acquisition
are as follows:
Acquiree's
carrying
EUR million amount Fair value
--------------------------------------------------- ------------- -------------
Property, plant and equipment 1,264 1,385
Intangible assets
Goodwill - 249
Brand - 306
Loyalty programmes - 253
Landing rights - 430
Other 45 88
Investments in associates 157 157
Other non-current assets 1,254 1,263
--------------------------------------------------- ------------- -------------
Cash and cash equivalents 689 689
Other current interest-bearing deposits 1,175 1,175
Trade and other receivables(1) 568 568
Inventories 215 215
Other current assets 201 201
--------------------------------------------------- ------------- -------------
Interest bearing long-term borrowings (462) (462)
Trade and other payables (1,549) (1,549)
Other current liabilities (184) (184)
Non-current provisions (1,203) (1,265)
Deferred tax liability (191) (537)
Other non-current liabilities (265) (265)
--------------------------------------------------- ------------- -------------
Net identifiable assets acquired 1,714 2,717
--------------------------------------------------- ------------- -------------
(1) The gross contractual amount for trade receivables was EUR603 million, 94 per cent of which is expected to be collected.
Goodwill recognised on the acquisition of Iberia reflects the excess value of the transaction that cannot be attributed to the assets and liabilities. This goodwill reflects the synergies that are expected to be achieved through the business combination. The goodwill has been allocated to the cash generating unit of Iberia and is not tax deductible.
Brand, loyalty programmes and landing rights have been assessed as assets with indefinite life which will be tested annually for impairment.
Transaction costs of EUR58 million were recognised in the Income statement for the nine months to December 31, 2010 within Property, IT and other costs. No material costs arose in the full year to December 31, 2011.
Iberia contributed revenues of EUR4,620 million and operating losses of EUR61 million to the consolidated Group results. Had Iberia been consolidated from January 1, 2011, the Group would have reported total revenue of EUR16,339 million and operating profit of EUR407 million.
4. EXCEPTIONAL ITEMS
Step acquisition
As a result of British Airways' initial investment in Iberia, the Business combination of the Group was achieved in stages. Therefore, the Group revalued its initial investment in Iberia to fair value at the acquisition date resulting in a non-cash gain of EUR83 million recognised within Exceptional items in the consolidated Income statement.
Derivatives and financial instruments
On January 21, 2011, Iberia had a portfolio of cash flow hedges with a net mark-to-market benefit of EUR78 million recorded within Other reserves on the Balance sheet. As these cash flow hedge positions unwind, Iberia will recycle the benefit from Other reserves through its Income statement.
The Group does not recognise the pre-acquisition cash flow hedge net benefits within Other reserves on the Balance sheet, resulting in fuel and aircraft operating lease costs being gross of the pre-acquisition cash flow hedge benefits. For the full year to December 31, 2011, this has resulted in an increase in reported fuel expense of EUR89 million, a decrease in reported aircraft operating lease costs of EUR11 million and a related EUR23 million tax credit.
The Group recognised the impact of the pre-acquisition cash flow hedges within the Exceptional items column in the Income statement.
5. SEASONALITY
The Group's business is highly seasonal with demand strongest during the summer months. Accordingly higher revenues and operating profits are usually expected in the latter six months of the financial year than in the first six months.
6. SEGMENT INFORMATION a. Business segments
British Airways and Iberia are managed as individual operating companies. Each company operates its network passenger and cargo operations as a single business unit. The chief operating decision maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the IAG Management Committee. The IAG Management Committee makes resource allocation decisions based on network profitability, primarily by reference to the markets in which the operating companies serve. The objective in making resource allocation decisions is to optimise consolidated financial results. Therefore, based on the way the Group treats the network passenger and cargo operations, and the manner in which resource allocation decisions are made, the Group has two (2010: one) reportable operating segments for financial reporting purposes, reported as British Airways and Iberia.
