IAG FY 2022 Results

RNS Number : 9698Q
International Cons Airlines Group
24 February 2023
 

Text Description automatically generated with medium confidence

IAG full year results 2022

Strong recovery in profits in 2022

In 2022 we saw a strong recovery in our core markets as COVID-19 restrictions were lifted, which drove revenue momentum and a return to profit with significantly positive operating cash flow

Further recovery in profits expected in 2023, with full year operating profit before exceptional items expected to be in the range of €1.8 to €2.3 billion, based on current foreign exchange rates and jet fuel forward prices. However, we are mindful of uncertainty in the macro environment and fuel and non-fuel cost inflation

Committed to generating long-term shareholder value and confident in returning to pre-COVID-19 levels of operating profit within the next few years

Luis Gallego, IAG Chief Executive Officer, said:

"2022 was a year of strong recovery, driven by sustained leisure demand and markets reopening. At this point of the year we continue to see robust forward-bookings, while also remaining conscious of global macro-economic uncertainties. We are transforming our businesses, with the intention of returning IAG to pre-COVID levels of profit within the next few years, through major initiatives to improve customer experience and operational performance. Our unique group structure allows us to maximise revenue and cost synergies, and invest capital to achieve strong returns, whilst continuing progress towards net zero by 2050.

"With the acquisition of Air Europa now agreed but subject to regulatory and other approvals which could take around 18 months, we are intending to welcome another leading airline to the Group. This acquisition will enable us to grow Madrid as a hub, offering a gateway to Latin America and beyond, with benefits for customers, employees and shareholders.

"I would like to thank the teams across IAG for their exceptionally hard work in addressing the challenges of ramping up the operation throughout the year."

Financial summary:


Year to December 31


Three months to December 31

Statutory results (€ million)

2022

2021


2022

2021

Total revenue

23,066

8,455


6,386

3,534

Operating profit/(loss)

1,256

(2,765)


486

(278)

Profit/(loss) after tax

431

(2,933)


232

(311)

Basic earnings/(loss) per share (€ cents)

8.7

(59.1)




Cash, cash equivalents and interest-bearing deposits

9,599

7,943




Borrowings

19,984

19,610










Alternative performance measures (€ million)

2022

2021


2022

2021

Total revenue before exceptional items

23,066

8,450


6,386

3,534

Operating profit/(loss) before exceptional items

1,225

(2,970)


486

(305)

Profit/(loss) after tax before exceptional items

402

(3,038)


232

(263)

Adjusted earnings/(loss) per share (€ cents)

5.6

(61.2)




Net debt

10,385

11,667




Total liquidity1

13,999

11,986




1  Total liquidity includes Cash, cash equivalents and interest-bearing deposits, plus committed and undrawn general and aircraft-specific financing facilities

 

Significant improvement to our financial performance with operating profit before exceptional items of €1,225 million, an increase of €4,195 million compared to full year 2021

Restored 87 per cent of 2019 capacity, measured in available seat kilometres (ASKs), by quarter 4 and 78 per cent in the full year

Passenger unit revenue was 11.0% higher than in 2019, with the increase seen particularly in the second half of 2022, with strong leisure traffic recovery and business traffic steadily improving. The premium leisure segment performed very well.

Higher non-fuel unit costs, up 24.1% versus 2019, driven by supplier cost inflation net of transformation initiatives, capacity levels still below 2019 and foreign exchange

Fuel unit cost was up 30.2% versus 2019, negatively impacted by significant rise in commodity prices for jet fuel, following the Russian invasion of Ukraine in February 2022, partially offset by the benefit of our hedging policy

Invested €3.9 billion to make important improvements in fleet, customer offerings, IT infrastructure and sustainability

Reduction in net debt to €10.4 billion, driven by operating profit and significant working capital inflows

Liquidity continued to strengthen to €14.0 billion at December 31, 2022, from €12.0 billion at the end of 2021

 



 

Good progress against strategic objectives in 2022

Investing for our customers:

Quickly recovered operations in our main hubs in Madrid, Dublin and Barcelona

Iberia recognised as the most punctual European airline in 2022. Iberia Express and Vueling also ranked as the third and fourth most punctual airlines in Europe1.

Significant focus on rebuilding operational stability at London Heathrow, with British Airways' operational performance improving through the summer, with 7,400 new colleagues recruited in 2022

27 deliveries of modern, fuel-efficient aircraft and 59 longhaul aircraft embodied with next generation products for British Airways and Iberia at the end of 2022

Ordered 109 new shorthaul aircraft, bringing fuel efficiency benefits of up to 20 per cent versus the aircraft they will replace

Carbon intensity, measured as grammes of CO2 per passenger kilometre, 7 per cent lower than in 2019

Agreement with Globalia to acquire the remaining 80 per cent equity of Air Europa, following the acquisition of a 20 per cent equity stake in August 2022. The transaction is subject to regulatory and other approvals which could take around 18 months

Funding level of British Airways' main pension scheme (NAPS) improved such that the scheme was in surplus on its triennial funding basis and no deficit recovery payments were made during 2022 or required in the foreseeable future

Trading outlook

Full year 2023 capacity (ASKs) of approximately 98 per cent of the 2019 level, with quarter 1, 2023 approximately 96 per cent of the quarter 1, 2019 level.

Full year 2023 operating profit before exceptional items expected to be in the range of €1.8 to €2.3 billion, with most of the improvement over 2022 in the first half of the year. Quarter 1, 2023 operating loss of approximately €200 million. This assumes no further setbacks related to COVID-19 or material impacts from geopolitical developments.

Capital expenditure for 2023 of approximately €4.0 billion, subject to the timing of aircraft deliveries. Net debt broadly maintained at the December 31, 2022 level of €10.4 billion by the end of 2023.

This guidance is based on forward jet fuel prices and spot foreign exchange rates at February 23, 2023.

 

IAG plans to update the market with further strategic and financial information at a Capital Markets event later in 2023.

 

Notes

1  Cirium report 'The On-time Performance Review 2022 Airlines & Airports', January 2023

 

 

LEI: 959800TZHQRUSH1ESL13

Forward-looking statements:

Certain statements included in this announcement are forward-looking. These statements can be identified by the fact that they do not relate only to historical or current facts. By their nature, they involve risk and uncertainties because they relate to events and depend on circumstances that will occur in the future. Actual results could differ materially from those expressed or implied by such forward-looking statements.

Forward-looking statements often use words such as "expects", "may", "will", "could", "should", "intends", "plans", "predicts", "envisages" or "anticipates" or other words of similar meaning. They include, without limitation, any and all projections relating to the results of operations and financial conditions of International Consolidated Airlines Group, S.A. and its subsidiary undertakings from time to time (the 'Group'), as well as plans and objectives for future operations, expected future revenues, financing plans, expected expenditure, acquisitions and divestments relating to the Group and discussions of the Group's business plans. All forward-looking statements in this announcement are based upon information known to the Group on the date of this announcement and speak as of the date of this announcement. Other than in accordance with its legal or regulatory obligations, the Group does not undertake to update or revise any forward-looking statement to reflect any changes in events, conditions or circumstances on which any such statement is based.

Actual results may differ from those expressed or implied in the forward-looking statements in this announcement as a result of any number of known and unknown risks, uncertainties and other factors, including, but not limited to, the current economic and geopolitical environment and ongoing recovery from the COVID-19 pandemic and uncertainties about its future impact and duration, many of which are difficult to predict and are generally beyond the control of the Group, and it is not reasonably possible to itemise each item. Accordingly, readers of this announcement are cautioned against relying on forward-looking statements. Further information on the primary risks of the business and the Group's risk management process is set out in the Risk management and principal risk factors section in the 2021 Annual Report and Accounts; this document is available on www.iairgroup.com. All forward-looking statements made on or after the date of this announcement and attributable to IAG are expressly qualified in their entirety by the primary risks set out in that section. Many of these risks are, and will be, exacerbated by the ongoing recovery from the COVID-19 pandemic and uncertainties about its future impact and duration of any further disruption to the global airline industry as well as the current economic and geopolitical environment.

IAG Investor Relations
Waterside (HAA2),
PO Box 365,
Harmondsworth,
Middlesex,
UB7 0GB

Investor.relations@iairgroup.com



CONSOLIDATED INCOME STATEMENT


Year to December 31


Three months to December 31

€ million

2022

2021

Higher/
(lower)


2022

2021

Higher/
(lower)









Passenger revenue

19,458

5,835

nm


5,438

2,695

nm

Cargo revenue

1,615

1,673

(3.5)%


399

499

(20.0)%

Other revenue

1,993

947

nm


549

340

61.5 %

Total revenue

23,066

8,455

nm


6,386

3,534

80.7 %









Employee costs

4,647

3,013

54.2 %


1,230

914

34.6 %

Fuel, oil costs and emissions charges

6,120

1,781

nm


1,720

732

nm

Handling, catering and other operating costs

2,971

1,308

nm


828

520

59.2 %

Landing fees and en-route charges

1,890

923

nm


499

325

53.5 %

Engineering and other aircraft costs

2,101

1,085

93.6 %


594

383

55.1 %

Property, IT and other costs

950

758

25.3 %


280

218

28.4 %

Selling costs

920

434

nm


249

154

61.7 %

Depreciation, amortisation and impairment

2,070

1,932

7.1 %


539

548

(1.6)%

Currency differences

141

(14)

nm


(39)

18

nm

Total expenditure on operations

21,810

11,220

94.4 %


5,900

3,812

54.8 %

Operating profit/(loss)

1,256

(2,765)

nm


486

(278)

nm









Finance costs

(1,017)

(830)

22.5 %


(294)

(218)

34.9 %

Finance income

52

13

nm


41

8

nm

Net change in fair value of financial instruments

81

89

(9.0)%


(51)

85

nm

Net financing credit/(charge) relating to pensions

26

(2)

nm


7

(4)

nm

Net currency retranslation (charges)/credits

(115)

(82)

40.2 %


190

(19)

nm

Other non-operating credits/(charges)

132

70

88.6 %


(130)

(31)

nm

Total net non-operating costs

(841)

(742)

13.3 %


(237)

(179)

32.4 %

Profit/(loss) before tax

415

(3,507)

nm


249

(457)

nm

Tax

16

574

(97.2)%


(17)

146

nm

Profit/(loss) after tax

431

(2,933)

nm


232

(311)

nm



 

ALTERNATIVE PERFORMANCE MEASURES

All figures in the tables below are before exceptional items. Refer to Alternative performance measures section for more detail.


Year to December 31


Three months to December 31


Before exceptional items


Before exceptional items

€ million

2022

2021

Higher/
(lower)


2022

2021

Higher/
(lower)









Passenger revenue

19,458

5,830

nm


5,438

2,695

nm

Cargo revenue

1,615

1,673

(3.5)%


399

499

(20.0)%

Other revenue

1,993

947

nm


549

340

61.5 %

Total revenue

23,066

8,450

nm


6,386

3,534

80.7 %









Employee costs

4,647

3,031

53.3 %


1,230

932

32.0 %

Fuel, oil costs and emissions charges

6,120

1,935

nm


1,720

733

nm

Handling, catering and other operating costs

2,971

1,308

nm


828

520

59.2 %

Landing fees and en-route charges

1,890

923

nm


499

325

53.5 %

Engineering and other aircraft costs

2,101

1,092

92.4 %


594

383

55.1 %

Property, IT and other costs

973

758

28.4 %


280

218

28.4 %

Selling costs

920

434

nm


249

154

61.7 %

Depreciation, amortisation and impairment

2,078

1,953

6.4 %


539

556

(3.1)%

Currency differences

141

(14)

nm


(39)

18

nm

Total expenditure on operations

21,841

11,420

91.3 %


5,900

3,839

53.7 %

Operating profit/(loss)

1,225

(2,970)

nm


486

(305)

nm









Finance costs

(1,017)

(830)

22.5 %


(294)

(218)

34.9 %

Finance income

52

13

nm


41

8

nm

Net change in fair value of financial instruments

81

89

(9.0)%


(51)

85

nm

Net financing credit/(charge) relating to pensions

26

(2)

nm


7

(4)

nm

Net currency retranslation (charges)/credits

(115)

(82)

40.2 %


190

(19)

nm

Other non-operating credits/(charges)

132

145

(9.0)%


(130)

44

nm

Total net non-operating costs

(841)

(667)

26.1 %


(237)

(104)

nm

Profit/(loss) before tax

384

(3,637)

nm


249

(409)

nm

Tax

18

599

(97.0)%


(17)

146

nm

Profit/(loss) after tax

402

(3,038)

nm


232

(263)

nm









Operating figures

2022

2021

Higher/
(lower)


2022

2021

Higher/
(lower)

Available seat kilometres (ASK million)

263,592

121,965

nm


71,048

47,842

48.5 %

Revenue passenger kilometres (RPK million)

215,749

78,689

nm


59,125

34,225

72.8 %

Seat factor (per cent)

81.8

64.5

17.3 pts


83.2

71.5

11.7 pts

Passenger numbers (thousands)

94,726

38,864

nm


25,222

15,309

64.8 %

Cargo tonne kilometres (CTK million)

3,980

3,970

0.3 %


1,090

1,129

(3.5)%

Sold cargo tonnes (thousands)

561

539

4.1 %


153

157

(2.5)%

Sectors

619,122

307,519

nm


162,285

114,686

41.5 %

Block hours (hours)

1,781,829

892,455

99.7 %


473,511

328,739

44.0 %

Average manpower equivalent1

59,505

50,222

18.5 %


63,790

49,114

29.9 %

Aircraft in service

558

531

5.1 %


n/a

n/a

n/a

Passenger revenue per RPK (€ cents)

9.02

7.41

21.7 %


9.20

7.87

16.8 %

Passenger revenue per ASK (€ cents)

7.38

4.78

54.4 %


7.65

5.63

35.9 %

Cargo revenue per CTK (€ cents)

40.58

42.14

(3.7)%


36.61

44.20

(17.2)%

Fuel cost per ASK (€ cents)

2.32

1.59

46.3 %


2.42

1.53

58.0 %

Non-fuel costs per ASK (€ cents)

5.96

7.78

(23.3)%


5.88

6.49

(9.4)%

Total cost per ASK (€ cents)

8.29

9.36

(11.5)%


8.30

8.02

3.5 %

1  Included in the average manpower equivalent are staff on furlough, wage support and equivalent schemes, including the Temporary Redundancy Plan arrangements in Spain.

 



 

FINANCIAL REVIEW

IAG capacity

The year 2022 was a year of rebuilding capacity, with COVID-19 related travel restrictions eased or removed in most of the Group's markets, allowing the airline industry to substantially restore capacity towards levels seen in 2019, in line with strong pent-up demand for travel. For the year, IAG capacity, measured in available seat kilometres (ASKs), reached 78.0 per cent of 2019. Each airline had a different recovery path, reflecting its respective network, markets served and constraints at hub and other airports. Group capacity increased steadily over the quarters, starting at 65.1 per cent of 2019 in quarter 1 and reaching 86.6 per cent of 2019 in quarter 4.

Proportion of 2019 passenger capacity operated by quarter

Year to December 31, 2022 (per cent)

Q1

Q2

Q3

Q4

Total

Aer Lingus

69.0

85.6

89.9

98.5

86.8

British Airways

57.4

69.1

74.2

79.8

70.3

Iberia

84.7

87.0

84.2

92.8

87.1

Level

30.3

60.7

55.5

51.3

50.5

Vueling

72.9

100.2

102.9

111.3

98.2

Group

65.1

78.0

81.1

86.6

78.0

Capacity operated as a percentage of 2019 by quarter by region

Year to December 31, 2022 (per cent)

Q1

Q2

Q3

Q4

Total

Domestic

90.1

105.1

101.5

104.0

100.6

Europe

63.3

84.7

88.2

96.0

84.0

North America

62.6

83.8

92.0

94.0

83.9

Latin America and Caribbean

90.2

81.0

75.0

85.5

82.8

Africa, Middle East and South Asia

64.3

73.9

79.0

88.8

76.4

Asia Pacific

5.9

9.5

10.4

19.2

11.3

Total network

65.1

78.0

81.1

86.6

78.0

The impact of COVID-19 and related travel restrictions was significantly less than in 2021, when many countries were still in lockdown or had severe travel restrictions in place. The strong recovery in demand and traffic was reflected in the Group's passenger load factor, which reached 81.8 per cent for the year, down just 2.8 points from 2019. The recovery increased across the year, with the passenger load factor in quarter 1 at 72.2 per cent and quarter 4 rising to 83.2 per cent.

Capacity operated out of London Heathrow airport was lower than originally planned at the start of the year. British Airways' capacity was capped by Heathrow Airport and along with limited access to South Asia, capacity reached 70.3 per cent of 2019 levels. In addition, there was an impact from the Omicron variant of COVID-19 in January and February. As global travel restrictions eased, British Airways restarted routes such as Sydney, San Jose in California, Tokyo and Hong Kong. In March 2022 British Airways also launched its new shorthaul Gatwick subsidiary, BA Euroflyer, operating to 35 new destinations in the summer, flying under the British Airways brand.

Iberia's capacity saw increasing recovery over the course of the year, after quarter 1 was negatively impacted by Omicron. Performance improved steadily, especially in the Latin America and Caribbean (LACAR) region, North America and Europe. For the year, Iberia significantly grew its capacity in LACAR versus 2021 by increasing frequencies to destinations such as Mexico and Colombia. Load factor was at 84.6 per cent in this region, only 0.8 points lower than 2019. The increase in capacity versus 2019 was lower in quarter 3 than quarter 2, as in 2019 the seasonal increase in Iberia's schedule to LACAR for the peak summer months was greater than in 2022.

Vueling adopted a new strategy to reduce its seasonality and increase aircraft utilisation during the winter travel months. The airline started seeing the results of this strategy in quarter 4, when Vueling had capacity growth above 2019 levels by 11.3 per cent, despite fewer aircraft in service, with new routes and growth into existing markets such as the Canary Islands.

Aer Lingus was able to restore the majority of its transatlantic services and in addition operated three transatlantic services from its new Manchester Airport base in the UK, all of which started in late 2021. These services represented 13 per cent of Aer Lingus' transatlantic capacity and 8 per cent of its total network in 2022. The Manchester base supported Aer Lingus in restoring longhaul passenger capacity to similar levels to 2019 by the end of the year.

IAG regional capacity

Year to December 31, 2022

ASKs

higher/(lower)

v2019

ASKs

higher/(lower)

v2021

Passenger load
factor

(per cent)

Higher/(lower)

v2019

Higher/(lower)

v2021

Domestic

0.6%

36.9%

85.5

(1.7)pts

10.6pts

Europe

(16.0%)

138.2%

81.5

(2.1)pts

12.4pts

North America

(16.1%)

192.9%

79.3

(4.8)pts

29.9pts

Latin America and Caribbean

(17.2%)

73.5%

85.1

(1.3)pts

15.3pts

Africa, Middle East and South Asia

(23.6%)

130.0%

81.1

(1.9)pts

13.7pts

Asia Pacific

(88.7%)

(7.1%)

84.0

(1.8)pts

44.6pts

Total network

(22.0%)

116.1%

81.8

(2.8)pts

17.3pts



 

Domestic and Europe

Capacity in IAG's Domestic markets recovered to a greater extent than other regions, with capacity slightly higher than 2019 by 0.6 per cent and higher than 2021 by 36.9 per cent. Iberia and Vueling benefited from strong leisure demand to the Canary and Balearic Islands, with capacity increases above 2019. Passenger load factor for the region remained the highest for the Group at 85.5 per cent, down 1.7 points versus 2019 and up 10.6 points versus 2021.

The Group's capacity in Europe was 16.0 per cent lower than 2019; however, it recovered to 138.2 per cent above 2021 as demand for travel increased. Outside of Russia and the countries neighbouring Ukraine, the impact of the conflict has been relatively limited in this region. Vueling expanded its operations from Paris Orly in November 2021, with an additional 18 slots that allowed Vueling to base an additional four aircraft at the airport, taking its total to nine at an airport which is highly slot-constrained. British Airways launched a new route to Nuremberg in Germany and BA Cityflyer launched a number of new routes from London City, including to Barcelona, San Sebastian and Thessaloniki. Iberia reopened its route to Bergen in Norway. Passenger load factor for the region was down 2.1 points versus 2019 to 81.5 per cent and was up 12.4 points versus 2021.

North America

IAG's North American capacity was 16.1 per cent lower than 2019 and was up significantly versus 2021, by 192.9 per cent. The United States Government eased its COVID-19 travel restrictions in November 2021 for vaccinated passengers and removed the need for a COVID-19 test prior to arrival in June 2022. British Airways was able to substantially restore its network to North America by the end of the year by reopening seven routes and adding a new service to Portland, Oregon. During the year, Iberia reopened flights to San Francisco and launched new routes to Washington and Dallas. Aer Lingus reopened six routes to North America during the year. Passenger load factor for the region was down 4.8 points versus 2019 to 79.3 per cent and was up 29.9 points versus 2021.

Latin America and Caribbean (LACAR)

IAG's capacity in LACAR was down 17.2 per cent on 2019 but increased 73.5 per cent on 2021. Demand in this region was strong, with the Group benefiting from pent-up demand as COVID-19 travel restrictions to LACAR were lifted earlier than in other regions. Iberia significantly increased its capacity to LACAR during the year, with Mexico up to three flights daily and increased frequencies for Bogotá, Colombia from 10 to 14 flights per week in February 2022. Passenger load factor was down 1.3 points versus 2019 at 85.1 per cent and was up 15.3 points versus 2021.

