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INTERNATIONAL
AIRLINES
GROUP
ANNUAL REPORT AND ACCOUNTS 2022
Connected by
our purpose
Contents
Strategic Report
1
Performance highlights
2
Connected by our purpose
6
Chairman’s letter
8
Chief Executive Officer’s review
12
Management Committee
14
Our business at a glance
16
Our business model
17
Our strategic priorities
21
Key performance indicators
24
Stakeholder engagement
32
Financial overview
34
Financial review
46
Regulatory environment
48
British Airways
50
Iberia
52
Vueling
54
Aer Lingus
56
IAG Loyalty
58
IAG Cargo
60
LEVEL
61
IAG GBS
62
IAG Tech
63
Sustainability
96
Risk management and
principal risk factors
Corporate governance
118
Chairman’s introduction to corporate
governance
120
Our Board of Directors
124
Corporate governance
140
Report of the Nominations
Committee
144
Report of the Safety, Environment
and Corporate Responsibility
Committee
147
Report of the Audit and Compliance
Committee
158
Report of the Remuneration
Committee
Financial Statements
186
Consolidated income statement
187
Consolidated statement of other
comprehensive income
188
Consolidated balance sheet
189
Consolidated cash flow statement
190
Consolidated statement of changes
inequity
192
Notes to the consolidated financial
statements
259
Alternative performance measures
265
Group investments
Statement of Directors’ responsibilities
Independent Auditors’ Report
Additional Information
280
Glossary
282
Fleet table
283
Operating and financial statistics
284
Shareholder 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
Group, 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 of
the following sections:
14
Our business at a glance
16
Our business model
17
Our strategic priorities
21
Key performance indicators
32
Financial overview
34
Financial review
46
Regulatory environment
63
Sustainability
96
Risk management and principal risk
factors
The Annual Corporate Governance Report
is part of this Management Report but has
been presented separately.
This report has been filed 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.
How to navigate this report:
Page symbol for links to pages
orsections within this report
Performance
highlights
Financial highlights
Total liquidity
€13,999 million
+€2,013 million vly
Operating profit before exceptional items
€1,225 million
+€4,195 million vly
Operating profit
€1,256 million
+€4,021 million vly
Net debt
€10,385 million
-€1,282 million vly
Capacity (ASKs % of 2019)
Non-financial highlights
NPS
18.4
-13.8 vly
Sustainable Aviation Fuel (SAF) use
(tonnes CO
2
saved) 2022
30,332 tonnes
Emissions intensity
83.5 gCO
2
/pkm
-11.7% vly
Females in senior management
34%
+1 pt vly
We are connected by our purpose. Our diversity inspires
our resilience and innovation as we return to profit for the
first time since aviation’s biggest crisis ever.
2020
2021 2022
33.5%
36.1%
78.0%
Net debt, Total liquidity and Females in senior management are calculated as at December 31; all other
measures are for the full year.
INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2022
1
Connected by
our purpose
Our role in the world is to connect people, businesses and
countries. We serve customers in many different markets
and regions around the world.
We celebrate the differences that make us who we are,
and our diversity inspires us to innovate.
Our goal is to perform in the long-term interests of our people,
customers, shareholders and society – knowing that success
in each reinforces the others.
We are inspired by the good we can do in the world, boosting
economies, supporting jobs and our supply chain.
And we create social value too. Travel is a window into other
cultures; it helps us understand other mindsets, other ways
of life, other beliefs.
Our approach is underpinned by our ambition to develop a
sustainable business – we were the first airline group worldwide
to commit to net zero emissions by 2050, and we are committed
to using 10 per cent Sustainable Aviation Fuel by 2030.
We are IAG. We are connected by our purpose.
2 INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2022
Strategic Report
“We always look forward to
welcoming our customers
and reconnecting them
with family and friends.”
Namsook Kirwan – Aer Lingus Check-in Agent
Bringing happiness to who
needit most
Dozens of volunteers from across
British Airways came together
tohelp send almost 200 seriously
ill children on the holiday of
alifetime, working with
Dreamflight, a UK-based charity
founded by a former British
Airways cabin crew member.
Investing in the next generation
IAG Tech developed 30 young
people through our graduate and
apprentice programmes this
year, shaping the next generation
of technology experts and
proudly winning the award for
Best Graduate Employer at
theWomen in Tech Employer
Awards 2022.
Helping to fulfil dreams
Twenty years ago, Santiago landed
in Madrid from Quito, Ecuador,
on an Iberia flight. He travelled
with his mother when he was seven
years old. Santiago always wanted
to work in the aviation industry.
