International Consolidated Airlines Group S.A.

Good morning, ladies and gentlemen, and welcome to International Airlines Group Q1 2026 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 de Ayo, Chief Executive Officer, to open the presentation. Please go ahead.

Thank you very much. Good morning, everybody, and welcome to the IAG first quarter results. As usual, I'm joined by Nicolas Cadbury, our CFO, as well as the IAG Management Committee. And for the first time, I would also like to welcome José Antonio Barronuevo, our incoming CFO, to the call. I'm pleased to report a strong first quarter. We grew revenue by 1.9%, reflecting continuing strong demand for our airlines and networks. We grew profit by 77% to deliver operating profit of 351 million euros. Our operating margin improved by 2.1 points to 4.9% in our seasonally quietest quarter. This good profit performance was mostly achieved before the impact of the Middle East conflict, which we expect to have a more substantial impact in the rest of the year. We have started this year in an incredibly strong position, so we are uniquely well set to navigate the headwinds that the crisis has created. We have leading positions across diverse geographical markets. We have leading brands across different customer segments in those markets. And we have structurally high margins supported by our well-established transformation program that help us to absorb some of the effects of this volatility. I will also mention at this point our capital light loyalty business, which grew revenue by 10% and profits by 32.6% at a 20% margin. And we have an incredibly strong balance sheet at 0.5 times net leverage. Finally, due to our cash generative business model, we are on track to complete the remaining 1 billion euros of our excess cash return by February, 2027, as we previously announced. Bringing this all together means that we have an opportunity now to prove how resilient this business is. We have faced macro challenges like this before. We have a well-established transformation program, which means that we are taking all the revenue and cost action that you would expect. And we are well positioned to take advantage of opportunities that arise as a result of the current market situation. So in summary, I'm very confident in the longer term prospects for this business. And now I turn over to Nicolas to take you through the numbers more detail.