Africa, Middle East and South Asia (AMESA)

Capacity to this region was down 23.6 per cent versus 2019 and up significantly versus 2021. British Airways had restored almost 90 per cent of its 2019 capacity to AMESA by quarter 4 and during the year reopened routes to Morocco, Doha and Cape Town. Iberia had strong results in Israel as Tel Aviv recovered faster than expected, and North Africa also performed well with good recovery to Morocco. Vueling launched new routes to Cairo, Alexandria and Amman. Passenger load factor for the region was down 1.9 points versus 2019 at 81.1 per cent and was up 13.7 points versus 2021.

Asia Pacific

During 2022, the Asia Pacific region remained the most capacity-constrained region, as strict travel restrictions continued to severely impact demand. Australia opened its borders to international travel in February 2022, while other countries such as Singapore, Japan and Hong Kong lifted travel restrictions later, while China did not lift restrictions until January 2023. During the year, British Airways restarted routes to Sydney, Hong Kong and Tokyo. Passenger load factor for the region was down 1.8 points versus 2019 at 84.0 per cent and was up 44.6 points versus 2021.

Basis of Preparation

At December 31, 2022, the Group had total liquidity of €13,999 million, comprising cash, cash equivalents and interest-bearing deposits of €9,599 million, €3,284 million of committed and undrawn general facilities, and a further €1,116 million of committed and undrawn aircraft-specific facilities. The Group has been successful in raising financing since the outbreak of COVID-19, having financed all aircraft deliveries in 2020, 2021 and 2022. The Group continues to secure aircraft financing on long-term arrangements.

In its assessment of going concern over the period to June 30, 2024 (the 'going concern period'), the Group has prepared extensive modelling, including considering a plausible but severe downside scenario and further sensitivities to the downside scenario. Having reviewed these scenarios and sensitivities, the Directors have a reasonable expectation that the Group has sufficient liquidity to continue in operational existence over the going concern period, and hence continue to adopt the going concern basis in preparing the consolidated financial statements.

In adopting the going concern basis of accounting, the consolidated financial statements have been prepared without the inclusion of a material uncertainty, which has been removed since the 2021 Annual Report and Accounts. The removal of the material uncertainty arises from the reduction in uncertainty over the going concern period due to both the continued recovery subsequent to the COVID-19 pandemic and the strength of the Group's liquidity at December 31, 2022.

Summary

The Group was able to substantially restore its capacity by the end of the year, having operated a significantly reduced schedule in 2020 and 2021 due to the impact of the COVID-19 pandemic. As capacity was increasingly restored through the year the operating result improved, with the third quarter, which includes the airlines' summer peak seasons, approaching levels of profitability seen in 2019. Fuel prices were significantly higher than both the previous year and 2019 and the airline sector also experienced high supplier price inflation. Due to the strong demand, passenger unit revenues also rose above those in 2019, thus allowing the airlines to recover a substantial portion of the fuel price increase and other cost inflation.

The net result was an operating profit for the year of €1,256 million, versus an operating loss of €2,765 million in 2021. The profit after tax for the year was €431 million, versus a loss of €2,933 million in 2021.



 

Profit/(loss) for the year

Statutory results
€ million

2022

2021

Higher/

(lower) vly

Operating profit/(loss)

1,256

(2,765)

4,021

Profit/(loss) before tax

415

(3,507)

3,922

Profit/(loss) after tax

431

(2,933)

3,364

The biggest driver of the year-on-year changes in revenues and costs was the significant restoration of the airlines' flying programmes, linked to the opening of markets and recovery from the substantial impacts of COVID-19 in 2020 and 2021. Passenger capacity, measured in ASKs, was more than double the level of the previous year, up 116 per cent on 2021. Such an increase has made percentage increases not meaningful and hence they are excluded from the tables below.

Summary of exceptional items

The Group uses Alternative Performance Measures (APMs) to analyse the underlying results of the business excluding exceptional items, which are those that in management's view need to be separately disclosed by virtue of their size or incidence in understanding the entity's financial performance.

In 2020 and 2021, the Group recorded a number of exceptional items arising as a direct result of COVID-19, which during 2021 principally related to the fair value movements on derivatives de-designated from hedge accounting and the reversal of the impairment of certain aircraft stood back up in 2021. In 2021 all items were associated with the impact of COVID-19, except for the termination payment to Globalia.

During the course of 2022 the Group recorded exceptional credits relating to the partial reversal of a fine issued to British Airways in 2010 and the reversal of the impairment of certain aircraft returned to service in 2022.

A summary of the exceptional items relating to 2022 and 2021 is given below, with more detail in the Alternative Performance Measures section, including a breakdown of the exceptional items by operating company.

Income statement line

Exceptional item description

Credit/(charge) to the

Income statement

€ million

2022

2021

Passenger revenue

Discontinuation of hedge accounting for foreign currency derivatives for revenue

-

5

Employee costs

Restructuring costs

-

18

Fuel, oil and emissions costs

Discontinuation of hedge accounting for fuel and associated foreign exchange derivatives

-

154

Engineering and other aircraft costs

Inventory write down and charge in relation to contractual lease provisions

-

7

Property, IT and other costs

Reversal of fine

23

-

Depreciation, amortisation and impairment

Impairment reversal of fleet and associated assets

8

21

Non-operating costs

Termination payment to Globalia

-

(75)

Tax

Tax on exceptional items

(2)

(25)

Excluding the impact of the exceptional items shown above, the operating profit for 2022 was €1,225 million, €4,195 million better than the operating loss of €2,970 million for 2021, reflecting the continued recovery in capacity. The profit after tax and before exceptional items was €402 million, €3,440 million higher than the 2021 loss of €3,038 million.

Alternative Performance Measures (before exceptional items)

€ million

2022

2021

Higher/
(lower) vly

Operating profit/(loss)

1,225

(2,970)

4,195

Profit/(loss) before tax

384

(3,637)

4,021

Profit/(loss) after tax

402

(3,038)

3,440

Revenue

€ million

2022

2021

Higher/
(lower) vly

Passenger revenue 1

19,458

5,835

13,623

Cargo revenue

1,615

1,673

(58)

Other revenue

1,993

947

1,046

Total revenue

23,066

8,455

14,611

For 2021 includes an exceptional credit of €5 million related to discontinued hedge accounting of revenue foreign currency derivatives. Further information is given in the Alternative Performance Measures section.

Total revenue increased €14,611 million versus 2021, of which €782 million was due to favourable exchange rate movements.

Passenger revenue

The increase in passenger revenue of €13,623 million was significantly ahead of the increase in passenger capacity, driven by higher yields and higher load factors than in 2021, linked to the reopening of markets, strong pent-up customer demand and increases in ticket prices to reflect a higher cost environment, with higher fuel prices and supplier price inflation, particularly following the outbreak of the war in Ukraine in February 2022.



 

The passenger load factor for the year of 81.8 per cent was 17.3 points higher than in 2021 and only 2.8 points lower than in 2019, with recovery increasingly seen as the year progressed and the final quarter of the year just 1.1 points lower than in 2019. Passenger yields, measured as passenger revenue per revenue passenger kilometre (RPK) were 21.7 per cent higher than in 2021 and up 14.7 per cent on 2019. The resulting passenger unit revenue (passenger revenue per ASK) for the year was 54.4 per cent higher than in 2021 and 11.0 per cent higher than in 2019. Passenger unit revenue also steadily rose as capacity was restored, being 11.7 per cent lower than 2019 in the first quarter, achieving 21.9 per cent higher than in 2019 in the summer peak of quarter 3 and still 16.4 per cent higher than 2019 in the fourth quarter.

Cargo revenue

Cargo revenue, at €1,615 million, was only 3.5 per cent lower than in 2021, which was a record year for cargo revenue and was linked to the number of additional cargo flights that were operated due to the severely restricted passenger flying programmes. In 2022, as passenger flying schedules were restored, there were significantly fewer cargo-only flights operating, with 502 during the year, compared with 3,788 in 2021. The early part of 2022 experienced global supply chain disruption, which eased across the year as shipping capacity returned, with cargo volumes, measured in cargo tonne kilometres (CTKs), 15.9 per cent higher than the previous year in quarter 1, but lower than in the previous year by 3.5 per cent by quarter 4; total cargo carried for the year was almost the same as in 2021, up 0.3 per cent. Cargo yields, measured as cargo revenue per cargo tonne kilometre, were 3.7 per cent below those of 2021, although double those of 2019. As global supply chain issues eased, cargo yields also declined across the year, with quarter 1 up 6.5 per cent on the previous year but quarter 4 being 17.2 per cent lower than in quarter 4 2021. The yield environment is expected to moderate, along with global air cargo volumes, in 2023.

Other revenue

The largest Other revenue streams for the Group are BA Holidays, Iberia's Maintenance, Repair and Overhaul (MRO) and Handling businesses and IAG Loyalty. Other revenue from activities linked to the volume of passenger flying rose significantly with larger flying programmes, resulting in Other revenue more than double the level in 2021 and 3.7 per cent higher than that of 2019. BA Holidays bookings benefited from an increase in British Airways' flying schedule and the strong demand for leisure travel. Iberia's third party MRO and handling businesses improved, reflecting higher activity. IAG Loyalty improved (on both 2019 and 2021), with a significant growth in the number of Avios issued linked to its partnerships, including with American Express, resulting in an increase in customers collecting Avios and with higher average numbers of Avios collected per customer. IAG Loyalty also launched a new partnership with Barclays in 2022.

Operating costs

Total expenditure on operations rose from €11,220 million in 2021 to €21,810 million in 2022, linked to the higher volume of flights and passenger numbers, together with adverse foreign currency movements of €1,104 million, which were mainly due to the strengthening of the US dollar against the euro and pound sterling.

Employee costs

€ million

2022

2021

Higher/

(lower) vly

Employee costs 1

4,647

3,013

1,634

For 2021 includes an exceptional credit of €18 million related to the release of restructuring provisions. Further information is given in the Alternative Performance Measures section.

The rise in Employee costs to €4,647 million versus €3,013 million in 2021 reflected an increase in employee numbers as the Group restored capacity and the end of the various government schemes to support employees and businesses during the most intense periods of the COVID-19 pandemic. The use of government wage support and related schemes in 2022 was limited to a small residual amount of €14 million, all in the first quarter, versus €555 million for the year in 2021. The Group agreed pay deals with the substantial majority of its bargaining groups and employees during 2022.

Fuel, oil and emissions costs

€ million

2022

2021

Higher/

(lower) vly

Fuel, oil costs and emissions charges 1

6,120

1,781

4,339

For 2021 includes an exceptional credit of €154 million related to the discontinuation of hedge accounting for fuel derivatives and fuel foreign currency derivatives as a result of the impact of COVID-19. Further information is given in the Alternative Performance Measures section.

Fuel, oil and emissions charges were up significantly on 2021, up €4,339 million, reflecting increased flying volumes and the significant rise in commodity prices for jet fuel, most notably following the Russian invasion of Ukraine early in the year. Foreign exchange movements accounted for €505 million of the increase, principally due to the average US dollar exchange rates being stronger versus the euro and pound sterling in 2022 compared with 2021. Average spot prices in 2022 were 80 per cent higher than the previous year, with prices at the end of 2022 39 per cent higher than at the start of the year.


Jet fuel price trend ($ per metric tonne)



 

Fuel hedging

The Group seeks to reduce the impact of volatile commodity prices by hedging prices in advance. The Group's fuel hedging policy was approved by the Board in May 2021 and is designed to provide flexibility to respond to both significant unexpected reductions in travel demand or capacity and/or material or sudden changes in jet fuel prices. The policy allows for differentiation within the Group, to match the nature of each operating company, and the use of call options for a proportion of the hedging undertaken. The policy operates on a two-year rolling basis, with hedging of up to 60 per cent of anticipated requirements in the first 12 months and up to 30 per cent in the following 12 months, and with flexibility for low-cost airlines within the Group to adopt hedging up to 75 per cent in the first 12 months. For all Group airlines, hedging between 25 and 36 months ahead is only undertaken in exceptional circumstances.

Fuel consumption

The Group continued to benefit from reduced fuel consumption, associated with the investment in new fleet, together with the early retirement of older aircraft, including the retirement of 15 Airbus A340-600 and 32 Boeing 747-400 aircraft in quarter 2 of 2020. Increasing passenger load factors versus 2021 also contributed to reduced carbon intensity.

Supplier costs

€ million

2022

2021

Higher/
(lower) vly

Handling, catering and other operating costs

2,971

1,308

1,663

Landing fees and en-route charges

1,890

923

967

Engineering and other aircraft costs 1

2,101

1,085

1,016

Property, IT and other costs 2

950

758

192

Selling costs

920

434

486

Currency differences

141

(14)

155

Total Supplier costs

8,973

4,494

4,479

For 2021 includes an exceptional credit of €7 million related to the reversal, due to adjusted fleet plans, of a 2020 inventory write-down and a charge relating to contractual lease provisions. Further information is given in the Alternative Performance Measures section.

Includes an exceptional credit of €23 million related to the partial reversal of the historical fine, plus accrued interest, initially issued by the European Commission to British Airways for involvement in cartel activity and recognised as an exceptional charge in 2010. Further information is given in the Alternative Performance Measures section.

Total Supplier costs rose by €4,479 million to €8,973, double the level of 2021, reflecting the higher capacity operated. Supplier costs were impacted by higher levels of inflation, although the impact was partially mitigated by the Group's procurement initiatives.

Property, IT and other costs include an exceptional credit of €23 million, due to the partial reversal of a fine originally issued to British Airways in 2010.

Supplier costs include a €141 million currency differences charge in 2022 versus a €14 million currency differences credit in 2021; currency differences mainly reflect the retranslation of current financial assets and liabilities at the closing foreign exchange rate for the period, which in 2022 reflects the strengthening of the US dollar against both the euro and the pound sterling over the course of 2022. Total foreign currency impacts on Supplier costs, including currency differences, were €526 million adverse versus 2021.

Ownership costs

Ownership costs include depreciation, amortisation and impairment of tangible and intangible assets, including right of use assets.

€ million

2022

2021

Higher/

(lower) vly

Ownership costs 1

2,070

1,932

138

Includes an exceptional credit of €8 million (2021: exceptional credit of €21 million) related to the partial reversal of an impairment relating to fleet assets that were previously stood down in 2020. Further information is given in the Alternative Performance Measures section.

The increase in ownership costs versus 2022 is mainly driven by the increase in the Group's fleet of aircraft, linked to the restoration of capacity and 27 deliveries of new aircraft in the year. An exceptional credit of €8 million was recorded in the year, reflecting the partial reversal of an impairment related to six aircraft previously stood down by Vueling in 2020 on the assumption these aircraft were no longer required and would not return to service; in 2022 it was determined the aircraft are required for Vueling's flying programme and they were stood up and re-entered service.

Aircraft fleet

In 2022, the in-service fleet increased by 27 aircraft, with 25 of the new aircraft delivered in 2022 in service by the end of the year; the remaining two entered service early in 2023. During the year 12 aircraft were removed from service, pending lease return or disposal, and 14 aircraft re-entered service, having previously been stood down from active service.

Number of fleet

Number of fleet in-service

2022

2021

Higher/

(lower) vly

Shorthaul

381

363

5.0%

Longhaul

177

168

5.4%


558

531

5.1%

In addition to the in-service fleet, there were a further 18 aircraft not in service, made up of 16 aircraft held by the Group pending disposal or lease return and two aircraft delivered late in 2022 and not in service by December 31, 2022.



 

Exchange rate impact

Exchange rate impacts are calculated by retranslating current year results at prior year exchange rates. The reported revenues and expenditures are impacted by the translation of currencies other than euro to the Group's reporting currency of euro, primarily British Airways and IAG Loyalty. From a transaction perspective, the Group performance is impacted by the fluctuation of exchange rates, primarily exposure to the pound sterling, euro and US dollar. The Group typically generates a surplus in most currencies in which it does business, except the US dollar, for which capital expenditure, debt repayments and fuel purchases typically create a deficit which is managed and partially hedged. The Group hedges its economic exposure from transacting in foreign currencies but does not hedge the translation impact of reporting in euro.

Overall, in 2022 the Group operating profit before exceptional items was reduced by €322 million due to adverse exchange rate impacts.

Exchange rate impact before exceptional items

€ million

Favourable/(adverse)


2022


Translation impact

Transaction impact

Total exchange impact

Total exchange impact on revenue

97

685

782

Total exchange impact on operating expenditures

(129)

(975)

(1,104)

Total exchange impact on operating profit

(32)

(290)

(322)

 

€ million

Favourable/(adverse)


2021


Translation impact

Transaction impact

Total exchange impact

Total exchange impact on revenue

220

(163)

57

Total exchange impact on operating expenditures

(251)

292

41

Total exchange impact on operating loss

(31)

129

98

The exchange rates of the Group were as follows:


2022

2021

Higher/ (lower) vly

Translation - Balance sheet




£ to €

1.14

1.18

(2.8)%

Translation - Income statement (weighted average)




£ to €

1.17

1.15

1.9%

Transaction (weighted average)




£ to €

1.17

1.15

1.9%

€ to $

1.05

1.20

(12.6)%

£ to $

1.23

1.38

(10.8)%

Total net non-operating costs

Total net non-operating costs for the year were €841 million, versus €742 million in 2021. The main driver of the increase was Finance costs, which were up €187 million, reflecting a full year of interest on the debt raised in 2021 and the impact of higher interest rates on the Group's floating rate debt.

The net change in the fair value of financial instruments of €81 million reflects fair value adjustments at December 31, 2022 of IAG's convertible bond maturing in 2028, partially offset by the fair value movements on the convertible loan issued to Globalia during quarter 2 and converted into a 20 per cent equity stake in Air Europa Holdings in quarter 3. In 2021 non-operating costs included a €89 million non-cash credit relating to movements in the fair value of the €825 million IAG convertible bond.

Other non-operating credits of €132 million (2021: €70 million) represent net gains on derivative contracts for which hedge accounting is not applied; in 2021 the credit of €70 million is net of an exceptional non-operating charge of €75 million, relating to a settlement agreement reached with Globalia to terminate the previous agreements signed in 2019 and 2021 for Iberia to acquire the issued share capital of Air Europa Holdings.

Tax

The tax credit on the profit for the year was €16 million (2021: tax credit of €574 million), and the effective tax rate was negative 3.9 per cent (2021: 16.4 per cent).

The substantial majority of the Group's activities are taxed where the main operations are based: in the UK, Spain and Ireland, which had statutory corporation tax rates of 19 per cent, 25 per cent and 12.5 per cent respectively for 2022. The expected effective tax rate for the Group is determined by applying the relevant corporation tax rate to the profits or losses of each jurisdiction.

The geographical distribution of profits and losses in the Group results in the expected tax rate being 24.6 per cent for the year to December 31, 2022. The difference between the actual effective tax rate of negative 3.9 per cent and the expected tax rate of 24.6 per cent is primarily due to the recognition of previously unrecognised tax losses in the Group's Spanish companies.

The profit after tax for the year was €431 million (2021: loss of €2,933 million).

On March 3, 2021 the UK Chancellor of the Exchequer announced that legislation would be introduced in the Finance Bill 2021 to set the main rate of corporation tax at 25 per cent from April 2023. On May 24, 2021 the Finance Bill was substantively enacted, which has led to the remeasurement of deferred tax balances and will increase the Group's future current tax charge accordingly. As a result of the remeasurement of deferred tax balances in UK entities, a credit of €17 million (2021: €78 million credit) is recorded in the Income statement and a charge of €10 million (2021: €61 million credit) is recorded in Other comprehensive income.

On October 8, 2021 the Irish Government announced that it would increase the rate of corporation tax for certain multinational businesses to 15 per cent with effect from 2023. This expected tax rate change has not been reflected in these results because it has not yet been substantively enacted.

The Group is monitoring the OECD's proposed two-pillar solution to address the tax challenges arising from the digitalisation of the economy. This proposed reform to the international tax system addresses the geographical allocation of profits for the purposes of taxation, and is designed to ensure that multinational enterprises will be subject to a minimum 15 per cent effective tax rate. On December 15, 2022, the Council of the European Union formally adopted the EU Pillar Two Directive. Member States are expected to transpose the Directive into national law by the end of 2023. The Group is continuing to assess the implications of the reform and these will be determined when the relevant legislation is finalised.

Operating profit and loss performance of operating companies


British Airways

£ million

Aer Lingus
€ million


Iberia
€ million


Vueling
€ million

Statutory

2022

Higher/
(lower) vly


2022

Higher/
(lower) vly


2022

Higher/
(lower) vly


2022

Higher/
(lower) vly

Passenger revenue

9,215

6,894


1,679

1,372


4,042

2,318


2,584

1,573

Cargo revenue

1,060

(37)


80

15


347

(47)


-

-

Other revenue

755

474


10

6


1,122

456


14

9

Total revenue

11,030

7,331


1,769

1,393


5,511

2,727


2,598

1,582

Fuel, oil costs and emissions charges

2,929

2,099


539

450


1,313

794


739

541

Employee costs

2,100

629


393

213


1,161

438


370

170

Supplier costs

4,595

2,407


646

341


2,284

872


1,088

464

Ownership costs 1

1,084

105


146

6


371

21


206

(21)

Operating profit

322

2,091


45

383


382

602


195

428

Operating margin

2.9%

50.7 pts


2.6%

92.6 pts


6.9%

14.8 pts


7.5%

30.5 pts













Alternative Performance Measures 2












Passenger revenue

9,215

6,899


1,679

1,371


4,042

2,318


2,584

1,573

Cargo revenue

1,060

(37)


80

15


347

(47)


-

-

Other revenue

755

474


10

6


1,122

456


14

9

Total revenue before exceptional items

11,030

7,336


1,769

1,392


5,511

2,727


2,598

1,582

Fuel, oil costs and emissions charges

2,929

1,990


539

440


1,313

785


739

532

Employee costs

2,100

618


393

213


1,161

433


370

170

Supplier costs

4,614

2,426


646

341


2,284

872


1,088

457

Ownership costs 1

1,084

99


146

6


371

21


214

(26)

Operating profit before exceptional items

303

2,203


45

392


382

616


187

449

Operating margin before exceptional items

2.7%

54.1 pts


2.6%

94.7 pts


6.9%

15.3 pts


7.2%

33.0 pts

Ownership costs reflects Depreciation, amortisation and impairment.

