International Consolidated Airlines Group S.A.

Good morning, ladies and gentlemen, and welcome to the International Airlines Group Recorded 2025 Results Call. 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, we'll 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, and welcome to the IAG third quarter results. Today I have with me Nicolas Casbury, our CFO, as well as members of the IAG Management Committee. This has been another good quarter for IAG, and we are on track for another very good year. Our strong fundamentals underpin our best-in-class value creation over the long term. We are continuing to see robust demand for travel across the group. Our leading network and brands have helped to deliver a strong revenue performance in the quarter with PRAX broadly flat at constant currency against a record quarter last year. Our transformation initiatives are delivering effective cost control, supporting our competitive flow base on which we are delivering market leading margins at 22% for the quarter and over 15% on a last 12 months basis. As Nicolas will show you, every single one of our airlines has reported a margin over 20% this quarter. This was also one of the best summers operationally that we have ever had, which is also supporting positive NPS performance. Our balance sheet continues to be strong, giving us optionality around our capital allocation. whether that is investing in the business at high rates of return or reducing our gross leverage as we take and encumber aircraft deliveries or as we increase our dividends, as we are doing with this set of results for our shareholders. And we intend to announce further returns of excess cash to shareholders at full year results in February. So for the short term, we are confirming that our outlook for this year is unchanged. And in the longer term, we are confident in our strategy to create value for our shareholders. And on that note, I will hand over to Nicolas to take you through the details for the quarter.

