International Consolidated Airlines Group S.A.

I'm very pleased to say that this morning we reported our first profit since the start of the pandemic. We continued to restore capacity, flying 78% of 2019 levels in terms of available seat kilometers, up from 65% in the first quarter, and broadly in line with the guidance. We achieved a pre-exception operating profit of 287 million euros substantially better than more than 1 billion euros lost one year ago. All businesses were profitable at the operating level, including for the first time since the start of the pandemic, Boeing, Aer Lingus and British Airways. Revenue recovered to 88% of 2019 levels, almost five times higher than a year ago. Liquidity was at its highest ever level of 13.5 billion euros at the end of June compared to 12.4 billion euros at the end of March. Liquidity has been boosted mainly by positive EBITDA of 777 million euros and a strong booking activity raising deferred revenues. Net debt ended the quarter at 11 billion euros, lower than 11.6 billion euros at the end of March. And demand continues to be very strong with bookings currently running at a rate of around 90% of 2019 levels in terms of volume and around 95% in terms of revenue. These bookings, we need to consider that we are not flying or we are flying very reduced capacity to Asia Pacific because of the street COVID travel restrictions. Premium leisure revenue is particularly strong and has almost fully recovered to 2019 levels. Business channel bookings have recovered to around 60% in volume and 70% in revenue. As is usual at this time of the year, it's difficult to see the last quarter of the year, and we have limited visibility except the key holiday periods and we can say that we don't see signs of weakness in demand. Overall for 2022, we plan capacity to be around 78% of 2019 levels. This is slightly lower than the 80% that we previously planned because, as you know very well, British Airways has reduced the capacity for this summer in order to enable operational resilience at Heathrow Airport. For the third quarter, we are operating capacity at 80% of 2019 levels, rising to 85% in the fourth quarter. We are operating an almost fully restored network in North Atlantic in the third quarter, but with a slightly lower capacity at 92% compared to 95% that we previously explained to you. In terms of the outlook, we expect for the third quarter that unit passenger revenue exceeds the improvement of 6.4% that we had in the second quarter compared with 2019. And because of that, we expect operating profits to be substantially higher in the third quarter than in the second quarter. Also, we expect to be profitable for the full year 2022 with an operating cash flow significantly positive, although net debt is likely to be higher by the end of the year. And now I will hand over to Nicolas for a final presentation.