Further detail is provided in the Alternative Performance Measures section.

Review by operating company

All four of the airline operating companies saw a return to profitability in 2022, following the significant negative impacts of COVID-19 in 2020 and 2021. The shape of each airline's recovery was linked to the pace of the easing of government travel restrictions and re-opening of travel in their key markets, together with operating constraints at their hubs and other airports.

British Airways operated the lowest passenger capacity relative to 2019, with ASKs at 70.3 per cent of 2019, partly linked to constraints at London Heathrow Airport. Aer Lingus operated at 86.8 per cent of 2019, including the impact of a new base at Manchester Airport in the UK, with Iberia at 87.1 per cent and Vueling at 98.2 per cent, including its expanded operation at Paris Orly.

Operating profit/(loss) before exceptional items


2022

2021

2019

British Airways (£ million)

303

(1,900)

1,890

Aer Lingus (€ million)

45

(347)

276

Iberia (€ million)

382

(234)

497

Vueling (€ million)

187

(262)

240

Iberia and Vueling saw the greatest return to profit versus 2019, linked to strong demand in the Domestic, Europe and LACAR regions. Aer Lingus saw an increasing recovery through the year and a strong quarter 3, in which there was strong pent-up demand for summer travel. British Airways also experienced rising profitability through the year, strong pent-up demand and significantly increased unit revenues versus 2019 in the second half of the year, as load factors improved and average yields rose.

All of the airlines experienced significantly higher fuel prices than in 2019 or 2021, although the impact was partly mitigated by the Group's hedging policy. Supplier costs were impacted by the high levels of price inflation and costs to restart the business following COVID-19 restrictions, with the impact lessened by procurement and transformation initiatives.

IAG Loyalty showed significant growth in its non-airline partner revenue streams, together with benefiting from the recovery in the Group's airlines, leading to operating profit before exceptional items of £240 million (€282 million), up from £113 million (€131 million) in 2021.



 

Capital expenditure

In 2022 the Group increased investment in its aircraft fleets, customer products and services, IT infrastructure and sustainability, as the business recovered, with capital expenditure of €3,875 million, compared with €744 million in 2021.

During 2022 the Group took delivery of aircraft delayed from 2020 and 2021 due to the impact of COVID-19, together with making pre-delivery payments for future aircraft deliveries, which had also been deferred. In 2022 the Group took delivery of 27 aircraft: 10 for British Airways, 15 for Iberia and two for Aer Lingus. Of these deliveries, 25 were aircraft acquired from Airbus and Boeing and two were leased directly from aircraft lessors. This contrasts with 2021, in which only five A320neo family aircraft were acquired from Airbus, with the remainder of the 11 deliveries in the year on direct lease arrangements from aircraft lessors.

Aircraft deliveries

2022

2021

Airbus A320 family

12

8

Airbus A330

-

1

Airbus A350

12

-

Boeing 787-10

3

-

Embraer E190

-

2

Total

27

11

Aircraft orders

The Group exercised options for 22 Airbus A320neo family aircraft in the first half of 2022, for delivery in 2024 and 2025. The Group entered into direct leasing contracts for and took delivery of two Airbus A320neo aircraft in the year. In October 2022 an Extraordinary Shareholders' Meeting approved the acquisition of a further 37 Airbus A320neo family aircraft and 50 Boeing 737 aircraft. The aircraft will replace Airbus A320ceo family aircraft and are up to 20 per cent more fuel-efficient than the aircraft they replace. These aircraft are expected to be delivered between 2024 and 2028.

Aircraft future deliveries at December 31

2022

2021

Airbus A320/A321

91

42

Airbus A321 XLR

14

14

Airbus A350

12

26

Boeing 737

50

-

Boeing 777-9

18

18

Boeing 787-10

7

10

Total

192

110

Following the orders placed in 2022, at December 31, 2022 the Group held options to acquire a further 246 aircraft from Airbus and Boeing.

Capital commitments

Capital expenditure authorised and contracted for at December 31, 2022 amounted to €13,749 million (2021: €10,911 million), with the increase attributable to the net of the aircraft deliveries and orders described above. Most of these commitments are denominated in US dollars.

The Group has certain rights to cancel commitments in the event of significant delays to aircraft deliveries caused by the aircraft manufacturers. No such rights had been exercised as at December 31, 2022.

Working capital

The Group saw strong booking inflows for travel in 2023 during the second half of 2022, reflecting expanded flying programmes as the recovery from COVID-19 continued, with capacity in 2023 expected to approach that of 2019 and with higher average yields. At December 31, 2022, Deferred revenue on ticket sales, which includes loyalty points (Avios), had risen €1,092 million on the previous year to close at €7,644 million. Of this balance, €7,318 million is included in current liabilities and €326 million within non-current liabilities, associated with the renewal of IAG Loyalty's multi-year contract with American Express in 2020.

Sales in advance of carriage, related to passenger ticket sales, were up €1,282 million versus 2021, at €5,014 million. Vouchers issued for future travel in lieu of a cash refund represented 13 per cent of sales in advance of carriage.

The value of loyalty points (Avios) issued and yet to be recognised in revenue was down €190 million versus 2021 at €2,630 million, reflecting the net impact of the unwind of the remainder of a pre-payment from American Express made in 2020 and the balance of Avios issued versus redeemed in 2022.

Trade receivables rose by €595 million to €1,330 million, related to the increased flying programmes and higher yields.

Trade and other payables rose by €1,497 million to €5,209 million, again due to the significantly increased flying schedule and cost inflation. In quarter 4, 2022, the period to which the Trade and other payables mainly relates, the Group operated 86.6 per cent of 2019 passenger capacity, versus 58.3 per cent operated in quarter 4 of 2021.

Funding and debt

IAG's long-term objectives when managing capital are: to safeguard the Group's ability to continue as a going concern and its long-term viability; to maintain an optimal capital structure in order to reduce the cost of capital; and to provide sustainable returns to shareholders. In November 2018, S&P and Moody's assigned IAG with a long-term investment-grade credit rating with a stable outlook; IAG's credit ratings remained investment-grade up until the outbreak of COVID-19. The impact of COVID-19 on the Group and wider airline industry led to ratings falling by three notches for S&P and two notches for Moody's. The Group's current ratings (at February 23, 2023) are: S&P: BB, Moody's: Ba2.



 

Debt and capital

The Group monitors leverage using net debt to EBITDA before exceptional items, in addition to closely following measures used by the credit ratings agencies, including those based on total borrowings (gross debt).

The Group had previously set a target of net debt to EBITDA before exceptional items below 1.8 times.

In 2022, net debt to EBITDA before exceptional items was 3.1 times, compared with 1.4 times in 2019, reflecting a partial recovery in operating profitability in 2022 following the significant impact of COVID-19 in 2020 and 2021, together with the impact of debt raised during the pandemic to boost liquidity and resilience. In 2021, EBITDA was negative, rendering the net debt to EBITDA before exceptional items ratio not meaningful; the calculation for 2021 resulted in net debt to EBITDA before exceptional items of minus 11.5 times.

Net debt

€ million

2022

2021

Higher / (lower)

Debt

19,610

15,679

3,931

Cash, cash equivalents and interest-bearing deposits

(7,943)

(5,917)

(2,026)

Net debt at January 1

11,667

9,762

1,905

Increase in cash net of exchange

(1,656)

(2,026)

370

Movements in total borrowings




Net cash outflow from repayments of borrowings and lease liabilities

(2,505)

(2,265)

(240)

Net cash inflow from new borrowings

1,436

4,817

(3,381)

Non-cash impact of new leases

1,017

518

499

(Decrease)/increase in net debt from regular financing

(52)

3,070

(3,122)

Exchange and other non-cash movements

426

861

(435)

Net debt at December 31

10,385

11,667

(1,282)

Net debt reduced by €1,282 million, principally due to the recovery in profitability and positive working capital from bookings into 2023, partially offset by the capital expenditure of €3,875 million. Gross debt increased by €374 million during the year to €19,984 million. Repayments exceeded new borrowings by €1,069 million, reflecting scheduled repayments of aircraft debt, new aircraft debt raised during the year and the repayments of non-aircraft financing as detailed below. Gross debt is subject to foreign exchange translation movements, as the majority of the Group's aircraft debt is denominated in US dollars. Over the course of 2022 the euro and pound sterling weakened against the US dollar which increased gross debt by €518 million.

Cash

Cash, cash equivalents and interest-bearing deposits

€ million

2022

2021

Higher/ (lower)

British Airways

2,877

1,986

891

Iberia

2,389

761

1,628

Vueling

766

441

325

Aer Lingus

375

228

147

IAG Loyalty

993

954

39

IAG and other Group companies

2,199

3,573

(1,374)

Cash, cash equivalents and interest-bearing deposits

9,599

7,943

1,656

British Airways, Iberia, Vueling and Aer Lingus all experienced significant positive operating cash flow in the year. The reduction in the balance of cash, cash equivalents and interest-bearing deposits in IAG and other Group companies reflects the repayment of unsecured debt in IAG and intragroup loan payments to Iberia and Aer Lingus.

Debt

Long-term aircraft financing was successfully secured during 2022 for all 27 of IAG's aircraft delivered in the year; financing for five of these aircraft for British Airways will be drawn in 2023. Committed aircraft financing facilities at December 31, 2022 includes an amount of €571 million for these five aircraft, together with one further Airbus A320neo, which will be delivered in 2023. Seven aircraft were financed via operating leases, reported as Lease liabilities, with five Iberia A350-900s financed through sale and leaseback transactions subsequent to the delivery of the aircraft and two Aer Lingus A320neos leased directly from aircraft lessors. All of British Airways' 10 deliveries and the remaining 10 Iberia aircraft were financed through finance leases, reported as Asset financed liabilities.

During 2022 IAG repaid its €500 million convertible bond originally issued in 2015 and Aer Lingus repaid €100 million of its loan from the Ireland Strategic Investment Fund (ISIF), thereby increasing the amount of its ISIF facility that is undrawn and available to draw in the future, if needed, to €300 million.

The maturity profile of the Group's Bank and other loans includes, in 2023, the maturity of a €500 million unsecured bond issued in 2019, along with the first amortisation of the syndicated loans to Iberia and Vueling drawn in 2020, which were partly backed by Spain's Instituto de Crédito Oficial (ICO). In 2026, the main maturity is a €2.3 billion (£2.0 billion) syndicated loan to British Airways drawn in 2021, which was partly backed by UK Export Finance (UKEF).

Maturity profile of Bank and other loans

€ million

2023

2024

2025

2026

After
2026
1

Payment of debt principal

715

287

875

2,738

2,096

Includes the €825 million IAG 2028 convertible bond.



 

Equity

No equity was raised or repaid during the year, nor in 2021.

Liquidity facilities

During the year, the Group extended its facility with Ireland's ISIF for Aer Lingus by €200 million, bringing the total facility to €350 million. At December 31, 2022 €50 million had been drawn and €300 million was undrawn.

The Group also exercised a one-year extension to the availability of its $1,755 million (€1,654 million) Revolving Credit Facility (RCF), which now has committed availability until March 2025. The facility was originally agreed and executed with a syndicate of banks in 2021, with availability for three years, plus two consecutive one-year extension periods, at the discretion of the lenders. The facility is available to Aer Lingus, British Airways and Iberia, each of whom has a separate borrower limit within the overall facility. Any drawings under the facility would be secured against eligible unencumbered aircraft assets and/or take-off and landing rights at London Heathrow or London Gatwick airports. This facility was undrawn at December 31, 2022.

The other major general facility for the Group is a £1,000 million (€1,143 million) committed credit facility for British Airways, partially guaranteed by UKEF, which was agreed and executed in 2021 and matures in 2026. This facility was also undrawn at December 31, 2022.

The Group also has certain other committed and undrawn general facilities, bringing total committed and undrawn general facilities at December 31, 2022 to €3,284 million (2021: €2,917 million).

The Group also holds €1,116 million of committed and undrawn aircraft financing facilities (2021: €1,126 million), including €620 million remaining undrawn from committed and undrawn sustainability-linked aircraft financing for British Airways agreed and committed in 2022 and to be drawn in 2023. The Group also has certain backstop financing arrangements, which can be used against certain future aircraft deliveries.

In total, the Group had €4,400 million of committed and undrawn general and aircraft facilities as at December 31, 2022 (2021: €4,043 million).

The facilities values above do not include the balance of certain shorter-term working capital facilities available to the Group's operating companies.

Dividends

No dividends were proposed or paid in 2022 (2021: nil).

Liquidity and cash flow

Total liquidity, measured as cash, cash equivalents and interest-bearing deposits of €9,599 million and committed and undrawn general and aircraft facilities of €4,400 million, was €13,999 million at December 31, 2022. This represented an increase of €2,013 million versus total liquidity of €11,986 million at the end of 2021.

Cash flow

The Group saw strong cash flow generation in 2022, mainly linked to a return to profitability and positive working capital movements, including an increase in bookings for future travel as the airlines' schedules increased and yields rose in the light of higher fuel prices and inflation. The resulting net cash flows from operating activities of €4,835 million was significantly higher than the net cash outflows from investing and financing activities, leading to an increase in Cash, cash equivalents and interest-bearing deposits of €1,656 million to
€9,599 million.

Condensed cash flow summary

€ million

2022

2021

Movement

Net cash flows from operating activities

4,835

(141)

4,976

Net cash flows from investing activities

(3,463)

(181)

(3,282)

Net cash flows from financing activities

(56)

2,235

(2,291)

Net increase in cash and cash equivalents

1,316

1,913

(597)

Net foreign exchange differences

(12)

205

(217)

Cash and cash equivalents at January 1

7,892

5,774

2,118

Cash and cash equivalents at year end

9,196

7,892

1,304

Interest-bearing deposits maturing after more than three months

403

51

352

Cash, cash equivalents and interest-bearing deposits

9,599

7,943

1,656

Many of the significant cash flow items are already explained above, including in the sections covering operating costs, non-operating costs, capital expenditure, working capital and other initiatives and funding. Further detail of other movements is provided below.



 

Cash flows from operating activities

€ million

2022

2021

Movement

Operating profit/(loss)

1,256

(2,765)

4,021

Depreciation, amortisation and impairment

2,070

1,932

138

Movement in working capital

1,884

1,634

250

Payments related to restructuring

(81)

(161)

80

Pension contributions net of service costs

(5)

(15)

10

Provision and other non-cash movements

627

305

322

Settlement of derivatives where hedge accounting has been discontinued

-

(497)

497

Interest paid

(824)

(640)

(184)

Interest received

42

3

39

Tax (paid)/received

(134)

63

(197)

Net cash flows from operating activities

4,835

(141)

4,976

Restructuring payments principally include payments in Spain relating to redundancy programmes in Iberia agreed prior to 2020.

In December 2022, British Airways agreed the valuation of its main defined benefit pension scheme, the New Airways Pension Scheme (NAPS), with the scheme's Trustee, which resulted in a deficit as at the valuation date of March 31, 2021 of £1,650 million (€1,887 million). As at December 31, 2022, the scheme was over 100 per cent funded on the 2021 valuation basis and an overfunding protection mechanism agreed with the NAPS Trustee meant that no contributions were due. Deficit contributions could resume should the funding level fall in the future. Previously British Airways had agreed deferrals of deficit contributions with the NAPS Trustee from October 2020 to September 2021. From October 2021 to December 2022, an overfunding mechanism agreed as part of the previous triennial valuation led to no deficit contributions being required. The pension cash flows shown above represent payments to various smaller schemes within the Group.

Provision and other non-cash movements mainly relate to restoration and handback provisions for leased aircraft and ETS allowances.

The cash outflow for the Settlement of derivatives where hedge accounting has been discontinued of €497 million in 2021 represented cash payments relating to overhedging of fuel and foreign exchange in 2020, linked to the significant fall in airline capacity in 2020, due to the impact of COVID-19.

The increase in interest expense in 2022 reflects the full year impact of additional debt raised in 2021 and higher interest rates. Approximately one quarter of the Group's total debt is on floating rate arrangements.

Cash flows from investing activities

€ million

2022

2021

Movement

Acquisition of PPE and intangible assets

(3,875)

(744)

(3,131)

Sale of PPE, intangible assets and investments

837

544

293

(Increase)/decrease in other current interest-bearing deposits

(351)

91

(442)

Payment to Globalia for convertible loan

(100)

-

(100)

Other investing movements

26

(72)

98

Net cash flows from investing activities

(3,463)

(181)

(3,282)

The €837 million of cash inflow from Sale of property, plant and equipment and intangible assets and investments is mainly due to the aircraft sale and leaseback transactions discussed in the Funding and debt section above, together with the disposal of surplus assets, principally aircraft being retired from service. The increase from 2021 is due to the value of aircraft financed through sale and leaseback transactions being higher, as in 2022 it includes five wide-bodied A350-900 aircraft.

In March of 2022 IAG entered into a convertible loan with Globalia for €100 million, convertible into an equity stake in Air Europa Holdings of 20 per cent. The conversion option was exercised in August 2022.

Cash flows from financing activities

€ million

2022

2021

Movement

Proceeds from borrowings

1,436

4,817

(3,381)

Repayment of borrowings

(1,050)

(784)

(266)

Repayment of lease liabilities

(1,455)

(1,481)

26

Settlement of derivative financial instruments

1,036

(268)

1,304

Acquisition of treasury shares and other financing movements

(23)

(49)

26

Net cash flows from financing activities

(56)

2,235

(2,291)

Proceeds from borrowings reflect the cash inflows from aircraft financing as described in the Funding and debt section above. There was no non-aircraft financing raised in 2022, whereas in 2021 British Airways raised £2.0 billion (€2.3 billion) through a loan guaranteed by the UKEF, Aer Lingus drew a further €75 million from ISIF and the Group raised €1.2 billion through unsecured bonds and issued a €825 million convertible bond.

Repayments of borrowings and lease liabilities includes the repayment of IAG's 2015 €500 million convertible bond, €100 million to the Ireland's ISIF and the principal element of ongoing lease payments.

Settlement of derivative financial instruments relates to settlements of foreign exchange instruments taken out to hedge long-term debt payments, including US dollar lease payments. The significant inflow in 2022 relates to the strengthening of the US dollar versus the euro and pound sterling.

STRATEGIC FRAMEWORK

IAG's purpose in the world is to connect people, businesses and countries, and we hold innovation, commitment, care for people, responsibility, pragmatism, execution, ambition and resilience as key values that enable us to fulfil our purpose.

We create value through a unique model that enables our airlines to perform in the long-term interests of our customers, people, shareholders and society - knowing that success in each reinforces the others. 

IAG, as the parent company, actively engages and works collaboratively with its portfolio of operating companies, sharing best practices and talent, overseeing intra-Group coordination and managing central functions that drive synergies and value to the Group. Its independence from the operating companies enables IAG to implement a long-term strategy for the Group that is aligned with our purpose and values, as well as set performance targets for the operating companies, track their progress and efficiently allocate capital within the Group.

IAG's strategic priorities are:

Strengthening a portfolio of world-class brands and operations;

Growing global leadership positions; and

Enhancing IAG's central platform.

These strategic priorities are achieved through:

An unrivalled customer proposition;

Value-accretive and sustainable growth; and

Efficiency and innovation

Our commitment to sustainability underpins our strategy - it is an important part of how we do business. As a Group, we have clear processes in place to drive our sustainability strategy forward, and remain committed to using 10 per cent SAF by 2030 and to reach the goal of net zero CO2 emissions for our Group and its supply chain by 2050. We also continue to prioritise other key sustainability issues, including waste management, stakeholder engagement and welfare.

PRINCIPAL RISKS AND UNCERTAINTIES

The Group has continued to maintain its framework and processes to identify, assess and manage risks. It continually reviews how its principal risks are evolving and how the severity or likelihood of occurrence of risks change, given the Group's exposure to the external risk environment, particularly weaknesses in the resilience of the aviation sector's supply chain and inflation impacts, combined with an ambitious transformation and change agenda. 

Throughout 2022, the Group has reviewed the macroeconomic and geopolitical landscape to identify emerging risks and the implications of market uncertainty and impacts on inflation, interest and exchange rates have been reflected in the principal risk assessments. By continuing to develop the Group's assessment of the interdependencies of risks; scenario planning to quantify risk impact under different combinations and assumptions; and considering the risks within the Group's risk environment that have increased either as a result of the external factors or as a result of decisions made by the Group, the Board and management are better informed and can react more quickly. Where further action has been required the Board has considered potential mitigations and, where appropriate or feasible, the Group has implemented or confirmed plans that would address those risks or retain them within the Board's determined Group risk appetite.

The principal risks and uncertainties affecting the Group, detailed on pages 100 to 121 of the 2021 Annual Report and Accounts, remain relevant at the date of this report. In assessing its principal risks, the Group has considered operational resilience, competition and market risk changes, the status of the financial markets and access to finance, people and culture across the Group and customer satisfaction and trust. Management remains focused on mitigating these risks at all levels in the business and investing to increase resilience whilst recognising that such risk events may not be so easily planned for and that mitigations are more responsive in nature. The Board reviews and challenges management on the risk landscape in the light of changes that influence the Group and the aviation industry. 