Thank you, Luis. Good morning, everyone. I'm pleased to announce another strong set of results. On the left, you can see the breakdown of the key drivers of the profit increase we've delivered in Q3. These are shown on a constant currency basis, with the impact effects shown separately. We delivered a passenger revenue increase of €177 million, or 2% up. Cargo revenue decreased slightly as we cycled over the elevated yields from the Red Sea disruption in 2024. And other revenue continued to perform well, with the increase including higher IAG loyalty revenues, together with increased third-party revenues from Iberia's MRO business. As we guided, the performance of non-fuel costs continued to improve quarter on quarter, and the increase was partially offset by lower fuel prices. We split out the FX into a separate item, and you can see that we had an 8 million euro overall headwind from FX on profit, with benefits from the weaker US dollar more than offset by weaker sterling euro in the quarter. Overall, we increased profit by 40 million euros on the record performance in Q3 last year. Opco, Iberia, Aer Lingus and Loyalty showed strong profit growth, whilst BA and Vueling profits were slightly down year on year. BA is shown in euros here and so was impacted by the depreciation of sterling against the euro, driving a larger reduction in euro terms than in sterling terms. Now let's look at the operating company's performance in more detail. Aer Lingus increased its operating profits by 31 million euros to 170 million, and its operating margins by three percentage points to 21.6%, despite competitor capacity growth in Dublin. Q3's performance was driven by the expansion of its networks, particularly on the North Atlantic, and the impact of the industrial action of approximately 30 million euros in Q3 last year. British Airways saw its operating profits decline slightly by £18 million and its operating margins remain high at 20.2%. Unit revenues fell 1% driven by the expected softer trading in US sold North Atlantic economy leisure and by 7% capacity growth in European short tour. Non-fuel unit costs increased by 3% driven by employee pay deals and resilience costs not being fully offset by the transformational benefits. Iberia continued to report strong results, with operating profits increasing €56 million to €510 million, and its operating margin increasing 2.2% to 23.7%. Iberia also saw softness in the North Atlantic, driven by capacity capacity into Madrid. However, it was fully more than offset by the continued strong demand in the South Atlantic regions. Non-fuel costs increased by 2.2%, primarily due to resilience costs and higher ownership costs from the new aircraft. Welling operating profit was €20 million lower at €272 million, but at a high operating margin of just over 25%. Good non-fuel unit cost performance was offset by a decline in unit revenue driven by slightly weaker demand, particularly in Benelux and Germany and the UK, as well as the effect of investing and strengthening some of its core markets, which was not fully offset by the strong demand in other markets. IAG Loyalty reported £141 million in operating profit, up £16 million year-on-year, at a margin of nearly 19%. Moving on to our revenue performance in more detail, overall demand for travel continues to be strong, driven by demand for our network and our strong brands. The performance was in line with the guidance we gave in an outlook at the entrance. It grew capacity by 2.4%, with unit revenue declining by 2.4%, and around two percentage points of which was due to currency movements, so only marginally down on an underlying basis against a record quarter last year. If we look at the performance by region, North Atlantic capacity increased by 2.9%, with unit revenue decreasing by 7.1%. It's really important to note that around half of this was due to currency headwinds from both weak US dollar and sterling against the euro. The trends were similar to those we reported at the interim results. We continue to see some softness in U.S. point of sale economy leisure and an impact on our transfer flows of U.S. direct capacity growth into secondary markets in Europe. Premium demand held up well. South Atlantic continues to be the star performer in the network. Unit revenue increased 0.6% on a capacity increase of up 2.9%. Iberia's performance continues to be strong, with the routes to Argentina continuing to perform well, along with routes to Venezuela, Ecuador and Colombia. Europe unit revenues decreased by 6% on a capacity increase of 2.4%. I've already mentioned weak demand for welling, weaker demand for welling, and the additional capacity from British shareways. In addition, there were FX headwinds from the weak sterling euro, representing about two percentage points on unit revenue impact, with Iberia and Aer Lingus performing better. To finish off, Asia-Pacific performed well, and Africa and the Middle East and South Africa partly saw the impact of additional capacity to Saudi Arabia and South Africa. Just turning to Q4, so far we're pleased with the revenue performance, with passenger revenue held positively year on year, including the North Atlantic. We did have a particularly good in-month booking in December last year following the EU elections, so we do have some tougher comparatives over the next few weeks. Despite this, we are confident about the long-haul market in particular. And while it's a bit further away, H1 is so far looking positively. Just to note, as you've seen, the currency impact on P-RASC in Q3 was minus 2%. In Q4, we currently see higher adverse effects on revenue of around 3.5 percentage points, most of which is due to the average sterling to euro rate, which was about 1.2 euros last year. And this year, it looks like it'll be around about 1.15%. Clearly, the majority of the translation FX impact on revenue is offset by favourable impact on costs. I guided last quarter that the increase in our non-fuel unit costs this year would be weighted to the first half of the year, and I'm pleased that we're broadly flat in Q3 compared to plus 4.6 increase in Q2. This is a good performance overall and in line with our expectations. Currency benefited these unit costs by about 2%. Employee unit costs increased 2.9% due to agreed salary increases, which were only partially mitigated by productivity benefits for more punctual operations. Supplier cost inflation was more than offset by procurement-driven transformation initiatives, part of our wider transformation programme. Ownership unit costs increased by 9%, driven by investments in new aircraft products and IT. Fuel unit costs reduced by almost 11% driven by lower commodity prices and the fuel consumption savings from the new generation aircraft we're investing in. We continue to expect non-fuel unit costs to increase around 3% in line with a guidance I gave you at the last quarter. And likewise on fuel, we continue to expect fuel costs to be around 7.1 billion euros. This slide shows our financial results for the nine months down to net profit. Operating profit increased by around 18% and pre-exceptional profit after tax increased by approximately 20% to 2.7 billion euros, which in addition to a lower share count from our share buyback programme, drove a 27% increase in adjusted earnings per share. I'm pleased to report that our balance sheet continues to strengthen. Gross leverage reduced to 1.9 times down from 2.6 at this time last year, driven by the regular maturity of our aircraft financing and paying down IAG bonds. Net debt was relatively flat year on year, despite the shareholder returns, and net leverage decreased to 0.8 times due to the year on year profit improvement. We still plan to keep approximately two thirds of our expected 25 new aircraft deliveries unencumbered. And we still expect to spend approximately 3.7 billion on CapEx this year. This is my final slide. I want to remind you about how we think about capital allocation, which is core to how we create long-term value for our shareholders. Our first priority is to main our balance sheet strength, targeting net leverage below 1.8 times through the cycle, which is a proxy for investment grade. Our second priority is to invest in long-term strength of the business at high rates of return with a focus on rebuilding our fleet, improving our customer experience and enhancing our digital capabilities and advancing our sustainability agenda. We're of course committed to a sustainable dividend return and are delighted to announce an interim dividend of €220 million. This represents approximately 50% of the anticipated annual total dividend. And as with the earnings per share, the dividend per share will also benefit from the share count reduction. Furthermore, with the current 1 billion share buyback programme nearly completed, we intend to announce further returns of excess cash to shareholders at our full year 2025 results at the end of February. We are confident of a strong end to the year and feel that this is a more appropriate time for the board to make their decision in line with pre-COVID practices. And on that positive note, I will now hand back to Lewis.