For the full year to December 31, 2011 and the nine months to December 31, 2010:
2011 2010
-----------------------------------------
British
EUR million Airways Iberia Unallocated Total Total
---------------------------------- --------- ------- ------------ ------- ------
Revenue
External revenue 11,483 4,620 - 16,103 7,889
Inter-segment revenue 9 16 36 61 -
---------------------------------- --------- ------- ------------ ------- ------
Segment revenue 11,492 4,636 36 16,164 7,889
---------------------------------- --------- ------- ------------ ------- ------
Depreciation, amortisation and
impairment (786) (169) (14) (969) (671)
Operating profit/(loss)(1) 592 (61) (87) 444 418
---------------------------------- --------- ------- ------------ ------- ------
Net non-operating income/(costs) 98 (217)
---------------------------------- --------- ------- ------------ ------- ------
Profit before tax 542 201
---------------------------------- --------- ------- ------------ ------- ------
(1) The 'Unallocated' segment includes an exceptional charge of EUR78
million (note 4).
b. Geographical analysis
Revenue by area of original sale
------------- -------------
EUR million Full year Nine months
to December to December
31, 2011 31, 2010
---------------------------------------------------- ------------- -------------
UK 5,124 3,474
Spain 2,168 93
USA 2,247 1,575
Rest of world 6,564 2,747
------------- -------------
16,103 7,889
---------------------------------------------------- ------------- -------------
6. SEGMENT INFORMATION continued
b. Geographical analysis continued
Assets by area
Property,
plant Intangible
EUR million and equipment assets
-------------------------- --------------- -----------
As at December 31, 2011
UK 8,090 377
Spain 1,407 1,310
USA 77 4
Unallocated 10 33
--------------- -----------
Total 9,584 1,724
-------------------------- --------------- -----------
As at December 31, 2010
UK 7,976 299
Spain - -
USA 91 3
Unallocated 13 34
--------------- -----------
Total 8,080 336
-------------------------- --------------- -----------
7. FINANCE COSTS AND INCOME
Full year Nine months
to December to December
EUR million 31, 2011 31, 2010
--------------------------------------------------------- ------------- -------------
Finance costs
Interest payable on bank and other loans, finance
charges payable under finance leases and hire purchase
contracts (198) (135)
Unwinding of discount on provisions (41) (14)
Capitalised interest on progress payments 2 1
Change in fair value of cross currency swaps 1 1
Currency charges on financial fixed assets 16 -
--------------------------------------------------------- ------------- -------------
Total finance costs (220) (147)
--------------------------------------------------------- ------------- -------------
Finance income
Interest on other interest bearing deposits 85 21
--------------------------------------------------------- ------------- -------------
Total finance income 85 21
--------------------------------------------------------- ------------- -------------
Net credit/(charge) relating to pensions
Net financing income relating to pensions 72 3
Amortisation of actuarial losses in excess of the
corridor (30) (73)
Immediate recognition of net actuarial gains on
Airways Pension Scheme - 99
Effect of APS asset ceiling 142 (86)
--------------------------------------------------------- ------------- -------------
Net financing credit/(charge) relating to pensions 184 (57)
--------------------------------------------------------- ------------- -------------
8. Tax
The tax credit for the full year to December 31, 2011 is EUR40 million (nine months to December 31, 2010: EUR11 million). Revised UK Corporation tax legislation was substantively enacted by March 31, 2011 reducing the main rate of corporation tax from 28 per cent to 26 per cent from April 1, 2011, and reducing the rate by an additional 1 per cent per annum to 25 per cent by April 1, 2012. The reduction in the corporation tax rate reduces the deferred tax liability provided at December 31, 2011 by EUR78 million.
Excluding the one-off adjustment arising from the reduction in the corporation tax rate (EUR83 million through the Income statement), the effect of pension accounting of EUR70 million and the tax impact of accounting for the Business combination of EUR22 million, the effective tax rate for the full year to December 31, 2011 was 25 per cent.