Thank you, Luis. Good morning, everybody. I know it's been a busy morning this morning, so thank you very much for your time. And it's good to be here presenting IAG's results in person for the first time for me. I'm even more pleased that IAG has today reported its first operating profit and profit since Q4 in 2019. We saw improved trends across the quarter, with June being the strongest month. And as Lewis has just told you, we expect this momentum to continue into the third quarter, leading to significantly improved operating profits compared to Q2. We changed the presentation format this quarter to give you more detail of the drivers of the performance in the quarter, particularly by the individual airlines. And hopefully this shows you the strength of the portfolio. I'm not going to go through every single bullet point on the right hand side of each of these slides. The new format really is for me to pull out key points and for you to take away the detail and peruse at your own leisure. However, I will pick out some of the key points. As in the previous quarter, we have provided both the comparisons versus last year and versus 2019, although I will focus my comments on the movement compared to 2019. Firstly, we've seen strong revenue metrics across all our airlines, with each airline reporting positive unit revenue, except for Aer Lingus, which I'll come and talk about in a bit. At the IAG level, passenger revenue recovered to 83%, driven by the capacity at 78%, and passenger unit revenue up 6% due to the strong yield improvement up just under 11%. Passenger unit revenue was strongest at Iberia and Vueling, driven by the Spanish domestic and the LATAM markets. Cargo posted another strong quarter, with revenue increasing by around 50%. a slightly smaller increase than we reported in the last quarter with COVID restrictions in China impacting freight volumes from Asia. Other revenue increased 14% compared to 2019, driven by good performances of British Airways holidays and IAG loyalty. Moving on to costs, our non-fuel unit costs increased by 21% compared to an increase of 32% in Q1. A large part of this increase reflects the fact that our capacity isn't fully recovered to 2019 levels. For half the increase is also explained by two additional factors. Firstly, FX, which relates to the translation of VA and Avios into Euros, and transaction currency differences that explains around 7% of the increase. A further 4% is explained by the growth of non-passenger business costs for cargo, BA holidays, MRO and handling. These costs have grown strongly but do not generate or move in line with ASKs. Employee unit costs were up around 11% and improved performance compared to the increase of 32% we reported in Q1, which, if you remember, was impacted by staff being recruited ahead of the summer season peak. Fuel costs were up nearly 35%, driven by the increase in fuel prices seen since the invasion of the Ukraine in February this year. Year-on-year, commodity spot prices increased over 150% in Q2, although our hedging limited the increase in our effective price to 45% year-on-year. And finally, the impact on disruption for the group was limited to around £15 million in the quarter. The proactive approach we took to manage our schedule, particularly at British Airways, minimized the impact of the reduced capacity. Although, of course, there was the lost opportunity revenue as it reduced the capacity we had to sell to customers during a period of very high demand. Looking at the airlines, turning to Aer Lingus, I'm pleased that Aer Lingus also reported the first operating profit since 2019. Aer Lingus was one of the most impacted IAG airlines during the pandemic, with Ireland relaxing COVID-related restrictions slower than most other countries. So it was very pleasing to see the progress that we had across the quarter. In capacity, if you remember from last quarter, Aer Lingus had recovered only 69% of 2019 capacity, following a strong work from home environment. This has now jumped to 86% in the second quarter. As a result of the slower opening of the travel market, passenger unit revenue declined around 10% due to lower load factors and a decrease in passenger yield just under 4%. The yield did, however, include a change in accounting treatment between revenue and costs. that without which the passenger unit revenue would have only been down around about 3%. Short haul leisure has been a strong segment overall with Aer Lingus seeing significant yield increase into European leisure destinations. And short haul cities are also seeing a pickup compared to last quarter, which was previously an area of relative weakness. North America unit yield revenue was down but improved across the quarter as the travel restrictions were lifted. So overall, an encouraging performance from Aer Lingus. This slide shows British Airways performance. British Airways returned to profitability and saw good momentum across the quarter, despite the capacity constraints at Heathrow that have been well publicised. Looking firstly at costs, BA non-fuel costs were up 31% in the quarter. A significant proportion of this It reflects the slower build-up of capacity. There was also three other factors that impacted unit costs. Firstly, the currency difference that I spoke to earlier, which relates to the strength of the US dollar against sterling. Secondly, there was a one-off benefit in 2019 of around $30 million. And lastly, the good growth of BA holidays, the costs of which are reported in supplier costs. These three items increased non-fuel costs by about 9%. Moving into revenue, passenger unit revenue increased around 6%, driven by an increase in yields of 11%. This was driven by the performance of long-haul premium and, in particular, premium leisure, with high yields offsetting slightly lower load factors. Long-haul and non-premium performed strongly with high unit revenues. In short haul, we saw good momentum across the quarter, with unit revenues turning positive compared to 2019 in the month of June. And business revenue gradually improved, reaching almost 60% across the quarter. Iberia had a very good Q2, with all its business areas, MRO, handling, and the airlines generating operating profit. Indeed, Q2's operating profit has recovered to 70% compared to 2019, despite the airline only having capacity at 