Thank you, Lewis, and good morning, everybody. I'm pleased to share our first quarter results with you. Before I go to the performance, I just want to highlight that this quarter contains only a limited impact on fuel costs from the Middle East conflict. We expect subsequent quarters will be impacted to a greater extent. Focusing on the first quarter, we delivered a strong operating profit of €351 million, up €153 million versus last year, driven by the strong passenger revenue growth, partly offset by an increase in fuel costs in March. The increase in operating profit benefited from the early timing of this year's Easter holidays and a small impact from the closure of Heathrow Airport on March 21st last year. We've seen strong demand across most of our markets, particularly in our premium cabins and in both the North and South Atlantic markets, which represents about around about half of our capacity. Garga revenue reduced slightly year on year, driven by the normalisation of the Red Sea related pricing surge, particularly in the first half of last year and a small reduction in tonnage relating to less Middle East capacity. Other revenues saw a small increase year on year at constant currency, with a reduction in third party MRO revenue at Iberia due to a change in how certain components are charged. And this was offset by the continuing growth in our loyalty business. FX, particularly the impact of the weaker USD against both the euro and the sterling, drove a benefit of 48 billion euros to the profit in the quarter. The right hand side of this shows the strong performance of our businesses. Our leadership positions across diverse markets and strong brands drove this exceptional performance, with all but Aer Lingus delivering improved results in the quarter. Aer Lingus saw a larger seasonal loss year on year, driven by the ongoing high level of capacity from competitors into Dublin, putting pressure on yields, together with the Manchester-based closure costs. British Airways delivered high profits and margins year on year, driven by strong passenger unit revenues, which increased 8.5% in the quarter. BA saw strong demand across its long-haul network, in particular on North Atlantic and short-haul leisure routes, in addition to a strong business travel market. Iberia delivered an operating margin of over 9% in the quarter at 1.6% points year on year, driven by a strong revenue and improved cost performance. Iberia saw strong demand on routes to Latin America and the Spanish domestic market. Welling also delivered and improved results with a smaller seasonal loss year on year, driven by a strong revenue performance. The performance of Spanish domestic routes was particularly pleasing, although routes to the UK and Italy were a little bit more challenging. At Loyalty, including our BA holidays, continue to deliver high-quality, high-margin asset-light earnings, with profits increasing over 30% in the quarter and margins increasing to over 20%. The growth in profit came mainly in the Loyalty business, driven by non-airline partnerships, with the Holiday business flat year-on-year as we invest in the Holiday platforms. Looking forward, we expect Loyalty to deliver just over 10% earning growths for the full year. Turning now to show our regional revenue performance in more detail. The revenue performance was extremely strong, with passenger unit revenue increasing 8.2% at constant currency and 3.5% on a reported basis. Capacity was broadly flat during the year, less than we guided at the full year results due to the cancellations of flights to destinations in the Middle East, which would normally be fully reallocated to other markets at short notice, and due to the availability of aircraft due to ongoing technical challenges. We were very pleased with the North Atlantic performance, where unit revenue increased by 6.8% to constant currency on a small reduction in capacity. The underlying performance sequentially improved compared to the previous quarter. And whilst the North Atlantic performance worsened for Aer Lingus, driven by intensified competition, performance of British Airways was notably strong. BA saw strong demand in both business and leisure segments for both premium and non-premium cabins, and business segment revenue grew from all points of sale, but notably strong from the North Atlantic point of sale. Latin American Caribbean continues to be our strongest long-haul network performer, with unit revenue increasing by 9% of constant currency on year-on-year and increasing capacity of just under 2%. All three cabins for Iberia contributed to the strong performance, in addition to both the Spanish and Latin American point of sale. Domestic saw very strong unit revenues, which increased 18% at constant currency on a 2.5% reduction in capacity. Performance was strong across both the Canary and the Balearic Islands, in addition to the Spanish mainland, partly benefiting from the disruption to the train services. Unit revenues on European routes increased 6% on a 1.6% cutting capacity. Ellinga's short haul performance worsened as a result of additional competition. BA and Iberia saw strong performance in business and leisure segments, with Welling seeing benefits from improving their revenue management approach and the timing of the Easter holidays. Africa, Middle East and South Asia was impacted by the Middle East conflict, with cancellations on routes to the Middle East in March, offset by benefits from customers shifting travel away from the Middle Eastern hubs onto routes in South Asia and Africa. And likewise in Asia-Pacific, routes benefited in particular from passengers avoiding the Middle Eastern hubs in March, with Far East routes seeing good growth in both business and leisure segments. Total unit costs improved by 0.5% and non-fuel unit costs improved by 0.9% year on year. Fuel unit costs increased 0.9% in the quarter, whilst fuel rose during the quarter, particularly from February 28th due to the Middle East conflict. This was largely offset by our hedging strategy and the timing of the pricing of our commodity contracts. The Q1 cost performance benefited from the FX movements of 4.6%, increasing plus 3.6% on a constant currency basis. This partly reflects the pay deals, the impact of employee national insurance increases in the UK, supplier cost increases and the higher ownership costs driven by investments in our new fleet. Capacity will be lower than the 3% increase I guided at full year results in February. And whilst we're taking constant actions to mitigate the increase in fuel price, the lower than planned capacity grade will be a slight headwind on non-fuel costs. Adjusted EPS increased by 56% in Q1, reflecting the strong performance in the quarter with adjusted profit after tax increasing by 71%. Adjusted EPS increased by 56%, lower than the increase in profit after tax, due to the positive fair value movement on the convertible being included in profit, but excluded from the EPS calculation. This was partly offset by the lower share count due to our share buyback programme. Our balance sheet continues to be exceptionally strong. It continues to strengthen further during the quarter. Net debt reduced both year on year and quarter on quarter, falling to 4.2 billion euros at the end of March, reflecting the strong profitability and seasonal working capital inflows and the build-up of bookings for future travel ahead of the peak summer. Likewise, net leverage fell to 0.5 times, reflecting lower net debt and strong profitability. Q1 saw one A321 XLR delivered, and we still expect to take delivery of 17 aircraft this year. And lastly, we expect to spend about €3.5 billion on CAPEX this year, slightly down on the €3.6 billion guidance in February, but mainly just due to small phasing changes. We remain committed to the investments we are making as part of the transformation programme, such as the commercial replacement and BA, which is delivering benefits for us this year. But on that note, I'll hand back to Luis. Thank you.