9. EARNINGS PER SHARE
Basic earnings per share for the full year to December 31, 2011 are calculated on a weighted average of 1,808,076,584 ordinary shares and adjusted for shares held for the purposes of Employee Share Ownership Plans. Diluted earnings per share for the full year to December 31, 2011 are calculated on a weighted average of 2,005,229,168 ordinary shares.
The number of shares in issue at December 31, 2011 was 1,855,369,557 ordinary shares of EUR0.50 each.
10. DIVIDENDS
The Directors declare that no dividend be paid for the full year to December 31, 2011 (nine months to December 31, 2010: EURnil).
11. PROPERTY, PLANT AND EQUIPMENT AND INTANGIBLE ASSETS
Property,
plant Intangible
EUR million and equipment assets
------------------------------- --------------- -----------
Net book value as at January
1, 2011 8,080 336
Additions 952 97
Acquired through business
combination 1,385 1,326
Disposals (37) -
Reclassifications (14) -
Depreciation, amortisation
and impairment (926) (43)
Exchange movements 144 8
------------------------------- --------------- -----------
Net book value as at December
31, 2011 9,584 1,724
------------------------------- --------------- -----------
Net book value as at April
1, 2010 7,767 303
Additions 663 41
Disposals (2) -
Reclassifications (52) -
Depreciation, amortisation
and impairment (651) (20)
Exchange movements 355 12
------------------------------- --------------- -----------
Net book value as at December
31, 2010 8,080 336
------------------------------- --------------- -----------
Capital expenditure authorised and contracted for but not provided for in the accounts amounts to EUR5,359 million for the Group commitments (December 31, 2010: EUR4,831 million). The majority of capital expenditure commitments are denominated in US dollars and are subject to the impact in exchange rates.
12. NON-CURRENT ASSETS HELD FOR SALE
The non-current assets held for sale of EUR18 million (December 31, 2010: EUR39 million) comprise three Boeing 757 aircraft (December 31, 2010: six Boeing 757 aircraft). These aircraft are presented within the British Airways operating segment and will exit the business within 12 months of December 31, 2011.
Non-current assets held for sale with a net book value of EUR35 million were disposed of by the Group during the full year to December 31, 2011 (nine months to December 31, 2010: EUR52 million), resulting in a loss of EUR7 million (nine months to December 31, 2010: EUR4 million).
13. FINANCIAL INSTRUMENTS BY CATEGORY
The detail of the Group's financial instruments as at December 31, 2011 and December 31, 2010 by nature and classification for measurement purposes is as follows:
As at December 31, Financial assets
2011
-------------------------------------------------------------------------
Total
carrying
Financial amount
assets Financial by
Loans at FV Derivatives assets balance
and through used held to Non-financial sheet
EUR million receivables P&L for hedging Available-for-sale maturity assets item
-------------------- ------------ ---------- ------------ ------------------- ------------ -------------- ---------
Non-current
financial
assets
Available-for-sale
financial assets - - - 466 - - 466
Derivative
financial
instruments - - 37 - - - 37
Other non-current
assets 42 - - - 8 21 71
-------------------- ------------ ---------- ------------ ------------------- ------------ -------------- ---------
Current financial
assets
Trade receivables 1,175 - - - - - 1,175
Other current
assets 203 - - - - 242 445
Derivative
financial
instruments - - 119 - - - 119
Other current
interest-bearing
deposits 1,507 - - - 251 - 1,758
Cash and cash
equivalents 1,977 - - - - - 1,977
-------------------- ------------ ---------- ------------ ------------------- ------------ -------------- ---------
13. FINANCIAL INSTRUMENTS BY CATEGORY
continued
As at December 31, Financial liabilities
2011
-----------------------------------------------
Total
carrying
amount
Liabilities by
Loans at FV Derivatives balance
and through used for Non-financial sheet
EUR million payables the P&L hedging liabilities item
-------------------- ------------ ---------- ------------ ------------------- ------------ -------------- ---------
Non-current
financial
liabilities
Interest-bearing long term
borrowings 4,304 - - - 4,304
Derivative
financial
instruments - - 55 - 55
Other long-term
liabilities 11 - - 373 384
-------------------- ------------ ---------- ------------ ------------------- ------------ -------------- ---------
Current financial
liabilities
Current portion of long-term
borrowings 579 - - - 579
Trade and other
payables 3,116 - - 2,261 5,377
Derivative
financial
instruments - - 64 - 64
