International Consolidated Airlines Group S.A.

Good morning, ladies and gentlemen, and welcome to the International Airlines Group's first quarter year 2025 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 instructions will follow at that time. I would like to remind all participants that this call is being recorded. I will now hand over to Luis Gallego, Chief Executive Officer, to open the presentation. Please go ahead.

Thank you very much. Good morning, everyone. Welcome to our update for the first quarter of 2025. As usual, I'm joined by Nicolas Cadbury, our CFO, as well as the rest of the IAG Management Committee. I would like to begin today by highlighting the key attributes about IAG that help to deliver the strong results in the first quarter and underpins our long-term world-class targets. Our fundamentals are strong. We have unique strengths in our network, apps and brands. Our customer base is high quality across all of our airlines. And we have additional businesses that drive capital life, high margin earnings growth. Our execution based on our well established transformation program and delivered by our talented people is delivering world class margins. And we are focused on creating value for our shareholders through sustainable dividends and returning excess cash to shareholders through our share buyback program. So IAG has delivered another strong quarter in Q1 2025. We grew revenue by 9.6 percent. All of our core markets performed well, particularly the North and South Atlantic. Our operating profit grew by 130 million euros to 198 million euros. And our margin increased by 1.7 percentage points to 2.8% in our quietest quarter. Operational performance has been good, particularly at British Airways, despite the impact of the Heathrow one-day closure. I'm pleased to announce our order today for 53 wide-body aircraft, as well as 18 orders in the first quarter. That will support the delivery of our strategy and signal our confidence in the long-term future of this business. And our balance sheet is getting stronger, which, as I have just mentioned, is underpinning a sustainable dividend and additional cash returns for our shareholders. I will now hand over to Nicolas to take you through the financial details. Thank you, Luis.