Thank you very much, Nicolas. As usual, I would like to remind you of our strategy that focuses on three strategic imperatives. Firstly, our strong core. We are deploying our capacity in a disciplined, focused way to leverage our market-leading positions. And we are building our brands by investing in new, more efficient aircraft and better cabins and services, alongside more efficient operations. Secondly, we are building up our complementary capital life businesses, in particular IAG Loyalty. And thirdly, we have a robust financial and sustainability framework. By consistently executing these imperatives, we can deliver and maintain targets that we think are both best in class and appropriate for our business through the cycle. As I mentioned earlier, we have now delivered a 15.2% margin over the last 12 months which is market-leading. Fundamentally, we believe that delivering earnings growth at these levels of margin and return capital will create substantial value for our shareholders. As usual, there are a lot of things going on around the group, and we have highlighted a few initiatives on this slide. Our network strategy is to focus on our core markets. With increasing scale in our hubs, we offer our customers more choice of destinations and frequencies. We focus on delivering improvements to the customer journey in our aircraft and on the ground and through a combination of the human touch and digital innovation. A good example of this is our announcement yesterday that we are going to partner with Starlink to provide high-speed connectivity in all of our airlines with a rollout likely starting early in 2026. And our punctuality as a driver of both customer satisfaction and efficiency is amongst the best in the world, and in particular has been excellent over the summer despite many external headwinds. On-time performance improved across all airlines, with British Airways achieving the best OTP at Heathrow since 2012, up by 10 points year-on-year. And MPS also continues to improve around the group, with Welling MPS hitting a record high this summer. Finally, we are pleased to announce today that IAG Loyalty has signed a multi-year partnership extension with American Express. Moving on to our outlook, our expectations for the 2025 full year are unchanged. As Nicolas has explained, we are booked positively so far for Q4, including the North Atlantic, so we are on track to deliver another very good year of revenue and earnings growth, margin progression, and strong shareholder returns. Demand for travel is strong, and our fundamentals are proven. We have leading market positions, a great network, powerful brands, and an attractive customer base. Through a transformation program, we are delivering the margins that we are reporting today. And we still have a significant number of initiatives to roll out across revenue, cost, and operations. So we believe that we can continue to deliver a strong value creation for our shareholders through the cycle. So I will finish by summarizing those key elements of that business model and our long-term investment case. Strong markets, strong execution, strong value creation. And on that note, we will turn the call over to Q&A.

Thank you. 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 and then one on your telephone keypad. We ask that you limit your questions to a maximum of two. We will pause for a moment to assemble the queue. Your first question comes from the line of Alex Irvin of Bernstein. Your line is now open.

Hi, good morning. Two for me, please. We heard from, first of all, we heard from some of your peers about a less peaky summer, but with the summer extending into Q4. Does that match your assessment? If so, is that a 2025 factor or a lasting change? What does that mean for how you manage the business? Second, on the North Atlantic, we saw Alaska launch in Heathrow. Do they get that slot from your existing joint business? If so, why? And should we see that as a precursor to potentially adding them into the joint business? Thank you.

Okay, thank you. So for the Q4 and Q1, we currently have about 80% of the Q4 book, and the overall revenue performance is good, and the passing year revenue is held positively versus last year. And we need to take into consideration that last year was very strong with a total PRAS up 3.1% in general and in North America was up 14%. So performance is different by region. We see improving trends in North Atlantic and currently revenue is held positive. We see also a strong October and November in North Atlantic. South Atlantic, as we said in the presentation, continue to be strong. And in Europe, we continue seeing some softness in intra-Europe, but lately we have seen improving. The rest of the world is also positive. And what we can see for Q1, Right now, with revenues around 30%, the levels of revenue that we have are also above last year. So in general, the trend that we see is positive. So Q3 was a little weaker. As we said, North Atlantic point of sale, non-premium and transfer traffic have an impact in that. but we see that the situation is improving since then. And about Alaska, maybe you want to comment some?

Yeah, look, I think Alaska are a very important partner to American MBA, and we have a very good connecting partnership over Seattle and to places in the West Coast where they've developed the network over recent years. You know, it would be premature to talk about entry into any joint business, but we work with Alaska on a very constructive basis, and, you know, we would have helped them through the kind of sloth process in advance of next summer.

All right, thank you.

Your next question comes from the line of James Hollands of BNP Paribas. Your line is now open.

Merci. One for Sean, please. Maybe if you could give us a quick update on the very sort of current news on the U.S. shutdown and clearly international flights are protected, but whether You might perceive there's a little bit of reticence on late bookings on your transatlantic network. And while you're on, maybe update on your BA digital transformation. I think we're getting into the upcoming. And then for Nicholas, full year cost. Let me put it this way. Is there a good chance you beat the 3% guy, particularly with FX and obviously the performance you've had so far? Or is there anything specific on costs in Q4 that would mean you don't beat 3%? Thank you.

Just on shutdown, I think it's early stages, but right now, you know, we're not seeing any impact. And I think one thing I would say is we have, it's November, so there's lots of kind of ability to reaccommodate across networks if there is an impact. We fly to 27 points directly in the US and we work with American closely in sort of setting over those networks. So I think right now it's business as usual and we're not seeing any effect, but I think our direct network out of London If there is any marginal impact on connecting traffic, we'll have plenty of capacity to kind of reabsorb any rebooking that we need to do. In relation to digital transformation, yeah, we are entering an exciting phase. About 50% of our bookings on .com now are going through what we call our new booking flow, and that's showing very encouraging results. We're happy with conversion, we're happy with performance, and we're very happy with the CSAT. We begin to scale the number of bookings we put through that platform as we head in towards the December, January sale period. So the vast, vast majority of bookings heading into next summer would have come through that new booking flow. And we're in a position that we start rolling out the app facing element of the digital transformation early in 2026. So, yeah, it's exciting and we're very encouraged by what we're seeing.

