International Consolidated Airlines Group S.A.

Good morning. With me today is Nicolas Cadbury, CFO, and each of the OPCOS CEOs, Adam, Sean, David, and Lynn, here in Waterside, and Javier and Marco in Spain. Before starting this presentation, I would like to express IEG's solidarity with the people of Ukraine. All of our operating companies have been active in supporting those affected in many different ways. Some examples. IAG Cargo has donated capacity to fly 125 tons of aid for Ukraine. British Airways has donated almost 300,000 pounds at the end of mid-April, mainly from onboard donations from customers. BA has also provided flights to aid workers from several charities and has donated 92,000 in flight products, such as blankets. Iberian Vueling has transported 2,400 refugees to Spain on scheduled flights and on six charter flights. Erlingus has raised 250,000 euros on board flights and donated to UNICEF. For the first quarter, we continue to recover capacity, flying 65% of 2019 levels, up from 58% in the fourth quarter of 2021. We reported a pre-abstention operating loss for the quarter of 754 million euros, which was in line with our expectation and significantly better than a loss of 1.1 billion euros a year ago. We had expected the loss to be significantly worse than the 305 million euros loss in the fourth quarter of 2021 because of normal seasonality the impact of Omicron on bookings for travel in January and February, and the cost associated with the ramp-up of capacity for the summer. Iberia, IAG Cargo, and IAG Loyalty continue to outperform within the group in terms of profit and cash contribution, and Erlingus, BA, and Vueling are recovering in line with expectations. The effect of Omicron was largely over by the middle of February. Liquidity remains strong, rising to 12.4 billion euros by the end of March, our highest ever level. And booking activity for Easter and this summer has been very strong, boosting deferred revenue. Debt ended the quarter at 11.6 billion euros, which was relatively flat compared to the end of 2021. And demand is strong with bookings running at a rate of around 90% of 2019 levels over the last two months, which is an increase from the 85% rate when we last presented to you at the end of February. Capacity has stepped up from around 62% in January and February to 69% in March and 77% in April. And low factors have also increased from 65% in January to 78% in March, demonstrating a strong momentum. Premium leisure bookings are particularly strong and demand on North Atlantic routes continues to recover. Overall, for 2022, we plan capacity to be around 80% of 2019 levels. This is slightly lower than 85% previously planned because British Airways has slightly moderated its capacity this summer in order to enable operational resilience at heat growth. Most of the reduction in VA's planned capacity is on short-haul routes for operational reasons and on Asia's services due to the COVID travel restrictions. For the second quarter, we plan to operate capacity at 80% of 2019 levels, rising to 85% in the third quarter. We plan to restore a full network on North Atlantic routes by the third quarter, but with a slightly lower capacity at 95% compared to 2019. And in terms of the outlook, we continue to expect to be profitable at the operating level from the second quarter. We expect also to be profitable for the full year 2022, despite the significant increase in the price of jet fuel since the last time that we reported. We continue to expect operating cash flow to be significantly positive this year. And now I will hand over to Nicolas for the financial presentation.