Good morning, everyone. I'm pleased to announce our excellent financial results for the first quarter of the year. This slide highlights the key drivers of profit and showcases our strong performance. The total revenue increased to €7 billion, driven by our leading networks and brands, as well as our growth in attractive markets. We also delivered good growth in our cargo and MRO business, as well as BA holidays. The strong revenue performance offset the increase in non-fuel costs, which were broadly as expected. The increase this year weighted to the first half, as we discussed at the results in February. I will come on to the split of costs in more detail later, but underlying airline non-fuel costs increased by around about 3%. Thanks to the strong revenue growth and the lower fuel price, we increased operating profit by 130 million euros to 198 million euros. We saw good performance across all the operating companies. This was despite the late timing of Easter. It had an adverse impact this year and the closure of Heathrow Airport on the 21st of March, which cost British Airways around about 50 million euros. Despite these headwinds, our transformation programmes continue to deliver and benefits our businesses, helping us increase our operating margin by 1.7 points. Now let's look at our operating company's performance in detail. I'm very pleased that almost all our businesses have delivered an improvement in operating results this year. Aer Lingus achieved an improvement of approximately 27 million euros in its operating results and increased its operating margin by nearly 9 percentage points. This is primarily due to a strong unit revenue performance benefiting the airline's network growth together with stable market capacity during the quarter. British Airways had a very good performance in the first quarter, with operating profits increasing by nearly 90 million to 96 million. And as just mentioned, this included the impact of the one-day closure of Heathrow Airport in March. This improvement was driven by the very strong demand in North Atlantic markets, along with the benefits of its ongoing transformation program. Iberia achieved a strong revenue performance, mainly driven by the demand across the North Atlantic and Latin America. This resulted in an increase in profits of €100 to €137 million, an operating margin growing approximately three points to each 7.5% operating margin. Welling had a really positive start to the year, although it was the airline most impacted by the shift in Easter holiday timings. This, combined with the changes in calendar dates and other celebrations in Spain, was the main driver of the year-on-year performance. IAG Loyalty reported operating profits but broadly flat compared to 2024 at £88 million. This now reflects the required adoption of HMRC's view of accounting for VAT on the issuance of Avios, which the group strongly disputes. Excluding this change, Loyalty would have reported a 5% increase in operating profit, £97 million. IAG Loyalty continues to drive strong underlying performance great engagement with the airlines, loyalty programs, and third-party partners. VA holiday performance contributed positively to the group's results. Moving to our regional performance in more detail, overall, we continue seeing a strong demand and unit revenue in our core markets during the first quarter of the year. We grew capacity by 3.2% and delivered a unit revenue increase of also 3.2%. This performance was driven by high yields, and helps by a positive currency impact of around about two percentage points. We look at the performance by region. The North Atlantic saw the strongest increase in unit revenue of any region year on year. The robust performance was evidence across each of the transatlantic airlines, all of them experiencing high single-digit or double-digit percentage increases in revenue. In particular, premium cabins performed well. And the deployment of the Airbus 321XLR aircraft by Iberia and Aer Lingus is also proving to be very successful. Latin America and the Caribbean carried on being one of the stars of the network, yet revenue increased by 1% after an increase in capacity of over 7% by the great sub of performance in the southern hemisphere. Europe continues to be another one of the best performing markets, being the one most negatively impacted by the Easter shift. Africa, Middle East and South Asia saw a strong performance with all our airlines with presence in the region having unit revenue and capacity increase. Asia Pacific remains our smallest market and is still only 50% of 2019 levels. Increased capacity by 70% in the quarter, reflecting the resumption of routes from Madrid to Tokyo with Iberia and London to Bangkok with British Airways. and unit revenue performed well given the high growth. If we look at the performance by segment, the premium segment has sustained strong performance in both long-haul premium and short-haul premium. We saw a good start to the year for the non-premium segment. As you would expect, the month of March was affected again by the Easter movement. But overall, we saw a strong start to 2025. We still plan to grow capacity around 3% this year, focused on our core markets. As noted last quarter, we anticipated that the increase in our non-fuel unit costs for this year would be weighted to the first half of the year. Therefore, the 8.8% increase in non-fuel unit costs for this quarter was broadly in line with our expectations. Three factors contributed to the increase. Firstly, 2.2 percentage points was attributed to the negative impact of foreign exchange. Secondly, approximately two percentage points was driven by the non-airline business of the group, MRO, loyalty, and holidays. And in particular, you can see the related revenue benefit of MRO in the increase in other revenue this year. And thirdly, one percentage point was due to the negative impact of the one-day closure of Heathrow, which was clearly not expected. So this leaves the underlying airline non-field cost increase of around about three percentage points. Benefits of this cost investment is also particularly being seen in British Airways best on time performance achievement formation of IAG. Fuel unit costs reduced by about 7% mainly driven by lower commodity price and we also benefit the group's new generation aircraft for better fuel consumption. 2025 as a whole We expect the non-fuel unit cost trend to be in line with our previous guidance, an increase of 4% approximately, including FX headwinds. And fuel costs, we are currently 65% hedge for the year, to be around about 7.5 billion a year. This slide shows our financial results at a net profit level. Profit after tax and exceptional items was 176 million pounds profit in the first quarter. This is an increase of 180 million euros on last year. As well as the high operating profits, we have seen continuing improvement in our net financial costs, primarily due to the reduction in gross debt. Going the other way, the tax charge was broadly normalized this year against the credit last year that came from the Spanish Constitutional Court decision. Turning our attention to our balance sheet, I am pleased to report continuous strengthening Net debt has decreased by over 1.4 billion compared to the end of last year to 6.2 billion euros. And gross debt has reduced by 1.9 billion euros over the same period. As a result, net and gross leverage has reduced to 0.9 times and 2.2 times respectively. This is significantly below our net leverage ceiling of 1.8 times and within our desired range 1.2, 1.5 times. which positions us to return excess cash to shareholders. We remain committed to reducing our gross debt, a process that began in January with a repurchase of €577 million of our 2027 and 2029 senior unsecured bonds. We continued in March with the redemption of our €500 million 2025 bond using cash. Additionally, we still plan to keep approximately two-thirds of 26 respected aircraft deliveries this year, be unencumbered. This slide illustrates the schedule of our financial non-aircraft debt maturity, and as I just described, you can see that after the partial early payments of the bonds and the redemption of the 2025 bond, there's really minimal major debt repayments due in the coming years. It's also worth noting at this point that during the quarter we received upgrades from our rating agencies. S&P upgraded IAG and British Airways to a strong BBB investment grade, And Fitch also upgraded British Airways to BBB as well, which we're very pleased about. And to conclude for me, I'd like to remind everyone of our disciplined approach to capital allocation, which is fundamental to generating long-term value for our shareholders. Our first priority is to maintain the strength of our balance sheet by targeting net leverage below 1.8 throughout the cycle. Currently, we have a significant leap below that, 0.9 times. Our secondary priority is to invest in the business to support sustainable profit growth. This quarter, we've increased our capacity by just over 3%, receiving a delivery of five new aircraft, while expanding our margins. We exercised options for 18 aircraft in the first quarter, and today we've announced an order of 53 aircraft for the group, medium, term, long-haul requirements. These aircraft are for combination of replacement and growth supporting our strategy to strengthen core network and airline brands. We will deliver and will be delivered between 2027 and 2033. And of course, we're committed to sustainable shareholder returns as we announced in March through an ordinary dividend, which is set at a level which is sustainable throughout the cycle, the proposed final dividend of six cents per share as we announced at year end. And additionally, we have planned to return excess cash to shareholders when net leverage is below 1.2 to 1.5 times, depending on the commitments and the outlook. So far, we've purchased 530 million euros of shares so far this year, completing the 350 million euro buyback announced in November and starting the program of up to 1 billion buyback announced this February. On that note, I'll now hand back to Lewis.