Yeah, just on the cost side, James, we've got all the MC here, so thanks for putting them under a bit of pressure overall. We're sticking with our kind of 3% guidance at the moment. You can see FX is moving around quite a bit at the moment overall, but we think we're holding on for that at the moment. But we're pleased with the progress we've made, particularly with supply costs overall, particularly with the kind of process improvements we're putting and the kind of procurement savings we're doing. So we're pleased with how that's going. Thank you.

Your next question comes from the line of Stephen Furlong of Davey. Your line is now open.

Yeah, hi there. Maybe for Louise, just talking about or thinking about into next year, even into next summer, I'm just thinking about the competitive environment. Maybe you could talk, maybe go through the regions again, because I'm thinking about things like Let's say in LATAM, is there any change? Obviously, you have Turkish investing in Europa. I don't know on the other side. In the US or North Atlantic, I'm thinking about like United or I think it's Delta expanding a lot of capacity. And then... And then for yourselves in terms of capacity, maybe you'd be able to grow a bit more at Heathrow if there's a bit of an improvement with the trends, et cetera. So just talk about the competitive dynamics as you see over the next 12 months in general terms. Thank you.

Okay, thank you. So I can comment on the capacity that we see for the next quarters. We need to take into consideration that still the people that are working in the programs for summer next year. But what we see, for example, for EU4 first quarter of 2026 is that the capacity from London Heathrow, North Atlantic London Heathrow, It's going to decrease in comparison to the previous year. So that's going to help. We see that the other hubs, the traffic with North Atlantic, are going to be more difficult. So Dublin, for example, the people, they are adding a lot of capacity in winter. That is not usual. So we see in the Q4 an increase of capacity of around 16%. And in the first quarter, 15%. So we are going to have a very tough competitive environment there. And Madrid's North Atlantic, Q4, we are going to have an increase in capacity of around 5% and the first quarter, 10%. So it's true that Q3, the increase of capacity was higher and now the people, they are moving capacity from Madrid to other regions in Spain. If we look at Latin America, from London, we see a decrease in capacity in the last quarter and also in the first quarter. Madrid is going to have an increase of around 4% in the Q4 and around 7% in the Q1. But even with this increase in capacity, we are seeing strong yields and strong low factors. And the entire Europe is different in the different subs that we have. Heathrow Europe is going to be almost flat. Madrid Europe is going to be around 7%. Barcelona Europe around 4%. And Dublin Europe, again, high increase of capacity of around 12% in the fourth quarter and 15% in the first quarter. So the competitive environment. North Atlantic, we see a positive trend. It's true that all of us are in capacity, but in the joint business, we keep our market share and also in number of premium seats, we continue with a very good position. And the other topics that you said, for example, Turkey with Europa, I think it's going to be an investment of 26% in the company. I suppose they will try to develop the business, but we don't see an impact of that in the short and medium term. I don't know if there was another question.

Okay, thank you. Thank you.

Your next question comes from the line of Jamie Robben of Deutsche Bank. Your line is now open.

Morning, gentlemen. Two from me, please. First, almost certainly for Nicholas on buybacks. On slide 11, you reiterate the plan to return cash to maintain leverage of 1.2 to 1. times net debt to EBITDA. It's an obvious question, but if we assume you're still at 0.8 times by year end, It would imply a quite staggering three to five billion euros of potential headroom. Is it as simple as that, Nicholas? And presumably at the lower end of that range, you could leave some buffer for potential M&A opportunities like TAP. Second question is just really on short haul. Could you remind us what the plan is for Vueling next year? I think there were some clues there in what Luis said about capacity growth. out of Barcelona. It seems like the short haul environment is a little bit tougher for you. You talked about weaker demand, Benelux, Germany, UK, not offsetting strength in other areas. So some comments, please, on short haul outlook and the plan for dwelling. Thanks very much.

Yeah, so just start with shareholder returns. So this year we'll have returned, by the time we get to the year end, we'll have returned 1.2 billion of share buybacks and 400 million of dividends overall, so 1.6 billion in total. We haven't quite finished the share buybacks, so we'll finish that over the next year. uh month or so overall um we've kind of held back kind of doing the next shareholder return to year end just to get it back into a normal process we did this exceptional one that we did last year just because it was the beginning of the process but um we'll just get back into the normal swing of it it's a normal year end uh decision that we have uh overall but we can hopefully we've kind of said in our that we're confident in going to give you further returns later on in the year overall. Just in terms of the kind of way we think about it, as you said, we've got that range of 1.2 to 1.5 net leverage below that overall. I think kind of right at the moment, we've got some increasing capital coming over the next few years. And as you say, the TAP, so we'll probably manage more towards the bottom end of that range rather than the top end of that range overall. But that still gives us kind of quite a lot of flexibility overall. We've had one or two analysts kind of saying that, you know, not giving shareholder buybacks for this quarter may show a kind of lack of confidence in the kind of future trading. I think kind of after. uh the strong quarter we just had and the fact that we've just said that we're um booked positively for the year ends as well and kind of confidence in our overall strategy we kind of find that that's obviously a personal statement but it doesn't reflect the confidence we have in our own business so about the the the circle and maybe carolina can expand on boiling but uh the the q3 uh the point-to-point traffic was okay and we suffered in the in the transfer traffic as i said previously

In the Q4, what we see is that competition is high. In Q4, intra-Europe capacity is going to raise around close to 6%. But we have different performance in different countries. For example, there are markets that are working very well for us. We need also to take into consideration the impact of the FX in the Q4 that is going to be relevant. But maybe, Carolina, you can comment on bullying.

