International Airlines Group (IAG) is converting 12 of the A320neo family options announced in August 2013 into firm orders for A320neos and A321neos. The Group is also ordering a further 25 A320neo family aircraft with the option to purchase 50 additional aircraft. IAG stated that the exact mix of A320neos and A321neos would be decided closer to the delivery dates.
The firm aircraft will be delivered between 2025 and 2028 and will be used to replace A320ceo family aircraft in the Group´s short-haul fleet. The fleet order is subject to approval by IAG shareholders.
"In line with our net zero commitment by 2050, we have announced the addition of 50 new Boeing 737s and 59 Airbus A320 Neo family aircraft subject to shareholder approval,” said Luis Gallego, IAG Chief Executive Officer. “These modern, fuel-efficient planes will see us over 60 per cent through our shorthaul fleet replacement by 2028. As we build back operational resilience, our strong portfolio of brands, ability to deliver efficiencies through our Group scale, strong capital discipline and our leadership position in sustainability will generate long term shareholder value.”
IAG reported an operating profit for the second quarter €293 million (€287 million before exceptional items) compared to an operating loss of €967 million in Q2 2021 (1,045 million before exceptional items). Second quarter profit after tax and exceptional items was €133 million compared to a loss of €981 million in the year-ago period. Profit after tax before exceptional items €127 million.
For the half year 2022, IAG posted an operating loss of €438 million compared to a loss of €2,035 million in H1 2021. IAG’s loss after tax and exceptional items for the half year was €654 million, compared to a loss of €2,048 million in H1 2021. The loss after tax before exceptional items was €683 million.
IAG maintains a strong liquidity cushion, which as June 30, 2022, increased to €13,489 million compared to €11,986 million at December 31, 2021. IAG has committed and undrawn general and aircraft financing facilities of €4,299 million, including an additional €200 million loan facility for Aer Lingus from the Ireland Strategic Investment Fund. Net debt at June 30, 2022 was down €688 million since December 31, 2021 to €10,979 million, reflecting the seasonal benefit on cash of bookings for travel in the second half of the year
IAG passenger capacity in the second quarter was 78% of 2019, up from 65% in the first quarter, driven primarily by IAG's key regions of European short haul (capacity 89% of 2019), North America (84%) and Latin America & Caribbean (81%). Second quarter passenger unit revenue increased by 6.4% compared to 2019, helping to offset lower capacity and higher fuel costs, driven by passenger revenue yield 10.6% higher than in 2019.
IAG’s load factor was 81.8% in the second quarter, 3.2 points lower than in 2019, but higher than 72.2% in quarter one. The airline group reports an almost full recovery in premium leisure revenue to 2019 levels, with the business channel revenue recovering to c.60% of 2019's level
IAG notes that British Airways’ capacity was limited to 69.1% in the second quarter due to “the challenging operational environment at Heathrow, but the airline group plans to increase that to c.75% in the third quarter.
IAG's overall passenger capacity plans for the remainder of 2022 are c.80% in the third quarter and c.85% in the fourth quarter, a reduction of 5% for the second half of the year compared to previous guidance, mainly due to the challenges at Heathrow. IAG says that full-year capacity is expected to be c.78% of 2019 (compared to c.80% previously), with North America close to 2019 capacity by the end of the year
IAG has increased its SAF (Sustainable Aviation Fuel) purchase commitments to $865 million (from $400 million previously) for the next 20 years, including a quarter of IAG's SAF target for 2030 (10% of total fuel needs).
“In the second quarter we returned to profit for the first time since the start of the pandemic following a strong recovery in demand across all our airlines,” said Gallego. "Our performance reflected a significant increase in capacity, load factor and yield compared to the first quarter. Premium leisure remains strong while business travel continues a steady recovery in all airlines.”
Gallego shared that Iberia and Vueling were the best performing carriers within the Group. “The Spanish domestic market and routes to Latin America continued to lead the recovery with demand exceeding 2019 levels last month,” he said. “Forward bookings show sustained strength and North Atlantic demand continues to grow following the lifting of the US COVID testing requirements in June. Although bookings into the fourth quarter are seasonally low at this time of year, we are seeing no signs of any weakness in demand.”
IAG expects pre-exceptional operating profit to be significantly improved for the third quarter and to be positive for full year 2022. Net cash flow from operating activities is expected to be significantly positive for the year, while net debt is expected to increase by year end compared with the end of 2021.