No new principal risks were identified through the risk management assessment discussions across the business in the year.  One risk has been reconsidered as part of the reviews in the year and has been reframed as 'Operational resilience' from 'Event causing significant network disruption' to recognise that the risk to the operational resilience of the business may be challenged by multiple combining events with significant network and customer impact and these may be more significant to the Group where they persist over a longer time frame compared to one-off events. 

From the risks identified in the 2021 Annual Report and Accounts, the main risks that continue to be a key area of focus, due to their potential implications for the Group, are outlined below. Business responses implemented by management and that effectively mitigate or reduce the risk are reflected in the Group's latest business plan and related downside scenarios.

Brand and customer trust. Operational resilience and customer satisfaction build brand value and customer trust. Reliability, including on-time performance, is a key element of the brands and of each customer's experience. The Group is pro-actively addressing its customer service processes and systems to deliver excellent customer service and support customers through disruption, which will help ensure that our customers choose to fly with the Group's airlines.

Critical third parties in the supply chain. The aviation sector has been affected by global supply chain disruption which has impacted aircraft deliveries, component availability, resource availability and/or threat of employee industrial action in critical third parties and airport services. Operational staffing shortages at hubs and airports have required capacity adjustments. The Group has pro-actively assessed its schedules to ensure that our customers have sufficient notice of any changes to their flight plans wherever possible and within our control. The Group continues to work with all critical suppliers to understand any potential disruption within their supply chains from either a shortage of available resource or production delays which could delay the availability of new fleet, engines or critical goods or services. It remains reliant on the resilience within the operations of air traffic control airspace services to deliver its flight schedules as planned.

Cyber attack and data security. The threat of ransomware attacks on critical infrastructure and services has increased as a result of the war in Ukraine and the potential for state sponsored cyber attacks. The Group continues to focus its efforts on appropriate monitoring to mitigate the risk.

Debt funding. Access to the unsecured debt markets is currently restricted for sub investment grade organisations which may reduce the external funding options available to the Group where it chooses to re-finance upcoming maturities. Rising interest rates also increase the cost for the Group for existing floating rate debt, which represented approximately 25 per cent of the Group's debt at December 31, 2022, as well as for new financing. The Group continues to successfully secure aircraft financing, having secured financing for all its deliveries in 2020, 2021 and 2022.

Economic, political and regulatory environment. The economic impact of energy shortages and increases in commodity and wage costs has driven significant inflation and uncertainty over the economic outlook. The Group is closely reviewing the impacts of wage and supplier inflation on margins and customer demand. The Group will continue to adjust its future capacity plans accordingly, retaining flexibility to adapt as required and where possible. 

Financial and treasury related risk. Fuel cost increases have been partly mitigated by the Group's fuel hedging policy. Access to fuel hedging instruments or the ability to pass increased fuel costs on to consumers could impact the Group's profits. The Group continues to assess the strength of the US dollar against the euro and pound sterling and the potential impacts on the Group's operating results. All airlines hedge in line with the Group hedging policy. 

IT systems and IT infrastructure. The Group is reliant upon the resilience of its systems for key customer and business processes and is exposed to risks that relate to poor performance, obsolescence or failure of these systems. The Group is currently engaged in a number of major programmes to modernise and upgrade its IT systems, digital capability, customer propositions and core IT infrastructure and network where required. Mitigating actions that prioritise operational stability and resilience have been built into all cutover plans.

Operational resilience. The pandemic resulted in an unprecedented level of disruption to the aviation sector and changed the Group's perspective on how resilient it needed to be. Ongoing labour shortages, threat of strike action in the aviation sector and staff sickness have impacted the operational environment of the Group's airlines as well as the operations of the businesses on which the Group relies. Many of these events can occur within a close timeframe and challenge operational resilience. In addition, the Group has significant IT infrastructure changes to complete which could impact operations. The Group is focussed on minimising any unplanned outages or disruption to customers with additional resilience built into the airlines' networks.

People, culture and employee relations. The resilience and engagement of our people and leaders are critical to achieving our transformation plans. Our people are a critical enabler of the Group's future success and the Group has identified the skills and capabilities that are required to manage its transformation, which include delivering on the Group's diversity and inclusion plan. Our leadership recognises the efforts of our staff and their resilience and commitment supporting the ramp up of operations. Resource shortages and the timelines to secure resource, particularly in UK and Ireland, can impact operational readiness and resilience. The Group is focused on measures to attract and secure flight and ground staff into its airlines to enable them to fulfil their schedules and maintain competitiveness. Across the Group, collective bargaining is in place with various unions. The Group is exposed to the risk of industrial relations action and the operating companies continue to engage in discussions with unions to address and resolve disputes arising within the negotiations.

Transformation and change. The Group recognises the need to transform to compete. The impact on our people of the wide-ranging change agenda if poorly managed or uncoordinated could lead to logistical and engagement challenges with the potential to negatively impact the delivery of customer and revenue benefits and cost efficiencies. The Chief Transformation Officer has clear oversight of all programmes to assess performance against plan. The Group transformation agenda is subject to Board approval and progress is regularly monitored by the Board.

The Board and its sub committees have been apprised of regulatory, competitor and governmental responses on an ongoing basis. 



 

 

INTERNATIONAL CONSOLIDATED AIRLINES GROUP S.A.

 

Full year Unaudited Consolidated Financial Statements

January 1, 2022 - December 31, 2022

 

 

 

CONSOLIDATED INCOME STATEMENT



Year to December 31

€ million

Note

2022

2021

Passenger revenue


19,458

5,835

Cargo revenue


1,615

1,673

Other revenue


1,993

947

Total revenue

5

23,066

8,455





Employee costs

8

4,647

3,013

Fuel, oil costs and emissions charges


6,120

1,781

Handling, catering and other operating costs


2,971

1,308

Landing fees and en-route charges


1,890

923

Engineering and other aircraft costs


2,101

1,085

Property, IT and other costs


950

758

Selling costs


920

434

Depreciation, amortisation and impairment

6

2,070

1,932

Currency differences


141

(14)

Total expenditure on operations


21,810

11,220

Operating profit/(loss)

 

1,256

(2,765)


 



Finance costs

9

(1,017)

(830)

Finance income

9

52

13

Net change in fair value of financial instruments

9

81

89

Net financing credit/(charge) relating to pensions

9

26

(2)

Net currency retranslation charges


(115)

(82)

Other non-operating credits

9

132

70

Total net non-operating costs


(841)

(742)

Profit/(loss) before tax

 

415

(3,507)

Tax

10

16

574

Profit/(loss) after tax for the year

 

431

(2,933)









Attributable to:

 



Equity holders of the parent


431

(2,933)

Non-controlling interest


-

-



431

(2,933)









Basic earnings/(loss) per share (€ cents)

11

8.7

(59.1)

Diluted earnings/(loss) per share (€ cents)

11

6.1

(59.1)



 

CONSOLIDATED STATEMENT OF OTHER COMPREHENSIVE INCOME

 


Year to December 31

€ million

Note

2022

2021

Items that may be reclassified subsequently to net profit




Cash flow hedges:




Fair value movements in equity


1,299

794

Reclassified and reported in net profit


(1,233)

(81)

Fair value movements on cost of hedging


(106)

10

Cost of hedging reclassified and reported in net profit


38

(12)

Currency translation differences

31

(53)

(12)









Items that will not be reclassified to net profit




Fair value movements on other equity investments

19

2

-

Fair value movements on cash flow hedges


173

54

Fair value movements on cost of hedging


(9)

-

Fair value movements on liabilities attributable to credit risk changes


(6)

(15)

Remeasurements of post-employment benefit obligations


662

1,400

Remeasurements of long-term employee-related provisions


52

25

Total other comprehensive profit for the year, net of tax


819

2,163

Profit/(loss) after tax for the year


431

(2,933)





Total comprehensive profit/(loss) for the year

 

1,250

(770)





Total comprehensive profit/(loss) is attributable to:




Equity holders of the parent


1,250

(770)

Non-controlling interest

31

-

-



1,250

(770)

Items in the consolidated Statement of other comprehensive income above are disclosed net of tax.



 

CONSOLIDATED BALANCE SHEET

€ million

Note

December 31,

2022

December 31,

2021

Non-current assets




Property, plant and equipment

13

18,346

17,161

Intangible assets

17

3,556

3,239

Investments accounted for using the equity method

18

43

40

Other equity investments

19

55

31

Employee benefit assets

32

2,334

1,775

Derivative financial instruments

28

81

77

Deferred tax assets

10

1,282

1,282

Other non-current assets

20

362

250

 


26,059

23,855

Current assets




Non-current assets held for sale

16

19

20

Inventories


353

334

Trade receivables

20

1,330

735

Other current assets

20

1,226

960

Current tax receivable

10

72

16

Derivative financial instruments

28

645

543

Current interest-bearing deposits

21

403

51

Cash and cash equivalents

21

9,196

7,892

 


13,244

10,551

Total assets


39,303

34,406





Shareholders' equity




Issued share capital

29

497

497

Share premium

29

7,770

7,770

Treasury shares


(28)

(24)

Other reserves


(6,223)

(7,403)

Total shareholders' equity


2,016

840

Non-controlling interest

31

6

6

Total equity


2,022

846

Non-current liabilities




Borrowings

25

17,141

17,084

Employee benefit obligations

32

217

285

Deferred tax liability

10

-

-

Provisions

26

2,652

2,267

Deferred revenue on ticket sales

23

326

391

Derivative financial instruments

28

84

47

Other long-term liabilities

24

200

208

 


20,620

20,282

Current liabilities




Borrowings

25

2,843

2,526

Trade and other payables

22

5,209

3,712

Deferred revenue on ticket sales

23

7,318

6,161

Derivative financial instruments

28

387

126

Current tax payable

10

8

21

Provisions

26

896

732

 


16,661

13,278

Total liabilities


37,281

33,560

Total equity and liabilities


39,303

34,406



 

CONSOLIDATED CASH FLOW STATEMENT

 


Year to December 31

€ million

Note

2022

2021

Cash flows from operating activities



 

Operating profit/(loss)


1,256

(2,765)

Depreciation, amortisation and impairment

6

2,070

1,932

Movement in working capital


1,884

1,634

Increase in trade receivables, inventories and other current assets


(914)

(351)

Increase in trade and other payables and deferred revenue on ticket sales


2,798

1,985

Payments related to restructuring

26

(81)

(161)

Employer contributions to pension schemes


(22)

(41)

Pension scheme service costs

32

17

26

Provisions and other non-cash movements


627

305

Settlement of derivatives where hedge accounting has been discontinued


-

(497)

Interest paid


(824)

(640)

Interest received


42

3

Tax (paid)/received


(134)

63

Net cash flows from operating activities


4,835

(141)





Cash flows from investing activities




Acquisition of property, plant and equipment and intangible assets


(3,875)

(744)

Sale of property, plant and equipment and intangible assets and investments


837

544

(Increase)/decrease in other current interest-bearing deposits


(351)

91

Payment to Globalia for convertible loan


(100)

-

Other investing movements


26

(72)

Net cash flows from investing activities


(3,463)

(181)





Cash flows from financing activities




Proceeds from borrowings


1,436

4,817

Repayment of borrowings


(1,050)

(784)

Repayment of lease liabilities


(1,455)

(1,481)

Settlement of derivative financial instruments

25c

1,036

(268)

Acquisition of treasury shares


(23)

(24)

Other financing movements


-

(25)

Net cash flows from financing activities


(56)

2,235





Net increase in cash and cash equivalents


1,316

1,913

Net foreign exchange differences


(12)

205

Cash and cash equivalents at 1 January


7,892

5,774

Cash and cash equivalents at year end

21

9,196

7,892





Interest-bearing deposits maturing after more than three months

21

403

51





Cash, cash equivalents and interest-bearing deposits

21

9,599

7,943

For details on restricted cash balances refer to note 21 Cash, cash equivalents and current interest-bearing deposits .



 

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the year to December 31, 2022

€ million

Issued share

capital

(note 29)

Share premium (note 29)

Treasury shares

(note 29)

Other reserves (note 31)

Retained earnings

Total shareholders' equity

Non-controlling interest

(note 31)

Total equity

January 1, 2022

497

7,770

(24)

(1,673)

(5,730)

840

6

846










Profit for the year

-

-

-

-

431

431

-

431










Other comprehensive profit for the year









Cash flow hedges reclassified and reported in net profit:









Fuel and oil costs

-

-

-

(1,115)

-

(1,115)

-

(1,115)

Currency differences

-

-

-

(90)

-

(90)

-

(90)

Finance costs

-

-

-

10

-

10

-

10

Discontinuance of hedge accounting

-

-

-

(22)

-

(22)

-

(22)

Ineffectiveness recognised in other non-operating costs

-

-

-

(16)

-

(16)

-

(16)

Net change in fair value of cash flow hedges

-

-

-

1,472

-

1,472

-

1,472

Net change in fair value of equity investments

-

-

-

2

-

2

-

2

Net change in fair value of cost of hedging

-

-

-

(115)

-

(115)

-

(115)

Cost of hedging reclassified and reported in net profit

-

-

-

38

-

38

-

38

Fair value movements on liabilities attributable to credit risk changes

-

-

-

(6)

-

(6)

-

(6)

Currency translation differences

-

-

-

(53)

-

(53)

-

(53)

Remeasurements of post-employment benefit obligations

-

-

-

-

662

662

-

662

Remeasurements of long-term employee-related provisions

-

-

-

-

52

52

-

52

Total comprehensive profit for the year

-

-

-

105

1,145

1,250

-

1,250

Hedges reclassified and reported in property, plant and equipment

-

-

-

(65)

-

(65)

-

(65)

Hedges reclassified and reported in sales in advance of carriage

-

-

-

36

-

36

-

36

Hedges reclassified and reported in inventory

-

-

-

(58)

-

(58)

-

(58)

Cost of share-based payments

-

-

-

-

39

39

-

39

Vesting of share-based payment schemes

-

-

19

-

(22)

(3)

-

(3)

Acquisition of treasury shares

-

-

(23)

-

-

(23)

-

(23)

Redemption of convertible bond

-

-

-

(62)

62

-

-

-

December 31, 2022

497

7,770

(28)

(1,717)

(4,506)

2,016

6

2,022



 

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the year to December 31, 2021

€ million

Issued share

capital

(note 29)

Share premium (note 29)

Treasury shares

(note 29)

Other reserves (note 31)

Retained earnings

Total shareholders' equity

Non-controlling interest

(note 31)

Total equity

January 1, 2021

497

7,770

(40)

(2,420)

(4,203)

1,604

6

1,610










Loss for the year

-

-

-

-

(2,933)

(2,933)

-

(2,933)










Other comprehensive loss for the year









Cash flow hedges reclassified and reported in net profit:









Passenger revenue

-

-

-

18

-

18

-

18

Fuel and oil costs

-

-

-

(45)

-

(45)

-

(45)

Currency differences

-

-

-

(15)

-

(15)

-

(15)

Finance costs

-

-

-

23

-

23

-

23

  Discontinuance of hedge accounting

-

-

-

(62)

-

(62)

-

(62)

Net change in fair value of cash flow hedges

-

-

-

848

-

848

-

848

Net change in fair value of cost of hedging

-

-

-

10

-

10

-

10

Cost of hedging reclassified and reported in net profit

-

-

-

(12)

-

(12)

-

(12)

Fair value movements on liabilities attributable to credit risk changes

-

-

-

(15)

-

(15)

-

(15)

Currency translation differences

-

-

-

(12)

-

(12)

-

(12)

Remeasurements of post-employment benefit obligations

-

-

-

-

1,400

1,400

-

1,400

Remeasurements of long-term employee-related provisions

-

-

-

-

25

25

-

25

Total comprehensive loss for the year

-

-

-

738

(1,508)

(770)

-

(770)

Hedges reclassified and reported in property, plant and equipment

-

-

-

9

-

9

-

9

Cost of share-based payments

-

-

-

-

23

23

-

23

Vesting of share-based payment schemes

-

-

40

-

(42)

(2)

-

(2)

Acquisition of treasury shares

-

-

(24)

-

-

(24)

-

(24)

December 31, 2021

497

7,770

(24)

(1,673)

(5,730)

840

6

846



 

NOTES TO THE ACCOUNTS

For the year to December 31, 2022

1  Background and general information

International Consolidated Airlines Group S.A. (hereinafter 'International Airlines Group', 'IAG' or the 'Group') is a leading European airline group, formed to hold the interests of airline and ancillary operations. IAG (hereinafter the 'Company') is a Spanish company registered in Madrid and was incorporated on December 17, 2009. The registered address of IAG is El Caserío, Zona industrial 2, Camino de La Muñoza s/n, 28042, Madrid, Spain. On January 21, 2011 British Airways Plc and Iberia Líneas Aéreas de España S.A. Operadora (hereinafter 'British Airways' and 'Iberia' respectively) completed a merger transaction becoming the first two airlines of the Group. Vueling Airlines S.A. ('Vueling') was acquired on April 26, 2013, and Aer Lingus Group Plc ('Aer Lingus') on August 18, 2015. A list of the subsidiaries of the Group is included in the Group investments section.

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 Español).

2  Significant accounting policies

Basis of preparation

The consolidated financial statements of the Group have been prepared in accordance with the International Financial Reporting Standards as endorsed by the European Union (IFRSs as endorsed by the EU). The consolidated financial statements herein are not the Group's statutory accounts and are unaudited. The consolidated financial statements are rounded to the nearest million unless otherwise stated. These financial statements have been prepared on a historical cost convention except for certain financial assets and liabilities, including the €825 million convertible bond due 2028, derivative financial instruments and other equity investments that are measured at fair value. The notes to the financial statements for the prior year include reclassifications that were made to conform to the current year presentation.

The Group's financial statements for the year to December 31, 2022 were authorised for issue, and approved by the Board of Directors on February 23, 2023.

Going concern

At December 31, 2022, the Group had total liquidity of €13,999 million (December 31, 2021: total liquidity of €11,986 million), comprising cash, cash equivalents and interest-bearing deposits of €9,599 million, €3,284 million of committed and undrawn general facilities and a further €1,116 million of committed and undrawn aircraft specific facilities. At December 31, 2022, the Group has no financial covenants associated with its loans and borrowings.

In its assessment of going concern, the Group has modelled two scenarios referred to below as the Base Case and the Downside Case over the period to June 30, 2024 (the 'going concern period'). The tenor of the going concern period encapsulates the seasonality of the Group's operations. The Group's three-year business plan, used in the creation of the Base Case, was prepared for and approved by the Board in December 2022. The business plan takes into account the Board's and management's views on the anticipated continued recovery from the COVID-19 pandemic and the wider economic and geopolitical environments on the Group's businesses across the going concern period. The key inputs and assumptions underlying the Base Case include:

capacity recovery modelled by geographical region (and in certain regions, by key destinations) with capacity gradually increasing from 97 per cent in quarter 1 2023 (compared to the equivalent period in 2019) to pre-pandemic levels by the end of the going concern period;

passenger unit revenue per ASK is forecast to continue to remain above the levels obtained in 2019 throughout the going concern period, which is based on, amongst other assumptions, higher ticket prices to reflect both higher fuel prices and cost inflation;

the Group has assumed that the committed and undrawn general facilities of €3.3 billion will not be drawn over the going concern period. The availability of certain of these facilities reduces over time, with €3.2 billion being available to the Group at the end of the going concern period;

the Group has assumed that €1.0 billion of the committed and undrawn aircraft specific facilities of €1.1 billion would be available to be drawn over the going concern period if required, of which €0.6 billion, relating to the EETC financing structures and other specific asset securitised financing are expected to be utilised;

the Group has assumed that the €500 million bond that matures in July 2023 will not be refinanced;

of the capital commitments detailed in note 15, €4.4 billion is due to be paid over the going concern period;

in addition to the €0.6 billion of committed aircraft financing, the Group has forecast securing approximately 100 per cent, or €4.9 billion, of the aircraft financing required that is currently uncommitted, to align with the timing and payments for these aircraft deliveries. This loan to value assumption is consistent with the level of financing the Group has been able to achieve recently, including over the course of the COVID-19 pandemic to date; and

the acquisition of the remaining shares in Air Europa Holdings, that the Group does not currently own, shall receive the relevant approvals and complete during the going concern period.

The Downside Case applies stress to the Base Case to model adverse commercial and operational impacts as the Group's capacity recovers over the going concern period, represented by: reduced levels of capacity operated in each month, including reductions of at least 25 per cent for three months during 2023 to reflect the risk of more severe operational disruption; reduced passenger unit revenue per ASK reflective of general pricing pressure due to the current economic backdrop; and increased operational costs reflective of inflationary pressures. In the Downside Case, over the going concern period capacity would be ten per cent down when compared to the Base Case. The Downside Case assumes that €350 million of the €3,284 million of available general credit facilities are required to be drawn. The Directors consider the Downside Case to be a severe but plausible scenario.

While not incorporated in the Downside Case, the Group has modelled the impact of further deteriorations in capacity operated and yield, as well as increases in the price of jet fuel by 20 per cent and a reduction in the forecast loan to value to 80 per cent of the uncommitted financing, but has also considered further mitigating actions, such as reducing operating and capital expenditure and deferring currently forecast early repayments of loans and borrowings. The Group expects to be able to continue to secure financing for future aircraft deliveries and in addition has further potential mitigating actions, including asset disposals, it would pursue in the event of adverse liquidity experience.

