International Consolidated Airlines Group S.A.

Good morning, ladies and gentlemen, and welcome to International Airlines Group All Year 2024 results. At this time, all participants are in listen-only mode. Later, we will conduct a question and answer session through the phone lines, and the instructions will follow at that time. We would like to remind all participants that this call is being recorded. I want to hand over to Louis Gallego, Chief Executive Officer, to open the presentation. Please go ahead.

Good morning, everyone, and welcome to our full year 2024 results. As usual, I am here with Nicolas Cadbury, our Chief Financial and Sustainability Officer, as well as other members of the IAG Management Committee. I'm going to start today by reminding you of the key elements of our investment case. Our fundamentals are very strong. We have a unique strong core proposition. We have the best network in the world and the best hubs. Our brands in those hubs are incredibly strong. Think Iberian Madrid or Air Lingus in Dublin. Our customer base is highly attractive. Think BA in London. And we have propositions that bring together the markets, the brands, and the hubs. Think Welling in Barcelona. We are also executing well. Our transformation program is delivering world-class margins. through revenue, cost, and operations across the group. Transformation is also designed to make this a more resilient, sustainable business that can perform well through the cycle. And this is delivered by a talented team of over 74,000 employees around the world. If you put those two elements together, it means we are creating significant value for our shareholders. We are delivering sustainable earnings growth. We are delivering a strong free cash flow after investing in the business. And we are delivering significant cash returns to our shareholders. Our strategy is simple. Firstly, we want to make the core of the business stronger. We are getting even stronger in those attractive markets and hubs that I have just mentioned by adding destinations and frequencies and improving our schedules. and we are strengthening our portfolio of attractive brands through improving the offering and operations at each of our airlines. Secondly, we want to grow our asset-light, higher-margin businesses. IAG loyalty continues to deliver very strong performance, expanding the ways it can create value, and it is now our third-largest operating company by profit. We can also expand by leveraging our partnerships to our customers. our customers can fly on the best network of flights globally. Secondly, we want to ensure this is a business that can continue to offer its customers, employees, and shareholders a long-term future. Financially and for society, as aviation has a clear role to play in connecting people and businesses, as well as providing jobs and economic growth. These strategic imperatives are designed to deliver sustainable, resilient profitability as well as secretive growth. And we set some targets out at our capital market day in 2023 for what we wanted to achieve. Decreasing margins of between 12% and 15%, return on invested capital between 13% and 16%, and leverage of less than 1.9% through the cycle. So if you look at those targets, you can see that our strategy is now very much delivering with a set of results that are the best in this company's history, one billion more than in 2018 on a pro forma basis. It is delivering for all of our stakeholders, but in particular for our shareholders. We grew revenue by 9% while growing operating profits by 27%. And we have achieved a 13.8% margin, securing return on investment capital of 17.3%. This is exceptional performance for any business. I am determined that this is not the peak, but the start of a more sustained level of profit. Our disciplined capital allocation framework means that we generated almost 3.6 billion euros of pre-cut flow after investing 2.8 billion euros in the business. Our balance sheet is strong, and Nicolas will tell you in a minute how we are going to maintain that stress. And we are rewarding our shareholders with an ordinary dividend that we intend to be sustainable through the cycle, with a sell-by-back program of €350 million that we announced in November, and with confidence in our ability to deliver sustainable, strong free cash flow We are pleased to announce the return of up to 1 billion of excess capital to shareholders in up to the next 12 months. I will now hand you over to Nicolas to take you through the numbers.