87%. Passenger unit revenue increased just under 10%, with positive unit revenue in every month in the quarter, and yields up nearly 14%, driven by the strong Spanish domestic and Atlantic demand. These high yields more than offset the lower load factors. So into costs, non-fuel unit costs, increased 8.5%, again, partly relating to the capacity not being fully restored. I'm pleased to say that Vueling fully recovered its 2019 revenue and capacity, driven by strong demand domestically and good yield management. The ancillary performance was particularly strong in Q2, increasing by 65%. Whilst the ramp-up for the new bases at Paris Orly and London Gatwick diluted the overall performance, Both bases are outperforming expectations, with a new base in London, Gatwick, starting operations in the quarter and helping to boost the international capacity restoration. Turning to our liquidity, cash and liquidity continues to be a key focus for the company, and our cash position remains very strong, increasing over £1.2 billion in the first six months of the year. I would like to highlight a few of the main drivers of the strong performance. As we've just been through, the good operating performance in Q2 has driven positive EBITDA to €554 million over the first six months. The biggest driver of the strong cash flow in H1 has been the inflow of €2.3 billion of deferred revenue. Most of this increase has come from advanced sales for bookings of flights in future periods. And we've also seen strong capital inflows in both Q1 and Q2 and working capital as the business recovers. As in other years, these inflows are seasonal as we build for the summer peak and a large proportion of this is likely to unwind in H2 as we hit the lower demand seasonal winter months. As we highlighted previously, gross capex stepped up in the first quarter to 2.1 billion euros. Almost 90% of this capex, 1.9 billion euros, relates to fleet capex, that largely reflects the delivery of 13 aircraft in the half, including seven wide-body aircraft as we build back our fleet back to pre-pandemic levels. And a little over a quarter of the fleet capex relates to pre-delivery payments, some of which were delayed from 2020 and 2021. This capital spend on on fuel and environmentally efficient and effective aircraft represents an investment in the future, allowing us to make progress to a lower total cost of ownership and towards our goal of reaching net zero emissions by 2050. Proceeds from borrowings saw an inflow of 641 million, which mainly reflect the sustainability link double ETC that Iberia successfully issued in April. that financed two A350s and three A320s which were delivered in Q1 of this year. And lastly, we had payments of €814 million relating to aircraft leases. This slide shows our liquidity position, which you can see has risen again to reach €13.5 billion at the end of the half. Our level of liquidity is the highest since the start of the pandemic and represents more than half of the revenue we generated in 2019. As you can see from the chart, our finance facilities of 4.3 million have remained unchanged since the end of the first quarter, showing the strong cash performance that I just took you through has been the driver of this increase in liquidity. Looking further ahead into H2, on the right of the chart, we have shown the three narrow bodies and three wide bodies that have already been delivered and we expect to be financed later this year. This slide shows our gross and net debt position, with our net debt decreasing over 600 million euros since the end of the first quarter. This includes 910 million adverse non-cash movements, mainly driven by FX movements due to the strengthening of the dollar. The gross debt increased around 400 million due to the financing of new aircraft shown on the previous page. And as we've said at the year end in Q1, we expect net debt to increase by the year end due to the seasonal unwind of working capital and deferred income and due to the previously communicated around 4 billion pounds of capital across the year. Turning to our debt's maturity, This chart shows a year-on-year split of when our financial debt becomes due for repayment. As a reminder, we have excluded finance from operating leases from this chart, so it just shows our secured aircraft finance and unsecured borrowings. There are two key points I want to make on this slide. Firstly, there isn't significant variability in the amount due before we get to 2026, when the UK EF loan becomes due. And secondly, The two main maturities we have in the next 12 months are the €500 million convertible bond due in November this year and the €500 million unsecured bond due in June 2023. We have a strong cash position, as you have seen, to meet the maturity of both of these bonds. However, should the credit markets improve ahead of the maturity, we would look at some form of liability management exercise as part of our balance sheet improvement planning. Lastly for me, this slide shows our current hedging position on fuel. We currently have 81% of our expected consumption for Q3 and 65% of our expected consumption for Q4 hedged. We also have a little over a third of our expected consumption in 2023 hedged. As we did in the first quarter, we've used the market forward pricing curve for jet fuel. Given the variance across the future quarters, we do think this better reflects the potential future impact on our fuel bill. However, for the first time in a number of quarters, we've given you an estimate of what our fuel bill could be at current spot rates and forward curve prices for jet fuel and FX. Based on prices at the beginning of July, our estimated fuel cost for the year is expected to be around 6.5%. So in conclusion, we're very happy to report our first profit since Q4 2019. We saw an improved trend across all months in the second quarter with all our airlines reporting strong revenue and trend metrics. We expect to build this performance into Q3 with substantial improvement in operating profit compared to this quarter and continue to expect to be profitable for the full year. We have an extremely strong liquidity position and have continued to be successful in raising new finance for aircraft across the last six months. And I'll leave you with Lewis now, who will tell you a little bit more about the year ahead.