Sure. If we look at Q3, I think it's a mixed bag. There are different things. So some markets work very well. Domestic worked very well for us. As Nicolas said before, we had some specific markets with a weak performance. Germany, UK, Netherlands, Netherlands very linked to the tax situation there. But we have a very strong position in Barcelona and we offer from there over 100 routes. It's a constrained airport and we have one third of domestic traffic. So we are very used to face strong competition. but we are positive about our ability to compete. If you look at our risk, a good part of that is self-dilution. So we have decided consciously to invest in some markets. Canary is a good example. We have grown over 30% in Canary, but we are already seeing the results of that investment. So although you are right, it's going to be very competitive, I think we have a good position to compete in our core markets.

Great answers. Thank you.

Your next question comes from the line of Savvy Sith of Raymond James. Your line is now open. Hey, good morning.

Maybe for Nicholas, I'm not looking for guidance or anything like that, but I was wondering if you could talk a little bit about as you look out to 2026, just across the kind of the main cost items, just generally what you are expecting in terms of inflation and And anything, any kind of offsets or headwinds or tailwinds that we should think about?

Yeah, we're not giving guidance for 2026 overall at the moment. You know, I think all I'm going to say just on the cost base as well, we've given kind of clarity the last kind of two quarters on this year, which we're confident to living. We've just delivered a good quarter on the cost base overall. So there'll be up about 3%. year on year on non-fueled cost. I'm expecting kind of with the transformation program and also with kind of some hopefully some kind of easing inflation overall that that kind of number should moderate into next year overall.

That's helpful. And if I might just also ask just on the demand side, if you could kind of give a little bit more color between just kind of corporate versus premium versus kind of maybe the economy leisure.

Yes, I think that if we look at business traffic, year-to-date, we have volumes around, in total, at group level, of around 70% of the volumes that we had in 2019, and revenues close to 87%. So situation is improving, but slowly, and with a very different performance in the different airlines. So, for example, in British Airways, 62, 63%, 82% in revenue. In Iberia, close to 80% in volume and about 100% in revenue. And in Anglingus, close to 100% in volume and similar in revenue. So with this, we expect to finish 2025 with business revenue above what we had last year. If we look at the volumes in Q3, we saw a decline in comparison with last year. But what we see now in the Q4 is positive. For example, in British Airways, we are seeing now growth in North Atlantic, both UK and North Atlantic point of sale. So we think that this is going to help to the recovery. But in any case, as I said, in some way we are in a stable situation and the improvement is slowly. In any case, when COVID started, we said that we were expecting to come back to levels of revenue of around 85% of what the revenue was up in 2019. And we are above that. And the good news is that we are delivering these strong results with this percentage of business traffic. What it means that our model is working very well also with the premium leisure traffic.

That's helpful.

Thank you. Your next question comes from the line of Harry Gowers of JP Morgan. Your line is now open.

Yeah, good morning, everyone. Two questions, if I could. The first one, just if I could ask on your positively booked revenue comments for Q4, if you could maybe clarify how positively booked we're talking. And could we end up seeing RASC higher year over year for Q4 versus last year? And then the second question, I was just wondering if you could go into some color on the UK point of sale on transatlantic and also UK point of sale on short haul as well. And if we're seeing any demand weakness or price sensitivity. Thanks a lot.

So just, Harry, I'd love to give you more detail, but I think that's about as much as we can give you this book, but positively overall. I mean, we're currently, we've had a good October and November, you know, particularly seen actually point of sale in North America being good on both sides, actually, from UK and Europe. and from the U.S. as well. And actually, U.S. leisure point of sale in the last few weeks has been a bit better as well, which is good to see. The only thing we're just calling out is we had a particularly strong December last year across the Atlantic. You know, after the Atlantic, there was a bit of kind of pent-up demand, and we saw it very strong. So we're just about to enter those weeks, but we're feeling pretty positive about it overall. So I think that's all we can say. And ASKs are going to be up about 2.3% in the quarter as well.

Yeah, just on the UK segments in terms of the booking profile, you know, Q3, we were positive across both business and premium and non-premium leisure. And Q4 is a little bit more positive, but we don't go into the specifics. So, yeah, we're seeing stable demand is the best way I would describe it. And that's relevant, I think, you know, it's prevalent in both Europe and or US markets, as Nicholas said earlier.

Great. Thank you.