Thank you, Luis, and good morning, everyone. I'm pleased to be presenting our strong financial results for the year. This slide shows the key metric trend and demonstrates our delivery of a world-class performance during 2024. The revenue increased to 32 billion euros driven by our strong networks and brands, and would deliver an operating profit of 4.4 billion euros, almost 1 billion euros. Our transformation programme has secured a step-up in operating margins to an industry-leading 13.8%, which in turn helped us deliver significant free cash flow and adjusted earnings per share growth of just over 12%. We believe these metrics represent a best-in-class financial performance, not just in Europe, Moving on to how our year-on-year operating profit growth was delivered, increase was mainly delivered on the back of strong passenger revenue growth, reflecting the power of our hunt, improvements we were making in our networks, and the investments in our customer proposition. On the right, you can see the impact of our transformation programme around the group. British Airways delivered a post-pandemic profit catch-up that the other airlines had already achieved, and we secured further profit growth from our Spanish businesses. Likewise, IAG loyalty continues to deliver high double-digit margin and asset-like earnings growth. Now let's look at the performance of our operating companies in more detail. I'm very pleased that almost all our businesses delivered world-class operating margins in their own right. Ellingus, despite the summer where it faced significant industrial action, as well as strong competition at its Dublin hub, still delivered incredible financial performance with operating and an operating margin of nearly 9%. The fairway's profits increased 50% in the year to over £2 billion, and our operating margin increased by over 4% to 14.2%. This has helped by strong demand in the core North Atlantic market, coupled with the benefit we're delivering from this transformation programme. The barrier built on the strong margin introduced in 2023, delivering a 9% increase in profits. This was the first time in the history that it has generated over €1 billion in operating profit, and it continues to sustain a high operating margin of 13.6%. Welling's margins remain strong, investing class over 12%, generating €400 million in profit. IAG Loyalty continues to deliver double-digit profit growth and to achieve £420 million of profit. The Loyalty Group now includes the BA holiday business, where we see tremendous growth potential in the future. Moving on to our recent performance and more details. Overall, we saw strong demand and unit revenue in all of our core markets during 2024. We entered the year strongly with quarter four seeing the largest quarterly unit revenue increase of 2024 with a 6% increase. On a portfolio basis, unit revenue across the group increased by 3.1%, helping to drive the overall revenue growth 9%. North America is our largest and most profitable market, accounting for a third of our capacity, with unit revenue increasing by 6.2%. Quarter 4 was incredibly strong, with unit revenue increasing by 14%. Strong performance was widespread, however you measure it, with our main transatlantic airline seeing unit revenue increase by double-digit percentages. Europe continues to be one of our best-performing markets, with high single-digit revenue growth, Quarter 4 was again strong with British Airways and Aer Lingus in particular. Aer Lingus extended the seasonality of some of its strongly performing surgeries, and British Airways saw good growth in both business and late traffic. North America and the Caribbean is our third biggest market, accounting for 20% of our capacity. Unit revenue fell by just over 2% during the year, but in the context of a 12% capacity growth, this shows the strong demand for our offering in the region. will be particularly strong for both Iberia and British Airways. Africa, Middle East and South Asia learned positive in quarter four as we started to cycle over the Middle East conflict. The Asia-Pacific is our smallest market and is the only market that hasn't recovered to pre-pandemic capacity, with capacity of 27% as we started flying Madrid to Tokyo with Iberia and resumed flights to Bangkok with British Airways. Overall, we saw strong demand, particularly across our core markets, and we continue to see, which we are continuing to see, although still early in the year. And we plan to grow capacity around 3% in 2025, again focusing on our core market. Our margins are supported by our cost transformation program. Our total non-fuel unit cost increased by 2.6% in 2024. slightly higher than our previous guidance, driven by a larger than expected negative ethics impact in quarter four. Our employee unit costs increased just over 7%, driven by pay deals, investments in resilience, ethics, and please say performance-related pay linked to our strong financial results. Supply unit costs reduced as our transformation initiatives offset general inflation pressures and costs increasing related to customer experience and IT investment. unit costs increased in terms of new aircraft delivery and investments in operations. 2025, we expect similar trends on overall unit costs together with additional foreign exchange translation. This slide shows our financial results at the net profit level. Profit after tax and exceptional items with 2.6 billion euros. There are three things I just wanted to highlight here. Firstly, our net interest costs reduced by €200 million in 2024, mainly due to the lower gross debt resulting from the early repayment in the second half of 2023 of expensive government-supported debt. Secondly, we've recognised an exceptional charge of €160 million relating to the employee restructuring in Iberia's grand handling subsidiary, and an exceptional charge of €50 million to terminate the agreement to acquire the remaining 80% of the value rate. And lastly, our P&L tax charge normalised in 2024 at an effective rate of 23% compared to a rate of 13% in 2023, which was reduced by the recognition of prior year tax losses, notably in the group Spanish and business. Ultimately, we're a business that generates significant free cash flow. In a robust trading environment, that we are currently enjoying. During 2024, we generated just over 6.4 billion euros of net cash from operating activities, an increase of almost 1.8 billion. This allowed us to invest 2.8 billion into the business. In 2025, we expect to continue to generate significant spring cash flow at a lower level than in 2024 due to two specific things. Firstly, whilst we are confident in our legal position, We're required to pay €557 million of VAT to HMRC, the years going back to 2018, pending the outcome of a legal appeal in respect of our loyalty business that we disclosed last year. Secondly, we expect TAPEX to step up to around €3.7 billion as we take delivery of more aircraft and continue to invest in our business as we execute our long-term strategies. Heading now to our balance sheet performance, I'm pleased that our balance sheet continues to strengthen with a reduction not only in net debt but also our gross and net leverage. Our net debt reduced by over €1.7 billion compared to last year and is down almost €3 billion compared to December 2022. Our gross and net leverage reduced to 2.5 times and 1.1 times respectively. This is well below our net leverage target of 1.8 times. We do want to further reduce our gross leverage to give us more resilience, a process we began last month with a buyback of €577 million of our 2027 and 2029 senior unsecured IAG bonds. We also intend to redeem over €500 million of our 2025 IAG bond next month and keep around two-thirds of the 26 expected aircraft deliveries this year unencumbered. This slide shows our maturity of our non-aircraft air. You can see the impact of the bond buybacks that we've just done, and that once we receive our 2025 bond for cash, we'll have almost no non-lease debts to repay until 2025. As a reminder, ensuring the business is appropriately invested, it is a priority for us. This slide shows our updated capex guidance for the year and 2025. Starting with last year, capex came in a little lower than the $3.1 billion we previously expected. This was driven by the reprofiling of pre-delivery payments for future aircraft deliveries and supply chain constraints, which delayed our onboard cabin refrigerator fits and property maintenance programs. Looking forward, we expect to take on 26 new aircraft deliveries this year, 14 short-haul aircraft, two wide-body long-haul aircraft, and 10 321 XLRs. As I mentioned earlier, we expect to spend about 3.7 billion on CapEx and around the same in 2026. As a reminder, this is our gross CapEx expenditure before sales and leaseback transactions. And finally, for me, I want to remind you about how we think about our capital allocation, which is core to creating value for our shareholders. Our first priority is to maintain our balance sheet strength, targeting net leverage below 1.89 through the cycle, which is a property for investment-grade data. My second priority is to invest in the long-term strength of the business with a focus on rebuilding our fleet, improving our customer experience and enhancing our digital capabilities and advancing the sustainability agenda. And of course, we're committed to a sustainable shareholder of terms. Firstly, through ordinary dividends, which is is below 1.2 times to 1.5 times depending on commitment from the outlook. We started to do this with a 350 million euro buyback programme last year and as Lewis mentioned earlier pleased that given our cash flow profile and confidence in the outlook we can confirm this commitment by an intention to return an additional 1 billion euros excess cash over the next 12 months. On that positive note I will now hand back to Lewis.