Thank you, Nicolas. The management team continues to be focused on transforming our business to emerge from this crisis in a stronger position and to excel across all aspects of our business. First of all, I'm going to talk about the product, where we continue significantly enhancing the proposition to our customers. You can see several examples in the slide. British Airways, for example, is continuing to embody more aircraft with the Club Suite product. We are having some delays because of the global ship shortage affecting the in-flight entertaining system. BA is also in the process of refreshing its catering offering across all its cabin on long-haul flights and in Club Europe. Iberia launched on the 7th of June the new business class long-haul in-flight service. The next generation A350s with a wider cabin will start in Iberia in September, and the first one with a new class suite will be available from December 2023. This new business class will have the Recaro CL suite with sliding doors to provide full privacy. And the next big development will be at JFK Airport, where in December we expect that BA and Iberia will collocate with American Airlines at American Terminal 8. We talk about loyalty. IAG loyalty has been critical during the pandemic to maintain our airlines' relevance to our customers in a moment where travel has been very low. And not only has increased the relevance to the customers, it has increased also the contribution to the group operating results this year. The most successful development has been the increase in avios collected by customers from our non-airline partners. This increased by 22% in the second quarter compared to 2019. Our largest and strongest non-airline partner is American Express in the UK, with whom we increased our remuneration by 54% in the second quarter compared to 2019. BA's co-branded car with Amex now has 30% more customers than before the pandemic. A new customer acquisition was 50% higher in the second quarter than in the same period in 2019. We are continuing to invest in enhancement to the Avios program, such as the relaunch of the BA prepaid master car. And we are planning more opportunities for customers to collect Avios that we will announce in the second half. Unfortunately, as you know very well, our industry has continued to face historic challenges as a result of the unprecedented scaling up of the operations and staff shortages across all the aviation ecosystems. The UK and therefore British Airways have been particularly affected, while others, for example, Liberia and Berlin, they have been less affected. Our airline teams have been very focused on enhancing operational resilience and improving the customer experience. And I would like to thank those customers affected for their loyalty and for their patience. VA has made some progress to restore operational resilience, hiring another 4,100 people since the last time we spoke, and they are improving also the referencing process. In particular, Terminal 5 is now a VA terminal only. HIPRO finally reopened Terminal 4 in mid-June, enabling Qatar Airways to move there. And American Airlines and Averia, they moved to the Terminal 3 on the 12th of July. But the most important tool that we have to restore operational resilience has been to reduce the schedule. This table summarizes the changes that VA has made for the summer season to the end of October. In total, it has canceled 18% of the flights from the original schedule, resulting in a reduction in plant capacity equivalent to 13% of the ASKs. We announced a majority of the flight capacity reduction at the time that we presented the results in the first quarter, 16,000 flights equivalent to 10%. These were preemptive cancellation in order to protect the completion and punctuality of the majority of VH flights and also to protect our customers. The majority of these flight cancellations were on short-haul routes where we have the facility to reaccommodate affected passengers. Also, we had some long-haul routes canceled, again, but we selected those ones with multiple daily frequency. For example, a daily Miami flight was transferred to American Airlines, and we delayed also to start Hong Kong and Tokyo after we have a reduction in the COVID restrictions. The second round of flight reductions occurred in June, involving 1% of the flights, equivalent to 1% of the ASKs. And the third round occurred in early July, when the Department of Transport waived the 70-30 slot rule. Because of that, we canceled, VA canceled 7% more flights, equivalent to 2% of ASKs, because again, mostly the flights were short-haul flights. Despite this amnesty, Heathrow, you know that they imposed a capacity cap of 100,000 passengers, but as BA previously cut their capacity, only had to cancel 0.5% of the flight, equivalent to 0.2% of the ASKs. And in this slide, you can see that the majority of flight cancellations in the second quarter and in the current quarter, in this third quarter, have been preplanned. So the vast majority of the customers, they have been informed and reaccommodated on other flights. However, it always happens that we have some unplanned last-minute cancellations for a lot of reasons. bag assistance, failure, staff shortages, technical reasons, et cetera. This slide shows an scheduled cancellation within 48 hours of departure for the second quarter. And you can see the major North American airlines and the major European airlines. It's based on OIG data. And you can see that VA had to cancel 2.9% of scheduled flights in this way. And the average is 2.2%. So we were a little higher if we compare with the average. Other airlines in the group, they did it much better. For example, Aer Lingus, they had around 1% cancellation rate. And in the case of Iberia and Welling, you can see that they had virtually no cancellations at all. They were one of the best performance in Europe. I'm talking about our people. First of all, I would like to thank our employees for their hard work and commitment during this challenging time. We have a number of people initiatives that we have or we are in the process of implementing. We are managing talent more proactively at the group level, and also we are measuring organizational health right across IAG and all the levels, and we continue with all our diversity initiatives. But more immediately, our management teams are in collective bargaining discussions with most employee groups throughout IAG. Talking about sustainability, IAG continues to lead the global aviation industry towards net zero emissions by 2050. We were the first airline group worldwide to commit to this goal three years ago, and we were the first major airline to extend this goal to include a scope three emissions last year. On the left-hand side of the slide, we show a chart of environmental responsibility ratings by CDP. the Carbon Disclosure Project. IAG is the top-rated airline worldwide with an A- rating, which we have had for three years. The only other airlines with A ratings are our partner, American Airlines, and ANA in Japan. On the right-hand side, we show some recent sustainability actions that we have taken. We were the first European airline group to commit to uplift 10% of our fuel as sustainable aviation fuel by 2030. In our ESG day in May, we announced an increase in our investment and purchase commitments of sustainable aviation fuel from $400 million to $865 million. And now we have secured 25% of our 2030 target commitment at competitive prices relative to the fossil fuel. In addition, we have increased our investment in the hydrogen electric aircraft developer, Ciroavia, and we are partnering with Airbus to explore