Having reviewed the Base Case, the Downside Case and additional sensitivities, the Directors have a reasonable expectation that the Group has sufficient liquidity to continue in operational existence over the going concern period and hence continue to adopt the going concern basis in preparing the consolidated financial statements for year to December 31, 2022. In adopting the going concern basis of accounting, the consolidated financial statements have been prepared without the inclusion of a material uncertainty, which has been removed since the Annual report and accounts 2021. The removal of the material uncertainty arises from the reduction in uncertainty over the going concern period due to both the continued recovery subsequent to the COVID-19 pandemic and the strength of the Group's liquidity at December 31, 2022.

Consolidation

The Group financial statements include the financial statements of the Company and its subsidiaries, each made up to December 31, together with the attributable share of results and reserves of associates and joint ventures, adjusted where appropriate to conform to the Group's accounting policies.

Subsidiaries are consolidated from the date of their acquisition, which is the date on which the Group obtains control and continue to be consolidated until the date that such control ceases. Control exists when the Group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity.

The Group applies the acquisition method to account for business combinations. The consideration paid is the fair value of the assets transferred, the liabilities incurred and the equity interests issued by the Group. Identifiable assets acquired and liabilities assumed in a business combination are measured initially at their fair values at the acquisition date. Non-controlling interests represent the portion of profit or loss and net assets in subsidiaries that are not held by the Group and are presented separately within equity in the Consolidated balance sheet. Acquisition-related costs are expensed as incurred.

If the business combination is achieved in stages, as at the acquisition date the acquirer's previously held equity interest in the acquiree is remeasured to fair value at the acquisition date through the Income statement.

Goodwill is initially measured as the excess of the aggregate of the consideration transferred and the fair value of non-controlling interest over the net identifiable assets acquired and liabilities assumed.

All intragroup account balances, including intragroup profits, are eliminated in preparing the consolidated financial statements.

Unconsolidated structured entities

The Group regularly uses sale and leaseback transactions to finance the acquisition of aircraft. In certain instances the Group will undertake several such sale and leaseback transactions at once through Enhanced Equipment Trust Certificates (EETCs). Under each of these financing structures, a company or companies (the EETC Issuer) are established to facilitate such financing on behalf of a number of unrelated investors. In certain of these financing structures, additional special purpose vehicles (the Lessor SPV) are established to provide additional financing from a number of further unrelated investors to the EETC Issuer. The proceeds from the issuance of the EETCs by the EETC Issuer, and where relevant the proceeds obtained from the Lessor SPV, are then used to purchase aircraft solely from the Group. The Group will then enter into fixed rate lease arrangements (which meet the recognition criteria of Asset financed liabilities) with the EETC Issuer, or where relevant the Lessor SPV, with payments made by the Group to the EETC Issuer, or the Lessor SPV, distributed, through a trust, to the aforementioned unrelated investors. The main purpose of the trust structure is to enhance the credit-worthiness of the Group's debt obligations through certain bankruptcy protection provisions and liquidity facilities, and also to lower the Group's total borrowing cost.

The EETC Issuer and the Lessor SPV are established solely with the purpose of providing the asset-backed financing and upon maturity of such financing are expected to have no further activity. The relevant activities of the EETC Issuer and the Lessor SPV are restricted to pre-established financing agreements and the retention of the title of the associated financed aircraft. Accordingly, the Group has determined that each EETC Issuer and the Lessor SPVs are structured entities. Under the contractual terms of the financing structures, the Group has no exposure to losses in these entities, does not own any of the share capital of the EETC Issuer or the Lessor SPV, does not have any representation on the respective boards and has no ability to influence decision making.

In addition to the above, such financial transactions expose the Group to no further significant financial or economic risks, such as no variability over time in interest rates.

In considering the aforementioned facts, management has concluded that the Group does not have access to variable returns from the EETC Issuers and Lessor SPVs because its involvement is limited to the payment of principal and interest under the arrangement and, therefore, it does not control the EETC Issuers or the Lessor SPVs and as such does not consolidate them.

Further information as to the financial impact of these financial transactions is given in note 25.

Segmental reporting

Operating segments are reported in a manner consistent with how resource allocation decisions are made by the chief operating decision-maker. The chief operating decision-maker, who is responsible for resource allocation and assessing performance of the operating segments, has been identified as the IAG Management Committee.

Foreign currency translation

a   Functional and presentation currency

Items included in the financial statements of each of the Group's entities are measured using the functional currency, being the currency of the primary economic environment in which the entity operates. In particular, British Airways and IAG Loyalty have a functional currency of pound sterling. The Group's consolidated financial statements are presented in euros, which is the Group's presentation currency.



 

b   Transactions and balances

Transactions in foreign currencies are initially recorded in the functional currency using the rate of exchange prevailing on the date of the transaction. Monetary foreign currency balances are translated into the functional currency at the rates ruling at the balance sheet date. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at balance sheet exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the Income statement, except where hedge accounting is applied. Foreign exchange gains and losses arising on the retranslation of monetary assets and liabilities classified as non-current on the Balance sheet are recognised within Net currency retranslation (charges)/credits in the Income statement. All other gains and losses arising on the retranslation of monetary assets and liabilities are recognised in operating profit.

c  Group companies

The net assets of foreign operations are translated into euros at the rate of exchange ruling at the balance sheet date. Profits and losses of such operations are translated into euros at average rates of exchange during the year. The resulting exchange differences are taken directly to a separate component of equity (Currency translation reserve) until all or part of the interest is sold, when the relevant portion of the cumulative exchange difference is recognised in the Income statement.

Property, plant and equipment

Property, plant and equipment are held at cost. The Group has a policy of not revaluing property, plant and equipment. Depreciation is calculated to write off the cost less the estimated residual value on a straight-line basis, over the economic life of the asset. Residual values, where applicable, are reviewed annually against prevailing market values for equivalently aged assets and depreciation rates adjusted accordingly on a prospective basis.

a   Fleet

All aircraft are stated at the fair value of the consideration given after taking account of manufacturers' credits. Fleet assets owned or right of use ('ROU') assets are disaggregated into separate components and depreciated at rates calculated to write down the cost of each component to the estimated residual value at the end of their planned operational lives (which is the shorter of their useful life or lease term) on a straight-line basis. Depreciation rates are specific to aircraft type, based on the Group's fleet plans, within overall parameters of 23 years and up to 5 per cent residual value for shorthaul aircraft and between 23 and 29 years (depending on aircraft) and up to 5 per cent residual value for longhaul aircraft.

Right of use assets are depreciated over the shorter of the lease term and the aforementioned depreciation rates. Where the lease includes a purchase option, at the discretion of the Group, where it is expected that the purchase option will be exercised, the associated right of use asset is depreciated using the aforementioned depreciation rates to reflect the reasonably certain life of the aircraft, irrespective of the lease term.

Cabin interior modifications, including those required for brand changes and relaunches, are depreciated over the lower of 12 years and the remaining economic life of the aircraft, whether owned or leased.

Aircraft and engine spares acquired on the introduction or expansion of a fleet, as well as rotable spares purchased separately, are carried as property, plant and equipment and generally depreciated in line with the fleet to which they relate.

Major overhaul expenditure, including replacement spares and labour costs, is capitalised and amortised over the average expected life between major overhaul. All other replacement spares and other costs relating to maintenance of fleet assets (including maintenance provided under 'pay-as-you-go' contracts) are charged to the Income statement on consumption or as incurred respectively.

b   Other property, plant and equipment

Provision is made for the depreciation of all property, plant and equipment. Property, with the exception of freehold land, is depreciated over its expected useful life over periods not exceeding 50 years, or in the case of leasehold properties, over the duration of the lease if shorter, on a straight-line basis. Equipment is depreciated over periods ranging from four to 20 years.

c   Capitalisation of interest on progress payments

Interest costs attributed to progress payments made on account of aircraft and other qualifying assets under construction are capitalised and added to the cost of the asset concerned. All other borrowing costs are recognised in the Income statement in the year in which they are incurred.

d   Liquidated damages

Liquidated damages are recognised in the Income statement only to the extent that they relate to compensation for loss of income and/or incremental operating costs, when a contractual entitlement exists, the amounts can be reliably measured and the receipt is virtually certain. When liquidated damages do not relate to compensation for loss of income and/or incremental operating costs, the amounts are recorded as a reduction in the cost of the associated aircraft in the Balance sheet and depreciated over the life of the aircraft.

e   Leases

The Group leases various aircraft, properties, equipment and other assets. The lease terms of these assets are consistent with the determined useful economic life of similar assets within property, plant and equipment.

At inception of a contract, the Group assesses whether a contract is, or contains, a lease. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified tangible asset for a period in exchange for consideration. The Group has elected not to apply such consideration where the contract relates to an intangible asset, such as for landing rights or IT software, in which case payments associated with the contract are expensed as incurred.

Leases are recognised as a ROU asset and a corresponding lease liability at the date at which the leased asset is available for use by the Group.



 

Right of use assets

At the lease commencement date a ROU asset is measured at cost comprising the following: the amount of the initial measurement of the lease liability; any lease payments made at or before the commencement date less any lease incentives received; and any initial direct costs. In addition, at the lease commencement date a ROU asset will incorporate unavoidable restoration costs, such as the removal of airline-specific branding and configuration, to return the asset to its original condition, for which a corresponding amount is recognised within Provisions. The ROU asset is depreciated over the shorter of the asset's useful life and the lease term on a straight-line basis. If ownership of the ROU asset transfers to the Group at the end of the lease term or the cost reflects the exercise of a purchase option, depreciation is calculated using the estimated useful life of the asset.

Lease liabilities

Lease liabilities are initially measured at their present value, which includes the following lease payments: fixed payments (including in-substance fixed payments), less any lease incentives receivable; variable lease payments that are based on an index or a rate; amounts expected to be payable by the Group under residual value guarantees; the exercise price of a purchase option if the Group is reasonably certain to exercise that option; payments of penalties for terminating the lease, if the lease term reflects the Group exercising that option; and payments to be made under reasonably certain extension options.

Aircraft lease payments are discounted using the interest rate implicit in the lease. The interest rate implicit in the lease is the discount rate that, at the inception of the lease, causes the aggregate present value of the minimum lease payments and the unguaranteed residual value to be equal to the fair value of the leased asset and any initial indirect costs of the lessor. For aircraft leases these inputs are either observable in the contract or readily available from external market data. The initial direct costs of the lessor are considered to be immaterial. If the interest rate implicit in the lease cannot be determined, the Group entity's incremental borrowing rate is used.

Each lease payment is allocated between the principal and finance cost. The finance cost is charged to the Income statement over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the lease liability for each period. After the commencement date, the amount of lease liabilities is increased to reflect the accretion of interest and reduced for the lease payments made.

The carrying amount of lease liabilities is remeasured if there is a modification of the lease contract, a re-assessment of the lease term (specifically in regard to assumptions regarding extension and termination options) and changes in variable lease payments that are based on an index or a rate.

Amounts excluded from recognition as lease liabilities

The Group has elected not to recognise ROU assets and lease liabilities for short-term leases that have a lease term of 12 months or less and those leases of low-value assets. Payments associated with short-term leases and leases of low-value assets are recognised on a straight line basis as an expense in the Income statement. Short-term leases are leases with a lease term of 12 months or less, that do not contain a purchase option. Low-value assets comprise IT equipment and small items of office furniture.

The Group is exposed to potential future increases in variable lease payments based on an index or rate, which are not included in the lease liability until they take effect. When adjustments to lease payments based on an index or rate take effect, the lease liability is re-assessed and adjusted against the ROU asset. Extension options are included in a number of aircraft, property and equipment leases across the Group and are reflected in the lease payments where the Group is reasonably certain that it will exercise the option. The Group is also exposed to variable lease payments based on usage or revenue generated over a defined period. Such variable lease payments are expensed to the Income statement as incurred.

Sale and leaseback transactions

The Group regularly uses sale and lease transactions to finance the acquisition of aircraft. Each transaction is assessed as to whether it meets the criteria within IFRS 15 'Revenue from contracts with customers' for a sale to have occurred. The principal criterion for assessing whether a sale has occurred or not, is whether the contract contains the option, at the discretion of the Group, to repurchase the aircraft over the lease term; with the existence of such a repurchase option resulting in a sale having been deemed not to have occurred; and if no such repurchase option exists, then a sale is deemed to have occurred. The following defines the accounting for such transactions:

if a sale is determined to have occurred, then the associated asset is de-recognised and a ROU asset and lease liability are recognised. The ROU asset recognised is based on the proportion of the previous carrying amount of the asset that is retained. Any gain or loss is restricted to the amount that relates to the rights that have been transferred to the counter-party to the transaction; and

where a sale is determined to have not occurred, the asset is retained on the balance sheet within Property, plant and equipment and an Asset financed liability recognised equal to the financing proceeds.

Cash flow presentation - lease liabilities

Lease payments are presented as follows in the Consolidated cash flow statement:

where the proceeds received from sale and leaseback transactions represent the fair value of the asset being transferred, the total proceeds are presented within cash flows from investing activities. Where the proceeds received from sale and leaseback transactions exceed the fair value of the asset being transferred, the element of the proceeds equivalent to the fair value of the asset being transferred is presented within investing activities and the amount of proceeds in excess of the fair value is presented within financing activities;

the repayments of the principal element of lease liabilities are presented within cash flows from financing activities;

the payments of the interest element of lease liabilities are included within cash flows from operating activities; and

the payments arising from variable elements of a lease, short-term leases and low-value assets are presented within cash flows from operating activities.

Cash flow presentation - asset financed liabilities

Payments associated with asset financed liabilities are presented as follows in the Consolidated cash flow statement:

the proceeds received asset financed liabilities are presented within cash flows from financing activities;

the repayments of the principal element of asset financed liabilities are presented within cash flows from financing activities; and

the payments of the interest element of asset financed liabilities are included within cash flows from operating activities.



 

COVID-19 related rent concessions

On May 28, 2020, the IASB issued 'COVID-19 Related Rent Concessions - amendments to IFRS 16 Leases'. The EU subsequently adopted the amendment on October 9, 2020. The amendment provides a practical expedient for lessees, up to June 30, 2021, not to assess whether a COVID-19 related rent concession is a lease modification. On March 31, 2021, the IASB extended the period for the application of these concessions through to June 30, 2022. The EU subsequently adopted the amendment on August 31, 2021. The extended amendment is effective for annual reporting periods commencing on or after April 1, 2021 and the Group has elected to adopt this amendment for the year to December 31, 2022.

Lessor accounting

From time to time the Group will lease, to third parties, specific assets, including certain property, plant and equipment. On inception of the lease, the Group determines whether each lease is a finance lease or an operating lease.

In order to make this determination, the Group assesses whether the lease transfers substantially all of the risks and rewards of ownership to the lessee. Factors in making this assessment include, but are not limited to, whether the lease term is for the major part of the economic life of the underlying asset and whether the underlying asset transfers to the lessee or the lessee has the option to purchase the underlying asset at the end of the lease. Where substantially all of the risks and rewards of ownership have been transferred, then the lease is recorded as a finance lease, otherwise it is recorded as an operating lease.

Intangible assets

a   Goodwill

Goodwill arises on the acquisition of subsidiaries, associates and joint ventures and represents the excess of the consideration paid over the net fair value of the identifiable assets and liabilities of the acquiree. Where the net fair value of the identifiable assets and liabilities of the acquiree is in excess of the consideration paid, a gain on bargain purchase is recognised immediately in the Income statement.

For the purpose of assessing impairment, goodwill is grouped at the lowest levels for which there are separately identifiable cash flows (cash generating units). Goodwill is tested for impairment annually and whenever indicators exist that the carrying value may not be recoverable.

b   Brands

Brands arising on the acquisition of subsidiaries are initially recognised at fair value at the acquisition date. Long established brands that are expected to be used indefinitely are not amortised but assessed annually for impairment.

c   Customer loyalty programmes

Customer loyalty programmes arising on the acquisition of subsidiaries are initially recognised at fair value at the acquisition date. A customer loyalty programme with an expected useful life is amortised over the expected remaining useful life. Established customer loyalty programmes that are expected to be used indefinitely are not amortised but assessed annually for impairment.

d   Landing rights

Landing rights acquired in a business combination are recognised at fair value at the acquisition date. Landing rights acquired from other airlines are capitalised at cost.

Capitalised landing rights based outside of the UK and the EU are amortised on a straight-line basis over a period not exceeding 20 years. Capitalised landing rights based within the UK and the EU are not amortised, as regulations provide that these landing rights are perpetual.

e   Contract-based intangibles

Contract based intangibles acquired in a business combination are recognised initially at fair value at the acquisition date and amortised over the remaining life of the contract.

f  Software

The cost to purchase or develop computer software that is separable from an item of related hardware is capitalised separately and amortised on a straight-line basis generally over a period not exceeding five years, with certain specific software developments amortised over a period of up to ten years.

g   Emissions allowances

Where an operating company purchases emissions allowances these amounts are recognised at cost and recorded within Intangible assets. As an operating company emits CO2 equivalent and builds up an obligation to the relevant authorities, a provision is recognised.

Emissions allowances recorded within Intangible assets are not revalued or amortised but are tested for impairment whenever indicators exist that the carrying value may not be recoverable. For those obligations arising for which the operating company has purchased emission allowances to offset the emissions, the provision is recognised at the weighted average cost of the intangible asset. For those obligations arising for which the operating company has not yet purchased emission allowances to offset the emissions, the provision is recognised at the market price of the allowances required at the reporting date. As the provision is recognised, a corresponding amount is recorded in the Income statement within Fuel, oil costs and emission charges.

The Group's emissions obligation, recognised as a separate liability, is extinguished when the associated emission certificates are surrendered, which is typically within 12 months of the reporting date.

From time to time the Group enters into sale and repurchase transactions for specified emission allowances. Such transactions do not meet the recognition criteria of a sale under IFRS 15 and accordingly the asset is retained on the balance sheet within Intangible assets and an Other financing liability recognised equal to the proceeds received.



 

Impairment of non-financial assets

Assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment. Assets that are subject to amortisation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the value by which the asset's carrying value exceeds its recoverable amount. The recoverable amount is the higher of an asset's fair value less cost to sell and value-in-use. Non-financial assets other than goodwill that were subject to an impairment are reviewed for possible reversal of the impairment at each reporting date.

a   Property, plant and equipment, including Right of use assets

The carrying value is reviewed for impairment when events or changes in circumstances indicate the carrying value may not be recoverable and the cumulative impairment losses are shown as a reduction in the carrying value of property, plant and equipment.

b   Intangible assets

Intangible assets are held at cost and are either amortised on a straight-line basis over their economic life, or they are deemed to have an indefinite economic life and are not amortised. Indefinite life intangible assets are tested annually for impairment or more frequently if events or changes in circumstances indicate the carrying value may not be recoverable.

Investments in associates and joint ventures

An associate is an undertaking in which the Group has a long-term equity interest and over which it has the power to exercise significant influence. Where the Group cannot exercise control over an entity in which it has a shareholding greater than 51 per cent, the equity interest is treated as an associated undertaking.

A joint venture is a type of joint arrangement whereby the parties that have joint control of the arrangement have rights to the net assets of the joint venture. Joint control is the contractually agreed sharing of control of an arrangement, which exists only when decisions about the relevant activities require unanimous consent of the parties sharing control. The considerations made in determining significant influence or joint control are similar to those necessary to determine control over subsidiaries.

Investments in associates and joint ventures are accounted for using the equity method, and initially recognised at cost. The Group's interest in the net assets of associates and joint ventures is included in Investments accounted for using the equity method in the Balance sheet and its interest in their results is included in the Income statement, below operating result. The attributable results of those companies acquired or disposed of during the year are included for the periods of ownership.

Financial instruments

a   Financial assets and liabilities

Financial assets and financial liabilities are classified, upon initial recognition, as measured at amortised cost, at fair value through other comprehensive income (OCI), or fair value through profit or loss. Financial assets and financial liabilities are not reclassified subsequent to their initial recognition unless the Group changes its business model for managing financial assets and financial liabilities.

The classification of financial assets and financial liabilities at initial recognition depends on the financial assets' and financial liabilities' contractual cash flow characteristics and the Group's business model for managing them. In order for a financial asset and financial liability to be classified and measured at amortised cost or fair value through OCI, it needs to give rise to cash flows that are 'solely payments of principal and interest' (SPPI) on the principal amount outstanding. A financial asset or financial liability that is not SPPI is classified and measured at fair value through profit or loss. This assessment is performed on an instrument by instrument basis.

The Group's business model for managing financial assets and financial liabilities establishes how it manages its financial assets and financial liabilities in order to generate cash flows. The business model determines whether cash flows will result from collecting contractual cash flows, selling the financial assets, or both. Financial assets and financial liabilities classified and measured at amortised cost are held within a business model with the objective to hold financial assets in order to collect contractual cash flows while financial assets and financial liabilities classified and measured at fair value through OCI are held within a business model with the objective of both holding to collect contractual cash flows and selling.

Long term borrowings

Long-term borrowings are recorded at amortised cost, including lease liabilities which contain interest rate swaps that are closely related to the underlying financing and as such are not accounted for as an embedded derivative.

Convertible debt

Convertible bonds are classified as either compound financial instruments or hybrid financial instruments depending on the settlement alternatives upon redemption. Where the bondholders exercise their equity conversion options and the Group has no alternative other than to settle the convertible bonds into a fixed number of ordinary shares of the Company, then the bonds are classified as a compound financial instrument. Where the Group has an alternative settlement mechanism to the convertible bonds that permits settlement in cash, then the convertible instrument is classified as a hybrid financial instrument.