Thank you Nicholas. We show you a version of this slide last year, highlighting the main drivers of value creation over the next couple of years. And we are delivering on those initiatives. British Airways is making good progress in this plan to deliver a 15% margin in 2027, with a very strong year in 2024. This has been delivered as it improves its customer proposition and operational efficiency. Our Spanish businesses have grown their profits and maintained their profitability and are close to their 1.5 billion euros ambition. We will tell you more about this in the inside date that we are going to have in Madrid in June, which with the IR team is going to confirm in due course. And IAE loyalty goes from strength to strength, growing by just over 40% this year to deliver profits of 420 million pounds. And we have an ambition to continue to grow this business at over 10% per annum. So I will now spend a few minutes on each of our strategic imperatives. Our first priority is to grow our portfolio of global leadership positions. In the North Atlantic, we have a leading position. Alongside our joint business partners, we operate around 150 flights every day across the North Atlantic, and we have a 58% share from the U.S. to London. We continue to invest in this core market. The area is consolidating its network, although constrained by aircraft availability and delivery schedules. And we are excited by the opportunity to increase North Atlantic profitability at Iberia and Erlingus as we introduced the A321 Extra Long Range aircraft, which give us the ability to manage frequencies, seasonality, or the mix of wide-body versus narrow-body. We are equally excited about the Latin American market. As you will have heard many people say, Madrid is the new Miami, with increasing investment in Spain from wealthy Latin Americans, while Spain itself is one of the best performing economies in Europe. Iberia is increasing its market share of the traffic in this market and benefiting from the strong demand. Our third core market is intra-Europe, with a particular focus on Spain. Spain is the biggest domestic market in Europe, and the UK to Spain corridor is the biggest international market, and we have very strong positions in both. Half of our total traffic represents connecting flights, and the remainder is operating by our efficient, low-cost airlines, such as Vueling or Avila Express, which are amongst the most profitable in Europe. Any airline that runs a robust operation is a more efficient and profitable one. It was a core function of the improvement in profitability at British Airways this year, where they increased their on-time performance by 12 percentage points. This was a direct result of the investment in the teams at Kipro, alongside investment in technology at our Global Operations Centre, and as some of you saw when you visited BA last year. Aer Lingus also improved its OTP significantly by 7 percentage points. This was through the optimization of processes around scheduling, planning, and ground handling, as well as operational responsiveness. With Iberian Whaling, we operate two of the most punctual airlines in the world, despite the ongoing challenges of European ATC. Moving on to how we are investing in making our customer journeys and experiences better, We are investing in new aircraft, such as the XLR, which have the latest products on board, and we are retrofitting all their aircraft with new technology. We continue to train our people to deliver the levels of service that our customers demand. In particular, we are supporting them with the tools to do that. For example, through the connected crew system that seeks potential issues before the passenger is even aware they exist. We are updating our launches throughout the network at Erlingus, BA, and Iberia, in places like New York, Boston, and Singapore, with more to come. And technology is a fundamental driver of improving the journey, with investments in apps, websites, disruptions, health service, and always on digital travel assistance. We have mentioned before, transformation is at the heart of everything we do to make our business more competitive, more resilient, and more efficient. We are doing it all the time, everywhere. Much of what I have already described is included in our transformation, such as investing in our operations, leads, and our customers. On this slide, we are highlighting some of the initiatives that will become part of our longer-term differentiators. One key area where all of our airlines are improving is in the way that they retail their offerings, leading to revenue benefits and cost savings. British Airways will lead us into the next generation of airline retail platforms with new revenue management and commercial platforms, as well as app and website upgrades. And both Air Lingus and Iberia are leveraging the new distribution capability to drive better content and distribution. Across all our airlines, we are using machine learning and AI to drive cost and efficiency. For example, wellings, scheduling, maintenance, and automation of reporting. Coming now to IAG loyalty, this is the biggest driver of capital life earnings growth in the group. This has almost doubled its profit since 2019 and grew by over 40% last year. They are focused on increasing loyalty to our own partner airlines, including new partnerships with Finnair and Loganair in the last 12 months, as well as creating value for non-airline partners like Amex or recently Revolut or Royal Caribbean. Last year, we moved BA holidays to loyalty. Currently, only 5% of BA club members book a BA holiday, but these customers represent almost 80% of BA holidays bookings. and only around 20% of those bookings use any Avios. We forecast that a 10% increase in VA club members booking a VA holiday will double revenues. This is a huge opportunity for us and for our customers. Our people are critical to our success. Last year, we recruited over 12,000 people across the group, showing the power of our brands. Specifically, we have pilot academies operating at Erlingus, BA and Averia, as we ensure that the next generation is being trained in these important roles. An equal opportunity is important to us across all jobs and jurisdictions, and we continue to target having 40% women in senior leadership roles. In terms of looking after our people, we are working towards longer-term, mutually beneficial agreements, which will depend on their own roles and functions. We continue to make good progress with our sustainability initiatives, where the main focus is to ensure that we are well-placed to meet regulatory mandates. We continue to put in place firm contractual commitments for sustainable aviation fuel, which differences us from most other airlines. As a result, 1.9% of the fuel we used in 2024 was SAF, meaning we are very well-placed for a 2% mandate in both the UK and EU in 2025. We have also beaten our 2025 target on carbon intensity with 78.1 grams CO2 per passenger kilometer versus our 80 gram target. So bringing this all together, we are very focused on creating value for our shareholders. We have the right strategy and business model to drive sustainable earnings growth, supported by our transformation program. We are and will continue to generate significant free cash flow. And we are committed to returning cash to our shareholders, firstly and sustainably through an ordinary dividend. And then we will return excess cash to our shareholders.