Thank you, Luis. And good morning, everyone. I'm really pleased to be here in my first six weeks for my first IAG quarterly results. This is a really exciting time to be joining the airline sector as it continues its journey of recovery. In the quarter, we saw the continuing easing of government's travel restrictions, particularly in the UK, resulting in a significant improvement in travel demand. In particular, we saw a good, steady recovery in business travel while premium leisure continues its strong trajectory. And so far, we have seen no noticeable impact on demand from the war in the Ukraine. Lewis will take you through the demand outlook later on in the presentation. On the top left of this graph, you can see how we have continued adding capacity, and we flew over 65% of 2019 levels, up nearly 7% on Q4, which I'm pleased to say was in line with the guidance that we gave you at the end. The first two months of the quarter were heavily impacted by Omnicron, and we exited March with a capacity of 69% and operated around 77% in April compared to 2019. The top right of the slide shows the evolution of our operating results for the last five quarters. The losses in Q1 of 754 million were due to the normal seasonality the impact of Omnicom in January and February, which particularly reduced business demand, and the cost of ramping up the business from a low base. And as mentioned, this was partly offset by the continuing strong performance of premium leisure and the solid return of business traffic. Moving on to debt in the bottom left chart, net debt was broadly flat at $11.6 billion, with an operating cash inflow as the business recovered, with positive working capital and customers booking for quarter periods increasing offsetting our capital spend. Gross debt was 19.8 billion, an increase of 170 million compared to the end of 2021, which I'll come and talk about in a few slides time. Turning to liquidity, in the bottom right, our position remains very strong, increasing to 12.4 billion, including 8.2 billion of cash. The liquidity levels is the highest since the start of the pandemic. Moving on to the next slide, we can see the operating profit performance in more detail. As in the previous quarters, we provided both a comparison versus last year and versus 2019. The increasing demand drove our passenger revenue up to $2.7 billion. This was driven by improvements in our passenger unit revenue, now at 88% of the 2009 level, yields only 1% and our load factor continuing to improve quarter on quarter to 72.2%. Cargo revenue was extremely strong as it continued to benefit from global supply chain disruption, increasing 57% compared to 2019, the best ever quarter one performance. The positive cargo performance continues to be driven by yields, with cargo volumes still down around 30% versus pre-pandemic levels. Likewise, IAG loyalty has been consistently one of the best performing parts of our business throughout the pandemic and had another strong performance this quarter. Other components of other revenue also had a good quarter with both BA holidays and Iberia's handling and MRO business continuing to improve and make a positive contribution. Moving on to costs, our overall costs reflect the increase in capacity, ramp up costs and the higher fuel rates. Ramp-up costs for the group were $70 million in the quarter. As our airlines prepared for the beginning of the summer operations, we'll see an increase in capacity from 65% this quarter to 80% in Q2 and 85% in Q3. These additional costs were mainly employee and engineering costs as we prepared our crews and readied our aircraft to fly. Employee costs increased as we staffed up the Q1 flying programme and for training and preparation ahead of the summer flying season. We also had only minimal use of government wage support and related schemes in the quarter compared to around €180 million this time last year. The fuel cost increase also reflected the added capacity, partly offset by the reduction in cargo-only flights to 287 flights in the quarter compared to around 1,300 a year ago. Additionally, it reflects the increase in fuel prices compared to last year. Commodity spot prices were up over 80% versus Q1 2021, although the impact of hedging limited the increase in our effective price in the quarter to around 20% versus 2021. On this page, you can see the quarterly performance of each airline. compared against 2019. Starting with Aer Lingus, Aer Lingus was one of the most impacted IAG airlines during the pandemic. Ireland has seen a slower relaxation of the COVID restrictions than other countries we operate from, with restrictions not fully removed until a few weeks ago before the end of the quarter at the beginning of March. You can see this impact in its traffic capacity and load statistics at the bottom of this page. with a particularly slow recovery in its North Atlantic business, as a stronger work-from-home culture in Ireland still exists. Aer Lingus did, however, start to rebuild capacity during the quarter, preparing for the summer, and saw a good demand performance for leisure and sun destinations. British Airways' performance in quarter one reflected the Omnicron spike in the UK in January and February, with available seat kilometres at 57% of 2019's levels. but still triple the level of last