-------------------- ------------ ---------- ------------ ------------------- ------------ -------------- ---------
As at December 31, Financial assets
2010
-------------------------------------------------------------------------
Total
carrying
Financial amount
assets Financial by
Loans at FV Derivatives assets balance
and through used held Non-financial sheet
EUR million receivables P&L for hedging Available-for-sale to maturity assets item
-------------------- ------------ ---------- ------------ ------------------- ------------ -------------- ---------
Non-current
financial
assets
Available-for-sale
financial assets - - - 77 - - 77
Derivative
financial
instruments - - 22 - - - 22
Other non-current
assets - - - - - 48 48
-------------------- ------------ ---------- ------------ ------------------- ------------ -------------- ---------
Current financial
assets
Trade receivables 453 - - - - - 453
Other current
assets 131 - - - - 175 306
Derivative
financial
instruments - - 156 - - - 156
Other current
interest-bearing
deposits 1,381 - - - - - 1,381
Cash and cash
equivalents 917 - - - - - 917
-------------------- ------------ ---------- ------------ ------------------- ------------ -------------- ---------
Financial liabilities
-----------------------------------------------
Total
carrying
amount
Liabilities by
Loans at FV Derivatives balance
and through used Non-financial sheet
EUR million payables the P&L for hedging liabilities item
-------------------- ------------ ---------- ------------ ------------------- ------------ -------------- ---------
Non-current
financial
liabilities
Interest-bearing long term
borrowings 4,114 - - - 4,114
Derivative
financial
instruments - - 4 - 4
Other long-term
liabilities 13 - - 349 362
-------------------- ------------ ---------- ------------ ------------------- ------------ -------------- ---------
Current financial
liabilities
Current portion of long-term
borrowings 538 - - - 538
Trade and other
payables 1,781 - - 1,533 3,314
Derivative
financial
instruments - - 11 - 11
-------------------- ------------ ---------- ------------ ------------------- ------------ -------------- ---------
14. RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET DEBT
Full year Nine months
to December to December
EUR million 31, 2011 31, 2010
------------------------------------------------------- ------------- -------------
Increase/(decrease) in cash and cash equivalents
during the period 371 (58)
Net funds acquired through business combination 1,402 -
Net cash outflow from repayments of debt and lease
financing 653 532
(Decrease)/increase in other current interest-bearing
deposits (843) 302
New loans and finance leases taken out and hire
purchase arrangements made (304) (436)
------------------------------------------------------- ------------- -------------
Decrease in net debt resulting from cash flow 1,279 340
Exchange movements and other non-cash movements (73) (121)
------------------------------------------------------- ------------- -------------
Decrease in net debt during the period 1,206 219
Net debt at beginning of period (2,354) (2,573)
------------------------------------------------------- ------------- -------------
Net debt at December 31 (1,148) (2,354)
------------------------------------------------------- ------------- -------------
Net debt comprises the current and non-current portions of long-term borrowings less cash and cash equivalents and other current interest-bearing deposits.
15. Borrowings
EUR million December December
31, 31,
2011 2010
---------------------------- --------- ---------
Current
Bank and other loans 247 209
Finance leases 317 255
Hire purchase arrangements 15 74
-------------------------------- --------- ---------
579 538
-------------------------------- --------- ---------
Non-current
Bank and other loans 1,625 1,688
Finance leases 2,673 2,405
Hire purchase arrangements 6 21
-------------------------------- --------- ---------
4,304 4,114
-------------------------------- --------- ---------
In August 2009, British Airways issued a GBP350 million fixed rate 5.8 per cent convertible bond, convertible into ordinary shares at the option of the holder, before or on maturity in August 2014. Under the terms of the merger, the bondholders are now eligible to convert their bonds into ordinary shares of IAG. Conversion into ordinary shares will occur at rate of GBP1.89 per share. The equity portion of the convertible bond issue is included in Other reserves. In January, 476,190 options were exercised at an exercise price of GBP1.89 per share with an aggregate principal balance of GBP900,000. As at December 31, 2011 184,708,995 (December 31, 2010: 185,185,185) options were outstanding.