And on that note, I will open the meeting to questions.

Ladies and gentlemen, we will now begin the question and answer session. To ask a question on the phone line, please signal by pressing star 1 on your telephone keypad. We ask that you please limit your questions to a maximum of two. We'll pause for a moment to assemble the queue. Your first question comes from the line of James Hollings from BNP Paribas. Your line is open.

Thanks very much. Two questions, please. I don't know if Sean is on. If he is, this would be for him. I was just wondering on the loyalty scheme changes, whether there's been any sort of sign of a customer negative reaction or any positive reaction or whether all the negativity is really assigned to just the loyalty points websites that are getting their knickers in a twist. And if someone is on, maybe can get a bit more of an update on the BA rollout of the new app and website. I think we're doing Q1 and indeed the revenue management system. And then secondly, probably for you, Louise, I think I saw some comments on your business travel friends or outlook and they look fairly bearish or cautious. Maybe you could just this form give us your view on your views on business travel. Thanks very much.

Yeah, it's Sean here. And let me start with loyalty. We haven't seen any change in travel patterns or behavior from an executive since we rolled it out. I think it's tracking very much in line with the rest of our intakes. And I think we've been communicating exactly how the program works. I think the more people are learning about the Spend Based Earn program and the additional ways in which they can earn here, I think the more positively it's being received. If we look at digital and technology, we are actually having about 65% of our loops now are booking through what we call the newbookingscore.com, and we're very encouraged by the user experience there. We also have a beta version of the app that we're testing with a closed user group at the minute. Again, the performance is very encouraging, and our expectation would be to roll the app out when it's fully functional in Q2, but we're just finalizing some data. But again, you know, very encouraged by the beta trials on the app. In terms of the new LabMAN system, that will come in in the middle of the year, so that's on track. But we haven't been testing, obviously, the technology yet, because we're still working off our old LCS system. So, yeah, you know, the transformation of the digital experience is really gaining traction.

Yes, and in regards to business demand continuing improving during the 2024, At the group level, we reached 74% of the volume that we had in 2019, 86% of the revenues. So that's an improvement in volume of three points in comparison with 2023, and six points in revenue compared with 2023. I think that the performance is different in the different airlines, We see that finance, including banking, accounting, and consultancy, for example, they are coming back to fly earlier. And also IT and tech, they are having a very good performance. So as I said, if we look at the Q4, for example, VA volume was 66% and revenue 82%. Iberia volume 84% and revenue 108%. And at Lingus, volume 105, and revenue 100%. So, you can see the differences between the different airlines.

In the case of Iberia, primarily, it was the last time flows to Europe that we are supporting this growth. In fact, there, not only in revenue, but also in volume, we are really 6% ahead of 2019 and 25% ahead in revenue 2019.

As a reminder, if everyone can please speak with their questions to two per person. Your next question is from the line of Alex Irving from Ben's Line. Your line is open. Hi, good morning, gentlemen. Here's from me, please. First, I wanted a bit of a follow-up. Neville, you've clearly had another couple of months of thinking and planning here. Can you please update us on your expectations for the vast impact of this new retailing platform? Related to that, you mentioned BA leading the airlines into this new world. Therefore, in further, Iberia and Aerolingus may also see a revenue impact going forward. The second question is on the engines and certainly managing through with the Trent 1000s, potentially being backfilling as best we can from other planes. How much longer can you keep doing this until those planes also start maintenance events? More broadly, are the Trent 1000s getting any better? Thank you.

Alex, it was quite hard to hear you. I think the question you asked was about the RAC and what the impact of some of the technology changes was. I think that's what it was. We're not being specific about it. We're not giving guidance on RAC today. We're not giving guidance about what specific individual ones. We're still very confident on the recovery, the build-up of the BAE margin back to 15%.

