International Consolidated Airlines Group S.A.

Thank you for standing by. Welcome to the first quarter 2024 International Airlines Group Earnings Conference Call. At this time, all participants are in listen-only mode. After this speaker's presentation, there will be the question and answer session. To ask a question during the session, you need to press star 1-1 on your telephone keypad. You will then hear an automatic message advising your hand is raised. To resolve a question, please press star 1-1 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to our speaker today, Luis Gallego. CEO, please go ahead.

Thank you very much. Good morning and welcome to the IAG trading update for the first quarter of 2024. With me today are Nicolas Cadbury, as well as members of the IAG Management Committee. I am pleased to announce that this has been a very good first quarter for IAG. We have seen a strong demand in most of our markets, and in particular, our three core markets of the North Atlantic, South Atlantic, and in Europe. This has driven increased unit revenue versus same quarter last year in the North Atlantic and Europe and supported the high-capacity investment we are making in Latin America. This has been helped by good Easter holiday training. As a result, our revenue has increased by over 9% to 6.4 billion euros. And we have delivered operating profits of 68 million euros, a 59 million euros increase compared to the first quarter last year. We are continuing to invest in our businesses to deliver customer and operational benefits that will sustain best-in-class margins over the long term. Unique costs were, as we expected, so a little bit higher in the first quarter than they will be for the rest of the year due to the timings of this investment. We are already seeing the benefits, in particular, in V8's operational performance. Our balance sheet continues to strengthen at 1.3 times leverage compared to 2.1 times at first quarter last year due to our strong performance and focus on free cash flow. And finally, we are well positioned for the summer. On that note, I will pass you to Nicolas for more detail about our financial performance.

Thank you, Lewis, and good morning, everyone. In this section, we will view the financial performance of IAG first quarter, highlighting the key revenue and cost drivers in our strong balance sheet. I'll start with the profit bridge, walking through both the drivers of the improvement in profits since last year and then the results by each operating company. On the left on this slide, you can see the increase in revenue has been the biggest profit driver, combined with the increase in capacity with strong unit revenue growth and benefits shifting from the timing of an early Easter. Cargo revenue was down on last year, which was when we were seeing high cargo demand due to the supply chain disruptions in the market. Non-fuel and fuel costs reflect the higher level of flying activity in the air. On the right that you can see, All of our airlines, except for Aer Lingus, have improved their profit year on year, which I'll come back to later. This page shows our key metrics for quarter one. We continue to invest in our network, increasing capacity by 7%. At the same time, our passenger unit revenue, or PRASC, increased plus 4.4% compared with last year, with our load factor up 1.6% and our yields up 2.4%. All our airlines saw an increase in their P-RASC with the largest increase at Aer Lingus and Welling, both of which have a high mix of leisure passengers. And non-fuel costs increased by 3.7% in line with our expectations for the quarter, but higher than our expectations for the full year. This higher Q1 reflects the timing that employee pay deals, recruitment, aircraft deliveries and inflation materialised last year. For the full year, we continue to be confident that non-fuel casks will increase in line with the guidance we gave in March, up slightly on last year. These revenue and cost metrics have delivered another profitable first quarter, generating 68 million euros in operating profit, which is 59 million euros improvement year on year. We further reduced our net debt to 7.4 billion euros. with leverage at 1.3 times EBITDA, significantly lower than the end of last year and compared to Q1 last year. These results continue to demonstrate the strength of our business and brands, coupled with our unique disciplined approach to capital allocation and our transformation initiatives. This slide is a breakdown of performance by business, with most of our businesses delivering an improved profit performance during the quarter. Aer Lingus is highly seasonal business, and typically makes a loss in Q1. Capacity grew by 4%, but the loss remained broadly flat year-on-year, with a small improvement in operating loss margins. British Airways' profit increased to £22 million, driven by the strength in the North Atlantic, and Iberia built on its performance last year by delivering another record profit in the quarter, reflecting robust market demand in their core Atlantic and European markets. Welling was the standout year-on-year performer. Welling delivered a strong revenue and cost metrics in the quarter driven by the high exposure to loads of traffic and again benefiting from the timing of Easter. Lastly, our loyalty business also built on the strong performance last year by growing profit to 80 million pounds showing the benefit of their non-seasonal business model. Turning to our revenue performance, this slide shows our revenue performance in terms of capacity, and passenger unit revenue. Overall, we saw strong demand in the corridor, driving high revenue and an increase in unit revenue across most of our geographies. We're particularly pleased with the performance in our core profit pool markets of North Atlantic, Latin America, Caribbean, and Europe. In the North Atlantic, we had an improvement in unit revenue growth compared to Q4 last year, with all our airlines seeing an increase in unit revenue on last year. Given its relative size, the improved performance was principally driven by British Airways, which saw strong unit revenue growth on broadly flat capacity, benefiting from both business and leisure volumes growing ahead of capacity in the quarter. Latin America and the Caribbean performed very strongly. Our investment in the region saw capacity increasing by 14%. This level of investment typically takes time to mature, but robust market demand, particularly from visiting friends and relatives and leisure segments, drove only a slight reduction in unit revenue performance. Our capacity was broadly flat in Africa, the Middle East and South Asia, but we saw a 4% decline in unit revenue, largely reflecting the ongoing conflicts in Israel and Gaza and competitive capacity growth in India. Asia Pacific, which is only around about 4% of our ASKs, saw the largest capacity growth with British Airways continuing to recover to 43% of IAG's pre-COVID levels of capacity. The unit revenue declines in this market, reflecting the timing of re-entry markets and weakness in demand of China. Our short-haul geographies performed particularly strongly in the quarter, with strong leisure demand and a good Easter holiday period. In Europe, all our airlines except Welling grew capacity to satisfy strong demand and all our airlines increased unit revenue in the quarter. Routes to Italy, France and the UK were particularly strong performers. This next slide shows our results after tax with a loss of €4 million. This was an improvement year on year at both pre- and post-tax levels. I would just highlight the tax line where the benefit from a one-off exceptional tax non-cash credit of 89 million euros relating to a constitutional court ruling in Spain earlier this year. This court ruling allowed our Spanish businesses to be able to recognize higher previous year's tax losses. This chart shows our balance sheet and liquidity positions. As you can see, our balance sheet remains strong with a reduction in both net debt and leverage, affecting our strong performance and positive seasonal working capital flows. CapEx guidance, which, as a reminder, is gross, not net CapEx, remains unchanged at €3.7 billion for the full year 2024. And I wanted to highlight that next quarter sees a peak in our aircraft deliveries, with quarter two accounting for around about seven of the 21 aircrafts delivered in the quarter. To conclude, we are pleased with the operational and financial performance of the business, and we have strong conviction in the future free cash flow creation of the group this year and beyond. And at that point, I will leave you now in the hands of Luis.