Does that answer your question, Harry? Yeah, thanks a lot.

Next question comes from the line of Conor Dwyer of Citibank. Your line is now open.

Thank you very much. I'd like to come back a little bit to the buyback question. Nicholas, you talked a little bit about managing towards the lower end of that range of 1.2 times to allow for some percentage of lemonade, things like that. But obviously that still implies basically you can pay out more than your free cash over the next few years. Is that really how we should be thinking about this? Or are there other things in there that might, let's say, move that leverage number away from that kind of level? And second question, which is essentially on the loyalty. So growing revenue at about 7%, obviously that growth has been extremely high in recent years. I'm just kind of wondering, are you now kind of viewing that business as, a bit more mature now. Should we be really kind of thinking that as a kind of mid-single-digit percentage growth business? Thank you very much.

Yeah, just on the share buyback, I mean, we set out the guidelines from where we want to manage our balance sheet to overall. And I think when we did that, we kind of said, you know, the things that we'll be looking out for, it's a forward looking thing rather than a backwards necessarily. So we'll be looking forward to, you know, how does the outlook look? We're feeling pretty positive about that at the moment. We also look at what M&A's on the horizon as TAP. maybe potentially overall and there's also kind of capex what's our capex commitments looking forwards as well now capex as we know is about 3.7 this year next year probably more about 4 billion but we know over the next few years after that it starts to ramp up and that's why we could be managing towards the bottom end of that and making sure we've got some good headroom and ready for that overall

On the loyalty side, just to come back on that specifically, yeah, we are continuing to see, if you look at the year-to-date performance, because there are some specifics around promotions, around particular issuance of the points. So if you look at it across the year, we're still seeing double-digit growth in terms of the currency that's being issued and there or thereabouts on usage of those points and how those points are redeemed. So I think we're seeing a continued growth and a continued double-digit growth that we've seen over the previous years.

Great. Thank you very much, Russell.

Your next question comes from the line of Rory Cullinane of RBC Capital Markets. Your line is now open.

Yes, good morning. First question on cargo revenue decline. Should we expect similar dynamics in Q4, given another strong prior year comp? And then just sort of coming back to the unit revenues, do you think the North Atlantic trends you've seen were suggestive of a liberation day headwind which may now be fading given the improvement looking forward thank you

Yeah, just on cargo. Yes, you're right. I think we're seeing actually the supply, the demand for cargo is still relatively good. And you can see that our weight we're carrying is still up overall. But we're just seeing some softness in yields. And as we said in the call, that's really based on the fact that we're anniversary. The high yields we had as there was a lot of disruption over the Red Sea last year. That's just the supply chain around that. It's just kind of normalizing overall. And you'll see that probably into Q4 as well. The North Atlantic, I'm not sure we can, anything else we can really say about that overall. I mean, Liberation Day was in April, overall.

Yes, as we said, in Q3, we were below what we expected. But since then, we see a recovery. And as Nicolas said before, we see an improving trend with a strong October and November, and we are good positively. So I think the effect of the Liberation Day is far away.

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

Morning, guys. Can I ask two questions? One on what labour relations lie ahead. I think there are some at BA, but perhaps you can correct me on that and whether there are any elsewhere in the group. Second question, I'd quite like to hear your thoughts around the situation at IANA, where, I mean, obviously you want low airport charges, I can imagine, but it appears that the... airport companies becoming something of a political football in Spain and its plans to develop the infrastructure are potentially being threatened. So where do you sit? Obviously, you do want beautiful facilities for very low costs, but how do you think about your key partner providing infrastructure in Spain being such a political football?

Thank you. So about the labor situation, I think... we have closed the most important agreements at group level. We are still negotiating some places like Iberia with the ground staff. Maybe Marco you can comment on that later. We have now a difficult situation in Manchester, where, as you know, we have a strike, and it's probable that we are going to continue with a strike. And in Erlingus, they need to negotiate the agreement with the different collectives. And in Berlin also, some of the agreements, they expire at the end of this year, and they are negotiating. So maybe you can comment, maybe lean the situation in Manchester and

Yeah, just to put Manchester in context, first of all, it's two aircraft there at the Manchester base that flies transatlantic. We're managing through the strike. We've been accommodating, reaccommodating more than 90% of our customers in the strike dates so far. We reached agreement with Unite on two separate occasions, and they recommended a deal to their members, which the members rejected. So we've benchmarked pay, we've been working through ACAS. I think the key thing here is we need to be cost competitive. Manchester needs to be able to perform financially. It needs to justify its asset allocation. We're part of a group where capital is constrained and distributed where returns can be made the most. And I'm very conscious of that when we look into our industrial relations situations.

Okay, and maybe Marco, you want to comment on the ground stuff?