Yeah. I think there's two phases. Obviously, one is to get the digital platform modernized, which is what we're working on. imminently the second then is to move to what we call shop order retailing which is where the nebio fills on top of that platform comes so that would be phase two and as nicolas said it's been captured in our 15 commitment um but we're not necessarily driving filing that capability as we speak and about the trend engines and we continue to work very closely with roles to improve the engine supply

As you know, we needed to adjust the capacity in British Airways. We are working in order to maximize the availability of the aircraft and to have more predictability. We know that we are going to have a durability enhancement package very soon that we hope is going to double the time on wind. We will have a second phase of this in 2026.

I think it's going to be very positive for the business. Thank you.

The next question comes from the line of Harry Goward from Jason Morgan. Your line is open.

Good morning, Edward. I have a question. You just said there's 2.14% of the debit margin in 2024. You've looked at that value of about 15%. I just want to know, what do you think the true... It has so good a business over the last few years. If you assume there's no build-up for stock for events, because it looks like 50% could be surpassed over the next few years at the current blood rate. And then the second question on transit last week, there was some beaming at the moment for yourself in the US areas. You know, with the power of the price in this year, are you concerned that maybe it could invite some capacity pressure into the market at some point? It's a new case yet. Thank you.

Sounds like you're on a motorbike. Just in terms of margins, we've just delivered really good margins of 13.8%, up nearly 2% year-on-year. And this is in the top half of where our guidance has got 15% range, you know, just a year ago. And you can see this acceleration is happening. That's where we're all. We've given that guidance at 12 to 15%. We're not giving guidance for this specific year as well. And we're going to keep with that guidance at the moment. I mean, if you look at the individual businesses with British Airways, we're confident again to the 15%. We've put that there for 2027. We've got a little bit ahead of ourselves. I think we've had a good year as well, but I think 2027 is still a good glide path given kind of what we're going to do this year. Iberia has delivered 13.6% and Reading 12.3%. So they're already at good margins overall. And I think that just under 9%, you know, you should see recovery, you know, back towards the middle of the range. And loyalty, you know, we're going to drive, you know, double-digit margins should be going about 10% per year. So we still see, you know, we're... We've changed good margins this year. There should be some upside to that paper at all, but at least we should be able to stay where we are with the MRSA learning growth from there. But we're not going to give additional guidance to what we've given already. Just on the transatlantic, you're right, we've seen very strong transatlantics. DRASC was up 14% overall as we said we saw every single one of our airlines was growing its DRASC over the quarter from British Airways to the new airline level as well so really really good performance there I think you're likely to see kind of strong performance continuing the Atlantic into Q1 as well and that's partly because we just had a stop if you look at Q1 23, Q4 and Q1 24 we had kind of comparative going to non-liberal.

Your next question comes from Stephen Furlong of Davie. Your line is open.

Yes, good morning. Okay, I was going to ask about BA margins and friends, but let me just circle back and ask something different. Okay, first thing, Ukraine, if something happens there positively, I mean, Do you think the market or the network in the next 18 months will change in any way? I'm thinking some pivot towards Asia, although I fully understand it's not your core. Second question, maybe Luis could talk about inorganic opportunities are generally about consolidation in the market. I'm thinking about just a general discussion on that. Thank you.

Okay. Good morning.

So, Ukraine, if there is a solution soon, I think we will have an impact in two areas. One is ATC, because you know that because of the closure of the airspace, ATC is more difficult. And last summer was the second worst ever summer in terms of ATC. And I think this can help. And the second impact is the network that you said. So we are not flying over Russia because of that. We are canceling some of the flights because it doesn't make sense to compete with people that they can do the flights with two, three hours less. So as soon as the airspace is open, we will reconsider to fly again. We need to do an analysis of safety because it's not only fly over Russia, in case you have a problem You need to land there, for example. What are you going to do? So we will do an analysis of the situation. And then we will try to resume the operation, but taking into consideration the lack of aircraft that we have now in the market. So we will give priority to the markets where we want to expand before. And about the inorganic development, DAP in particular, we are following the process with the Portuguese government. It looks like in March, maybe we are going to have the conditions of privatization. And when we will have that, we will take a decision. We always say that this is an interesting airline for the group. I think we can improve the performance of the airline And the airline can help the group to have more presence in markets, for example, like Brazil, where we don't have a lot of capacity. But we need to see the conditions and the freedom we can have to manage the company. Because in order to have the margins that we are having in this group, between 12% and 15%, it's because we do the right things that we have to do in a different airline.

So I think in maybe six weeks, we will have a a more clear idea.

Your next question comes on of 35th of Raymond James. Your line is open.

Hey, good morning, everyone. Just for my first question, I was wondering if you could provide a little bit more detail on that 26 aircraft you're expecting this year, just kind of what times and generally when you're expecting those to cross the borders and The second question is just around the MRO purchase at Gatwick, you know, what does that do to your capacity to do maintenance in-house and any potential contributions to cost there?

Just to do the 26 aircraft, we just said we've got two wide-body aircraft coming in, one 5.1, one 4, three fairways, two roles. We'll think about Thames, Iberia, and the rest of the Libyans and Moria bodies coming in. And they're coming in pretty much straight. They'll always be fine before the summer as well.

Yeah, in relation to Gatwick, you know, we have 26 short-haul planes at Gatwick and about 12 long-hauls. So I think the ability to do more on-site maintenance is very attractive. It will stop us parrying flights between Heathrow and Gaffigan, so there's an immediate cost saving there. It also will give us the capacity to do more winter maintenance across our short-haul program and improve summer utilization and also do more base maintenance on our 777 fleet. And I think generally what we've found over the last few years is having more resilience on our MRO and maintenance functions is a real strategic advantage. So we were very... I'm really happy to be able to complete the transaction.