opportunities for direct air carbon capture and storage. We have made three announcements recently, talking about the fleet, including one yesterday, for aircraft orders for a total of 109 short-haul aircraft, including 50 Boeing 737s and 59 A320 neo-family aircraft. These orders are mainly replacement and are already in our previous fleet and CAPEX plans. They offer some growth because some of them, they have an average capacity higher than the aircrafts that they are going to replace. And the slide shows our total committee aircraft orders and options for all the aircraft as of the end of June on the left-hand side. And on the right-hand side, we show the 37320 neo family orders that we announced yesterday, plus the 50.737 orders that we announced in May. We will need to seek shareholder approval for these 87 orders because the value of our Airbus and Boeing orders in a 12-month period exceeds the London Stock Exchange Class 1 test of 25% of the value of our equity market cap. We will seek shareholder approval at an EEM later this year. In total, we expect to replace around 60% of our current short-haul fleet by 2028. And these orders are going to be instrumental in achieving our net zero emissions target by 2050. Both the Airbus 320 Neos and the 737 will improve carbon efficiency and fuel burn by up to 20% if we compare with the current generation aircraft. In addition, they will enable us to achieve our intermediate climate change targets. We have a carbon efficiency target for 2025 of 80 grams of carbon per passenger kilometer, compared to 89.8 grams in 2019, a reduction of 1.9% per year. The new order will have a meaningful impact also on our 2030 target for net emissions of 22 million tons, which will be 19% lower than 27 million tons in 2019. And if we come back to capacity, and as I mentioned at the At the start of my presentation, we have moderated our plan capacity for 2022, again, from 80% to 78% of 2019 levels, and compared to an original plan of 85% that we set earlier in the year. This is almost entirely due to the reduction in the schedule to build the operational resilience that we have commented before. And now we expect V8 to fly 70% of its 2019 level of capacity this year compared to the 74 before and the 80% that we planned originally. Regarding the North Atlantic area, we had originally expected to get back to 2019 levels in the current third quarter, but reduced this to 95% the last time we spoke in May. And we are now expecting the third quarter to be 92% of the 2019 levels. But we expect North Atlantic capacity to be restored to 2019 levels by January of 2023. The reduction in North Atlantic capacity is mainly frequency. The number of cities that we serve has not changed. For example, VA is serving now 34 cities in North America, which is unchanged to the original plan and is only two fewer than in the summer of 2019. Overall capacity for IEG is expected to be 5% lower in the second half of the year, with the third quarter at 80% of 2019 compared to 80% that we previously explained, and the fourth quarter at 85% compared to the 90% that we had before. in the form of forward bookings remains very strong. These graphs, we are used to these graphs during the pandemic, show forward bookings in terms of volume of the bookings that we are having. All three routes areas, you can see a recent peak in the last week of April and first week of May, around the time that we presented the first quarter results. Overall forward bookings over the last five weeks have been running at a rate of 85% of 2019 levels in volume terms and around 95% in revenue terms. And this difference reflects the higher pricing levels that we have if we compare with three years ago. Spanish domestic remains the strongest at around 100% in volume terms and 120% in revenue terms. European short-haul is also strong, at 80 percent in terms of volume and 100 percent in terms of revenue over the last five weeks. There has been a slight slowdown, as you can see, in short-haul bookings in the last few weeks, but this reflects mainly the capacity gaps that we have seen in Heathrow. Long-haul continues to lack at 80 percent volume and 90 percent revenue. And a lot of the difference in the long haul with 2019 reflects the closure, as I explained before, of most of Asia-Pacific due to COVID restrictions. Because you remember that Asia-Pacific for us in 2019 was 8.5% of our ASKs. On a like-for-like basis, In North Atlantic, booking volume is running around 95% on a plant capacity growth of 92% in the third quarter and 95% in the fourth quarter. Premium leisure has seen the strongest recovery in demand so far, in particular for Iberia. BA's premium leisure revenue has recovered to 85% of 2019 levels in June, while Iberia's premium leisure has recovered to 120% of 2019 levels. The strongest premium leisure demand is in Shoalhole, North Atlantic, and Caribbean routes. Premium business revenue continues to lack for both airlines, but has made steady progress in the recovery. For VA, premium business is now back to 60% of 2019 levels in terms of revenue. The small dip in June that you can see in the slide reflects a very high positive impact in June of 2019 that we had as a result of President Trump's visit to the UK, resulting in a lot of travels from government and media-related traffic. but it doesn't reflect that in the current demand. For VA, you must consider again that Asia Pacific is still largely closed and is flying only one route, currently to Singapore and Sydney. Asia Pacific, the same way it was 8.5% of ASKs in 2019, represented around 50% of VA's traffic in 2019. On a like-for-like basis, BA's premium leisure revenue is performing better than BA's average of 85%, and premium business is performing better than BA's average of 60%. For Iberia, premium business revenue has recovered to around 70% of 2019 levels. The most recovered sectors are SMEs, oil, gas, and mining, media, also banking is working well. And the least recovered sector is pharma. We expect that the corporate travel will recovery, will continue the recovery from the fourth quarter driven by the pent-up demand and more people also returning to the office. And finally, the conclusions. So the second quarter has, Been the first profitable quarter at the operating level since the latest, the last quarter of 2019, as we had expected. All businesses were profitable. Liquidity, very strong, 13.5 billion. Profitable quarter at the operating level since the latest, the last quarter of 2019, as we had expected. All businesses were profitable. Liquidity, very strong, 13.5 billion euros. Net debt reduced slightly to 11 billion euros due to the strong EBITDA and strong bookings that we have for the future. Overall capacity for the full year has been reduced slightly from 80% to 78% as a result of the capacity reduction in British Airways. The financial impact of this reduction is minimal, as VA could reaccommodate the vast majority of affected customers in all the flights. Forward bookings continue to be strong, especially in the leisure segment, while the business segment is making steady progress. We are aware that the inflationary and recessionary concerns that we have out and the operational challenge that we are facing But we don't see any signs of weakness in booking behavior, although we are for sure looking at this very closely. Our guidance for the full year is unchanged. We continue to expect to be profitable for the rest of the year, particularly in the third quarter, and to make a positive operating result for 2022. We also continue to expect the operating cash flow to be significantly positive for the full year. We are ready for all your questions.