Last year he joined Iberia as
anaeronautical engineer and,
asathank you to his mother
onMother's Day, the Iberia team
showed her the airline’s engineering
facilities at Madrid’s airport.
INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2022
3
Helping Ukraine
Iberia has brought nearly 300
Ukrainian refugees to Spain since
the conflict began. The airline
operated six charter flights in
partnership with NGOs and has
carried over 100 tonnes of
humanitarian aid for the Red
Cross and SEPLA Ayuda. This
was an unforgettable experience
for everyone in the Iberia team.
Recovering routes
Rebuilding its North American
network was a critical milestone
in Aer Lingus’ recovery.
Restarting popular routes such as
Los Angeles, Miami and Seattle,
and announcing a new route to
Cleveland, Ohio, brought a great
sense of excitement to the
airline’s employees.
“I’m proud to be part
of a team ensuring our
aircraft are ready to fly
for our customers.”
Tsungi Maruta – British Airways Certified
B Licensed Technician
Innovating to offset emissions
As part of the innovation platform
Hangar 51, Iberia partnered with
CHOOOSE, to test and launch a new
platform that will allow customers
to receive information about their
business travel emissions and offset
them. British Airways is offering
customers the chance to compensate
their flight emissions by purchasing
certified carbon removal credits
through the platform CO
2
llaborate
created in partnership with CHOOOSE.
4 INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2022
Strategic Report
CONNECTED BY OUR PURPOSE CONTINUED
“I’m excited to be part of
the team that achieved
a flight with 72% reduced
CO
2
emissions thanks
to a straighter trajectory
and the use of SAF”.
Jorge Franco – Vueling Air Traffic Operations Manager
Iberia’s new uniforms
June 1, 2022 was a very special
day for Iberia. Iberia launched
itsnew uniforms, a new in-flight
service, new routes to
Washington and Dallas, restarted
flights to San Francisco, and
operated all these flights with
ablend of SAF.
The Wine Flyer
IAG Loyalty launched a
completely new wine business
venture in just five months
including technology platforms,
customer services, warehouse
and logistics. This new way to
reward our customers has been
possible using agile working
methods and modern delivery
approaches.
Collaborating with charity
Working with several charity
partners such as UNICEF, Red
Cross and Project Hope, IAG
Cargo donated the capacity to
transport 159 tonnes of
emergency aid for the relief
efforts in Ukraine and Pakistan.
INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2022
5
Rebuilding with purpose
“The pandemic has taught us that
society depends on air travel. It is a
vital creator of wealth, jobs and
economic growth.”
Javier Ferrán
Chairman
The last three years have been a reminder
that aviation and its ability to bring
people together, from far across the
world, is a cause for celebration. Whether
through reuniting family members or
exploring new countries, enjoying a
well-deserved holiday or by connecting
businesses and fostering economic
growth, we contribute to making people’s
lives richer and more joyful.
The COVID-19 pandemic has taught us
that society depends on air travel. It is
avital creator of wealth, jobs and
economic growth.
I am pleased to report that IAG has
continued to restore capacity to do more
of what we are designed to do – to fly
andto connect people, businesses and
countries around the world.
In the second half of the year, pent-up
demand drew more people back to the
skies which ensured we returned to
profitability in 2022 for the first time
inthree years.
6 INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2022
Strategic Report
CHAIRMAN’S LETTER
On behalf of the Board, I would like to
thank all our people for the extraordinary
contribution they have made to achieving
this result; for their personal sacrifices and
resilience and everything that they have
done to strengthen IAG over the past year.
I would like to thank our shareholders
andfinance providers too for their support
aswe continue to rebuild financially with
afocus on delivering stronger returns
inthe future.
Aviation is a force for good
We believe that our impact on society
must go beyond our economic
contribution. The success of our Group
depends on us playing our role in tackling
broader global issues such as climate
change, and fostering a diverse and
inclusive workplace. On the latter issue, we
are pleased that 45 per cent of our Board
members are female. But we know there is
more to be done to further embed
diversity throughout our Group. Last year,
we set a new target of having at least 40
per cent of senior leadership roles held by
women by 2025, and we are on track to
deliver this.
Sustainability and contributing to society
remained a core focus for IAG in 2022. For
our customers, their choice should not be
whether to fly or not, but about choosing
the most sustainable way of doing so.
That is why we have continued to invest
indecarbonising, despite the challenges
ofrecent years. As we rebuilt our business
in2022, we did so with the future in mind.
We are among the leaders in this industry’s
efforts to transition to a low-carbon future
and will continue playing our part in
tackling climate change.