Thank you.

Your next question comes from one of Jamie Rathbosom from Deutsche Bank. Your line is open.

Morning all. Two from me. So where you've talked about Unix costs in 2025, Nicholas, you say the inflation will be weighted to the first half. Could you talk a bit about the magnitude of that shift? and what the main reasons are for it, please. And then secondly, is there anything to say on ownership and control? I'm conscious that Ryanair is flirting with removing the purchase of shares by non-EU and think that might allow for their re-inclusion in certain global indices. Obviously, there aren't any restrictions at ID at the moment, but you are, I believe, still excluded because of foreign ownership limitation rules from being included in some of those indices. Is there anything to say there, please? Thanks.

Yes, just one last one. There's no new news on it as well. I'm not kind of aware of kind of any kind of industries that we're excluded from at the moment. But if anything, just with the dividend and the share buyback, we've probably gone into more industries than we've ever been, or have been in the last five years anyway. So we've started going into income industries overall, which is good news as well. Just in terms of the unit cost for 2025, the kind of guidance we've given is a similar sort of trend overall, but not behind it, as you explained, but overall for 2025. So even a two to two and a half percent overall but we have got some fx headwinds as well sort of medical food that's mainly translation so you'll get the benefit also in the revenue uh as well unit cost the unit revenue as well so we think we'll be weighted towards the half of what we haven't kind of given um kind of guidance on that but that is really towards getting about resilience uh for the summer we're assuming that a lot of the kind of environment external environment is fairly similar to where it was last year, but you shouldn't think you, but you'll see it quite heavily weighting towards a two-volume Q2. Thanks.

Your next question comes from from America. Your line is open.

Good morning. So, just to speak then, If you take the $3.6 billion in 2024, CapEx up by a billion, and then the tax charge, so well over $2 billion is how we should think about the cash flow outlook for 2025, if you can just talk us through the moving parts there. And then you've talked about the demand environment. With BA holidays, kind of what are you seeing since you probably have a bit more visibility there? What are the trends there? through the year and what's the competitive environment for BA holiday.

Thank you. Yeah, so as soon as free cash flow, we generated 3.5 billion free cash flows after CapEx this year, the results as well. We call that two things that you would expect to see about a billion extra of CapEx going through this year. if all the aircraft doesn't live it on time overall and then we just called out the kind of VAT which is another 500 million so they're the two kind of moving parts overall.

Hi it's Adam here just on the beer holiday side in terms of 2024 we have a strong 24 revenues up 13% passengers about the same and strong both in in the short haul business on the beach and also on our classical long haul businesses, the Caribbean, Indian Ocean. So we look for 2025 and how we're looking for 2025. Again, bookings look strong. We're seeing a good performance on short haul beach again. So places like Greece, the Canaries are particularly strong. And we've booked about 60% of the whole of 2025. So strong so far, particularly in premium, actually. Probably the biggest strength we're seeing is in premium books.

Your next question comes from the line of Darragh Castle. Yes, your line is open.

Thank you. Good morning, everyone. I'd like to maybe just get your view on kind of, you know, what seems to be a debate both in Parliament and the press around Gatwick versus Heathrow runway extension. So just how you see that and, you know, feasibility and timeframe. And then secondly, just in terms of the capacity growth that you've given, you know, the 3% and 2% to 4%, I guess, with the media concerned about them. Do you have any kind of indications in terms of, you know, split across the operating companies, how you see that and how you size capacity in general? Is there a limit, for instance, of fleet deliveries?

About Gatwick and Heathrow, I think we support the expansion of both airports, but we always say if we do it in an affordable and sustainable way, So in case of Gatwick, we support that the northern runway can be in use. I think it's good for the development of the airport. But in any case, Gatwick is not a hub, and we need the development in Heathrow. So about Heathrow expansion, also we support the ambition of the government for growth. but cannot be done with the regulatory model that we have in place now. And that's the reason we are pushing to have a review of the situation that we have now, because with the current conditions, we cannot afford the investment that is needed to develop the new bandwidth. But in both cases, I think if we do it, again, in an affordable and sustainable way, it will be good for UK and the development of the economy. And about capacity, if we look at the increasing capacity for 2025 by airline, BA is around 2-2.5%, really around 4%, Boeing 4-4.5%, Air Lingus 7%, And level with a lower base, 14%. And we look at the different regions. Domestic, around 4%. Europe, 3%. North Atlantic, 3%. Latin, 4.5%. Asia Pacific, 5%. So long haul is around 70% of the growth. And store haul is 30%.

Yeah, just... on capacity we're going to send um due to uh four percent overall that's not far off what we said at the capital market day we said in the capital month there was four to five percent but that included 2024 which was which was which was the high level growth so if you've taken that out actually we've just moved it from three to four to a two to four i think the key thing for us overall is that we're focused on paper revenue, not capacity growth overall. And the capacity is used to delay the bear crop, which is the whole world is seeing that. So we're not relying on that. Hence, we're being more focused on paper revenue.

Your next question comes from the line of Andrew Lovenberg from Barclays. Your line is open.

