International Consolidated Airlines Group S.A.

Good morning, everyone, and welcome to the IAG third quarter results. Today, I have with me Nicolas Cadbury, our CFO, as well as members of the IAG Management Committee. First of all, I would like to extend my deepest sympathies to the families affected by the impact of the catastrophic rainfall and flooding in Spain. Our Spanish airlines are supporting the relief efforts, and our thoughts are with those impacted during this difficult time. In summary, this has been a very successful quarter financially as we continue to execute our strategy. We have increased revenue by 7.9%. Our operating profit has increased by 15.4%, which is an increase of 268 million euros to just over 2 billion euros. And we have increased our operating margin by 1.4 percentage points to 21.6%. This means that for the nine months to 30 years, of September, our operating profit is 3.3 billion euros, and the operating margin is 13.8%. This emphasizes the strong margins already been achieved individually by our airlines, as well as at group level, and we are on track to deliver on our world-class margins target. Demand for travel remains strong, particularly in our core markets of North America, Latin America, and intra-Europe. which has supported a passenger unit revenue increase of 1.2%. We continue to invest for our customers and in particular to improve our operational resilience. We are making progress. Iberia's on-time performance remains very high and V8 has improved meaningfully compared to last year. Our increasing profitability is delivering the significant precast flow generation that we have previously signaled and our balance sheet is increasingly strong. So I am very pleased to say that this means that we are now announcing a sell-by-back of €350 million. This reflects our commitment to delivering sustainable shareholder returns on top of the interim dividend that we announced at the half-year results, with opportunity for further returns in future. This is a measure of our confidence in our strategy and business model as well as in the execution of our transformation program. And looking forward, we expect our strong financial performance to continue for the rest of the year. I will now pass you over to Nicolas.

Thank you, Luis, and good morning, everyone. I'm pleased to share with you our financial results for the third quarter. This slide demonstrates how we have once again delivered a very strong financial performance. increasing our operating profits by €268 million compared to last year to just over €2 billion. This performance was delivered on the back of strong passenger revenue growth and good revenue growth in cargo and loyalty. On the right, you can see that the transformation of British Airways was the largest contributor to this growth. This slide demonstrates that we have achieved a robust performance across all of our key performance indicators during the third quarter. Our ASKs increased by 5.7%, which is slightly below our initial guidance of 7% due to a higher level of disruption than anticipated. Our passenger unit revenue grew by 1.2% against a very strong comparator last year, mainly driven with our load factor reaching nearly 90% up one percentage point. Looking at our costs, non-fuel costs increased by 2.2%. with the impact of previous wage settlements and supplier cost inflation partially offset by our transformation initiatives, but on guidance. Our fuel unit costs improved 4.2%, benefiting from the drop in the commodity price and also the introduction of our new, more efficient aircraft. These together resulted in our total cask increasing by only 0.3%. Together with our strong revenue performance, these delivered world-class margins of 21.6%, an increase of 1.4 percentage points. This performance led to a further strengthening of our balance sheet and the net debt to EBITDA leverage ratio improved to one time, down 0.7 times from year end. This really illustrates the resilience of our group and the efficiency of our strategy in a competitive and challenging market. Now let's look at our performance of our operating companies in more detail. The third quarter presented a number of challenges for Aer Lingus with industrial action during the summer period, particularly in July, and continued competitive pressure from the U.S. carriers. Consequently, Aer Lingus' operating profit declined by €57 million to €140 million. An agreement was reached with the pilots at the end of July, and as the quarter progressed, we saw a recovery in demand, enabling Aer Lingus to still deliver a very good operating margin of 18.6%. British Airways saw the most significant year-on-year improvement among our airlines. with an increase in operating profit of £251 million, and its operating margin increasing by over 5 percentage points to 20.7%. This robust performance was driven by good unit revenue and capacity growth, especially in the North America and European markets, and a reduction in non-fuel unit costs. Iberia continues to build on its record performance from last year, with an operating profit of €454 million and a margin of 21.5%. driven by the strong performance in its core European and Latin American markets, with overall capacity growth of over 12%. Welling's network strategy continues to deliver positive results, with the company's operating profit reaching €252 million, and the margin, the highest amongst our airlines, reaching 27%, an impressive improvement of 0.8 percentage points. Finally, Our loyalty business has performed very well this summer with an operating profit of £125 million and a 10% increase year-on-year. The third quarter saw a strong revenue performance against a strong prior year, reflecting the strength of our core markets and market positions and our customer proposition. We were particularly pleased with performance across the North Atlantic, the group's largest market. Revenue improved 3.5% on top of a 4% increase in capacity. British Airways performed particularly well with its premium cabins and in both its US and UK points of sale, where Aer Lingus saw a negative impact in the pilot strike and US competition, but improved as we went through the quarter. Europe was again one of the best performing markets. Unit revenue was up 1.4% and capacity up 5%. All our airlines demonstrated strong performance, leveraging our leading position in our key European hubs, as well as the attractive proposition of our low-cost airlines. Latin America and the Caribbean was again a standout performance, with capacity up 11%, and despite the significant increase, unit revenue only decreased by 2.8%. In Africa, the Middle East, and South Asia, we limited our capacity growth to only 1% due to the geopolitical issues. The Asia-Pacific market saw the largest capacity increase by 18% as we restored some of the pre-COVID routes, but still represents our smallest market, accounting for only 4% of our ASKs. China is still seeing soft demand, and there continues to be a cost advantage for local Chinese carriers. In both AMISA and Asia-Pacific, We continue to adjust our schedule to reduce our exposure to the weaker performing routes and allows us to focus on the stronger Atlantic markets and build more operational resilience. This slide shows our results from the nine months to September down to net profit levels. We have delivered 3.3 billion euros of operating profit after exception of items, up 300 million year-on-year and 2.3 billion of profit after tax. I'd also just point out the reduction in our net finance costs, which declined by 204 million in the first nine months of the year due to the lower gross debt. Turning to our balance sheet performance, our financial position continues to strengthen with a reduction in both net debt and leverage. Our net debt decreased by 3 billion euros versus December 2023 to just over 6 billion due to the strong cash flow from profits. And our leverage, as I said earlier, improved to one times, well below our target of below 1.8 through the cycle. Our total liquidity increased by 1.7 billion euros to just over 13 billion, again, due to the increase in our cash. This delivery and confidence in our business model and strategy led to the 147 million euro interim dividend announced in August that we paid in September. Our CAPEX plans for the year have declined slightly to 3.1 billion due to the phasing of some investments. But despite this, we continue to expect to take delivery of 20 aircraft in the year, with four expected to come in the fourth quarter. We anticipate that our net debt leverage will have a modest increase by the end of the year in line with a typical seasonal unwind of four bookings. And finally, for me, this strengthened financial position has allowed us to invest in our business confidently and fulfill our commitments to shareholder returns. We had already committed to a sustainable dividend, and as Lewis mentioned earlier, we will start returning a further €350 million to our shareholders through a share buyback that will run through to the year-end results presentation. As we continue to execute on our strategy, delivering stronger margins and stronger free cash flow, you can see from our capital allocation framework that we will have the opportunity to return more to shareholders in the future. I'll now hand you back to Luis.