16. SHARE BASED PAYMENTS
During the year 11,878,197conditional shares were awarded, under the Group's Performance Share Plan (PSP) to key senior executives and selected members of the wider management team. No payment is due upon the vesting of the shares. The fair value of equity-settled share-based payment plans is either estimated as at the date of the award using the Monte-Carlo model, taking into account the terms and conditions upon which the options were awarded, or based on the share price at the date of grant, dependent on the performance criteria attached. The following are the weighted average inputs to the model for the PSP share-based payment plans granted in the year:
Weighted average fair value (GBP): 1.11
Expected share price volatility (per cent): 50
Expected life of options (years): 3
Weighted average share price at date of grant (GBP): 1.97
The Group also made awards under the Group's Incentive Award Deferral Plan during the year under which 927,696 conditional shares were awarded.
17. EMPLOYEE BENEFIT OBLIGATIONS
The Group operates two funded principal defined benefit pension schemes in the UK, the Airways Pension Scheme (APS) and the New Airways Pension Scheme (NAPS), both of which are closed to new members. The results of the accounting valuation at December 31, 2011 are summarised below:
APS NAPS
---------------------- ----------------------
December December December December
EUR million 31, 2011 31, 2010 31, 2011 31, 2010
--------------------------------------- ---------- ---------- ---------- ----------
Fair value of scheme assets 8,285 7,516 10,895 10,161
Present value of scheme liabilities (7,232) (6,890) (11,972) (11,340)
--------------------------------------- ---------- ---------- ---------- ----------
Net pension asset/(liability) 1,053 626 (1,077) (1,179)
--------------------------------------- ---------- ---------- ---------- ----------
Net pension asset/(liability)
represented by:
Net pension asset recognised 700 426 608 240
Restriction on APS surplus due - 145 - -
to the asset ceiling
Cumulative actuarial gains/(losses)
not recognised 353 55 (1,685) (1,419)
--------------------------------------- ---------- ---------- ---------- ----------
Net pension asset/(liability) 1,053 626 (1,077) (1,179)
--------------------------------------- ---------- ---------- ---------- ----------
At December 31, 2011 both APS and NAPS were recognised on the Balance sheet as employee benefit assets, representing EUR1,308 million of the EUR1,317 million disclosed (2010: EUR666 million of EUR676 million). The EUR277 million employee benefit obligations at December 31, 2011 relates to other schemes (2010: EUR258 million).
APS NAPS
---------------------- ----------------------
December December December December
EUR million 31, 2011 31, 2010 31, 2011 31, 2010
--------------------------- ---------- ---------- ---------- ----------
Per cent per annum:
Inflation (CPI) 2.15 2.9 2.25 3.0
Inflation (RPI) 2.9 3.4 3.0 3.5
Salary increases (as RPI) 2.9 3.4 3.0 3.5
Discount rate 4.7 5.5 5.0 5.5
--------------------------- ---------- ---------- ---------- ----------
18. PROVISIONS FOR LIABILITIES AND CHARGES
Employee leaving
indemnities
and other Legal Restoration
employee related claims and handback Other
EUR million provisions provisions provisions provisions Total
---------------------------- ------------------ ------------ -------------- ------------ ------
Net book value January 1,
2011 36 309 135 47 527
Provisions recorded during
the year 73 46 81 35 235
Acquired through business
combination 956 78 166 65 1,265
Utilised during the year (130) (179) (22) (35) (366)
Release of unused amounts (43) (7) (41) (13) (104)
Unwinding of discount 23 9 8 1 41
Exchange differences 1 (3) 2 (2) (2)
---------------------------- ------------------ ------------ -------------- ------------ ------
Net book value at December
31, 2011 916 253 329 98 1,596
---------------------------- ------------------ ------------ -------------- ------------ ------
Analysis:
Current 137 114 74 27 352
Non-current 779 139 255 71 1,244
---------------------------- ------------------ ------------ -------------- ------------ ------
19. CONTINGENT LIABILITIES
There were contingent liabilities at December 31, 2011 in respect of guarantees and indemnities entered into as part of the ordinary course of the Group's business. No material losses are likely to arise from such contingent liabilities. A number of other lawsuits and regulatory proceedings are pending, the outcome of which in the aggregate is not expected to have a material effect on the Group's financial position or results of operations.
