INTERNATIONAL AIRLINES GROUP
CONTENTS
Strategic Report
2Our highlights
3Chairman's letter
4Our network
6Chief Executive Officer's review
11Question and answers with the Chief Executive Officer
12Business model and strategy
14Our strategic priorities and key performance indicators
18British Airways
20Iberia
22Vueling
23Aer Lingus
24LEVEL
25IAG Platform
27Avios
28IAG Cargo
29Digital
30Risk management and principal risk factors
37Financial overview
38Financial review
49Regulatory environment
51Sustainability
Corporate Governance
72Chairman's introduction to corporate governance
74Board of Directors
76Corporate governance
88Report of the Audit and Compliance Committee
91Report of the Nominations Committee
94Report of the Safety Committee
95Report of the Remuneration Committee
Financial Statements
116Consolidated income statement
117Consolidated statement of other comprehensive income
118Consolidated balance sheet
119Consolidated cash flow statement
120Consolidated statement of changes in equity
122Notes to the consolidated financial statements
172Group investments
Statement of Directors' Responsibilities Independent Auditors' Report
Additional Information
183Alternative performance measures
186Glossary
188Operating and financial statistics
IBCShareholder information
Management Report
IAG is required to prepare a Management Report in accordance with Article 262 of the Spanish Companies Act and Article 49 of the Spanish Commercial Code. Pursuant to this legislation, this management report must contain a fair review of the progress of the business and the performance of the company, together with a description of the principal risks and uncertainties that it faces. In the preparation of this report, IAG has taken into consideration the guide published in 2013 by the Spanish National Securities Market Commission (CNMV) which establishes a number of recommendations for the preparation of management reports of listed companies.
The Management Report is composed by the following sections:
12 Business model and strategy
14 Our strategic priorities and key performance indicators
25 IAG Platform
30 Risk management and principal risk factors
37 Financial overview
38 Financial review
49 Regulatory environment
51 Sustainability
The Annual Corporate Governance Report is part of this Management Report but has been prepared separately.
This report has been file with the CNMV, together with the required statistical annex, in accordance with the CNMV Circular 2/2018, dated June 12. The Annual Corporate Governance Report and the statistical annex are also available on the company's website (www.iairgroup.com). The Non-Financial Information Statement in response to the requirements of Law 11/2018, of December 28, (amending the Commercial Code, the revised Capital Companies Law approved by Legislative Royal Decree 1/2010, of July 2, 2010 and Audit Law 22/2015, of July 20, 2015), is part of this Management Report and is available on the Company's website (www.iairgroup.com).
"IAG continues todeliverin a changing industry. We are responding to consumer needs,deliveron our financial targets, operate with sustainability at our heart and leverage technology to support our vision. We're confident that we will continue todeliverfor our customers and shareholders while investing in the future of our people and airlines. IAG is built to succeed and we hope you'll join us on our journey as we move towards greater achievements together."
Willie Walsh
Chief Executive Officer
Our highlights
Operating profit before exceptional items (€m)1
+€280 millionvly
2018 2017 2016
DividendsShare buybackSpecial dividend
Value returned to shareholders3+25%vly
2018
2017 2016
Return on Invested Capital1
IAG Platform
INTERNATIONAL AIRLINES GROUP
16.6%+0.9pts
Our financial performance | |||
Statutory results | 2018 | 20171 | Versus last year |
Total revenue | € 24,406m | € 22,880m | 6.7% |
Operating profit after exceptional items | € 3,678m | € 2,662m | 38.2% |
Profit after tax and exceptional items | € 2,897m | € 2,009m | 44.2% |
Basic earnings per share | 142.7€c | 95.2 €c | 49.9% |
Cash and interest-bearing deposits | € 6,274m | € 6,676m | (6.0%) |
Interest-bearing long-term borrowings | € 7,509m | € 7,331m | 2.4% |
Alternative performance measures2 | 2018 | 20171 | Versus last year |
Profit after tax before exceptional items | € 2,481m | € 2,231m | 11.2% |
Adjusted earnings per share | 117.7€c | 102.2 €c | 15.1% |
Adjusted net debt | € 8,355m | € 7,759m | 7.7% |
Adjusted net debt to EBITDAR | 1.6 | 1.5 | 0.1 pts |
1 2017 figures restated for new accounting standards IFRS 15 'Revenue from contracts with customers' and IFRS 9 'Financial instruments'.