Over the course of 2022, we signed
agreements with Airbus and Boeing to
acquire 87 new aircraft which will reduce
our emissions by up to 20 per cent and we
thank our shareholders for their approval.
We have also increased our investment in
Sustainable Aviation Fuels (SAF) to power
our fleet in a way that will reduce its
impact on the environment. This is part
ofour commitment to meet at least 10 per
cent of our fuel needs with SAF by 2030.
We estimate that this will cut at least two
million tonnes of CO
2
in 2030 – the
equivalent to taking one million petrol
ordiesel cars off the road, per year.
Challenges and transformation
In the last few years, we’ve become
accustomed to managing unexpected
events and the last twelve months have
brought new ones both politically and
economically. Against a difficult
macroeconomic backdrop, we’ve also
faced our own difficulties in the form of
technology performance, balancing our
resources and industrial action. Teams
across the Group have shown dedication
and commitment in working to resolve
these issues and there are learnings
they’ve been able to draw on to inform
future business resilience plans.
Looking to the longer term, we are
investing in new technologies that have
the potential to radically transform the
way we fly in the future – such as
hydrogen power and electric aircraft.
While a long journey remains for these
innovative technologies, we will stay
focused on our sustainability agenda.
The outlook
There are uncertainties in the global
economic outlook. Around the world,
sharp increases in commodity and energy
prices have impacted on household
budgets as well as created headwinds for
all industries.
We have been working hard to emerge
stronger, transforming our business
tomake it more efficient and sharing best
practices so that we are well prepared
toface these challenges. Just as we always
have, we help fund, support and scale
innovations in travel and aviation. We are
always listening to and engaging with our
stakeholders which include our customers
and our people. Our relationships with
them, as well as the partnerships we have
with governments, start-ups, suppliers,
manufacturers and others in the industry
ecosystem will be the key to our future
success.
More than any other industry we will
always have to adapt and evolve at pace.
As we set out in these pages, we have
shown it is possible to do so profitably
andsustainably, with the interests of all
ourstakeholders in mind.
Despite the obstacles we’ve faced in
thelast year, these results give us reasons
to feel positive, and we have every
confidence that we will only get stronger.
Javier Ferrán
Chairman
INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2022 7
Emerging stronger
“This year we returned to profitability
with the ability to be even better-
placed to deliver on our purpose.”
Luis Gallego
Chief Executive Officer
In 2022, we worked hard to transform
ourbusiness, ensuring we are emerging
stronger from the biggest crisis in modern
aviation’s history.
I am pleased that the actions we took
tostrengthen our foundations have stood
us in good stead. This year we returned
toprofitability with the ability to be even
better-placed to deliver on our purpose,
and much of that is as a result of the
resilience and commitment shown by our
people. So I’d like to start by thanking all
our employees for helping us reach this
incredible milestone in our recovery.
Fulfilling our purpose
What we do matters. Our purpose is to
connect people, businesses and countries,
maximising sustainable value creation for
our shareholders and all our stakeholders.
8 INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2022
Strategic Report
CHIEF EXECUTIVE OFFICER’S REVIEW
As we continue to rebuild capacity, we do
so with a focus on ensuring our customers
enjoy the best possible experience when
flying with us. In 2022, we continued
toinvest in new aircraft that will enhance
ourservices. We have also launched and
extended partnerships, opening up new
routes and destinations for our passengers.
We are in the process of refreshing our
premium and economy cabins’ offerings
across our airlines while we continue to
invest in the digitalisation of our business,
for instance, by introducing facial
recognition to speed up services.
Our financial framework is designed to
deliver strong returns for our shareholders.
As we look ahead, we will focus on cash
generation and growing our earnings in
order to return to strong margins while
maintaining disciplined investment. We will
achieve this by balancing investing in our
people, customers’ experience, and
reducing our leverage.
Accelerating the transition to a net zero
carbon economy will require us to invest
more in new technologies. We are already
one of the largest buyers of SAF in the
world which will enable us to cut our
emissions in the short-term. We would like
to go further, but we are constrained by
the lack of supply.
So far, we have committed to the
equivalent of $865 million in future SAF
purchases and investments based on
assumed energy prices, including funding
five projects in the UK and US. Doing
sowill not only enhance the industry’s
emissions reductions, it will create
sustainable jobs and wealth.
SAF, low-carbon technologies including
hydrogen-powered aircraft and carbon
removal are areas in which we can make
progress by working together with
governments, manufacturers and fuel
suppliers. With the right policy support
from the EU and UK governments, 30 SAF
plants could be built across Europe over
the next eight years, saving seven million
tonnes of CO
2
annually by 2030 and
creating thousands of jobs.