Convertible bonds that are classified as compound financial instruments consist of a liability and an equity component. At the date of issue, the fair value of the liability component is estimated using the prevailing market interest rate for similar non-convertible debt, and is subsequently recorded on an amortised cost basis using the effective interest method until extinguished on conversion or maturity of the bonds, and is recognised within Long-term borrowings. The difference between the proceeds of issue of the convertible bond and the fair value assigned to the liability component, representing the embedded option to convert the liability into equity of the Group, is included in the equity portion of the convertible bond in Other reserves and is not subsequently remeasured. The interest expense on the liability component is calculated by applying the effective interest rate for similar non-convertible debt to the liability component of the instrument. The difference between this value and the interest paid is added to the carrying amount of the liability.



 

Convertible bonds that are classified as hybrid financial instruments consist only of a liability component recognised within Long-term borrowings. At the date of issue, the entirety of the convertible bonds is accounted for at fair value with subsequent fair value gains or losses recorded within Long-term borrowings. The fair value of such financial instruments is obtained from their respective quoted prices in active markets, with the portion of the change in fair value attributable to changes in the credit risk of the convertible bonds recognised in Other comprehensive income and the portion of the change in fair value attributable to market conditions recognised in the Income statement within Finance costs.

Issue costs associated with compound financial instruments are apportioned between the liability and equity components of the convertible bonds where appropriate based on their relative carrying values at the date of issue. The portion relating to the equity component is charged directly against equity. Issue costs associated with hybrid financial instruments are expensed immediately to the Income statement.

Other equity investments

Other equity investments are non-derivative financial assets including listed and unlisted investments, excluding interests in associates and joint ventures. On initial recognition, these equity investments are irrevocably designated as measured at fair value through Other comprehensive income. They are subsequently measured at fair value, with changes in fair value recognised in Other comprehensive income with no recycling of these gains and losses to the Income statement when the investment is sold or a change in the structure of transaction changes its classification as an Other equity instrument. Dividends received on other equity investments are recognised in the Income statement.

The fair value of quoted investments is determined by reference to bid prices at the close of business on the balance sheet date.

Where there is no active market, fair value is determined using valuation techniques.

Interest-bearing deposits

Interest-bearing deposits, principally comprising funds held with banks and other financial institutions with contractual cash flows that are SPPI, and held in order to collect contractual cash flows, are carried at amortised cost using the effective interest method.

Impairment of financial assets

At each balance sheet date, the Group recognises provisions for expected credit losses on financial assets measured at amortised cost, based on either 12-month or lifetime losses depending on whether there has been a significant increase in credit risk since initial recognition. The simplified approach, based on the calculation and recognition of lifetime expected credit losses, is applied to contracts that have a maturity of one year or less, including trade receivables.

When determining whether there has been a significant increase in credit risk since initial recognition and when estimating the expected credit loss, the Group considers reasonable and supportable information that is relevant and available. This includes both quantitative and qualitative information and analysis, based on the Group's historical experience and informed credit assessment, including forward-looking information. Such forward-looking information takes into consideration the forecast economic conditions expected to impact the outstanding balances at the balance sheet date. A financial asset is written off when there is no reasonable expectation of recovery, such as the customer having filed for liquidation.

b   Cash and cash equivalents

Cash and cash equivalents include cash in hand and deposits with any qualifying financial institution repayable on demand or maturing within three months of the date of acquisition and which are subject to an insignificant risk of change in value.

c   Derivative and non-derivative financial instruments and hedging activities

Derivative financial instruments, comprising interest rate swap derivatives, foreign exchange derivatives and fuel hedging derivatives (including options, swaps and forward contracts) are initially recognised at fair value on the date a derivative contract is entered into and are subsequently remeasured at their fair value. They are classified as financial instruments through the Income statement. The method of recognising the resulting gain or loss arising from remeasurement depends on whether the derivative is designated as a hedging instrument, and if so, the nature of the item being hedged (as detailed below under cash flow hedges). The time value of options is excluded from the designated hedging instrument and accounted for as a cost of hedging. Movements in the time value of options are recognised in Other comprehensive income until the underlying transaction affects the Income statement.

When forward contracts are used to hedge forecast transactions, the Group generally designates only the spot component of the forward contract as the hedging instrument within a hedge relationship. Gains or losses arising on the change in fair value of the spot component are recognised within Other comprehensive income in the Cash flow hedge reserve within equity. The forward component of a forward contract is not designated within a hedge relationship, with the associated gains and losses on the forward component recorded within Other comprehensive income in the Cost of hedging reserve within equity until the underlying transaction affects the Income statement.

To manage foreign exchange movements on foreign currency customer cash inflows (denominated in US dollars, euros and Japanese yen), certain non-derivative repayment instalments on foreign currency-denominated interest-bearing liabilities are designated as hedging instruments within a hedge relationship. Gains or losses arising from movements in foreign exchange rates are recognised within Other comprehensive income in the Cash flow hedge reserve within equity. Accumulated gains or losses within the cash flow hedge reserve are transferred to Sales in advance of carriage in the same period as the forecast transaction occurs or when hedge accounting is discontinued when the forecast transaction is no longer expected to occur, at which point amounts are immediately reclassified to Passenger revenue.



 

When a derivative is designated as a hedging instrument and that instrument expires, is sold or is restructured, if the initial forecast transaction is still expected to occur, any cumulative gain or loss remains in the cash flow hedge reserve until such time as the hedge item impacts the Income statement. Where there is a change in the risk management objective, then hedge accounting is discontinued and the associated cumulative gain or loss arising prior to the change in risk management objective remains in the cash flow hedge reserve until such time as the underlying hedged item impacts the Income statement had the risk management objective continued to have been met. Where a forecast transaction which was previously determined to be highly probable and for which hedge accounting applied, is no longer expected to occur, hedge accounting is discontinued and the cumulative gain or loss in the cash flow hedge reserve is immediately reclassified to the Income statement.

Each operating company enters into foreign currency derivative contracts, that are not designated in a hedge relationship, in order to mitigate foreign exchange movements on financial liabilities designated in currencies other than the presentational currency of each operating company, including but not limited to, lease liabilities. Movements in the fair value of such derivatives are recognised in the Income statement in the period in which they occur and are presented within Net currency retranslation charges.

Exchange gains and losses on monetary investments are taken to the Income statement unless the item has been designated and is assessed as an effective hedging instrument. Exchange gains and losses on non-monetary investments are reflected in equity.

d   Cash flow hedges

Changes in the fair value of derivative financial instruments designated as in a hedge relationship of a highly probable expected future transaction are assessed for effectiveness and accordingly recorded in the Cash flow hedge reserve within equity.

Hedge effectiveness

Hedge effectiveness is determined at the inception of the hedge relationship, and through periodic prospective effectiveness assessments, to ensure that an economic relationship exists between the hedged item and hedging instrument. A hedging relationship qualifies for hedge accounting if it meets all of the following effectiveness requirements: (i) there is 'an economic relationship' between the hedged item and the hedging instrument; (ii) the effect of credit risk does not dominate the value changes that result from that economic relationship; and (iii) the hedge ratio is aligned with the requirements of the Group's risk management strategy and in all instances is maintained at a ratio of 1:1.

Sources of ineffectiveness include the following:

in hedges of fuel purchases, ineffectiveness may arise if the timing of the forecast transaction changes from what was originally estimated, or if there are changes in the credit risk of the Group or the derivative counterparty;

in hedges of foreign currency purchases, ineffectiveness may arise if the timing of the forecast transaction changes from what was originally estimated, or if there are changes in the credit risk of the Group or the derivative counterparty; and

in hedges of interest rate payments, ineffectiveness may arise if there are differences in the critical terms between the interest rate derivative instrument and the underlying hedged item, or if there are changes in the credit risk of the Group or the derivative counterparty.

Ineffectiveness is recorded within the Income statement as Realised/unrealised (losses)/gains on derivatives not qualifying for hedge accounting and presented within Other non-operating charges.

Reclassification adjustments

Gains and losses accumulated in the Cash flow hedge reserve within equity are reclassified from the Cash flow hedge reserve when the hedged item affects the Income statement as follows:

where the forecast hedged item results in the recognition of expenses within the Income statement (such as the purchase of jet fuel for which both fuel and the associated foreign currency derivatives are designated as the hedging instrument), the accumulated gains and losses recorded in both the cash flow hedge reserve and the cost of hedging reserve are reclassified and included in the Income statement within the same caption as the hedged item is presented. Such reclassification occurs in the same period as the hedged item is recognised in the Income statement;

where the forecast hedged item results in the recognition of a non-financial asset (such as the purchase of aircraft for which foreign currency derivatives are designated as the hedging instrument or where the purchase of jet fuel gives rise to the recognition of fuel inventory in storage facilities), or a non-financial liability (such as the sales in advance of carriage for which both foreign currency derivatives and non-financial derivative instruments are designated as the hedging instrument), the accumulated gains and losses recorded within both the cash flow hedge reserve and the cost of hedging reserve are included in the initial cost of the asset and liability, respectively. These gains or losses are recorded in the Income statement as the non-financial asset and the non-financial liability affects the Income statement (which for aircraft is through Depreciation over the expected life of the aircraft, for fuel inventory through Fuel, oil costs and emission charges and for sales in advance of carriage through Passenger revenue when the flight is flown); and

where the forecast hedged items results in the recognition of a financial asset or liability (such as variable rate debt for which interest rate swaps are designated as the hedging instrument), the accumulated gains and losses recorded within the cash flow hedge reserve are reclassified to Interest expense within the Income statement at the same time as the interest expense arises on the hedged item.

Further information on the risk management activities of the Group is given in note 28d.



 

e  Interest rate benchmark reform

In 2020 the Group adopted the amendments to IFRS 9 and IFRS 7 relating to the interest rate benchmark reform Phase 1, ('Phase 1') and in 2021 the Group adopted the amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16 relating to the interest rate benchmark reform Phase 2 ('Phase 2').

The Phase 1 amendments provide temporary relief from applying certain hedge accounting requirements to hedging relationships directly affected by Interbank Offered Rates ('IBOR') reform. The reliefs have the effect that IBOR reform does not cause hedge accounting to terminate prior to contracts being amended. Where transition to an alternative benchmark rate has taken place, the Group ceases to apply the Phase 1 amendments and instead applies the Phase 2 amendments.

Hedge accounting

Where the Group continues to apply the Phase 1 amendments, the following reliefs are applied:

when considering the highly probable requirement, the Group has assumed that those benchmark rates that need to be transitioned to an alternative benchmark rate, on which the Group's hedged long-term borrowings are based, do not change as a result of IBOR reform;

in assessing whether the hedge is expected to be highly effective on a forward-looking basis the Group has assumed that those benchmark rates that need to be transitioned to an alternative benchmark rate, on which the cash flows of the hedged long-term borrowings and the interest rate swaps that hedge them are based, are not altered by IBOR reform; and

the Group has not recycled the cash flow hedge reserve relating to the period after the IBOR reform is expected to take effect.

When the Group ceases to apply the Phase 1 amendments, the Group amends its hedge designation to reflect changes which are required by IBOR reform, but only to make one or more of the following changes:

designating an alternative benchmark rate (contractually or non-contractually specified) as the hedged risk;

amending the description of the hedged item, including the description of the designated portion of the cash flows being hedged; or

amending the description of the hedging instrument.

The associated hedge documentation is updated to reflect these changes in designation by the end of the reporting period in which the changes are made. Such amendments do not give rise to the hedge relationship being discontinued.

When the Group transitions to an alternative benchmark rate, the accumulated amounts within the cash flow hedge reserve are determined to be based on the alternative benchmark rate and no reclassification adjustments are made from the cash flow hedge reserve to the Income statement.

Long-term borrowings and lease liabilities

Phase 2 of the amendments requires that, for financial instruments measured using amortised cost measurement, changes to the basis for determining the contractual cash flows required by interest rate benchmark reform are reflected by adjusting their effective interest rate prospectively. No gain or loss is recognised upon transition to the new benchmark. The expedient is only applicable to direct changes that are required by interest rate benchmark reform.

For lease liabilities where there is a change to the basis for determining the contractual cash flows, as a practical expedient the lease liability is remeasured by discounting the revised lease payments using a discount rate that reflects the change in the interest rate where the change is required by IBOR reform.

Further information on the management of and uncertainty arising from interest rate reform is given in note 27i. No amounts have been recorded in the current or prior periods as a result of these amendments.

Employee benefit plans

a   Pension obligations

The Group has both defined benefit and defined contribution plans. A defined contribution plan is a pension plan under which the Group pays fixed contributions into a separate entity. The Group has no legal or constructive obligations to pay further contributions if the fund does not hold sufficient assets to pay all employees the benefits relating to employee service in the current and prior years.

Typically defined benefit plans define an amount of pension benefit that an employee will receive on retirement, usually dependent on one or more factors such as age, years of service and compensation.

The Group's net obligation in respect of defined benefit pension plans is calculated separately for each plan by estimating the amount of future benefit that employees have earned in return for their service in the current and prior years. The benefit is discounted to determine its present value, and the fair value of any plan assets are deducted. The discount rate is the yield at the balance sheet date on AA-rated corporate bonds of the appropriate currency that have durations approximating those of the Group's obligations. The calculation is performed by a qualified actuary using the projected unit credit method. When the net obligation calculation results in an asset for the Group, the recognition of an asset is limited to the present value of any future refunds, net of the relevant taxes, from the plan or reductions in future contributions to the plan ('the asset ceiling'). The fair value of the plan assets is based on market price information and, in the case of quoted securities, is the published bid price. The fair value of insurance policies which exactly match the amount and timing of some or all benefits payable under the scheme are deemed to be the present value of the related obligations. Longevity swaps are measured at their fair value.

Current service costs are recognised within employee costs in the year in which they arise. Past service costs are recognised in the event of a plan amendment or curtailment, or when the Group recognises related restructuring costs or severance obligations. The net interest is calculated by applying the discount rate used to measure the defined benefit obligation at the beginning of the period to the net defined benefit liability or asset, taking into account any changes in the net defined benefit liability or asset during the period as a result of contributions and benefit payments. Net interest and other expenses related to the defined benefit plans are recognised in the Income statement. Remeasurements, comprising IAS 19 gains and losses, the effect of the asset ceiling (excluding interest) and the return on plan assets (excluding interest), are recognised immediately in Other comprehensive income. Remeasurements are not reclassified to the Income statement in subsequent periods.



 

b   Severance obligations

Severance obligations are recognised when employment is terminated by the Group before the normal retirement date, or whenever an employee accepts voluntary redundancy in exchange for these benefits. The Group recognises a provision for severance payments when it is demonstrably committed to either terminating the employment of current employees according to a detailed formal plan without realistic possibility of withdrawal, or providing severance payments as a result of an offer made to encourage voluntary redundancy.

Other employee benefits are recognised when there is deemed to be a present obligation.

Taxation

Current income tax assets and liabilities are measured at the amount expected to be recovered from or paid to the taxation authorities, based on tax rates and laws that are enacted or substantively enacted at the balance sheet date.

Deferred income tax is recognised on all temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements, with the following exceptions:

where the temporary difference arises from the initial recognition of goodwill or of an asset or liability in a transaction that is not a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss;

in respect of taxable temporary differences associated with investments in subsidiaries or associates, where the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future; and

deferred income tax assets are recognised only to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, carried forward tax credits or tax losses can be utilised.

Deferred income tax assets and liabilities are measured on an undiscounted basis at the tax rates that are expected to apply when the related asset is realised or liability is settled, based on tax rates and laws enacted or substantively enacted at the balance sheet date.

Income tax is charged or credited directly to equity if it relates to items that are credited or charged to equity. Otherwise income tax is recognised in the Income statement.

Inventories

Inventories are valued at the lower of cost and net realisable value. Such cost is determined by the weighted average cost method. Inventories include mainly aircraft spare parts, repairable aircraft engine parts and fuel held in storage facilities.

Share-based payments

The Group operates a number of equity-settled, share-based payment plans, under which the Group awards equity instruments of the Group for services rendered by employees. The fair value of the share-based payment plans is measured at the date of grant using a valuation model provided by external specialists. The resulting cost, as adjusted for the expected and actual level of vesting of the plan, is charged to the Income statement over the period in which the options vest. At each balance sheet date before vesting, the cumulative expense is calculated, representing the extent to which the vesting period has expired and management's best estimate of the achievement or otherwise of non-market conditions, and accordingly the number of equity instruments that will ultimately vest. The movement in the cumulative expense since the previous balance sheet date is recognised in the Income statement with a corresponding entry in equity.

Provisions

Provisions are made when an obligation exists for a present liability in respect of a past event and where the amount of the obligation can be reliably estimated and where it is considered probable that an outflow of economic resources will be required to settle the obligation. Where it is not considered probable that there will be an outflow of economic resources required to settle the obligation, the Group does not recognise a provision, but discloses the matter as a contingent liability. The Group assesses whether each matter is probable of there being an outflow of economic resources to settle the obligation at each reporting date.

Employee leaving indemnities and other employee provisions are recorded for flight crew who, meeting certain conditions, have the option of being placed on reserve or of taking early retirement. The Group is obligated to remunerate these employees until they reach the statutory retirement age. The calculation is performed by independent actuaries using the projected unit credit method.

Other employee related provisions are recognised for direct expenditures of business reorganisation such as severance payments (restructuring provisions) where plans are sufficiently detailed and well advanced, and where appropriate communication to those affected has been undertaken at the balance sheet date.

Restoration and handback provisions arising on inception of a lease are recognised as a provision with a corresponding amount recognised as part of the ROU asset. Any subsequent change in estimation relating to such costs are reflected in the ROU asset. Maintenance and handback provisions that occur through usage or through the passage of time are recognised as such activity occurs, with a corresponding expense recorded in the Income statement. Any subsequent change in estimation are recognised in the Income statement.

The method for determining legal claims provisions is determined on a claim by claim basis. Where a claim includes a significant population of items, the weighted average provision is estimated by determining all potential outcomes and the probability of their occurrence. Where a claim relates to a single item, then the Group determines the associated provision by applying the most likely outcome giving consideration to alternative outcomes. Where an individual claim is significant, the disclosure of quantitative information is restricted to the extent that it does not prejudice the outcome of the claim. If the effect is material, expected future cash flows are discounted using a rate that reflects, where appropriate, the risks specific to the provision. Where discounting is used, the effect of unwinding the discount rate is recognised as a finance cost in the Income statement.



 

Revenue recognition

Passenger revenue

The Group's revenue primarily derives from transportation services for both passengers and cargo. Revenue is recognised when the transportation service has been provided.

Passenger tickets are generally paid for in advance of transportation and are recognised, net of discounts, as Deferred revenue on ticket sales in current liabilities until either the customer has flown or, for flexible tickets, when unused ticket revenue is recognised or the ticket expires unused.

At the time of expected travel, revenue is recognised in relation to flexible tickets where a customer can reschedule the date of intended travel, that are not expected to be used, a term referred to as 'unused flexible tickets'. This revenue is recognised based on the terms and conditions of the ticket and analysis of historical experience. For these unused flexible tickets, revenue is recognised only when the risk of a significant reversal of revenue is remote based on the terms and conditions of the ticket and analysis of historical experience. The estimation regarding historical experience is updated at each reporting date.

Where a flight is cancelled, the passenger is entitled to either compensation, a refund, changing to an alternative flight or the receipt of a voucher. Where compensation is issued to the customer, such payments are presented net within Passenger revenue against the original ticket purchased. Where the Group provides a refund to a customer, Deferred revenue on ticket sales is reduced and no amount is recorded within revenue. Where a voucher is issued it is retained within Deferred revenue on ticket sales until such time as it is redeemed for a flight or it expires, at which time it is recorded within Passenger revenue. The Group also recognises revenue by estimating the amount of vouchers that are not expected to be redeemed prior to expiry using analysis of historical experience. The estimation regarding historical experience is updated at each reporting date. The amount of such revenue recognised is constrained, where necessary, such that the risk of a significant reversal of revenue in the future is remote.

Payments received in relation to certain ancillary services regarding passenger transportation, such as change fees, are not considered to be distinct from the performance obligation to provide the passenger flight. Payments relating to these ancillary services are recognised in Deferred revenue on ticket sales in current liabilities until the customer has flown.

The Group considers whether it is an agent or a principal in relation to passenger transportation services by considering whether it has a performance obligation to provide services to the customer or whether the obligation is to arrange for the services to be provided by a third party. The Group acts as an agent where (i) it collects various taxes, duties and fees assessed on the sale of tickets to passengers and remits these to the relevant taxing authorities; and (ii) where it provides interline services to airline partners outside of the Group. Commissions earned in relation to agency services are recognised as revenue when the underlying goods or services have been transferred to the customer. In all other instances, the Group considers it acts as the principal in relation to passenger transportation services.

Cargo revenue

The Group has identified a single performance obligation in relation to cargo services and the associated revenue is measured at its standalone selling price and recognised on satisfaction of the performance obligation, which occurs on the fulfilment of the transportation service.

Other revenue

The Group has identified several performance obligations in relation to services that give rise to revenue being recognised within Other revenue. These services, their performance obligations and associated revenue recognition include:

the provision of maintenance services and overhaul services for engines and airframes, where the Group is engaged to enhance an asset while the customer retains control of the asset. Accordingly, the performance obligations are satisfied, and revenue recognised, over time. The Group estimates the proportion of the contract completed at the reporting date and recognises revenue based on the percentage of completion of the contract;

the provision of ground handling services, where the performance obligations are fulfilled when the services are provided;

the provision of holiday and hotel services, where the performance obligations are satisfied over time as the customer receives the benefit of the service; and

brand and marketing activities, where the performance obligations are satisfied as the associated activities occur.

Customer loyalty programmes

The Group operates four loyalty programmes: the British Airways Executive Club, Iberia Plus, Vueling Club and the Aer Lingus Aer Club. The customer loyalty programmes award travellers Avios to redeem for various rewards, primarily redemption travel, including flights, hotels and car hire. Avios are also sold to commercial partners to use in loyalty activity.