Oh, hi there. Can I ask what your expectations are on the 777X deliveries? I appreciate you're not the launch customer. And then the second question would be around alliance partnerships away from the JVs. Any prospects of building a central partnership with someone to play with in Latin America? And also, does the proposed guitar acquisition of Virgin Australia bring any opportunities for you? notwithstanding the potential conflicts with Contisys on World membership.

Thanks. We expect the first one in 2027. You know that we are not a large customer, but Boeing is still adjusting the program, but we expect to have the first one then. And about the partnerships, Yes, after abandoning the Europa operation, we are considering the different scenarios that we can have and the different partnerships. We have a strong partnership in Latam, for example, with Latam, that we have a joint business in Peru and Ecuador. And we are looking at other ways to develop this partnership. There are also other opportunities with One World members and other opportunities in North America that we are considering in order to reinforce our network there, but we are working on it and we will inform in due course.

Your next question comes from Morgan Stanley. Your line is open.

Thank you very much. First question is on slide 25, highlighted RTL in the deal in terms of being able to earn Avios. I'm wondering if that's kind of a similar offering in terms of they can just offer their customers that, but also if there would ever be kind of potential for, you know, BA holidays to do something with them and kind of improve that relationship. And then secondly, what is this around, can it demand in the back of the cabin? I remember, you know, late last year, a couple of operators were calling out, slightly weaker demand, particularly in the Atlantic in that part of the cabin. Is that something you're still seeing or if you were seeing it? And what are the kind of trends you're overall seeing in premium versus economy? Thanks very much.

Yeah, in terms of the Royal Caribbean, it's Adam here. Yes, that is a relationship that we've started this year in terms of being able to book on the Royal Caribbean site and get avials for it. We've seen a good take up And due to the average spend of a cruise, that means you get a lot of avios if you book it. In terms of linking it to beer holidays and thinking about beer holidays, selling cruise. Is that something that we're thinking about considering we are in the middle of a re-platforming with British Airways in terms of free airways holidays and the technology? We certainly need to do that first before we look at that, but certainly extending the capability of free holidays into other segments is something that we're having a look at as part of what we think could be the growth plan moving forward.

And about the less every month, I think 2024, we saw an increase in volume in comparison with 2020 of 6.5% and if we look at the revenues of 9% so it's still very very strong and premium leisure is continuing it continues having a very strong performance across all of our airlines and we don't see any change in the booking price we saw like factoring in previous place in all classes

Your next question comes from your line is open.

Hello, thank you for taking my question. The first one on the ongoing capital experience in Europa and the potential entry of a new shareholder. How this could impact your decision to maintain the current stakes in the company and the overall relationship with Europa and the Latin market position? And the second, if to build on your expectations for effects. So you mentioned a two percentage point impact in terms of cost. What could be the consistent impact in terms of unit revenue?

Thank you.

The first question, Europa, you know, we abandoned the operation because of the remedies that Europe was asking. we decided to maintain the 20% of the company because it's a financial investment and even we went to the capital increase that they did. In case they have a new partner, we will consider what we are going to do with our financial investment. In any case, it's a financial investment. We are not involved in anything related with the company and the management. So we need to take a financial decision that we will take when it's needed.

your second question about fx we called out that fx is um influencing arm and fuel costs by about two percent and it is mainly translation so kind of uh terms into euros particularly so it will then you kind of get almost an equal impact on the revenue as well so it will be neutral okay your next question comes line of rory palani from

Your line is open.

Yes, good morning. So you touched on the supply cost of those particularly impressive line and selling costs in Q4. So can you help us think where that goes from here? just a second BA holidays has there actually been a up in bookings as a result of the loyalty overhaul I wasn't sure on that I think that's the third question selling costs selling costs yeah selling costs are coming down with the general trend across the business

sales as we're moving more towards direct sales overall.

In terms of the Bay of Holidays question, it's early days, but we are seeing some evidence that executive club bookings are increasing on the back of the changes we've made. And if we're looking at where those are, particularly in Shortwall Beach in premium, and that's probably where you would expect it to be if you're thinking about getting trying to attain tier status or retain tier status. So I think early days, but some signs that we are seeing some customers take advantage of that opportunity.

Your next question comes from the line of Diana Mistry from Jefferies. Your line is open.

Hi, it's Dana Mistry. I wanted to double click on CA margins with two questions. You've obviously hit 14% this year. Your target is 15% in two years' time. I guess the question is, do you see upside to your target at this stage? Or do you see quite a slow slide path from 14% to 15% and what's driving that? Where's the reinvestment coming in the next two years? And then the second question is a bit backwards looking. So your BA margins grew four percentage points. past year, how much of this was a post-pandemic catch-up versus self-help opportunities that came to fruition? Thank you.

Yeah, so the margins in BA have kind of got back to where they were originally. So there is a bit of a catch-up, but it's not just a catch-up, it's a transformation of the business that we've done. Most of the kind of efficiency and the cost-pays in the business, it's all real. Just in terms of the margins in BA, it was only in November, kind of till the just two and a half months ago, that we put the target at a 15% overall. So I think you've got to think about it. We've got to go glide past to get there for 2027 overall. I don't think, you may think it's a slow increase, but actually 15% margin would be the best performing airline in the world from a margin point of view this year.