This is our opportunity. Flying has been
animmense force for good in the world
and has opened up global travel like no
other force in history. Now, the UK and
EUhave an opportunity to be true leaders
on the SAF agenda.
Our approach
Our business is based on three pillars:
ourpeople, our customers and financial
performance, underpinned by
sustainability. Only by focusing
onallthreewill we succeed in creating
atrulysustainable business for all our
stakeholders.
Our people play a central role in everything
we do. That is why we place such a priority
on maintaining a diverse and inclusive
place to work; one where our employees
feel valued, and their contribution is fairly
recognised and rewarded. We are
cultivating a culture that allows every
individual to grow and give the best
ofthemselves. And we are making
progress. We ended the year at 34 per
cent of women in senior leadership roles,
up from 33 per cent in 2021, thanks to
aGroup-wide effort.
And we are already delivering on our plans.
We achieved a strong performance,
returning to profitability from the second
quarter of 2022. At a Group level, we
reported an operating profit of
€1,225 million before exceptional items,
animprovement on the €2,970 million
operating loss recorded in 2021. Revenue
for the Group was approaching pre-
pandemic levels despite total capacity
being at 78 per cent of 2019, which is the
reference year as it was before the
COVID-19 pandemic.
The improved financial position means
wewere able to generate significant levels
of cash, contributing to strong liquidity of
€14 billion and the opportunity to reinvest
in our business with the addition of 27 new
aircraft in 2022. We have also reached
anagreement with the trustees of British
Airways’ main pension scheme (NAPS);
based on the latest funding position no
contributions are currently required from
the airline.
During an Extraordinary Shareholders’ Meeting held in October, IAG’s shareholders
approved the purchase of 50 Boeing 737 aircraft and 37 Airbus A320neo family
aircraft. These latest-generation aircraft are more fuel-efficient than those they
willreplace and are in line with IAG’s commitment to achieving net zero carbon
emissions by 2050.
INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2022 9
At an individual airline level, Spanish
capacity has been almost completely
restored. Vueling reached 98 per cent
ofits 2019 capacity and Iberia 87 per cent.
British Airways focused on restoring
capacity throughout the year but faced
challenges with multiple disruptions to the
operation. Even though Aer Lingus had
toface the late lifting of the travel
restrictions in Ireland, its capacity was
almost fully restored to 2019 levels in the
last quarter of the year. All airlines returned
to profitability in 2022.
Headwinds
Scaling up the operation rapidly to meet
high levels of pent-up demand was a
challenge for the entire industry
ecosystem. As a consequence, our
customers faced disruption in some of our
hubs. However, stability is gradually
returning to the sector which should
enable a better and more consistent
customer experience in 2023.
We also faced headwinds in relation
torising fuel costs, the impact of the war
inUkraine, inflation and a rise in the cost
ofliving.
More recently, we’ve been responding
tothe news that China would be reopening
its borders. We are also cognisant that
anynew COVID-19 variants of concern
could create significant aftershocks, but
we can say with confidence that our
experience in dealing with the pandemic,
including working closely with regulators
and governments around the world, has
allowed us to lay the solid foundations
needed to react and adapt to any new
changes to global travel.
Emerging stronger
As we build back from the pandemic,
weremain in a strong position to deliver
on our strategy.
The reason is simple: we have a proven
business model and investment case.
Ourunique structure enables us to capture
revenue and cost synergies while
maximising efficiencies and allocating
ourcapital in a disciplined way. The
acquisition of Air Europa, which is agreed
subject to regulatory and other approvals
which could take around 18 months, will
allow us to generate additional value for
the Group, while helping Madrid expand as
a hub. This acquisition will expand IAG’s
“We have a portfolio of leading brands,
catering to distinct customers and
geographies – and most importantly
we have talent.”
portfolio of leading airlines, each of which
cater to distinct customers and
geographies and are accountable for
delivering to their stakeholders – and will
further add to the talent within our
workforce.
People choose to work for IAG because
ofits reputation as a leader and innovator,
and that allows us to attract and retain the
very best people to our business.
Our airlines are leaders in key European
hubs, offering connectivity to hundreds
ofdestinations around the world. We can
leverage the successful consolidation track
record of our global leadership positions
inEurope, the North Atlantic and Latin
America to take advantage of market
opportunities.
Transformation is an imperative and we
are looking at ways to do things
differently. No stone will be left unturned.