Thank you very much, Lewis and Nicholas. Yes, we're ready for your questions. Unfortunately, we can only take questions in the room and not over the line or the webcast. And I would ask, if possible, could you please contain your list of questions to just two? I see there are relatively few analysts in the room, so if we have time, we can always go do another roundup.

Thanks. Thanks again for the presentation. Actually, I got two questions. I'll limit myself to two here. This is Satish from Citigroup. So firstly, on the booking curve, you actually said that the booking into H2, into the leisure period, like Christmas and then after, actually, you're not seeing any sign of weakness there yet. And then if you refer to slide 26, where you're actually given the booking forward. The bookings that we are seeing right now is actually related to those periods, which means that the yield or the pricing is likely to be up 10% in those off-term and the peak leisure period. How does it actually compare versus the other part of Q3 and Q4 in terms of booking trends? And then the load factor, obviously the load factor is still slightly below 2019 levels. Given what we have seen, say, on the capacity reduction and the demand surge, would I actually expect the load factor actually to come closer to 2019 levels? So what is actually the disconnect there? And then within BA, actually, if you could give any color on all the load factors performing versus premium versus non-premium segment compared to 2019 levels, that would be helpful. Thank you.

OK. I think when we see the health revenue that we have for the rest of the year, in general, we are above the levels that we had in 2019. The biggest improvement is yield, as we are experiencing now. Blood factors are still lagging behind. But the rush that we can see is above the rush that we have in the same period in 2019. So we are comfortable with the situation, and we don't see any sign of weakness for the future. If we talk about the low factor, it's true what you say. For example, in the second quarter, the low factor in premium was minus two points in the case of British Airways, if you compare with the low factor that we had in 2019. In the non-premium, it was minus seven points. if you compare with what we had in 2019. And in the case of short-haul, it was one point above. So the big advantage we are having doesn't come from loss factor, it comes from yield. And in yields, we are in premium and non-premium long-haul around 120% the yields that we had in 2019. And what is still lagging behind is the short-haul where yields are close to 100 levels that we had in 2019. But in general, in the three segments, the second quarter and what we see in the future is an improvement in the RAS, mainly driven by the yield.

Total market, where are you actually seeing more pressure? Why the yields are actually lagging again there?

This is still ongoing. Holiday leisure destination is very strong. So you can see that through Welling and Iberia particularly. And actually in British Airways as well, leisure destination is really, really strong. Where it's probably a little bit weaker, it's kind of city to city. City weekend breaks is where it's been weaker. But actually, we are starting to see a bit of improvement there as well.

Hi. Alex Irving from Bernstein. Two from me, please. So first one's on RASC. Clearly very strong trends into the quarter. You're talking about this getting better into Q3. I'm conscious that's in a capacity-constrained market with pent-up demand. How much of those factors drive performance, and where do you think RASC would be likely to stabilize as we move through 2023, 2024? And how does that flex as if you remain, say, where it is versus where it was in 2019? Second question on Heathrow, just digging in a little bit. When do you think that's likely to improve to normal operational performance? I think the CEO is on record as saying the cap could be in place possibly for a year. Is that realistic? Is the airport doing enough to restore reliability? And how are you expecting operations there to develop this?

The first one is a very good question. As I said before, we don't see any weakness in the future. But we understand that there is a risk of retention, for example. What we see is that right now the capacity we are flying is below the capacity we were flying in 2019. So we can adjust our capacity and also the advantage that we are having in RASC can compensate the effect that we can have if a recession arrives. So we are comfortable and we don't see any sign that this is going to be weaker for the future. Talking about Heathrow, I think the problem is not only us. I think it's a combination of actors in the ecosystem. So it's the airport, it's us for sure, it's ATC, more providers. So we need to do it very well together, and that's the reason we are working with them. In order to fix and to give resilience to the operation, we hope that this is going to improve by the end of the year. But when you see still the OTP that we are having, although last week is improving, we still have days where we cannot cope with the volume that we are having there. Maybe soon you can.

Yeah, I think Heathrow... will depend on recruitment fundamentally, and I think it's an ecosystem where the labour market has been tight. To give you a sense of British Airways, we've brought 4,000 people into the business. 3,300 are operational. We need about 7,000 to be in place by the end of December. So the run rate that we have today very much aligns to the recovery we need in our business by year end. And the rate at which we're bringing people in is improving every month. Now that's British Airways and the things we control. HAL needs to recruit more people and they need to train more people. And I think one of the things we are seeing is even when security people come into Heathrow, the speed of processing passengers and bags and getting trucks through control posts isn't as quick because of an experience lag. So that's another thing that we've got to factor in. And the third thing is the effect of the wider constraints in third-party ground handlers on operations that we don't control but can affect the performance of the airport. So again, we watch closely how the wider Heathrow ecosystem in terms of supply chain is performing. But one thing we are seeing is attrition is falling, recruitment is picking up, and operations are stabilizing, even though they're not at the level that we would like them to be.

Good morning. Jamie Robotham from Deutsche Bank. Two questions on cost, really. Firstly, what do you see as the likely impact on your employee cost of the recent deals that BA struck with the GMB and Unite unions, along with any further offers you might have to make to staff, such as the pilot to avoid strike action? And then secondly, should the unthinkable happen and this very positive unit revenue environment start to weaken, What will you do on cost? I mean, you know, you've tried to cut costs against the backdrop of the crisis. Now you've got cost inflation because of the environment that we're in. We're just interested in, you know, actions that you would take, flexibility that you might have in a weaker unit revenue environment.

Thanks.