The Group has guaranteed certain liabilities and commitments, which at December 31, 2011 amounted to EUR411 million (2010: EUR460 million).
20. RELATED PARTY TRANSACTIONS
Following the merger on January 21, 2011 the Group held the interests of both British Airways and Iberia. IAG is the ultimate controlling party of its subsidiaries British Airways and Iberia.
All amounts disclosed for 2010 include transactions between British Airways and Iberia, as before the merger both companies were classified as associates of one another. As a result of the merger both British Airways and Iberia are now classified as subsidiaries of the Group, and all subsequent transactions between the two companies have been eliminated on consolidation.
The Group had the following transactions in the ordinary course of business with related parties for the financial periods ended December 31.
Sales and purchases of goods and services:
Full year Nine months
to December to December
EUR million 31, 2011 31, 2010
------------------------------------------------------ ------------- -------------
Sales of goods and services
Sales to associates 163 44
Sales to significant shareholders 5 -
Purchases of goods and services
Purchases from associates 66 49
Purchases from significant shareholders 21 -
------------------------------------------------------ ------------- -------------
Period end balances arising from sales and purchases
of goods and services:
December December
31, 31,
EUR million 2011 2010
------------------------------------------------------ ------------- -------------
Receivables from related parties
Amounts owed by associates 24 1
Amounts owed by significant shareholders 282 -
Payables to related parties
Amounts owed to associates 19 8
Amounts owed to significant shareholders - -
------------------------------------------------------ ------------- -------------
For the full year ended December 31, 2011, the Group had not made any provisions for doubtful debts relating to amounts owed by related parties (nine months to December 31, 2010: EURnil).
21. DIRECTORS AND OFFICERS REMUNERATION
No loans or credit transactions were outstanding with Directors or officers of the Group at December 31, 2011 (2010: EURnil) that require disclosure in accordance with the requirements of Article 260 of Ley de Sociedades de Capital.
Compensation received by the Group's key management personnel, which included the Board of Directors and Management Committee in 2011 and 2010 is as follows:
Full year Nine months
to December to December
EUR million 31, 2011 31, 2010
---------------------------------------- ------------- -------------
Salaries and other short term-benefits 9 6
Share based payments 1 2
---------------------------------------- ------------- -------------
10 8
---------------------------------------- ------------- -------------
The Company provides life insurance for all members of the Board and Management Committee. For the year to December 31, 2011 the Company paid contributions of EUR13,000. At December 31, 2011 the total transfer value of accrued pensions covered under defined benefit pension schemes totalled EUR4 million (2010: EUR11 million).
STATEMENT OF DIRECTORS' RESPONSIBILITIES
LIABILITY STATEMENT OF COMPANY DIRECTORS FOR THE PURPOSES ENVISAGED UNDER ARTICLE 11.1.b OF SPANISH ROYAL DECREE 1362/2007 OF 19 OCTOBER (REAL DECRETO 1362/2007).