year's quarter one. Since the UK government removed all travel restrictions in March, we started to see a very good improvement in passenger revenue for BA. Available seat kilometres reached 61% in 2019 in March and around 67% in April. Cargo was particularly strong in BA, with cargo revenues increasing 63% And as mentioned earlier, BA holidays also had a good quarter. The airline's performance was negatively impacted by the well-publicized disruptions at Heathrow, with the total impact of the disruption at around 50 million euros in the quarter, impacting both revenues and costs. Iberia's performance was again the strongest airline in the group. The airline benefited from the strong domestic travel and customers visiting friends and relatives in South America, enabling them to reach 85% of 2019 capacity. March capacity was also at 85% of 2009 levels, and April will increase to around 88%. And as mentioned, it also had a good quarter in Iberia's handling and MRA business. Iberia managed its costs very well in the quarter, which were down in line with capacity. This was achieved by continuous cost control higher aircraft utilization, and better fuel efficiency through new fleet mix management. Last, but definitely not least, Vueling. Vueling continued its capacity recovery to 73% in the quarter and achieved 80% in March and close to 100% in April, with good recovery in the domestic market, especially in the Canaries. The new routes from Orly and Gatwick performed as we'd expected, and costs in Vueling similar to BA, reflect the associated costs of preparing for a full restoration of their network for a busy summer season. This slide shows our liquidity, and as we have already seen, it's in a strong position at 12.4 billion euros. Despite the operating losses, we've benefited from the positive working capital from the increasing momentum of customers booking the next quarter's flights and as the turnover with our suppliers grew, this helped offset our capital spend and increased our cash balance by 250 million euros. We will also continue to be successful in finance in the business, with Aer Lingus agreeing a new Ireland Strategic Investment Fund facility for an additional 200 million euros, which remains undrawn. And early in Q2, Iberia has also been successful in agreeing its first sustainability-linked double ETC for $461 million. This will finance five aircraft that were delivered to the airline in Q1. Cash balance at the end of April continues to be very strong, thanks to the last financing, together with strong forward bookings. This slide shows our net debt positions. which has increased 74 million despite an adverse non-cash movement of around 400 million euros relating to FX and lease adjustments. The improvement, as we have already covered, was due to our better operating cash generation, especially working capital. And lastly, for me, this slide shows our hedging position on fuel. We currently have 78% of our expected consumption for Q2 hedged and around 65% for the second half of 2022. We also have around 25% of our fuel hedged for 2023. This quarter, we have changed the way we show you this data. Previously, we used to use the spot rate price as the reference. However, on the top line, we are now showing the market forward pricing curve for jet fuel. Given the variance across the future quarters, we think this better reflects the potential future impact on our fuel bill. Based on the scenario we have shown in the table, the blended price to us post fuel and FX hedging would be between $570 million per tonne and $950 million, $950 per tonne in 2022. So in conclusion, Q1 performance was as we expected, despite a number of headwinds in the quarter. We've seen our revenue metrics all move in the right direction and seen further improvements after the quarter end. We have a very strong liquidity position and have been able to successfully raise new finance during and after the quarter. This forward momentum will put us in a good position as we move into profitability from Q2. I will leave you with Luis now that will tell you more about the year ahead.

Thanks, Nicolas. As you can see in the graphs in the next slide, the fund has continued to strengthen. When we last saw this chart of forward bookings as of 20 February, they were running at an average rate of 85% of 2019 levels. For the last five weeks, the run rate has averaged at over 90% and has been over 100% in the last two weeks. Spanish domestic bookings remained the strongest at around 110% of 2019 levels. European short-haul is also strong at slightly over 95%. Long-haul continues to lag, but is still strong at around 75%. And bear in mind that many long-haul markets remain shut, such as most of Asia. Within long-haul, our largest market is the North Atlantic. On the left-hand side, we show the total bookings of North Atlantic routes since the start of 2021. And the chart on the right shows point of sale North America. Both charts show the key border opening date to fully vaccinated visitors in 2021. Bookings increased significantly when the EU opened to North American travelers in May last year and when the UK opened to visitors in July. When the US announced the opening of its border in September, there was again an increase in bookings to almost 100% of 2019 levels. The UK is still not fully