The second one I was just going to take overall. I think, you know, we're very aware that, you know, if the recession does hit, I think our brands, particularly our premium brands, are well positioned in that market given our customer segments overall. So I think we're probably more protected from the low-cost carriers overall from a revenue point of view. But that doesn't avoid us having to address costs. Hopefully, if you go into that recession, you do see fuel prices fall down hopefully as well. I think also we've got quite a big program kind of already in terms of making sure that we make the most of our procurement. So we've got the kind of our GBS, our growth level business services already kind of pulled together across IAG where we're really looking at supplier by supplier performance as well. And the investments we're making in the new aircraft really kind of focused on making sure we take total cost of ownership down overall. So I know that's a longer term. But it will give you big advantage over some of those who aren't doing that at the moment as well.

I think we can have also the flexibility. We are bringing new aircraft, but in the same way that during the COVID we could postpone the delivery of some aircraft. Now, as we said before, we are still below the capacity we started in 2019. So in case something happens, I think we can manage the capacity in a way that others consider they cannot do. And talking about the employee cast, I think the pressure that we have, you know very well, is the inflation, labor shortage, and then supplier costs are raising. People, they have suffered a lot during COVID, and now they want to come back to where they were, plus the inflation that we have right now. So we don't have any other alternative than to be more efficient. And that's the reason we have a transformation plan, to be more efficient. And that's the reason we need to be more efficient in the labor cash. So in the case of British Airways, the projections that we have, even with what they are negotiating now, on the table is a reduction in the labor costs in the following years. And I think that's going to be important in order to cope with all the headwinds that we can have in the revenue side and in the cost side, sustainability, cost, et cetera. In the rest of airlines, for example, Erlingus also, they have a plan to reduce the labor costs in the following year. And Iberia and Berlin, they had a part of the scheme that was different in Spain. So now they are in the process of negotiating the new CBA for the following year. And I hope, and that's what they are trying, that we can... for sure to try to come back where we were before, because we want to treat well our people, but we need to be more efficient in order to come back to the results that we've had before. And in that sense, productivity is going to be one of the big topics in the discussion.

Hello, Carolina Doris from Morgan Stanley. I'll pick up from Jamie and talk about cost and you're seeing rising interest rates in the level of gross debt. keeps going up. So I guess, Nicholas, how do you see, how do you manage, expect to manage the interest costs in this rising rate environment and on that, what are leasing costs doing? And my second question is on the evolution of net debt. I guess given the rising yields and improvement in capacity, we should expect Q2 second half results to be better than first half. CAPEX should be the same, right? It's half-half. So basically net debt goes up by the working capital swing. Should we expect a full reversal, or is there some of the improvement that you think you're able to keep?

Yeah, just in terms of starting with the last one first. We've kind of signaled that you will get a reversal. I think it's a large proportion of it. It'll depend on what the trajectory of revenue is going into January, February, really. depend on what kind of levels of deferred deferred income is but i think a large proportion that maybe not all of it will unwind uh hopefully generally a lot better than it was last this year overall um just in terms of uh kind of interest rates uh i guess managing interest rates i guess it's being um what we're seeing in the market as you know in the kind of bond market is is fairly fairly challenging at the moment so i think the kind of question is you've got to be patient And being patient means you've got to make sure you've got good liquidity to allow you to be patient, which I think we've worked ourselves into a really good position to do that and being ready to move when the market opens again, which I'm sure it will do, but we're being ready for that. I think the kind of pleasing thing overall is that we are still seeing leasing costs being fairly attractive, not moving kind of as you see kind of the spreads in the kind of other kind of bond markets at the moment. You know, we're out there, you know, doing some aircraft leasing and financing at the moment, and actually we're seeing fairly attractive rates at the moment.

Yeah, morning, guys. Thanks for the presentation. It's Harry Gowers from JP Morgan. If I could dig into color on the costs as well. So I think in Q2, employee unit costs are up 11% and the supply unit costs up close to 30%, if I'm not mistaken. So how should we expect them to trend or compress in Q3 and as the year goes on? And then just more midterm as well. I mean, when you get back to 100% pre-COVID capacity, how should we think about a cost base, especially on the non-fuel side relative to 2019, because we've done the restructuring during COVID. As mentioned before, clearly, quite a lot of patient pressure coming through at the moment.

Thank you. If you see in our first quarter that we were flying 65% of the capacity, our cast fuel was plus 32% if you compare with 2019. In the second quarter, flying 78% of the capacity, the cast fuel has increased 21%. So capacity is an important factor. If you do the math, because of the reduction of 22% in capacity, we have an increase of 28% of the cash. So the fixed costs are affected by that magnitude. But if we look to the 21.3% increase in cash still, 10% we can say is linked because we have spread the fixed costs in lower ASKs. 6.5% are related to FX, mainly, and 3.5% are related to business that are not linked to ASK. So, for example, we have sold more NBA holidays, or, for example, we have done cargo-only flights. We did in the quarter 108 cargo flights that we didn't do in 2019. So I think when we come back to the capacity that we had in 2019, The objective is – I cannot tell if we are going to come back there because of the inflationary environment that we have right now, but the objective that we have in the transformation plan is to come back closer to the situation that we have in 2019.

