International Consolidated Airlines Group S.A.

Good morning, everyone. Thanks for coming to IAG's 2021 results presentation, the first one we've done in two years in person. So thank you very much for making the effort to come here. It's nice to see many old friends and also some new ones that I've seen on teams for the best part of two years that we've met in person for the first time this morning. We have our chairman here today, Javier Ferran. And we have, obviously, our CEO, Luis Gallego, and CFO, Steve Gunning, who will be conducting the bulk of the presentation. And then in the front row, we have various members from our management committee. So we have Sean from BA, Lynn from Aer Lingus, Marco from Vueling, and Javier from Iberia. So they'll be all ready to answer your questions that you may have at the end of the presentation. So I'll now hand over to Luis for his presentation.

Thank you very much. Good morning, everyone. It's a pleasure to see you again face-to-face after two difficult years. This morning, we reported a precessional operating loss of 2.97 billion euros for 2021, which is in line with the guidance that we gave you of 3 billion euros. For the fourth quarter, pre-exception operating loss was €305 million, a significant improvement over the €485 million that we had in the third quarter and also over the €1 million that we had in the previous two quarters. We were able to operate 58% of the capacity up from the 43% that we had in the third quarter And we achieved for the first time since the starting of the pandemic, positive EBITDA. Operating cash flow also in the second half of the year was positive, 1 billion euros. Most of this in the fourth quarter, driven by the positive EBITDA that I told you before and the strong booking activity. October and November were much stronger than we expected. mainly because of the opening of the North Atlantic market on the 8th of November. Unfortunately, on the 25th of November, we started with Omicron, and because of the new travel restrictions and increased testing requirements, we had an impact in our bookings. December was, therefore, weaker than we expected, But nevertheless, it was not a very bad month because we have a lot of PFR traffic, a lot of people visiting friends and relatives for Christmas. And also, leisure markets, long haul, work very well, like the Caribbean. The year ended with our total liquidity of 12 billion euros, our highest for a quarterly period end. And we reduced the net debt at 11.7 billion euros. The reduction during the fourth quarter was 600 million euros, but mainly was because of the delay in the delivery of seven long-haul aircraft, Airbus and Boeing. And for that reason, the capex for the full year was 0.7 billion euros instead of the 1.3 that we told you in our previous guidance. Right now, our main priority is to restore the operations of our operating companies. We want to fly around 90% of the capacity that we had in 2019 this summer. And the priority is also to improve the customer experience and the operational resilience. Since October last year, our airlines have been working to restore the capacity to bring back aircraft from storage, to bring back our people from different furlough schemes, and we are recruiting and training people, mainly people in the front line, such as cabin crew. Erlingus, the focus now is to restore 90% of its North Atlantic network, and they are preparing also the Manchester base for the peak summer season. British Airways intends to operate 100% of the North Atlantic operation in the third quarter. And all the flights to New York, for example, now they are operating with a new club suite seat. BA plans 100% European operation from the second quarter, including the launch of BA Euroflyer on the 29th of March. Iberia is also planning to restore the Latin America operation at the end of the year, but in the summer they will expand the domestic network, and also the presence in North Atlantic will be larger with the new destinations to Dallas and Washington. Welling expects the capacity to come back to 2019 levels by April, and also they have expanded the Paris-Orly base with the slots that they won after the remedies that they put to Air France. And they are going to increase also for aircraft in London Gatwick during the summer. IAG loyalty has a very strong year in terms of customer acquisition, customer relevance, profitability, and cash generation. And I think it was... very important during this crisis for the group. We have announced earlier this week a new agreement with Qatar Airways Privileged Club. They will adopt Avios currency globally. And also we will be extending our relationship with Barclays in the UK with new products that we will launch at the end of the quarter. Both initiatives ensure that they are going to increase IAG's loyalty customer base and our customer engagement. And finally, IAG Cargo. They had an extraordinary year. 2021 was a huge success. The focus this year will be on offering more destinations. We are restoring the capacity. We are flying more passengers, so they need to come back to the old model in some way. So they are going to come back to fly more to North America and South America. And we are going to reduce the only cargo flights and the charter. Before I hand over to Steve, I would like to talk to you about our outlook for 2022. We are planning the capacity in the first quarter of 65% compared to the 2019 levels, slightly more than the 58% that I told you before that we flew in the last quarter of the year. However, we are expecting significant operating loss in this first quarter, and there are three reasons mainly for this. First of all, the normal seasonality. Even more when you have Eastern in April, as we have this year. Secondly, the impact of Omicron, February and January and February, they were impacted for Omicron and the number of bookings. And thirdly, the impact of restoring the capacity that I told you before, bringing back aircraft from the storage, bringing back our people, training people, recruiting people. But what we see from March onwards, including Easter and summer period, is that Omicron has not affected the number of bookings. And to be honest, what we see is a strong recovery. And these bookings give us the confidence to plan for 90% of the capacity of 2090 levels for the third quarter. Overall, we are planning the total group to fly 85% of 2090 capacity levels for the full year. And we expect sustainable operating profitability from the second quarter and a significant operating profit for the full year. Operating cash flow is also expecting to be significantly positive. And I said before that we have reduced the capex in 2021 because of the delay in the delivery of the long haul aircraft. Now we are going to bring those aircraft. And that's the reason this year we are going to incorporate in our fleet 25 new aircraft. The reason to do that, as you can imagine, we rounded 50 long-haul aircraft during the crisis, and we need to bring new aircraft to restore the capacity. So because of that, we expect the CAPEX for this year to be significantly higher than in 2021, and we expect to have 3.9 billion euros As a consequence of that, net debt is going to be increased as a result of these investments. And all this that I told you is assuming that we have no further setbacks related to COVID. And also we need to take into consideration the geopolitical situation that we are living right now. And at this point, I want to provide you some information about the Ukraine situation and the impact for the group. Following the UK government's decision to ban Russian carriers from landing in the UK yesterday, we took the decision to cancel the flight that we have to Moscow today. And also we have rerouted the flight that we were operating to Singapore and Delhi, not to fly over Russia. For IAG, the impact of this crisis we are still monitoring, but it's true that the capacity we are flying to the east is very reduced, and all the flights that we are doing now we can reroute, so we can maintain the schedule that we had in mind. And now I am going to hand over to Steve for the financial presentation. This is going to be your last results presentation. So I want to take the opportunity to tell you thank you. Thank you for all these years. Thank you for your effort. And thank you for your support these two years. And I wish you the best.

