Strong growth in IAG‘s operating profit in 2023 underpinned by robust and sustainable demand for travel, alongside continued investment in company’s transformation to drive long-term earnings growth.
Summary
Strong and sustained demand for travel, in particular in leisure
Full year 2023 operating profit before exceptional items of 3,507 million euros significantly higher than last year and ahead of 2019 (2022: 1,247 million euros; 2019*: 3,253 million euros)
Operating margin of 11.9% (2022: 5.4%) delivered by our transformation programme
Strong free cash flow generation of 1.3 billion euros has delivered a strong balance sheet, with net debt to EBITDA before exceptional items of 1.7 times (2022: 3.1 times), below our target of 1.8 times over the cycle
Positive outlook for 2024: confidence in significant free cash flow generation; disciplined capital allocation will maintain its strong balance sheet; committed to sustainable shareholder value creation and cash returns
Strategic highlights
Capacity growth in 2023 of 22.6% vs 2022, focused on our core North Atlantic and South Atlantic markets
Revenue and cost transformation initiatives driving improvements to our customer proposition
Company’s Spanish businesses delivered 1.4 billion euros of operating profit (2022: 0.6 billion euros), highlighting the greater balance in our portfolio
Company’s highly cash-generative, high-margin IAG Loyalty business grew profits by 17% to £280 million, adding 4.9 million new members (17% increase in new members) during the year
Quarter 4 2023 operating profit before exceptional items of 502 million euros (quarter 4 2022: 477 million euros)
Continued investment in our people, with 13,000 new colleagues hired in 2023
One third of company’s sustainable aviation fuel target for 2030 is now committed
Financial highlights for 2023
Restored 95.7% of 2019 capacity, measured in available seat kilometres (ASKs), with quarter 4 at 98.6% of 2019
Passenger unit revenue for the year was 8.2% higher than in 2022, with strong leisure traffic recovery and business traffic recovering more slowly. The premium leisure segment continued to perform very well
Non-fuel unit costs reduced by 4.4% versus 2022, driven by a passenger capacity increase and transformation initiatives, offsetting inflation and the investments we are making in our customer offering and our systems
Fuel unit cost was up 0.7% versus 2022, with effective fuel prices after hedging broadly unchanged from 2022 and the Group’s investment in more fuel-efficient aircraft partially offsetting increased costs of Emissions Trading Schemes
Profit after tax for the year of 2,655 million euros (2022: 431 million euros)
Outlook
Demand continues to be robust, with particular strength in leisure travel. We are currently 92% booked for Q1 2024 and 62% booked for H1 2024*, ahead of our position last year
IAG continue to invest in our core markets and in growing our global leadership positions. We plan to grow capacity (ASK by c.7% in 2024. In particular British Airways will continue to rebuild to its pre-COVID-19 long-haul capacity and Iberia to grow efficiently in the attractive and growing Latin American market
The company expect our non-fuel unit costs to increase slightly in 2024, as they invest in their businesses. Company’s ongoing transformation programme will help us to offset the impact of inflation, improve our customer proposition and support the delivery of world-class margins and returns over the medium term
The company expect to generate significant free cash flow during the year, prior to the benefit of any leasing transactions and with no additional pension or material debt maturity repayments this year. This is net of capital expenditure related to our investment plans of around 3.7 billion euros in 2024
Luis Gallego, IAG Chief Executive Officer, said: “In 2023, IAG more than doubled its operating margin and profits compared to 2022, generated excellent free cash flow and strengthened its balance sheet position, recovering capacity to close to pre-COVID-19 levels in most of its core markets.
“In 2024, we will execute on our strategy, building long-term value into the business. We will focus on strengthening our core airline businesses and on developing IAG Loyalty and our other asset-light growth opportunities, and we will do this while operating under a strong financial and sustainability framework. Our airlines operate in the largest and most attractive markets globally and we will continue to invest in our brands to transform the business, improve the customer experience and support the delivery of sustainable growth and world-class margins.
“I would like to thank all of the teams across the Group for their continued hard work and dedication to delivering our transformation plan.”
Senior management changes with new CEOs for Iberia and Vueling
Also, IAG announced changes to its senior management team effective from the beginning of April 2024.
Marco Sansavini has been appointed CEO and Chairman of Iberia, moving from his current role as CEO of Vueling.
Fernando Candela, who was appointed as interim CEO of Iberia in May 2023, will step down as CEO of Iberia. He will continue as CEO of Level.
Carolina Martinoli will become the CEO and Chair of Vueling, moving from her current role as IAG Chief People, Corporate Affairs and Sustainability Officer.
Marco Sansavini has been appointed CEO and Chairman of Iberia.
Announcing the changes on the same day as IAG’s Full Year results and during the analysts’ presentation in London, Luis Gallego commented: “Today IAG is announcing very good results for 2023, more than doubling operating margin and profits compared to 2022. With these changes to our Management Committee, we will continue to execute on our strategic priorities, to transform our businesses and to deliver sustainable growth and world-class margins.”
“It is a testament to the strength of the talent and experience of IAG’s senior management that we have been able to make these appointments internally, from leaders already on the Management Committee. This depth of experience in senior leadership is a benefit of our Group structure.”
“Both Marco and Carolina have already made a significant impact in IAG’s transformation and I know that they will continue to deliver results in their new positions. I would like to pay particular tribute to Fernando Candela who stepped in to take leadership of Iberia in May 2023, after having set-up the Group-wide transformation programme. At Iberia, he closed the handling agreement, which is important for the future of the company.
“Our Spanish businesses are both performing very well and are positioned to take advantage of growing traffic to Latin America from Europe as well as the valuable intra-European aviation market.”
Commenting on his new appointment, Marco Sansavini said: “The last three years have been the most intense and exciting of my professional life, so I want to thank the great team at Vueling for working to make the company stronger and more resilient than ever. It is an honour for me to take over from Fernando Candela at the helm of Iberia and I will dedicate myself, together with all the people who are part of this great company, to continuing to build its future.”
Commenting on her new appointment, Carolina Martinoli said: “Vueling is a vibrant and innovative airline and it will be my honour to succeed Marco as they enter their twentieth year as a company. I look forward to working with the talented team at Vueling as we build the next chapter of the airline. I would like to thank Luis for his support and guidance and my team at IAG for the progress we have made over the past three years.”
Carolina Martinoli will become the CEO and Chair of Vueling.
*The 2019 results include a reclassification to conform with the current year presentation for the Net gain on sale of property, plant and equipment, and a restatement for the treatment of administration costs associated with the Group’s defined benefit pension schemes.
The article IAG full year results 2023: Full year 2023 operating profit before exceptional items of 3,507m. euros first appeared in TravelDailyNews International.