This kind of high inflation, it's just going to take a year or a bit longer just to get there.

from Liberum, two from me. Obviously you haven't talked about 2023 capacity yet, but given the delays to wide-body deliveries, how confident are you that you're going to have the metal to actually fly, let's say if it's a 2023 schedule that continues to recover from 2022, and what sort of contingencies and flexibilities do you have? And secondly, I think one of the slides you talked about on sustainable aviation fuel, a target of 10% by 2030. I was wondering whether you could clarify, when you say 10%, is that a 10% blend on 100% of your fuel, or is that a given blend on 10% of your total fuel consumption, or whatever? Or what does that 10% actually mean?

OK. I'll talk about the capacity. We are not giving guidance about the capacity. I think with the delivery of aircraft that we have now planned, we have enough for the capacity that we want to fly. Right now, for example, the bottleneck that we have is not the number of aircraft. It's the restrictions that we have at the different airports. And that's the reason we are cutting capacity in Citroën to give resilience. But we could fly. more aircraft in case it is possible. So 2023, we are not giving any guidance, but we don't foresee any problem with the number of aircraft. And now the second question, maybe Carolina, you want to answer?

Yeah, we talk about we estimate 1 million tons. That's 10% of our fuel consumption, estimated fuel consumption in 2030. It's 10% of our fuel to be sourced. So it's the volume.

It's 1 million tons estimation. You mentioned that you wanted to ramp up to 7,000 FTEs by end of the year, right? So just to clarify, that's for your ramp up into next year capacity of plans, or is it just to meet your winter demand?

Yeah, that would be to ramp up into summer as well. So there will be some incremental recruitment on top of that. But we'd be looking probably at 7,500 to 7,700 for the summer program. But we'd expect to have people in the business and being trained through the winter. And December, our projection would be to get to 7,000. Yeah, there will be as we rebuild, a bit like we would have had this winter. But as I said, I think that the run rate that we're seeing is encouraging. And the level of interest, we have 60,000 applications to work for British Airways since the 1st of January, and that's very encouraging.

First, I noticed the delivery times of the newer bus Orders, there's quite a big overlap with the Boeing on the maxes. I guess, how are you feeling about timing? Do you still need all of that capacity coming in in the later part of the decade? And my second question is just to remind us on the repayment of the pension fund liabilities, which are still very low. What is the timing for, I guess, the revaluation and ramp up of repayment?

But just on the deliveries, you'll see that most of our deliveries take us to about 60% getting to the replacements that we need to make by 2030. So most of those are purely just replacement aircraft coming in overall, rather than necessarily growing the fleet overall. In terms of the repayment liabilities to the pension fund, we're right at the, hopefully, getting towards the end of the triennial pension negotiations. So hopefully by Q3 or Q4 this year, we'll be able to talk you through the pension fund. Obviously, we've seen quite big improvements in the kind of, if you look at the accounting purposes, you've seen a kind of quite large improvement in the surplus, just in terms of where all the metrics have gone lately. So hopefully that kind of gives an indication.

About the fleet, in the 737 and the 320, they are going to different airlines. We are still deciding where to pull the aircraft. there is no overlap. So we need all of them in order to replace 60% of our fleet by 2028.

Sorry, I'll ask another just to be difficult. It's Harry from JP Morgan. On business travel, that 60% figure in volume in 2019, obviously visibility is pretty low at this stage, but any early indications from speaking to corporates where that exit rate could kind of be towards the end of the year?

It's quite difficult. You always hit this time of year, and your September bookings in corporate are always fairly low because no one thinks about booking travel at this time of year. So I think it's hard to predict. I think if you look at the graphs, though, it's a steady slope kind of improvement every single week we go through. So I think we take kind of confidence from that at the moment. And we're seeing particularly in areas like kind of farm and buck finance, they've shown good recovery.

Two more from me as well, please. So first on aeroflex, we have an update on where we're up to, what's the next decision point, and who needs to make that. And then second is on IT. You had a comment on an earlier slide that there were no issues

About Europa, we don't have a lot of things to add to the situation we had previously. We said that we gave a loan in June of 100 million euros that we want to convert in equity as soon as we said that we needed to deal with different competition authorities. As soon as we can go ahead, we will convert this 20% loan in 20% equity. And then from that position, we always said that we will analyze the possibility to have 100% of the company if everything makes sense for the group. And about IT, IT, as you know, is a process that is taking time because we need to fix all IT that we have mainly in British Airways. So we are moving a lot of systems to the cloud, but it's going to take time, because also before moving the things to the cloud, you need to fix the system. But we are doing things. For example, recently we have implemented the LIDO4, that is a system to do flight plans that will replace three systems in British Airways. So we are going to have more resilience, and we are doing all that in the cloud. So we are in the process. It's going to take time. Do we have risk? What we said last time is in the next 18 months, we are still in the process and we need to minimize the risk, but we are still in a legacy environment.