IAG(ICAGY) - 2022 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company reported a pre-exceptional operating profit of €287 million, a significant improvement from a loss of over €1 million a year ago [3] - Revenue recovered to 88% of 2019 levels, nearly five times higher than the previous year [4] - Liquidity reached a record high of €13.5 billion at the end of June, up from €12.4 billion at the end of March [4] - Net debt decreased to €11 billion from €11.6 billion at the end of March [5] Business Line Data and Key Metrics Changes - All airlines within the group reported positive operating profits, including Vueling, Aer Lingus, and British Airways for the first time since the pandemic [3] - Passenger revenue at the IAG level recovered to 83%, with a 6% increase in passenger unit revenue driven by strong yield improvement [15] - Cargo revenue increased by approximately 50%, although impacted by COVID restrictions in China [15] Market Data and Key Metrics Changes - Demand remains strong, with bookings running at around 90% of 2019 levels in volume and 95% in revenue [5] - Premium leisure revenue has almost fully recovered to 2019 levels, while business channel bookings recovered to about 60% in volume and 70% in revenue [6] Company Strategy and Development Direction - The management is focused on transforming the business to emerge stronger from the crisis, enhancing customer propositions and operational resilience [40] - The company plans to invest in environmentally efficient aircraft to achieve net zero emissions by 2050 [30][55] - Capacity for 2022 has been slightly reduced to 78% of 2019 levels due to British Airways' operational adjustments [63] Management's Comments on Operating Environment and Future Outlook - Management does not see signs of weakness in demand despite inflationary and recessionary concerns [76] - The company expects to be profitable for the full year of 2022, with significantly positive operating cash flow [77] - Forward bookings remain strong, particularly in the leisure segment, while business travel is gradually recovering [75] Other Important Information - The company has made significant investments in fleet CapEx, with €2.1 billion in gross CapEx for the first half of the year [29] - The company is actively managing its debt maturity and liquidity position, with a focus on maintaining strong cash flow [34][36] Q&A Session Summary Question: Booking trends and load factors - Management indicated that revenue for the rest of the year is above 2019 levels, with load factors lagging but improving yields [81] - Load factors for premium and non-premium segments were reported, with premium slightly better than non-premium [82] Question: RASK trends and Heathrow operations - Management noted that RASK is expected to improve, with adjustments possible in capacity if needed [85] - Heathrow's operational performance is dependent on recruitment and collaboration with various stakeholders [86][87] Question: Employee costs and cost management - Management acknowledged rising employee costs due to inflation and labor shortages, with plans to improve efficiency [94] - The company is focused on procurement and cost management strategies to mitigate potential revenue declines [92] Question: Interest costs and net debt evolution - Management expects a reversal in net debt due to improved capacity and revenue, while managing interest costs through liquidity [99][100]