No, I think the recent performance, I think, gives us confidence on hitting that target by 2027. I think a couple of levers of value that we will mature over the next couple of years will be, one, probably having a bit more mix of long haul compared to short haul, because we're still a bit lower than we were in 2019. So I think the performance is strong in that context. And two is the transformation initiatives that we have maturing as well, whether it's the digital experience, the investments in technology, and the improvements in operational and customer metrics. I think there is more momentum to come on those levers, which is what had us to the American Incompetence Act of 1997.

And just to go back to the second question, which was how much of a post-pandemic catch-up versus transformation opportunities have come in, would you be able to segment it and say whether half was a catch-up and half was self-help?

It's not really.

The world's quite different. I think there's so many moving parts, but a lot of it is transformation.

Yeah, I think the business was, you know, 4% smaller in 2019 because it delivered higher profits in 2019. So that tells you that transformation is playing a significant role in the performance this year.

Your next question, Constantine, is Johannes Braun from EFL.

Your line is open. Yes, good morning. Thanks for taking my question. Coming back on the 14% unit revenue performance on the Atlantic in Q4, I was wondering, can you give us the currency impact, given the strong US dollar, and also what the impact from higher load factor was, just to get the underlying pricing performance? So I guess what I'm looking for is an X currency yield number. And then secondly, if the cash flow was 3.6 billion, So, for the ordinary dividend, you need, I think, less than $500 million, and you announced the $1 billion share buyback, so that still means more than $2 billion is left. And the question would be, what will you do with all the cash left? Will that be held back for any potential M&A, or how do you think about spending the cash?

I'm afraid we're not going to break that off. around any more details we've given you given 14 percent so we don't we don't go into some kind of distance by uh by regional or low system by region overall overall was up um and north america's a strong part of it so by instance overall uh yeah so just in terms of free cash flow you see um So we're setting one and a half billion this year. We've given aside in terms of the balance sheet that we want to manage to. So we're saying that we want to kind of keep net leverage. We want to distribute excess platforming from 1.2 to 1.5 net leverage overall. The reason we've got that range there is because of what the outlook is looking like, which is going to be positive at the moment, but it's also about where we are with the commitment and the potential for today at the moment. So we're not going to go into what those are fixedly. We know that kind of in terms of capital at the moment, we're not spending the amount of capital that we'd like to spend, but we know by the time we get to 2758, we will see us bumping the capital and capital will bend as we get those catch-ups and surveys going forward. Thank you. Thank you.

Your next question comes from Alex Patterson from Steelhunt. Your line is open.

Can I just ask a couple of questions? One on VA holidays. Did you say that was 60% sold, so 6-0%? And is that for all of 2025 or just say the summer? If it is all of 2025, should we expect you to increase your number of assholes? And secondly, you recently signed an NDC agreement with TUI. How should we think about this in relation to VA holidays? is there a risk of cannibalisation or do you charge API fees and is the benefit from higher load factors and potentially yield, does that allow you to offset any cannibalisation?

Alex, before we go into too much detail, we're going to come back to BA in a later time in the future because we've just moved it from British Airways into loyalty to really make sure that we can get the most British Airways. So we'll probably come back in more detail in a few days.

come in more detail I don't know if you want to give any yeah I mean just in terms of the first question the 60% is related to the whole of 2025 so that's where we are and that's what you would expect if you look at the other players in the market they are maybe slightly below that but we are roughly 60% and you know we're happy with that we're on plan and we're still seeing the growth that we saw last year so still a lot of upside and a lot of potential to come

Thank you. And is there anything you can say about the 2E NDC agreement at this stage, or is that something we should wait for you to say more about in the future? Yeah, we don't. Thank you.

Thank you very much. Thanks, Ali. Thank you.

I think that brings the end of our question. One more.

So the next question comes from the line of Dudley Stanley from Goodbody. The line is open.

Good morning, everyone. If you could help me, I just want to ask a question on how you think about North Atlantic capacity at an overall level. I'm thinking in particular about U.S. carriers who've been talking about record levels of service into Europe and how you see that playing out over the next year or so.

I think what we see now, North Atlantic capacity and the scales that are published, we see a decline In Europe, North Atlantic in the first quarter, around 4%. And in the second quarter, almost flat. So if we look at the different hubs that we have, in London, it's totally different in the performance in Gatwick than in Heathrow. In Gatwick, the Q1 capacity is going to be around minus 20% if we compare with previous year. And in the second quarter, similar, minus 24%. Q3 first quarter is going to be around minus 3% and the second quarter almost flat. If we look at Madrid, capacity in the first quarter to North Atlantic is going to be below around 4% the capacity we had last year. Q3 is going to be flat. In any case, capacity is going to be above the capacity that we had in 2019. That's important. And in Dublin, the first quarter capacity is going to be below 1.8%, if we compare with the same quarter last year. Q2, we are going to have an increase in capacity. And in summer, we expect increases in capacity of around 11%, with United, Delta, and Canada mainly having strong capacity during the summer.

are no further questions. I want to hand back to Luis Gallegos for closing remarks.

Okay so thank you very much everybody to be here today. We are reviewing strong results for 2024. I think the strategy that we have and the transformation we are having in the different businesses and in the group is working well. What we see for the future is the same trend so We are looking forward to the next first quarter results presentation, where I hope we will continue with the good news. So thank you very much.