At a meeting held on February 28, 2012, the Directors of International Consolidated Airlines Group, S.A. confirmed that to the best of their knowledge the Consolidated Condensed Financial Statements for the year to December 31, 2011 were prepared in accordance with IAS 34 as adopted by the European Union, offer a true and fair view of the assets, liabilities, financial situation and the results of International Consolidated Airlines Group, S.A. and of the companies that fall within the consolidated group taken as a whole, and the Consolidated Condensed Managements' Report includes an accurate analysis of the required information also in accordance with the Financial Services Authority's DTR 4.2.7R and DTR4.2.8R including an indication of important events in the period, a description of the principle risks and material related party transactions.
February 28, 2012
Mr Antonio Vazquez Romero Mr. William Walsh
Chairman of the Board of Chief Executive Officer
Directors
Sir Martin Broughton Mr. Cesar Alierta Izuel
Deputy Chairman of the
Board of Directors
Mr. Patrick Cescau Baroness Kingsmill
Mr. James Lawrence Mr. Jose Manuel Fernandez
Norniella
Mr. Jose Pedro Perez-Llorca Mr. Kieran Poynter
Mr. Rodrigo de Rato y Figaredo Mr. Rafael Sanchez-Lozano
Turmo
Mr. John Snow Mr. Keith Williams
AIRCRAFT FLEET
Number in service with Group companies
On balance Off balance Total Total Changes
sheet fixed sheet operating December December since December Future
assets leases 31, 2011 31, 2010 31, 2010 deliveries Options
------------- ----------------- ---------- ---------- ---------------- ------------ --------
Airline operations
Airbus A318 2 - 2 2 - - -
----------------- ------------- ----------------- ---------- ---------- ---------------- ------------ --------
Airbus A319 31 21 52 56 (4) 2 -
----------------- ------------- ----------------- ---------- ---------- ---------------- ------------ --------
Airbus A320 34 36 70 75 (5) 28 31
----------------- ------------- ----------------- ---------- ---------- ---------------- ------------ --------
Airbus A321 15 15 30 30 - - -
----------------- ------------- ----------------- ---------- ---------- ---------------- ------------ --------
Airbus A330 - - - - - 8 8
----------------- ------------- ----------------- ---------- ---------- ---------------- ------------ --------
Airbus A340-300 7 11 18 18 - - -
----------------- ------------- ----------------- ---------- ---------- ---------------- ------------ --------
Airbus A340-600 2 15 17 17 - - -
----------------- ------------- ----------------- ---------- ---------- ---------------- ------------ --------
Airbus A380 - - - - - 12 7
----------------- ------------- ----------------- ---------- ---------- ---------------- ------------ --------
Boeing 737-400 19 - 19 19 - - -
----------------- ------------- ----------------- ---------- ---------- ---------------- ------------ --------
Boeing 747-400 52 - 52 50 2 - -
----------------- ------------- ----------------- ---------- ---------- ---------------- ------------ --------
Boeing 757-200 1 2 3 4 (1) - -
----------------- ------------- ----------------- ---------- ---------- ---------------- ------------ --------
Boeing 767-300 21 - 21 21 - - -
----------------- ------------- ----------------- ---------- ---------- ---------------- ------------ --------
Boeing 777-200 41 5 46 46 - - -
----------------- ------------- ----------------- ---------- ---------- ---------------- ------------ --------
Boeing 777-300 4 1 5 3 2 3 2
----------------- ------------- ----------------- ---------- ---------- ---------------- ------------ --------
Boeing 787 - - - - - 24 28
----------------- ------------- ----------------- ---------- ---------- ---------------- ------------ --------
Embraer E170 6 - 6 6 - - -
----------------- ------------- ----------------- ---------- ---------- ---------------- ------------ --------
Embraer E190 7 - 7 5 2 - 16
----------------- ------------- ----------------- ---------- ---------- ---------------- ------------ --------
Group total 242 106 348 352 (4) 77 92
----------------- ------------- ----------------- ---------- ---------- ---------------- ------------ --------
As well as those aircraft in service the Group also holds 30 aircraft (2010:
39) which are not in service, which includes 5 sub-leased aircraft (2010:
6) and 3 aircraft held for sale (2010: 16).
This information is provided by RNS
The company news service from the London Stock Exchange
END
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