Avios issuance

When issued, the standalone selling price of an Avios is recorded within Deferred revenue on ticket sales in current liabilities until the customer redeems the Avios. The standalone selling price of Avios is based on the value of the awards for which the points could be redeemed. The Group also recognises revenue associated with the proportion of Avios which are not expected to be redeemed, referred to as 'breakage', based on the results of modelling using historical experiences and expected future trends in customer behaviour, up until the reporting date. The amount of such revenue recognised is limited, where necessary, such that the risk of a significant reversal of revenue in the future is remote.

Where the issuance of Avios arises from travel on the Group's airlines, the consideration received from the customer may differ to the aggregation of the relative standalone selling prices. In such instances the allocation of the consideration to each performance obligation is undertaken on a proportional basis using the relative standalone selling prices.



 

The Group has contractual arrangements with non-Group airlines and non-air partners for the issuance and redemption of Avios, for which it has identified the following performance obligations:

Companion vouchers

Certain non-air partners issue their card holders with companion vouchers, which forms part of the variable consideration of the overall contract, depending on the level of expenditure by the card holders, for redemption on the airlines of the Group for the same flight and class of cabin as the underlying fare being purchased. The Group estimates the standalone selling price of the companion voucher performance obligation, using valuation techniques, by reference to the amount that a third party would be prepared to pay in an arm's length transaction.

Brand and marketing activities

For both air and non-air partners, the Group licenses the Avios and the airline brands for certain activities, such as the creation of co-branded credit cards. In addition, the Group has certain contractual arrangements whereby it commits to provide marketing services to the members of the loyalty schemes on behalf of those partners. For the provision of both brand and marketing services, the partner receives benefits incremental to the issuance of Avios. The Group estimates the standalone selling price of the brand and marketing performance obligations, using valuation techniques, by reference to the amount that a third party would be prepared to pay in an arm's length transaction for access to comparable brands for the period over which they use the brand. For brand services, as the Group considers that the partner has the right to use the brand, revenue is recognised as the brand service is provided and not over time. For marketing performance obligations, revenue is recognised as the marketing activities occur based on when the partner receives the benefit of those services.

Upfront payments

Where a partner makes an upfront payment to the Group which does not relate to any specific performance obligation, then the Group considers such payments as advance payments for future goods and services and the associated revenue is recognised as those goods and services are provided, as detailed above. In such instances the payment is allocated across all of the performance obligations over the contract term. The Group estimates the expected level of Avios to be issued over the contract term using experience, historical and expected future trends, and allocates the payments to the relevant performance obligations accordingly. At each reporting date, the Group updates its estimate of the number of Avios expected to be issued over the total contract term and recognises a cumulative catch-up adjustment where necessary.

When a partner makes an upfront payment to the Group, the Group assesses whether such a payment is representative of a significant financing event. Where a significant financing component is identified, the Group estimates a market rate of interest that an arm's length financial liability of similar size and tenor would yield. The Group recognises the imputed interest as a Finance expense in the Income statement.

Other considerations

The Group considers whether it is an agent or a principal in relation to the loyalty services by considering whether it has a performance obligation to provide services to the customer or whether the obligation is to arrange for the services to be provided by a third party. In particular, the Group acts as an agent where customers redeem their Avios on interline partner flights outside of the Group, where the fees payable to the interline partner are presented net against the associated release of the Deferred revenue from ticket sales.

Exceptional items

Exceptional items are those that in management's view need to be separately disclosed by virtue of their size or nature and where such presentation is relevant to an understanding of the Group's financial performance. While management has defined a list of items and a quantitative threshold that would merit categorisation as exceptional that has been established through historical experience, the Group retains the flexibility to add additional items should their size or nature merit such presentation. The accounting policy in respect of exceptional items and classification of an item as exceptional is approved by the Board, through the Audit and Compliance Committee.

The financial performance of the Group is monitored by the Management Committee and the Board on a pre-exceptional basis to enable comparison to prior reporting periods as well as to other selected companies, and also for making strategic, financial and operational decisions.

The exceptional items recorded in the Income statement include, but are not limited to, items such as significant settlement agreements with the Group's pension schemes; significant restructuring; the impact of business combination transactions that do not contribute to the ongoing results of the Group; significant discontinuance of hedge accounting; legal settlements; individually significant tax transactions; and the impact of the sale, disposal or impairment of an asset or investment in a business. Where exceptional items are separately disclosed, the resultant tax impact is additionally separately disclosed. Certain exceptional items may cover more than a single reporting period, such as significant restructuring events, but not more than two reporting periods.

Further information is given in the Alternative performance measures section.

Government grants

Government grants are recognised where there is reasonable assurance that the grant will be received. Loans provided and/or guaranteed by governments that represent market rates of interest are recorded at the amount of the proceeds received and recognised within Borrowings. Those loans provided and/or guaranteed by governments that represent below market rates of interest are measured at inception at their fair value and recognised within Borrowings, with the differential to the proceeds received recorded within Deferred income and released to the relevant financial statement caption in the Income statement on a systematic basis. Grants that compensate the Group for expenses incurred are recognised in the Income statement in the relevant financial statement caption on a systematic basis in the periods in which the expenses are recognised.

Critical accounting estimates, assumptions and judgements

The preparation of financial statements requires management to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses. These judgements, estimates and associated assumptions are based on historical experience and various other factors believed to be reasonable under the circumstances. Actual results in the future may differ from judgements and estimates upon which financial information has been prepared. These underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised prospectively.

Estimates

The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are as follows:

a  Employee benefit obligations, employee leaving indemnities, other employee related restructuring

At December 31, 2022 the Group recognised €2,334 million in respect of employee benefit assets (2021: €1,775 million) and €217 million in respect of employee benefit obligations (2021: €285 million). Further information on employee benefit obligations is disclosed in note 32.

The cost of employee benefit obligations, employee leaving indemnities and other employee-related provisions is determined using the valuation requirements of IAS 19. These valuations involve making assumptions about discount rates, future salary increases, mortality rates and future pension increases. Due to the long-term nature of these schemes, such assumptions are subject to significant uncertainty. The assumptions relating to these schemes are disclosed in note 32. The Group determines the assumptions to be adopted in discussion with qualified actuaries. Any difference between these assumptions and the actual outcome will impact future net assets and total comprehensive income. The sensitivity to changes in pension assumptions is disclosed in note 32.

Under the Group's Airways Pension Scheme (APS) and New Airways Pension Scheme (NAPS) defined benefit schemes, increases to pensions are based on the annual Government Pension Increase (Review) Orders, which since 2011 have been based on the Consumer Prices Index (CPI). Additionally, in APS there is provision for the Trustee to pay increases up to the level of the Retail Prices Index (RPI), subject to certain affordability tests. Historically market expectations for RPI could be derived by comparing the prices of UK Government fixed-interest and index-linked gilts, with CPI assessed by considering the Bank of England's inflation target and comparison of the construction of the two inflation indices.

In November 2020, the UK Government and UK Statistics Authority (UKSA) confirmed alignment of RPI with CPIH (a variant of CPI) from February 2030. In assessing RPI and CPI inflation from investment market data, allowance has been made for alignment of RPI with CPIH from 2030 and, therefore, effectively no gap between RPI and CPI inflation from that date. CPI inflation before 2030 is assumed to be 1 per cent per annum below RPI inflation.

b  Revenue recognition

At December 31, 2022 the Group recognised €7,644 million (2021: €6,552 million) in respect of deferred revenue on ticket sales of which €2,630 million (2021: €2,820 million) related to customer loyalty programmes. Further information on deferred revenue from ticket sales is included in note 23.

Passenger revenue

Passenger revenue is recognised when the transportation service is provided. At the time of transportation, revenue is also recognised in respect of unused tickets and is estimated based on the terms and conditions of the tickets and historical experience. The Group considers that there is no reasonably possible change to unused ticket assumptions that would have a material impact on Passenger revenue recorded in the year.

Historically, where a voucher has been issued to a customer in the event of a flight cancellation, the Group estimated, based on historical experience, the level of such vouchers not expected to be used prior to expiry and recognised revenue accordingly. During 2020 and 2021, due to the significant level of flight cancellations arising from COVID-19, the Group issued a greater volume of vouchers than it would have otherwise done so. In addition, given the uncertainty as to the timing of customers redeeming these vouchers, the Group was unable to estimate with a high degree of probability that there would not be a significant reversal of revenue in the future had it applied the historical expiry trends over the period of the pandemic. Accordingly, for the years ended December 31, 2020, and December 31, 2021, the Group did not recognise revenue arising from those vouchers issued due to COVID-19 related cancellations until either the voucher was redeemed or it expired.

During 2022, while the recovery from COVID-19 has seen much lower levels of voucher issuance and high levels of voucher redemption, the Group's operating companies' voucher programmes have had limited voucher expiry in 2022, with the majority not expected until 2023 at the earliest. Accordingly, the Group has had insufficient historical expiry experience relating to vouchers issued during the pandemic and therefore has not applied any breakage to existing voucher liabilities as it cannot confirm that there would not be a subsequent significant reversal of revenue if it were to do so.

Customer loyalty schemes

Revenue associated with the issuance of Avios under customer loyalty programmes is based on the relative standalone selling prices of the related performance obligations (brand, marketing and Avios), determined using estimation techniques. The transaction price of brand and marketing services is determined using specific brand valuation methodologies. The transaction price of an Avios is determined as the price of the rewards against which they can be redeemed and is reduced to take account of the proportion of Avios that are not expected to be redeemed by customers.

During 2020 and 2021, due to the significant restrictions imposed on the ability of customers to redeem Avios coupled with the disruption in the patterns of redemption caused by COVID-19, the Group considered that the trends experienced since the start of the COVID-19 pandemic were not reflective of the long-term expected patterns of redemption and accordingly, the Group was unable to determine with a high degree of probability that there would not be a significant reversal of revenue in the future had it applied the redemption trends over the period of the pandemic. Accordingly, for the years to December 31, 2020 and December 31, 2021, the Group continued to estimate the level of redemption activity based on pre-COVID-19 customer behaviour. While 2022 has seen all operating companies recover from the COVID-19 pandemic, there remains uncertainty as to whether recent redemption data is representative of long-term behavioural trends and accordingly the Group cannot confirm that there would not be a subsequent significant reversal of revenue if the level of redemption estimates were to be updated to reflect behaviours during the COVID-19 period. Accordingly, the Group continues to estimate the level of redemption activity based on pre-COVID-19 customer behaviour.

The Group estimates the number of Avios not expected to be redeemed using statistical modelling based on historical experience and expected future trends in customer behaviour. A five percentage point increase in the assumption of Avios outstanding and not expected to be redeemed would result in an adjustment to Deferred revenue from ticket sales of €95 million, with an offsetting adjustment to increase revenue and operating profit recognised in the year.



 

c  Income taxes

At December 31, 2022 the Group recognised €1,282 million in respect of deferred tax assets (2021: €1,282 million). Further information on current and deferred tax is disclosed in note 10.

The Group is subject to income taxes in numerous jurisdictions. Estimates are required in determining the worldwide provision for income taxes. There are many transactions and calculations for which the ultimate tax determination is uncertain because it may be unclear how tax law applies to a particular transaction or circumstance. Where the Group determines that it is more likely than not that the tax authorities would accept the position taken in the tax return, amounts are recognised in the financial statements on that basis. Where the amount of tax payable or recoverable is uncertain, the Group recognises a liability based on either: the Group's judgement of the most likely outcome; or, when there is a wide range of possible outcomes, a probability-weighted average approach.

The Group recognises deferred tax assets only to the extent that it is probable that the taxable profit will be available against which the deductible temporary differences, carried forward tax credits or tax losses can be utilised. Management uses judgement, including the consideration of past and current operating performance and the future projections of performance laid out in the approved business plan in order to assess the probability of recoverability.

In exercising this judgement, while there are no time restrictions on the utilisation of historic tax losses in the principal jurisdictions in which the Group operates, future cash flow projections are forecast for a period of up to ten years from the balance sheet date, which represents the period over which it is probable that future taxable profits will be available.

At December 31, 2022, the Group had unrecognised deferred tax assets of €2,084 million relating to tax losses the Group does not reasonably expect to utilise. In applying the aforementioned judgement, had the Group extended the period of future cash flow projections indefinitely, then the amount of unrecognised deferred tax assets would have reduced by €1,608 million. Conversely, if the forecast profit before tax for each operating company was reduced by two percentage points over the forecast period, the amount of the unrecognised deferred tax asset relating to tax losses would increase by €11 million.

d  Impairment of non-financial assets

At December 31, 2022 the Group recognised €2,423 million (2021: €2,439 million) in respect of intangible assets with an indefinite life, including goodwill. Further information on these assets is included in note 17.

Goodwill and intangible assets with indefinite economic lives are tested, as part of the cash-generating units to which they relate, for impairment annually and at other times when such indicators exist. The recoverable amounts of cash-generating units have been determined based on value-in-use calculations, which use a weighted average multi-scenario discounted cash flow model, which are then compared to the carrying amount of the associated cash-generating unit.

In determining the carrying value of each cash generating unit, the Group allocates all associated operating tangible and intangible assets, including ROU assets. In addition the Group has allocated certain liabilities to the carrying value of each CGU where those liabilities are critical to the underlying operations of the cash-generating unit and in the event of a disposal of the cash-generating unit would be required to be transferred to the purchaser. Such liabilities include lease liabilities.

The Group has applied judgement in the weighting of each scenario in the discounted cash flow model and these calculations require the use of estimates in the determination of key assumptions and sensitivities as disclosed in notes 4 and 17.

The Group assesses whether there are any indicators of impairment for all non-financial assets at each reporting date. When such indicators are identified, then non-financial assets are tested for impairment.

e   Engineering and other aircraft costs

At December 31, 2022, the Group recognised €2,400 million in respect of maintenance, restoration and handback provisions (2021: €1,832 million). Information on movements on the provision is disclosed in note 26.

The Group has a number of contracts with service providers to replace or repair engine parts and for other maintenance checks. These agreements are complex and generally cover a number of years. Provisions for maintenance, restoration and handback are made based on the best estimate of the likely committed cash outflow. In determining this best estimate, the Group applies significant judgement as to the level of forecast costs expected to be incurred when the aircraft is returned to the lessor. The assumptions of this significant judgement include aircraft utilisation, expected maintenance intervals, future maintenance costs and the aircraft's condition. The associated forecast costs are discounted to their present value. In 2021, the Group considered that there was no reasonably possible change to a single assumption that would have had a material impact on the provisions, however a combination of changes in multiple assumptions may have. In 2022, with the status of the macro-economic environment, the Group considers that a reasonable possible change in the inflation rate and discount rate assumptions of a 100 basis points increase would give rise to an increase of €51 million and a decrease of €68 million, respectively, when applied in isolation to one another.

Judgements

a   Determining the lease term of contracts with renewal and termination options

The Group determines the lease term as the non-cancellable term of the lease, together with any periods covered by an option to extend the lease if it is reasonably certain to be exercised, or any periods covered by an option to terminate the lease, if it is reasonably certain not to be exercised. The Group applies judgement in evaluating whether it is reasonably certain whether or not to exercise the option to renew or terminate the lease. Such judgement includes consideration of fleet plans which underpin approved business plans and historical experience regarding the extension of leases. After the commencement date, the Group re-assesses the lease term if there is a significant event or change in circumstances that affects the Group's ability to exercise or not to exercise the option to renew or to terminate. Further information is given in note 14.



 

b   Determining whether the Group has significant influence over Air Europa Holdings

The Group applies judgement in the determination as to whether it has the power with which to participate in the decision making of, and as a result significant influence over, Air Europa Holdings, S.L. (Air Europa Holdings). Such judgement includes the consideration as to the ability of the Group to: have representation on the board of Air Europa Holdings; participate in the policy-making processes, including participation in decisions regarding dividends and other distributions; the existence of material transactions between Air Europa Holdings and the Group; enable the interchange of management personnel and provide essential technical information.

In forming its judgement, the Group notes that: it does not have the ability to have representation on the board of Air Europa Holdings; it does not have the ability to participate in the policy-making processes; has not entered into material transactions outside of the normal course of business; it does not have the ability to enable the interchange of management personnel and it does not have the ability to provide essential technical information. The Group has therefore concluded that it does not have significant influence over Air Europa Holdings.

Accordingly, the Group accounts for its shareholding in Air Europa Holdings as an Other equity investment and measures it at fair value through Other comprehensive income. Had the Group concluded that it does have significant influence over Air Europa Holdings, then the shareholding would have been classified as an associate, measured at fair value on inception and subsequently measured using the equity method. At December 31, 2022, the fair value of its shareholding in Air Europa Holdings was €24 million. Further information is given in
note 19.

New standards, amendments and interpretations

The following amendments and interpretations apply for the first time in 2022, but do not have a material impact on the consolidated financial statements of the Group:

property, plant and equipment: proceeds before intended use - amendments to IAS 16 effective for periods beginning on or after
January 1, 2022;

reference to the Conceptual Framework - amendments to IFRS 3 effective for periods beginning on or after January 1, 2022;

onerous contracts - cost of fulfilling a contract - amendments to IAS 37 effective for periods beginning on or after January 1, 2022; and

annual improvements to IFRS standards 2018-2020 - effective for periods beginning on or after January 1, 2022.

The IASB and IFRIC have issued the following standards, amendments and interpretations with an effective date after the year end of these financial statements which management believe could impact the Group in future periods. The Group has assessed the impact of these standards, amendments and interpretations and it is not expected that these will have a material effect on the reported income or net assets of the Group. Unless otherwise stated, the Group plans to adopt the following standards, interpretations and amendments on the date they become mandatory:

IFRS 17 Insurance contracts - effective for periods beginning on or after January 1, 2023;

definition of accounting estimate - amendments to IAS 8 effective for periods beginning on or after January 1, 2023;

disclosure of accounting policies - amendments to IAS 1 and IFRS Practice statement 2 effective for periods beginning on or after January 1, 2023; and

deferred tax related to assets and liabilities arising from a single transaction - amendments to IAS 12 effective for periods beginning on or after January 1, 2023.

On October 31, 2022, the IASB issued the amendments to IAS 1 - classification of liabilities as current or non-current (the 'Amendments'), effective for periods beginning on or after January 1, 2024. The Amendments will require the €825 million convertible bond that matures in 2028, which as at December 31, 2022, had a carrying value of €605 million, to be reclassified from a non-current liability to a current liability with the comparative presentation as at December 31, 2023 also reclassified. The Amendments require that where the conversion feature of a convertible instrument does not meet the recognition criteria for separate presentation within equity and where the associated bond holders have the irrevocable right to exercise the conversion feature within twelve months of the balance sheet date, that such convertible instruments be presented as current. Other than this reclassification, the Amendments will not have a material effect on the reported results or net assets of the Group.

Significant changes and transactions in the current reporting period

The financial performance and position of the Group was affected by the following significant events and transactions in the year to December 31, 2022 as detailed below:

on March 4, 2022 Aer Lingus entered into a financing arrangement with the Ireland Strategic Investment Fund (ISIF), which subsequently increased the existing €150 million of facilities to €350 million and extended the maturity to March 2025. On December 13, 2022, Aer Lingus repaid €100 million of the €150 million it had previously drawn against this facility. At December 31, 2022, €300 million of undrawn facilities remains available for draw down;

on April 12, 2022, the Group entered into an asset-financing structure, under which five aircraft were financed. These transactions mature between 2032 and 2036. This arrangement was transacted through an unconsolidated structured entity, which in turn issued the Iberia Pass Through Certificates, Series 2022-1, commonly referred to as EETCs. In doing so, the asset financing structure provides committed aircraft financing of €680 million;

on May 19, 2022, the Group entered into an agreement with Boeing to purchase 25 737-8200 and 25 737-10 aircraft, plus 100 options. The aircraft will be delivered between 2023 and 2027 and will be used for shorthaul fleet renewal. The fleet order was subsequently approved by shareholders on October 26, 2022;

on June 15, 2022, following approval from Sociedad Estatal de Participaciones Industriales (SEPI) (the Spanish state holding company that has a direct participation in Air Europa Holdings) and the Instituto de Crédito Oficial (ICO) in Spain, the Group entered into a financing arrangement with Globalia Corporación Empresarial, S,A, ('Globalia'), whereby, the Group provided a €100 million seven-year unsecured loan. The loan was convertible for a period of two years from inception into a fixed number of the shares of Air Europa Holdings;

in the first half of 2022, the Group converted 22 Airbus A320neos options into firm orders for 17 Airbus A320neos and five Airbus A321neos;

on July 28, 2022, IAG announced a further order for more fuel-efficient Airbus A320neo family aircraft, as part of its plan to meet climate commitments. The Group converted 12 Airbus A320neo/A321neo options into firm orders and ordered a further 25 Airbus A320neo/A321neo aircraft, with the option to purchase 50 additional aircraft. The firm orders will replace existing Airbus A320ceo family aircraft and are for delivery between 2025 and 2028; the split between A320neos and A321neos will be determined nearer to delivery. The fleet order was subsequently approved by shareholders on October 26, 2022;

on August 16, 2022, the Group exercised its exchange option and converted the €100 million loan it had made to Globalia into 20 per cent of the share capital of Air Europa Holdings, which has been recognised within Other equity instruments. The fair value of the loan immediately prior to conversion was €65 million, representing a reduction of €35 million from inception, which has been recorded within the Income statement. Upon converting the loan into share capital of Air Europa Holdings, the fair value of the investment was determined to be €22 million, with the difference between the fair value of the loan immediately prior to conversion and the fair value of the equity investment immediately after conversion, representing €43 million, being recorded as a loss within the Income statement. Further details regarding the investment in Air Europa Holdings are given in note 19;

on August 23, 2022, the Group extended its $1.755 billion secured Revolving Credit Facility accessible by British Airways, Iberia and Aer Lingus, previously due to mature on March 23, 2024, by a further 12 months to March 23, 2025;

on October 21, 2022, the Group entered into an asset-financing structure, under which four aircraft were financed. These transactions mature between 2032 and 2036. This arrangement was transacted through an unconsolidated structured entity, which in turn issued the British Airways Pass Through Certificates, Series 2022-1, commonly referred to as EETCs . In doing so, the asset financing structure provides committed aircraft financing of €416 million; and

on November 17, 2022, the Group redeemed the convertible bond issued in November 2015 for its nominal value of €500 million.