2 Alternative performance measure calculations page 183.
3 Presented in the year they were proposed
4 Excluding LEVEL
For definitions see Glossary page 186.
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INTERNATIONAL AIRLINES GROUP
Annual Report and Accounts 2018
CHAIRMAN'S LETTER
A business model built for sustainable growth
Antonio Vázquez
"I'm delighted to welcome you to our latest Annual Report which charts another year of high achievement for all our operating airlines in an increasingly testing economic environment."
Corporate Governance
Chairman
Financial Statements
2018 was another year of strong growth for our business, despite significant economic and political challenges.
To report operating profits of €3,230 million before exceptional items (up by 9.5%) on revenues of €24.4 billion is a significant achievement at a time when oil prices were volatile and the geo-political environment uncertain.
Difficulties lie ahead on both these fronts, but we remain confident we have the right strategy, supported by a unique business model and a robust governance structure, to continue pursuing long-term growth.
Forecasts from the International Air Transport Association make good reading. They predict our industry's net profits will increase to $35.5 billion this year - the tenth consecutive year of profit for the industry, and, more importantly, the fifth in a row where returns will exceed the cost of capital, creating value for investors.
In some sectors, that wouldn't make a headline. In the airline industry, given its history, it is big news.
It matches our own vocation to deliver consistent returns to shareholders. We were delighted to return some €1 billion in dividends and share buy backs in 2018, for the second year running.
Brexit is certainly one of the biggest challenges we face. However, we remain confident a comprehensive air transportagreement between the UK and EU will be reached which allows flights to continue as normal.
Liberalisation in Europe has delivered so much, benefitting around 1 billion consumers and sustaining thousands of jobs each year. And IAG remains confident that its operating companies will comply with relevant ownership and control rules post Brexit.
Consolidation remains a prime motivation for IAG. It takes two different forms - full-blown M&A activity and, more frequently in recent times, acquiring distressed assets from airlines that fail. We have a business model ideally suited to pursuing both paths.
Joint business agreements are also crucial. We're very pleased that the agreement between British Airways, Iberia and LATAM received approval in Brazil, Uruguay and Colombia, promising real benefits for travellers between Europe and South America. Approval from the Chilean Free Competition Defence Court was also received in 2018, though this remains subject to final ruling by the Chilean Supreme Court following an appeal. These relationships have longevity. In February 2019 we celebrated the 20th anniversary of the oneworld alliance that includes both British Airways and Iberia.
This is IAG's eighth year. We remain a young company with a unique structure. To sustain our success we must apply thehighest standards of governance and the new UK Corporate Governance Code's determined aspirations are and will be a big focus for the Board. We're thinking deeply about how IAG - a parent company, overseeing a diversity of brands and cultures - can make a meaningful reality of the Code's demands, not least on stakeholder engagement.
We also remain firmly fixed on growing sustainably. We are on track to meet our 10 per cent carbon efficiency improvement target of 87.3gCO2/pkm by 2020 and are making big progress on reducing onboard waste.
More widely we are proud of the lead role we are playing in industry-wide action on carbon. Our sector is the first to agree a worldwide mechanism to reduce emissions and the global CORSIA offset and reduction programme, which we advocated for strongly, is an initiative few industries can match.
I hope in the following pages you can clearly see that IAG continues to grow and prosper, much of which is down to the terrific work done by people across the Group.
We are all conscious of the challenges we face, but very excited about the opportunities that lie ahead.
Antonio Vázquez
Chairman
Additional Information
www.iairgroup.com
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IAG - International Consolidated Airlines Group SA published this content on 05 March 2019 and is solely responsible for the information contained herein. Distributed by Public, unedited and unaltered, on 05 March 2019 11:59:09 UTC