Diving into Airlines

Piotr Bobula IAG GBS

Credit Matters VI – The Deep Dive Diving into Airlines

Airline industry work under regulations of The International Air Transport Association (IATA, 83 %) and regional agreements

IATA assures settlement and risk management tools

Carriers measure capacity by ASK and fight for Revenue per ASK (RASK)

Airlines create alliances (One World, Star Alliance) and Groups

Low-cost or New Generation Carriers (NGC) are growing

International (Consolidated) Airlines Group = IAG was funded in 2010

Care & Carry A (big) Question

What airlines are part of IAG?

a) British Airways, Iberia, Aer Lingus, Iberia Express, Vueling, IAG Cargo b) BOAC, Iberia, Iberia Express, Vueling, Level, Aer Lingus, Alitalia c) British Airways, Iberia, Aer Lingus, Iberia Express, Vueling, Level d) British Airways, Iberia, Aer Lingus, Qatar, Iberia Express, Vueling, Level

Care & Carry Numbers and facts

IAG - Not only Airlines: IAG Cargo, Avios, IAG GBS (Q4 2014), subsidiaries

Hub – based flight schedule model

2016 numbers: +100 M passengers flown to 279 destinations on 548 aircraft

2017: IAG started long-haul NGC (low-cost) LEVEL …and a new trend

… Group RASK for 2016: 7.56 for 298,431 ASK

Care & Carry Comparing European Verticals

Receivables Sales EBITDA Employees Eur th Eur th Eur th

Airlines 29,072,735 148,767,019 34,924,115 594,651 Pharma. & Medical Dev. 63,069,485 329,313,010 86,038,384 893,823

FMCG 11,193,047 137,249,593 9,252,732 275,462

Automotive 70,066,731 1,149,270,725 101,517,725 2,814,514

Total 173,401,998 176,460,0347 231,732,956 4,578,450

Top 50 EU companies as at Dec.2015 Data supplied by Bureau van Dijk Care & Carry Major Challenges

Acting at a thin profit margin and high risk our industry is facing:

- Dynamic political situation (government as one of major partners) - Terrorism (absolute need to secure passengers and cargo) - Fuel pricing - Law changes (e.g. EU directives on Passenger Compensation) - High competition and push for cost reduction (Low-cost carriers) - Exchange rates and fraud attempts

Care & Carry Bringing value

By 2 facts - of being setup set up and set up here IAG GBS is bringing:

Talents from a developed corporate labour market Cost savings by consolidation and efficiencies Change of thinking – aligned with New Generation members of the Group Seamless process from ticket booking until flow or compensated Quick reaction to ad hoc challenges Proof that GBS can be focused on high-value activities and absorb key roles

Care & Carry Airline industry AR structure

Pax Revenue Accounting * Revenue recognition => Billing Revenue (Sales) Accounting process

Cargo Revenue Future sales reporting Accounting Receivables GSA and GHA as intermediary * Travel Agents and businesses Engineering / MRO * GSA and GHA

IATA Clearing House (ICH) for Interline Settlement and Risk Management BSP and ARC for Pax Non- IATA CASS and CNS for Cargo agents

Credit Non-IATA and Credit Cards Card sales IATA ICH- BSP-CASS Care & Carry Collection Tips

3 tips from IAG GBS on Sales Ledger / Debt Management

USE the technology / tools you have – no excuse if these bring no stability (!)

Act proactively to be able to react when needed (structure above all)

Work with your Sales teams – you are to secure the same sales and the world is your area

Care & Carry Re-Act ! Case study 1

Top European sports team going for their game in the finals

Weekend flight cancelled in one of IAG hubs Clear prestige / PR case GBS mobilize Procurement, PtP * and Treasury Charter organized (contract, payment) Double - victory

* aka ‘The Dark Side’ Care & Carry Re-Act ! Case study 2

Recently 2nd biggest German airline filed for bankruptcy

Alert raised by one OpCo and channelled through GBS C2C team checked ICH and other balances on in-scope airlines Customer Master / Credit Block applied immediately Early warning sent to other Group airlines All internal teams advised to check pending billing (revenue recognition) Review further potential impact on Receivables (current risk, legal procedure)

Care & Carry A (big) Question part 2

What will be on your mind during your next air travel? (control question)

a) Tight conditions in managing airline business b) Your travel schedule and planned holidays c) How GBS can add value to the business in airlines d) Difference between Low-Cost (NGC) and Full-Service

Care & Carry Any questions?

Piotr Bobula IAG GBS Telephone: +48 512898369, +48 795510054 E-mail: [email protected] Source data supplied by Thank you