unrestricted because all travelers must undertake a COVID test on the day before travel, which represents a risk especially for US travelers. Hopefully this testing requirement will be lifted very soon. You can also clearly see the impact of Omicron at the end of 2021 and the recovery since then. We have received many questions from investors and analysts about the possible impact of bookings of the world in Ukraine, which started on 24th of February, the day before we reported full year 2021 results. And in the last 10 weeks since the war started, North Atlantic and point of sale North America have bought average 85% of 2019 levels compared to 64% in the first seven weeks of 2022 prior to the war starting. It might be early days, but so far there is no evidence that the war in Ukraine has had an impact on bookings on either side of the Atlantic. The next slide we have shown before, it shows premium class leisure and premium class business loan revenue for VA and Iberia compared to 2019 since the start of 2021 up to and including March this year. As a reminder, our definition of premium class is first and business class and excludes premium economy. In the upper chart, the light blue line for VA is premium leisure and the dark blue line premium business. For Iberia, the yellow line is premium leisure and the purple line premium business. The main change since we last reported is the recovery of premium business travel revenue. For BA, business travel revenue has recovered from 20% of 2019 in January to 45% in March and ahead of the pre-Omicron level of 30% last November. For Iberia, it's a very similar story, although it continues to be ahead of BA at 60% of 2019 levels in March compared to 40% in January. The partial recovery in business travel is consistent with the return of many companies to the office, particularly in London, Madrid, and the U.S. Banking and finance have recovered the most this year, with some investment banks back to almost 100% of 2019 levels on North Atlantic routes. In April, BA's business channel bookings on North Atlantic routes have recovered to 90% of 2019 levels. Technology and pharma sectors have recovered the least, while small and medium-sized businesses have recovered the most. Premium leisure continues to outperform business, having returned to 80% in March for BA and 100% for Iberia. For BA, the strongest premium leisure routes are to the Caribbean, Africa, Middle East, and the Indian subcontinent, but North America is rapidly catching up. For Iberia domestic and Europe are the strongest route areas for premium leisure. Unfortunately, the increase in pent-up demand and the ramp up of capacity have brought operational challenges affecting British Airways at Heathrow in February and March. The original plan for BA was to scale up at Heathrow to 100% of 2019 flights by the third quarter of this year. This is the largest scale ramp-up ever undertaken by VA. VA anticipated this and started a major recruitment effort in October of 2021. So far, VA has received 39,000 applications for positions. Of these, 4,800 have passed their assessment. 3,100 are currently in referencing 1,600 have started work. There have been three key operational challenges, people resourcing, airport capacity constraints, and unstable IT systems. First, let's talk about people resourcing. Absence is abnormally high among existing employees in all functions due to the increasing Omicron infection, which is an issue that all companies globally are having to deal with. In terms of recruitment, most of the vacancies and most of the applications are for cabin crew positions. There have been few issues with recruiting cabin crew because of the attractions of BA Brand and Global Network. The main recruitment issue has been for ground operations due to the tight recruitment market for this position across the industry and particularly in the UK. Converting applications into new recruits is another bottleneck and has been heavily impacted by the referencing process, in particular obtaining airside passes for cabin crew and ground operations recruits. Average referencing process time has increased by 20% to 103 days due to onerous government regulations that require a full reference of the last five years' employment history and personal references for any gaps in employment. COVID has made this more difficult because more people have had temporary jobs with many gaps over the last two years, requiring a higher referencing workload and therefore delays. Second, airport capacity constraints. When the pandemic started, closed terminals three and four, requiring those airlines affected to relocate to terminals two and five. American Airlines and Qatar Airways moved to Terminal 5. American Airlines moved back some of its services to Terminal 3 when it reopened last year, but many services remain in Terminal 5. Terminal 4 remains closed until mid-June. The result is that VA has 25% fewer checking desks and less access to the rest of the terminal infrastructure than before COVID. Terminal capacity has also been reduced by insufficient security and border force staff, who are also suffering from recruitment and referencing issues. The loan security and immigration queues are a function of Heathrow Airport planning according to unrealistically low passenger volume