Thank you, Nicolas. I will now spend a couple of minutes highlighting some of the initiatives that we are implementing around the group. In terms of our network strategy, we continue to focus on our cold markets and hubs. Erlingus has returned to flying to Minneapolis and will use its 321 external range to go to Nashville and Indianapolis. Iberia will fly their new XLR to Boston and Washington, as well as continue to add frequencies to Latin America. British Airways continues to add a range of additional frequencies for the U.S. And Boeing is increasing its presence at its Barcelona hub and in the Spanish market. Each airline is also investing in its customer propositions and brands. Aer Lingus, BA and Iberia are all refreshing their onboard offering as well as their airport lounges. Vueling is increasingly developing the digital tools its customers can use to manage their journeys. We are also very focused on delivering better on-site performance in the context of an operating environment where disruption factors are largely outside our control and which are affecting all airlines. In particular, BA has now taken steps to add resilience to its winter schedule as well as for next summer, addressing not only the poor performance of its Rolls-Royce trend engines, but also the significant effect of air traffic restrictions at Heathrow and across Europe over the summer. Stronger, resilient operations for all of our airlines will deliver a better customer experience and more efficient growth over the longer term. This is also where our investment in digital technology plays a major part. For example, as our airlines introduce self-service capability for customers to manage their own journeys. Finally, our loyalty business is doing well. Aer Lingus is our third airline to offer Avios-only flights. They launched Avios Wallet as we bring our separate airlines more closely into the loyalty ecosystem. and Royal Caribbean Cruises were added as a third-party partner. Moving on to our outlook, I continue to feel very positive about the business. Our planned capacity growth for the final quarter is around 5%, which means that for the full year, it will be around 6%. This mainly reflects the impact of the schedule adjustment that I have just mentioned. We therefore expect non-fuel unit costs to be up around 2% on a full year basis. Our expected total fuel cost for the year is now around 7.7 billion euros as the price of oil has come down through the year. And we expect this strong financial performance to continue for the rest of the year. So, in summary, the execution of our strategy is delivering good results, but there is more to come. We expect a strong, sustainable long-term demand for travel, particularly in our core markets. We are making good progress towards our world-class margins and return targets as we execute our transformation program. And we are generating significant free cash flow as a result. With an increasingly strong balance sheet and disciplined investment, we can now focus on rewarding our shareholders. First, with the reinstatement of the dividend in August, And now the announcement of the share buyback with the opportunity for more in future. And on that note, I will open the call to questions.