Impact of climate change on financial reporting

Significant transactions and critical accounting estimates, assumptions and judgements in the determination of the impact of climate change

As a result of climate change the Group has designed and approved its Flightpath Net Zero climate strategy, which commits the Group to net zero emissions by 2050. While approved business plans currently have a duration of three years, the Flightpath Net Zero climate strategy impacts both the short, medium and long-term operations of the Group.

The details regarding the inputs and assumptions used in the determination of the Flightpath Net Zero climate strategy include, but are not limited to, the following that are within the control of the Group:

the additional cost of the Group's commitment to increasing the level of Sustainable Aviation Fuels (SAF) to ten per cent by 2030 and to seventy per cent by 2050;

the cost of incurring an increase in the level of carbon offsetting and carbon capture schemes; and

the impact of introducing more fuel-efficient aircraft and being able to operate these more efficiently.

In addition to these inputs and measures within the control of management, Flightpath Net Zero includes assumptions pertaining to consumers, governments and regulators regarding the following:

the impact on passenger demand for air travel as a result of both passenger trends regarding climate change and government policies;

investment and policy regarding the development of SAF production facilities;

investment and improvements in air traffic management; and

the price of carbon through the EU, Swiss and UK Emissions Trading Schemes (ETS) and the UN Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA).

The level of uncertainty regarding the impact of these factors increases over time. Accordingly, the Group has applied critical estimation and judgement in the evaluation of the impact of climate change regarding the recognition and measurement of assets and liabilities within the financial statements.

Critical accounting estimates, assumptions and judgements - cash flow forecast estimation

With the Flightpath Net Zero climate strategy assessing the impact over a long-term horizon to 2050, the level of estimation uncertainty in the determination of cash flow forecasts increases over time. For those assets and liabilities, where their recoverability is dependent on long-term cash flows, the following critical accounting estimates, assumptions and judgements, to the extent they can be reliably measured, have been applied:

a  Long-term fleet plans and useful economic lives

The Group's Flightpath Net Zero climate strategy has been developed in conjunction with the long-term fleet plans of each operating company. This includes the annual assessment of useful lives and the residual values of each aircraft type.

During the course of 2020 as a result of the impact of COVID-19, the Group permanently stood down 82 aircraft (of which ten were subsequently stood back up), their associated engines and rotable inventories. These permanently stood down aircraft were older generation aircraft, that were less fuel efficient, more carbon intensive and more expensive to operate than more modern models.

With the permanent standing down of these aircraft, coupled with the future committed delivery of 192 fuel efficient aircraft as detailed in note 15, the Group considers the existing fleet assets align with the long-term fleet plans to achieve its Flightpath Net Zero climate strategy. All aircraft in the fleet, and those due to be delivered in the future, have the capability to utilise SAF in their operations without impediment. Accordingly, no impairment has arisen in the current or prior year, nor have the useful lives and residual values of aircraft been amended, as a result of the Group's decarbonisation plans.



 

b  Impairment testing of the Group's cash generating units

The Group applies discounted cash flow models, for each cash generating unit, derived from the cash flow forecasts from the approved three-year business plans. The Group's Flightpath Net Zero climate strategy is long-term in nature and includes commitments that will occur at differing points over this time horizon. To the extent that certain of those commitments occur over the short-term, then they have been incorporated into the three-year business plans.

The Group adjusts the final year (being the third year) of these probability weighted cash flows to incorporate the impacts of climate change from the Group's Flightpath Net Zero climate strategy that are expected to occur over the medium term. These adjustments are limited to those that: (i) the Group can reliably estimate at the reporting date; (ii) only relate to the Group's existing asset base in its current condition; and (iii) incorporate legislation and regulation that is expected to be required to achieve the Group's Flightpath Net Zero climate strategy, and which is sufficiently progressed at the reporting date.

As a result, the Group's impairment modelling incorporates the following aspects of the Group's Flightpath Net Zero climate strategy through to 2030, after which time the level of uncertainty regarding timing and costing becomes insufficiently reliable to estimate: (i) an increase in the level of SAF consumption of 10 per cent of the overall fuel mix; (ii) forecast cost of carbon, including SAF, ETS allowances and CORSIA allowances (all derived from externally sourced or derived information); (iii) the removal of existing free ETS allowances issued by the EU member states, Switzerland and the UK; (iv) forecast kerosene taxes applied to jet fuel for all intra EU flight activity; and (v) assumptions regarding the ability of the Group to recover these incremental costs through increased ticket pricing.

In preparing the impairment models, the Group cash flow projections are prepared on the basis of using the current fleet in its current condition. The Group excludes the estimated cash flows expected to arise from future restructuring unless already committed and assets not currently in use by the Group. In addition, for the avoidance of doubt, the Group's impairment modelling excludes the following aspects of the Group's Flightpath Net Zero climate strategy: (i) the expected transition to electric and hydrogen aircraft, as well as future technological developments to jet engines and airframes; (ii) any savings from the transition to more fuel efficient aircraft other than those either in the Group's fleet or those committed orders due to be delivered over the business plan period; (iii) the benefit of the development of carbon capture technologies and enhanced carbon offsetting mechanisms; (iv) the required beneficial reforms to air traffic management regulation and legislation; and (v) the required government incentives and/or support across the supply chain.

As detailed in note 17, the Group applies a long-term growth rate to these adjusted probability weighted cash flows, per CGU, and each of the long-term growth rates include a specific adjustment to reduce the rate to reflect the Group's assumptions regarding the reduced demand and elasticity impact arising from climate change. These impacts are derived with reference to external market data, industry publications and internal analysis.

Given the inherent uncertainty associated with the impact of climate change, the Group has applied additional sensitivities in note 17 to reflect a more adverse impact of climate change than currently expected. This has been captured through both the downward sensitivities of the long-term growth rates, ASKs, operating margins and the increased fuel price sensitivity.

c  Valuation of employee benefit scheme assets

The Group's employee benefit schemes are principally represented by the British Airways APS and NAPS schemes in the UK. The schemes are structured to make post-employment payments to members over the long term, with the Trustee having established both return seeking assets and liability matching assets that mature over the long-term to align with the forecast benefit payments.

The assets of these schemes are invested predominantly in a diversified range of equities, bonds and property. The valuation of these assets ranges from those with quoted prices in active markets, where prices are readily and regularly available, through to those where the valuations are not based on observable market data, often requiring complex valuation models. The trustees of the schemes have integrated climate change considerations into their long-term decision making and reporting processes across all classes of assets, actively engaging with all fund and portfolio managers to ensure that where unobservable inputs are required into valuation models, that such valuation models incorporate long-term expectations regarding the impact of climate change.

d  Recoverability of deferred tax assets

In determining the recoverable amounts of the Group's deferred tax assets, the Group applies the future cash flow projections for a period of up to ten years derived from the approved three-year business plans. The Group applies a medium-term growth rate subsequent to the three-year business plans, specific to each operating company. In considering the impact of the Group's Flightpath Net Zero climate strategy, management adjusts this medium-term growth rate, where applicable, to incorporate the assumed impacts on both revenue and costs to the Group.



 

e  The price of carbon through the EU, Swiss and UK Emissions Trading Schemes

The EU, Swiss and the UK's ETS were established to reduce greenhouse gas emissions cost effectively. Under these schemes, companies, including the Group, are required to buy emission allowances, or are issued them under existing quotas. The Group is required to surrender these allowances to the relevant authorities annually dependent on the level of CO2 equivalent emitted within a 12-month period. Over time the level of available emission allowances decreases in order to reduce total emissions, which has the effect of increasing the price of such allowances. The Group expects that the future price of such allowances will continue to increase and that the free allocation of emission allowances will cease. Given the relative illiquid nature of the emission allowance market there is uncertainty as to the future pricing of such allowances.

As detailed in note 2, the Group accounts for the purchase of allowances as an addition to Intangible assets, which are measured at amortised cost. In addition, as the Group emits CO2 equivalent as part of its flight operations, a provision is recorded to settle the obligation. For emissions for which the Group has already purchased allowances, the provision is valued at the weighted cost of those allowances. Where the level of emissions exceeds the amounts of allowances held, this deficit is measured at the market price of such allowances at the reporting date.

At December 31, 2022, the Group has recorded ETS allowances within Intangibles assets of €407 million, representing sufficient allowances, by operating company, to settle its forecast obligations through to at least December 31, 2023. At December 31, 2022, the Group has recorded a provision for settling its 2022 emissions obligation of €132 million.

5  Segment information

a  Business segments

The chief operating decision-maker is responsible for allocating resources and assessing performance of the operating segments, and has been identified as the IAG Management Committee (IAG MC).

The Group has a number of entities which are managed as individual operating companies including airline and platform functions. Each airline operates its network operations as a single business unit and the IAG MC assesses performance based on measures including operating profit, and makes resource allocation decisions for the airlines based on network profitability, primarily by reference to the passenger markets in which the companies operate. The objective in making resource allocation decisions is to optimise consolidated financial results.

The Group has determined its operating segments based on the way that it treats its businesses and the manner in which resource allocation decisions are made. British Airways, Iberia, Vueling, Aer Lingus and IAG Loyalty have been identified for financial reporting purposes as reportable operating segments. LEVEL is also an operating segment but does not exceed the quantitative thresholds to be reportable and management has concluded that there are currently no other reasons why LEVEL should be separately disclosed.

The platform functions of the business primarily support the airline operations. These activities are not considered to be reportable operating segments as they either earn revenues incidental to the activities of the Group and resource allocation decisions are made based on the passenger business or are not reviewed regularly by the IAG MC and are included within Other Group companies.



 

For the year to December 31, 2022


2022

€ million

British Airways

Iberia

Vueling

Aer

Lingus

IAG Loyalty

Other Group companies1

Total

Revenue








Passenger revenue

10,523

4,002

2,584

1,665

451

233

19,458

Cargo revenue

1,239

284

-

80

-

12

1,615

Other revenue

848

799

14

10

322

-

1,993

External revenue

12,610

5,085

2,598

1,755

773

245

23,066

Inter-segment revenue

311

426

-

14

228

378

1,357

Segment revenue

12,921

5,511

2,598

1,769

1,001

623

24,423









Depreciation and amortisation charge

(1,272)

(371)

(222)

(146)

(8)

(59)

(2,078)

Impairment reversal

-

-

8

-

-

-

8









Operating profit/(loss)

362

382

195

45

282

(10)

1,256









Exceptional items2

23

-

8

-

-

-

31

 

 

 

 

 

 

 

 

Operating profit/(loss) before exceptional items

339

382

187

45

282

(10)

1,225









Net non-operating costs







(841)

Profit before tax







415

Total assets

23,788

9,200

3,177

1,946

3,303

(2,111)

39,303

Total liabilities

(20,975)

(9,005)

(3,774)

(1,942)

(2,914)

1,329

(37,281)

1  Includes eliminations on total assets of €16,159 million and total liabilities of €5,755 million.

For details on exceptional items refer to the Alternative performance measures section.

For the year to December 31, 2021


2021

€ million

British Airways

Iberia

Vueling

Aer Lingus

IAG Loyalty1

Other Group companies1,2

Total

Revenue








Passenger revenue

2,607

1,707

1,011

302

180

28

5,835

Cargo revenue

1,268

333

-

65

-

7

1,673

Other revenue

314

443

5

4

181

-

947

External revenue

4,189

2,483

1,016

371

361

35

8,455

Inter-segment revenue

129

301

-

5

77

293

805

Segment revenue

4,318

2,784

1,016

376

438

328

9,260









Depreciation and amortisation charge

(1,104)

(350)

(240)

(140)

(7)

(74)

(1,915)

Impairment (charge)/reversal

(30)

-

13

-

-

-

(17)









Operating (loss)/profit

(2,041)

(220)

(233)

(338)

131

(64)

(2,765)









Exceptional items3

151

14

29

9

-

2

205









Operating (loss)/profit before exceptional items

(2,192)

(234)

(262)

(347)

131

(66)

(2,970)









Net non-operating costs4







(742)

Loss before tax







(3,507)

Total assets

20,891

6,919

2,671

1,820

3,184

(1,079)

34,406

Total liabilities

(18,795)

(7,062)

(3,364)

(1,806)

(3,009)

476

(33,560)

1  In 2022, based on size thresholds the Group determined that IAG Loyalty was a reportable segment and accordingly presented the financial information of the segment separately. The prior year segment note has been re-presented to align with the current year presentation.

2  Includes eliminations on total assets of €16,023 million and total liabilities of €5,833 million.

3  For details on exceptional items refer to the Alternative performance measures section.

4  Includes €75 million of exceptional items relating to the Air Europa Holdings termination settlement payment.



 

b  Geographical analysis

Revenue by area of original sale


Year to December 31

€ million

2022

2021

UK

7,923

2,435

Spain

4,313

2,189

USA

3,735

931

Rest of world

7,095

2,900

 

23,066

8,455

Assets by area

December 31, 2022

€ million

Property, plant and equipment

Intangible

assets

UK

12,026

1,490

Spain

5,082

1,462

USA

47

9

Rest of world

1,191

595

 

18,346

3,556

December 31, 2021

€ million

Property, plant and equipment

Intangible

assets

UK

11,544

1,317

Spain

4,404

1,333

USA

76

13

Rest of world

1,137

576


17,161

3,239

6  Expenses by nature

Operating result is arrived at after charging

Depreciation, amortisation and impairment of non-current assets:

€ million

2022

2021

Depreciation charge on right of use assets

1,092

1,058

Depreciation charge on owned assets

748

638

Gain arising on de-designation of foreign exchange hedges recorded in Depreciation1

(29)

-

Impairment reversal on owned property, plant and equipment

-

(4)

Amortisation and impairment of intangible assets

218

178

Impairment (reversal)/charge on right of use assets

(8)

20

Depreciation charge on other leasehold assets

49

42


2,070

1,932

Included in the Depreciation charge, not included within note 13 is a credit of €29 million relating to the de-designation of hedge accounting that had been applied to mitigate the foreign currency exposure on aircraft purchases.

Cost of inventories:

€ million

2022

2021

Cost of inventories recognised as an expense

749

1,038


749

1,038



 

7  Auditor's remuneration

The fees for the year to December 31, 2022, for audit and non-audit services provided by the auditor of the Group's consolidated financial statements and of certain individual financial statements of the consolidated companies, KPMG Auditores S.L., and by companies belonging to KPMG's network, were as follows:

€'000

2022

2021

Fees payable for the audit of the Group and individual accounts

6,378

4,860

Fees payable for other services:



Audit of the Group's subsidiaries pursuant to legislation

985

532

Other services pursuant to legislation

195

431

Other audit and assurance services

1,644

569

Services relating to working capital review

1,022

776


10,224

7,168

Fees payable to the Group's auditor for the audit of the Group's pension scheme during the year total €236 thousand (2021: €182 thousand).

8  Employee costs and numbers

€ million

2022

2021

Wages and salaries

3,207

2,135

Social security costs

519

307

Costs related to pension scheme benefits

272

232

Share-based payment charge

39

23

Other employee costs1

610

316

Total employee costs

4,647

3,013

1  Other employee costs include allowances and accommodation for crew.

The number of employees during the year and at December 31 was as follows:


2022

2021



December 31, 2022


December 31, 2021


Average number of employees1

Number of employees

Percentage

of women

Average number of employees1

Number of employees

Percentage

of women

In the air:







 Cabin crew

19,801

22,278

70%

9,304

17,865

70%

 Pilots

7,340

7,864

7%

3,879

7,607

6%

On the ground:







 Airports

13,798

15,087

38%

6,728

12,842

37%

 Corporate

11,741

13,819

49%

8,612

10,709

52%

 Maintenance

6,908

6,775

8%

6,345

7,448

8%

 Senior executives

212

221

34%

167

187

33%


59,800

66,044

44%

35,035

56,658

42%

1  The average number of employees excludes those employees who were on furlough, wage support and equivalent schemes, including the Temporary Redundancy Plan arrangements in Spain. For further details see note 34. The total average number of employees including these schemes is 61,192.

The number of employees is based on actual headcount at December 31. The average manpower equivalent for 2022 was 59,505 (2021: 50,222), which includes employees on furlough, wage support and equivalent schemes, including Temporary Redundancy Plan arrangements in Spain.



 

9  Finance costs, income and other non-operating charges

a  Finance costs

€ million

2022

2021

Interest expense on:



Bank borrowings

(191)

(133)

Asset financed liabilities

(107)

(65)

Lease liabilities

(464)

(408)

Bonds1

(83)

(63)

Provisions unwinding of discount

(43)

(12)

Other borrowings1

(102)

(90)

Capitalised interest on progress payments

11

3

Other finance costs

(38)

(62)


(1,017)

(830)

1  The 2021 total finance costs include a reclassification of results to conform with the current basis of presentation. A charge of €63 million has been reclassified from Other borrowings to Bonds. There is no change to total finance costs.

b  Finance income

€ million

2022

2021

Interest on other interest-bearing deposits

51

5

Other finance income

1

8


52

13

c  Net change in fair value of financial instruments

€ million

2022

2021

Net change in the fair value of convertible bond

159

89

Net fair value losses on financial assets at fair value through profit or loss

(35)

-

Net fair value losses on de-recognition of financial assets and recognition of other equity investment

(43)

-


81

89

d  Net financing credit/(charge) relating to pensions

€ million

2022

2021

Net financing credit/(charge) relating to pensions

26

(2)

e  Other non-operating charges

€ million

2022

2021

Gains on sale of property, plant and equipment and investments1

22

59

Charge related to equity investments (note 19)

(3)

-

Share of profits in investments accounted for using the equity method (note 18)

5

2

Realised gains on derivatives not qualifying for hedge accounting

190

37

Unrealised (losses)/gains on derivatives not qualifying for hedge accounting

(82)

47

Air Europa Holdings termination settlement payment

-

(75)


132

70

1  2021 includes a gain of €24 million arising from the disposal of Compaña Auxiliar al Cargo Exprés, S.A. and Auxiliar Logística Aeroportuaria, S.A. The Group previously owned 75 per cent of the share capital of these companies and disposed of them during the fourth quarter of 2021. The disposal led to the de-recognition of €12 million of net assets from the consolidated financial statements of the Group.



 

10  Tax

a  Tax credits/(charges)

Tax credits/(charges) recognised in the Income statement, Other comprehensive income and directly in equity:


2022


2021

€ million

Income statement

Other comprehensive income

Recognised directly in equity

Total


Income statement

Other comprehensive income

Recognised directly in equity

Total

Current tax





 





Movement in respect of prior years

(6)

-

-

(6)


10

-

(1)

9

Movement in respect of current year

(64)

3

-

(61)

 

(9)

5

-

(4)

Total current tax

(70)

3

-

(67)

 

1

5

(1)

5






 





Deferred tax





 





Movement in respect of prior years

(36)

(2)

-

(38)

 

(23)

-

-

(23)

Movement in respect of current year

105

(60)

5

50

 

518

(420)

-

98

Rate change/rate differences

17

(10)

-

7

 

78

61

-

139

Total deferred tax

86

(72)

5

19

 

573

(359)

-

214






 





Total tax

16

(69)

5

(48)

 

574

(354)

(1)

219

The current tax credit in Other comprehensive income relates to the fair value movements on the convertible bond of €2 million (2021: €5 million) and movements relating to employee benefit plans of €1 million (2021: €nil).

Tax recognised directly in equity relates to cash flow hedges of €5 million (2021: €nil) and share-based payment schemes of €nil (2021: €1 million).

Within tax in Other comprehensive income is a tax credit of €8 million (2021: tax charge of €123 million) that may be reclassified to the Income statement and a tax charge of €77 million (2021: tax charge of €231 million) that will not.

b  Current tax asset/(liability)

€ million

2022

2021

Balance at January 1

(5)

53

Income statement

(70)

1

Other comprehensive income

3

5

Recognised directly in equity

-

(1)

Cash

134

(63)

Exchange movements and other

2

-

Balance at December 31

64

(5)




Current tax asset

72

16

Current tax liability

(8)

(21)

Balance at December 31

64

(5)



 

c  Deferred tax asset/(liability)

€ million

Fixed assets

Right of use assets

Lease liabilities

Employee leaving indemnities and others

Employee benefit plans

Fair value gains/ losses1

Share-based payment schemes

Tax loss carried forward and tax credits

Other temporary differences

Total

Balance at January 1, 2022

(477)

(220)

19

196

62

57

11

1,573

61

1,282

Income statement

(194)

169

(9)

19

1

-

6

87

7

86

Other comprehensive income2

-

-

-

(17)

(12)

(46)

-

3

-

(72)

Recognised directly in equity

-

-

-

-

-

5

-

-

-

5

Exchange movements and other

(9)

7

(1)

(1)

3

(19)

-

(27)

28

(19)

Balance at December 31, 2022

(680)

(44)

9

197

54

(3)