forecast. For example, Heathrow's forecast for the second quarter that we are now made last December was for 11.1 million passengers or 53% of 2019 levels. Last week, it raised its forecast for the second quarter by more than one third to 14.9 million, 72% of 2019. This is despite VA publicly stating that it has been aiming for a 90% operation this summer since early November last year, including 100% of flights at Heathrow. To compound matters, transaction times at checking at the gate have increased, driven by the multitude of different COVID restrictions and vaccine requirements by countries. And third, unstable IT systems. VA has IT events on three occasions in February and March as a result of selected data center and network hardware issues. And British Airways has taken many actions to deal with these issues and build operational resilience in the short term, but also over the long term. I am sure that some can provide you later more detail in the Q&A session. A multifunctional special task force has been set up to focus on the main bottlenecks and causes of the disruption. Second, VA has made many scheduling changes, resulting in the planned cancellation of around 60 departures per day and then declining significantly over the summer. To put this in perspective, BA typically operates 270 short-haul and 70 long-haul departures from Heathrow every day. Overall cancellations are expected to be around 10% of flights at Heathrow between March and the end of October. London Gatwick and London City are unaffected. Cancellations are now planned weeks in advance and customers inform at the time of the cancellation. There were unplanned cancellations only during the first few days of this ration at the end of March, but now there are very few, if any, unplanned cancellations on the day, and mostly for some technical reasons. 75% of cancellations are focused on short-haul flights, while most long-haul flights are being maintained. VA has managed to accommodate 80 to 85 percent of affected passengers arrive at their destination within 24 hours of their scheduled arrival. To minimize planned cancellations, VA is releasing 10 narrow-body aircraft this summer, some of them coming from the rest of the airlines of the group, such as Siberia Express, and others from alliance partners such as Finnair. American Airlines is operating one of VA's twice daily flights to Miami. Third, VA is boosting resourcing where it comes in addition to the recruitment effort that I have talked about. For example, many head office staff have been redeployed to help with the recruiting and referencing. Also, VA will be using temporary coming to you source from Spain on six-month contracts. These are experienced and licensed cabin crew introduced to BA by AVIDIA from their pool of seasonal crew. Referencing is being speeded up using automation and a new portal. Recent changes in government regulation now allow new recruits to start training even before the referencing has been completed. Fourth, airport terminal capacity constraints are being overcome. The layout of Terminal 5 is being rearranged to make more efficient use of space for checking. The number of self-service backdrops are being doubled. New recruits awaiting completion of references, such as coming crew, are being assigned to land-side tasks, such as assisting passengers in the terminal. Qatar Airways will move out of Terminal 5 in mid-June when Terminal 4 reopens. And VA is also making changes for the long term. In terms of management, the operations structure is being split into technical and operations in order to enable more focus. In terms of processes, VA is leveraging best practices across the group at Iberia and Welling, who have strong operational and punctuality metrics. The aim is to transform operations using these best practices and support it by software and data analytics to drive better decision making. Finally, IT is a core pillar of V8's transformation program. We are continuing to invest in IT, and we are accelerating the replacement of legacy IT systems and migration to the cloud. As I mentioned at the start of my presentation, we have moderated our plan capacity for 2022 from 85% to 80% of 2019 levels. This is entirely due to VA reducing its schedule to build operational resilience this summer and reducing planned Asian services. We now expect VA to fly 74% of its 2019 level of capacity this year compared to 80% before. And finally, the conclusions. And the most important point is that demand is recovering strongly. In particular, leisure demand, both short-haul and long-haul. Business travel demand is lagging, but there has been a strong increase since the start of the year. Demand on North Atlantic routes is now back to at least 80% of 2019 levels, and we plan a fully restored network in terms of destination and 95% of 2019 capacity by the third quarter. Turning to profitability, we expect to be profitable from the second quarter and to be profitable at the operating level for 2022 as a whole. We also expect operating cash flow to be significantly positive in 2022. Finally, a reminder about our ESG Day on 20 May, which will be an in-person and virtual event. If you would like to attend, please contact Investor Relations. Nicolas and I look forward to see many of you there. And now we are ready for the Q&A.