Good morning. Okay, you don't have to say good morning if you don't want to. That's a tough crowd. Okay. Good morning. Oh, that's much better. Thank you. It seems strange, actually, to think it was two years almost to the day the last time I stood in front of you. I think it was possibly in this auditorium as well. So a lot's happened in that intervening two-year period. And then just to add to that, the developments over the last 48 hours have been very significant, haven't they? And our thoughts are with the people in the Ukraine at the moment as much as anything. So it's my pleasure, as Luis said, to take you through the financial results for 2021 and some other aspects. So let's do that. So if I take you through the highlights slide, I think as Luis has already said, in Q3, we began to see the business turn. We said it was an inflection quarter. We stopped burning cash. and actually the net cash flow from operating activities was slightly positive. In Q4, despite Omicron, we've continued to see that progress. So EBITDA was positive to $250 million, and actually net cash flow from operating activities was positive to nearly $800 million. So Q4 was a strong quarter despite the fact that Omicron came in at the end to take some of the edge off of it. But in terms of where we've been over the last two years, it was a real progress. If I look at the slide here, if we go through it by quadrant, if we look at the top left, you'll see that we flew 58% of 2019 capacity. We've guided you to around 60%. So that was pretty much as expected. Load factor was about 2.5 points better. So pretty much, as we were saying, around the Q3 time, In absolute ASK levels, Q4 was about 20% more ASKs than Q3. If you look to the top right and you look at the operating result, clearly the operating loss has continued to narrow. So we incurred a loss of 485 in Q3, and that's now down to 305. So it continues to narrow. Overall, we came within our guidance. We said we'd be around 3 billion. We were 2970. If I look at consensus, that's about a $16 million beat on consensus. If we look at the bottom left on debt, you'll see that the gross debt went up about $3.9 billion during the course of the year, but net debt only went up $1.9 billion. The gross debt went up because of the funding initiatives that you'll all be very familiar with, the unsecured bonds, the convertible bonds, the $2 billion of UKEF. But as you can see, net debt only went up 1.9 billion because the cash position improved 2 billion as well. And I'll take you through some more detail on that later. And then if you look at the liquidity position, we finished with 12 billion of liquidity. That's a quarter end high for us. We were at about 12.1 in October on a pro forma basis. So a very strong liquidity position going into 2022. And I have to say, Because I got a couple of questions at the Q3 results that said, well, do you think you've got a bit much? When Omicron started to hit late November, I was very pleased to have the sort of liquidity position that we had. So those are the highlights. Why don't we talk a little bit more about the actual operating result for the quarter? Now, we've given this to you both quarterly and for the full year. And we've given you two comparators, versus last year and versus 2019. I'll primarily focus for the purposes of this on Q4, and I will sometimes refer to the position versus Q3. So in terms of ASKs, as we said, we flew 58% of 2019 ASKs, but actually our revenue was only 50% of 2019 level for the passenger business. That's primarily because the load factor was down compared to 2019, so that brought the unit revenue down. It was Far less of a yield issue, it was primarily a load factor issue. If you look at the cargo revenue, as Luis has already indicated, the cargo businesses had a very strong year indeed. In fact, cargo revenue was up 71% compared to 2019, and up 23% even compared to Q3, and Q3 had been a record quarter. So a particularly strong performance by cargo. We look at costs. The non-fuel costs rose broadly in line with the capacity. A number of things to note there. The furlough scheme in the UK ended at the end of September, so there weren't benefits coming through from that, and some of the other furlough schemes reduced. We have incurred additional costs because we've been rebuilding capacity during that quarter. We had some impairments that we didn't run through, exceptional, that we thought were business-as-usual And also selling costs were up considerably. And selling costs, you take the selling costs when you take the booking, not when you take the flying. So because we saw strong booking coming through in Q4, we saw selling costs up. So overall, non-fuel costs were broadly in line with capacity. On the fuel costs, they were up about 30%. And broadly, half of that was because the price was up. And roughly half of that was due to the fact that the amount of flying was up as well. And you'll see on the slide that there's 27 million of exceptional credits. That's us truing up some restructuring provisions we'd made previously and an impairment provision we'd made previously. So it's actually a credit for the year. If that's the performance overall for the group, let's talk about it by airline.