Yeah, indeed. In terms of the labor relations in Iberia last year, there was a major milestone that was achieved. It was to set the new collective with our pilots that, as you know, is a system where we share the benefits of the results of the company, not only linking the pay evolution and the one-off evolution and payment to the average results of the group, but also to the productivity of our staff, to the MPS and the OTP, so the capability to deliver to our customers. And the same has been achieved this year. with our cabin crews and we've just started now the process of opening the negotiation with our brand personnel and we're confident that the same scheme and system of course with the nuances for the specific collectives can be applied also also there is very very beneficial also for for the people and worry mark as you know we also introduced the possibility for uh people to uh uh buy shares and become shareholders and and more than thousand of our staff currently have subscribed to that. That is another element of sharing the benefits of the results of the company. And maybe a comment in terms of the IANA situation. And of course, our strategic plans imply the necessity of an alignment with IANA, and we have a common view of bringing to the full potential of the Spanish, both operating companies and infrastructure. Of course, that needs to be done at an affordable price. It's the same view the group has with regard to the UK. So we are in close contact with IANA to ensure that that will happen.

Thanks. Can I just check? Is everything done and dusted on CLAs at BA, or are there any... Yeah, Andrew, our collective agreements go to the end of 26 and mid-27.

So we concluded those over the last 18 months.

Great, thanks. Your next question comes from the line of Patrick Corsette of Goldman Sachs. Your line is now open.

Hello, it's Nicholas. Just coming back to your comments on Q4 trading, please. When you say booked passenger revenue for Q4 is up here only including on the Atlantic, just double checking that that is after the FX headwind that you flagged with this constant currency. And then secondly, if we look at your ASK guide of 2.3% for the quarter, again, coming back to your comment on increasing passenger revenue overall, That would imply RASC at least somewhere around flat year on year consensus standing at minus 2% for the quarter. So is that a fair interpretation? And then on the basis of that, looking at consensus expectations somewhere around 5 billion, just shy of 5 billion off profit for the year. Do you still feel comfortable with that? Thanks.

Yeah. Just, yeah, you're right. The guidance we've given on the positive booking includes the FX. So it's not from currency to currency. It takes account of the currency impact as well. I'm afraid I can't give you any. I'm not going to give you a PRAS guidance for North Atlantic for Q4 overall, except I think we said we're positive overall. And that's taking account the ASK growth as well. But we've got positive momentum on that overall. And so the last question.

Brilliant.

So consensus, yeah, you're right. Consensus is just under $5 billion. And if we weren't happy with that, we'd have to say something. And we're not saying anything.

Thank you. Your next question comes from the line of Muneeba Kayani of Bank of America. Your line is now open.

Yes, good morning. Thanks for taking my questions. I just wanted to touch on this new Amex partnership extension. How should we be thinking about it in terms of impacting the loyalty top line margins? And then just related to that, overall margins into next year, you're very much at the top end of your midterm guide range. You talked about possibly unit cost inflation being better next year. You're seeing good demand trends. How are you thinking about that margin into next year, please? Thank you.

Yeah, just starting on the Amex agreement. Yeah, so we're very pleased that we've recently agreed with a long-term agreement with American Express. That continues the... The good work that we've done previously in terms of that agreement includes the British Airways co-brand, the membership rewards business and the acceptance of Amex across the different airlines, this time to include Level as well. So, you know, we're delighted that we have this month of year agreement. And that will help the loyalty business as we go through the next few years to have that agreement in place. And we look forward to working with Amix in the years to come.

Yeah, just on guidance. We're not giving guidance next year. But I mean, I think kind of with the dynamics that we're seeing, we still see strong demand for travel. We still see a constraint in supply of aircraft into the market next year. Overall, we've got our transformation program, which is both driving our own revenues and also the kind of costs under control, which I said should moderate overall. um so if you put those dynamics together you know there's no reason why we shouldn't be at the top end of our of our guidance and sustain there overall of course it depends on where fuel is and inflation ends up overall but i think we're feeling confident thank you your next question comes from the line of gerald cole of pan-neuroliberal your line is now open

Morning, everyone, too, if I can. There's been a lot of talk about the ongoing strength in premium leisure. I was wondering whether you could give an indication as to the relative importance of premium leisure within the premium cabin. I know you probably won't give an exact figure, but just something to give a rough indication of how important that is proportionately. And in terms of that trend of growth, What could derail it? What could cause the premium leisure strength to reverse or soften? And secondly, I think there was some talk about strong short-haul capacity growth at British Airways. I just want to try to understand where that was and why that was done, please.

Yeah, just in kind of premium leisure. Yeah, we don't disclose the kind of precise mix that we've got on premium leisure. Premium seats, if you look at it, it's different by different airlines. Of course, if you look at British Airways, we've got about 45% of our seats are premium overall. And a significant part of that is leisure. We've got about 20% of our overall customers are corporate customers. And more of that when you look at SME businesses overall, but they're an important part of our growth. And you can see that in terms of corporate customers overall, they're still down year on year, but actually that's been filled very successfully by the demand for leisure, particularly at the front end of the plate. So it still continues to be strong. You know, in terms of derailing, you know, one of the concerns we had as you get up to the, we're approaching the UK election, which feels like it could be targeted more at our customers at the wealthier end of the line. So you could, you know, you would expect maybe some slowdown, but we're seeing the opposite of that at the moment as well. So, you know, the people who've got money have got money at the moment.

