Demonstrating the Continued Strength and Flexibility of Our Business Model
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CHIEF EXECUTIVE OFFICER’S REVIEW Demonstrating the continued strength and flexibility of our business model Some problems were internal. The strike by British Airways pilots in September had an impact on our operations, our customers and finances. Nobody wants to see industrial action especially with a highly valued group like our pilots and I am glad the situation has been resolved. These are strong results and ones we will be able to look back on in a few years as very impressive. It confirms our view that we continue to make good progress and remain firmly placed among the leaders of Willie Walsh a much-improved industry. Group Chief Executive Air Europa We were really delighted that Iberia’s €1 billion acquisition of Air Europa was agreed during the year, subject to regulatory approvals. This will be a transformational deal for the two airlines and for IAG. Above all it will allow us to transform Madrid, turning it into a genuine global hub. It’s already a powerful hub for In many ways 2019 was a bittersweet Latin America, but our aim is to further Although our results year for International Airlines Group “ extend its reach into Africa and Asia. for 2019 were down but one where, once again, we proved the underlying strength of our business I think this opportunity to transform slightly, they are still model and our flexibility to respond to Madrid explains why the deal has been market conditions and challenges within so well received in Spain – by trade very impressive and the Group. unions, politicians, the airport itself and the travel industry. are proof that we Our results showed a 5.7 per cent decline in our operating profits to €3.3 billion, But for me it also demonstrates that remain firmly among which came despite our revenues climbing people now really understand how IAG works. the leaders in our to €25.5 billion. A number of external factors contributed When we make acquisitions we can point industry. to that result, including a sharp increase to a solid track record of achievement. We ” in our fuel bill to €6 billion and continuing can demonstrate what we have done with volatility in the oil price throughout the Vueling, for instance. We can show what year which we were able to partly offset we have achieved for Aer Lingus and for through our hedging policies. The general Dublin by turning that airport into an economic environment was also softer, exciting and expanding transatlantic hub, but we responded well, modifying our with huge benefits for consumers and the capacity where necessary to match Irish economy. People now know we underlying demand. honour our commitments, and often far exceed them. 2019 was also the second-worst year on record for air traffic control disruption in We expect to receive approval for the deal Europe, following an even worse situation in the second half of 2020. Our plan is to the year before. Our airlines coped well maintain the Air Europa brand initially, with this situation, especially Vueling giving ourselves time to decide how best which was particularly exposed to ATC to integrate our operations in Spain, where strikes in France. we will eventually have five brands, including Iberia, Iberia Express, Vueling and LEVEL. Although we think Spain is both a diverse and big enough market to support a multi-brand strategy, we need to really understand what the brands mean in different segments of the market. We continue to keep our eyes open for Net promoter scores Operational highlights other consolidation opportunities in I talked extensively about our use of Net British Airways celebrated its centenary Europe. One of our key strengths is the Promoter Scores (NPS) within our airlines during the year and it was great to see the fact that we have a dedicated team last year and this was one of the big airline proudly trace its roots right back to working on the Air Europa integration and positives in 2019. The NPS provides a 1919 when, under the name Air Transport plenty of extra capacity to scan the market fantastically sensitive tool to weigh up and and Travel, it launched its inaugural flight for further opportunities. balance financial and customer investment – with just one passenger on board – Although we see no immediate prospects decisions, providing a mass of highly between London and Paris. granular data. I’m glad to say all our airlines right now, it’s clear that 2020 will be a A highlight of the year was the saw their scores climb during the year. challenging year in Europe, even before we introduction of the Airbus A350 fitted take account of the impact of COVID-19. The increase was particularly strong at with our new Club Suite product, which Economic growth continues to soften, Vueling as the team responded to the ATC customers love. The airline is investing although not to the point where recession disruption last summer in an exceptional heavily in this product but retrofitting it to is likely, and some airlines will fail. That is manner, adjusting the network, providing our existing longhaul fleet will take time never nice to see, but it does provide us additional standby aircraft, and using data and we will have the challenge of having with the opportunity to grow into gaps in analytics to predict disruption and its two products – one new, one old – on our the market left by carriers that disappear. effects more accurately from patterns aircraft for a while. they’d seen in 2018. As a result customer Climate change Iberia is prospering following some five satisfaction rose significantly. Once again we took an industry-leading years of work to transform its brand, position on climate change, becoming the British Airways also performed strongly. operations, culture and financial first airline group to commit to net zero The NPS was affected by the pilot strike, performance. People often talk to me carbon emissions by 2050, through our but recovered quickly. We have seen a about how Iberia is so different to ten or Flightpath net zero programme unveiled great example of how the scores help us even five years ago. They can really see in October. to track customer reactions with British the difference. The product is great, Airways’ Euro Traveller product, where we and the service is excellent. It’s a This is a vitally important initiative for IAG introduced buy-on-board a few years fantastic achievement. and our industry. I am convinced we can ago in our economy cabin. Customers achieve that goal and am pleased that we Vueling has done an excellent job in were not happy at first, but, much as we have a 30-year programme, backed by dealing with the disruption I mentioned expected, there has been a shift in opinion tough targets, that is based on the hard earlier and has also had to overcome a and scores are now higher than before we science of keeping rises in global softening in key markets, particularly Italy made the change. temperatures to below 1.5 degrees Celsius. and France. It has done this well. Ten years ago the industry pledged to We measure reactions in all our cabins Aer Lingus continues to focus on halve CO emissions, but the science and, where we see things going wrong, 2 expanding its transatlantic services, helped makes it clear we must go much faster. move very quickly to make changes. We by the introduction of the long-range have now set new targets for 2020 and Powerful new aviation technologies are version of the Airbus A321. This aircraft is a 2021 and there are very clear investment on our side, as we demonstrated during game-changer. It allows Aer Lingus to plans in place for all the airlines to either the year on a promotional flight by one target cities on the eastern side of North maintain NPS at high levels or of British Airways’ new Airbus A350s America where there is unlikely to be to improve further. from London to Toronto. It allowed us to demand for a direct service with a larger compare fuel burn in this new aircraft with aircraft. Replacing one Airbus A330 with a Boeing 747 carrying an identical payload. two Airbus A321LRs also allows the airline It was reduced by a huge 38 per cent, to operate multiple frequencies, opening with the same reduction in emissions. up better connecting opportunities. A This represents a real step-change service to Minneapolis, St. Paul was in technology. launched in 2019. However, the planned service to Montreal was postponed because of delays to aircraft deliveries. Aer Lingus also continues to compete effectively with Ryanair on shorthaul routes, providing an efficient and profitable feed for flights across the Atlantic. CHIEF EXECUTIVE OFFICER’S REVIEW CONTINUED LEVEL – our low-cost longhaul brand Our cargo operations had a very difficult Digital transformation – had a mixed year. Its popular Barcelona year as world trade faltered and as the It’s vital we strengthen and transform to Buenos Aires service was performing trade war between China and the US our digital infrastructure and we were very exceptionally well, ahead of the intensified. There is still a disconnect fortunate to recruit John Gibbs as our new devaluation of the Argentinian peso. between supply and demand, made worse Chief Information Officer on the With a very strong point of sale in by the growing number of airlines making Management Committee. Argentina and with continuing strong hold space available for freight on wide Our airlines still rely on a range of demand locally, the financial performance body passenger aircraft.