In terms of EA short haul capacity, there's probably two dimensions driving it. One is we have been replacing A319s with A320s and A321s at Heathrop, so there's a chunk of gauge. We've also been reorienting the network to fly to probably more of the Southern European leisure markets, which gives us a stage-light effect, which increases ASKs. We've been continuing to build back our Euroflare business at Gatwick, so that's operating 25, 26 aircraft. which is probably where it was back in 2017-18. They're three drivers of that capacity increase. We've had some gauge benefits as well at London City. Again, we're adding some ASKs, but again, primarily into longer sector leisure markets, which were robust over summer. Okay. Thanks very much.

Your next question comes from the line of James Goodall. of Rothschild. Your line is now open.

Hi, everyone. Thanks for taking my question. So just firstly, following up on Muneeba's question on Amex, has there been any changes in commercial terms with Amex as a result of the new agreement? And how should we think about the cash remuneration element going forward? And then secondly, just given the strong on-time performance in all entities in Q3, can you quantify what the benefit was to both revenue and costs from lower disruption in the quarter, please? Thank you.

Yeah, I mean, on the Amex car, it's a commercial sensitive agreement, so we can't really get any details in terms of the specifics overall, both in terms of kind of large share of cash.

No, just to say, I think that's right. But clearly, we're very happy with that agreement. It works for both us and American Express, and we're very pleased to have extended it for the long term.

And about the disruption cost, in the case of VA this year, the costs were almost halved, 45% less than the cost with that last year.

Thank you.

Your next question comes from Delano Jared Castle of UBS. Your line is now open.

Good morning, everyone. Two as well. Seems like the MRO business is doing pretty well. So if you could just give a little bit more color in terms of pipeline of work and what you're seeing there. And then just secondly, a lot of attention to loyalty. And, you know, obviously the changes happened, I think it was April this year. Loyalty members, you know, they're going to get their tier status, I would imagine, sometime in March next year. Just interested, you know, within the different tiers, gold, silver, bronze at BEA, Has the mix changed, i.e. are some of the gold members as a percent of total mix slipping down or some of the silver going up? And what are signings like into the loyalty program at the moment? So any color and how you see that evolving going into March? Thanks.

Maybe, Marco, you want to comment on that? MRO mainly is an engine business.

Yeah, the engine business is still cycling over the post-COVID phase. So, indeed, as you say, it's recuperating. You see that a lot of the non-airline revenue growth has been driven by the growth of maintenance. So, it's coming back to pre-COVID levels of profitability. And we're currently in the phase of setting the stages of the next phase a longer term view of the strategic opportunities there. So I think we will come back in time on that.

In relation to the club and the relaunch, I think it's performing as we would expect. I think the tier sizes are broadly tracking the way they were last year, but we are hearing anecdotes of people who were higher value customers getting their tier quicker. So we don't expect to see too much movement in terms of tier sizes, but we do think that the club tiers will be rewarding our higher revenue customers more quickly and more fairly.

Yeah, and I think I'd add to that, just in terms of the club, you asked about where the numbers are, we are still seeing some good growth in terms of people joining the club, both in terms of the BA club and the Iberian club. Active members, so that's somebody that's done something in the last 12 months, is up double digits, so we're seeing a lot of activity. And we're also starting to see, which we talked about last quarter, the people increasingly using their holiday as a method of obtaining tier points. So that's another trend that we're seeing.

Thanks. Thank you.

Your next question comes from the line of Alex Patterson of Peel Hunt. Your line is now open.

Morning, everybody. So just continuing that theme of holiday sales to BA club members, has that really benefited the third quarter? And if I look ahead, the number of atolls that you have paid for is flat year on year. So if I think about then where is the growth in IAG loyalty going to come from, if it's not from the number of holidays, are you going more upscale or is it the growth is going to come from more Avios issuance?

Yeah, thanks for that. Yeah, in terms of club members, yes, we are seeing more revenue coming from club members. That's up on where we were in terms of you looking at year to date. And we are expecting that to continue. So and you're right in thinking that. the quality of revenue that comes from those members tends to be strong. And so that's definitely where we're seeing some of the growth. In terms of atolls, I've always said that atolls are a bit of an art rather than a science. And so, you know, we certainly plan to grow the business into 26. And in Q3, we definitely saw that growth. In a lot of areas, I would highlight Greece as probably the region that's had its strongest summer, certainly for us. So, yeah, that growth continues.

Thank you.

There are no further questions. I will now hand back to Luis Galliego for final remarks.

Okay, so thank you very much everybody for being here today. As we said at the beginning, a strong set of results, positive trending bookings for the first quarter and first quarter. So we are going to continue executing our strategy that is delivering better results than average. Thank you very much.