In particular, we keep our technology,
digital estate and capabilities under
constant review. Innovation is critical to
drive efficiency as demand recovers and
competition intensifies coming out of the
crisis. This is underpinned by our ambition
to develop a truly sustainable business.
In 2022, we have continued to innovate
and transform our business to take IAG to
its full potential by sharing best practices
and making decisions in the best interests
of the Group. British Airways’ and Vueling’s
new operation at Gatwick was launched in
2021 and has proved a success. Aer Lingus’
transatlantic flights from Manchester,
which started in late 2021, have also been
well received. Vueling’s services at Orly
airport in Paris continue to go from
strength to strength, while our new
maintenance model at Barcelona is
providing efficiencies.
In adjacent businesses too we have taken
the opportunity to rebuild for the benefit
of customers. At IAG Loyalty, new
customers enrolments were 25 per cent
higher in 2022 compared with 2019.
Arecord number of people are collecting
Avios – our reward currency – and we
continue to expand our partnerships to
give customers more of what they want.
In2022, we reached an agreement with
Qatar Airways enabling its customers to
earn Avios, thereby extending the global
reach of Avios as a reward currency.
It has been a strong year for IAG Cargo
too. Revenues reached €1.6 billion, similar
to those of 2021 and 45 per cent higher
than in 2019.
We know that there are uncertainties and,
as we rebuild from the pandemic, other
macroeconomic challenges remain.
Thatiswhy we will continue to transform
theGroup to become more efficient.
Outlook and conclusion
As we build back our operational resilience,
we are confident in our strengths as a
Group: first, a portfolio of leading airline
brands; second, leading positions in our
key markets and hubs serving distinct
customers; and third, the flexibility
afforded by IAG to drive operational
efficiency and innovation.
These will enable us to return to pre-
pandemic levels of profit and fulfil the
ambitions of our strategy: to create
long-term sustainable value for our
stakeholders.
I want to thank our people for all their hard
work and achievements in 2022 and look
forward to all we can achieve together
in2023.
Luis Gallego
Chief Executive Officer
10 INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2022
Strategic Report
CHIEF EXECUTIVE OFFICER’S REVIEW CONTINUED
A revolution in the air
This in-person and online event provided
a comprehensive overview of the
Group’s sustainability, diversity and
inclusion strategies. This included
initiatives on Sustainable Aviation Fuels
and new technologies that are helping
todecarbonise aviation. The event
showcased expert panels and video
presentations to explain the Group’s
targets and goals, and the progress
itismaking towards these.
IAG demonstrated how it continues
touse its scale, influence and track
record to not only transform its business
but drive the system-wide change
required to develop a truly sustainable
aviation industry.
Highlights:
• First airline group to commit to net
zero emissions by 2050, and to then
extend this commitment to Scope 3
emissions
• First European airline group to commit
to 10 per cent SAF by 2030
• Three years of Leadership grades
(A/A-) in CDP climate rankings and
the joint highest-ranked airline group
in TPI ratings.
Focused on leading the industry towards
net zero emissions by 2050
Aircraft modernisation: Replacing around
192 aircraft in the next five years with new
aircraft that are up to 20 per cent more
fuel efficient. Investment in innovators
such as ZeroAvia to accelerate
development of hydrogen-powered
aircraft.
Sustainable Aviation Fuel: 10 per cent SAF
by 2030 will save as much carbon as
taking one million cars off the road a year.
IAG’s SAF commitment, based on assumed
energy prices, is equivalent to $865 million
in future SAF purchasing and investments.
Offsetting: Support for strengthening
theglobal CORSIA scheme to reduce
netemissions. Contributions to our
independently verified offsetting providers
saw a reduction of over 225,000 tonnes of
CO
2
in 2022.
Carbon removal: Publishing our first
removals roadmap, building industry
support, and research and investment in
innovative carbon capture and removal
opportunities.
In 2022, IAG hosted its first ESG day for investors and analysts
inLondon.
Guided by a clear flightpath
to net zero
2022 emissions (tonnes CO
2
e)
Scope 2
12,000
0.05%
Scope 3
5,481,000
20.57
%
Scope 1
21,155,000
79.38%
Scope 1
Scope 2
Scope 3
Total
26,648,000
100%
IAG roadmap to net zero (Scope 1)
We remain on track for our 2025
and2030 emissions targets
2050
20452040203520302025
Million tonnes CO
2
(MT)
2015
2020
Demand growth
Gross emissions
SAF
New aircraft and operations
Net emissions
ETS/CORSIA and offsets
2019 baseline emissions IAG net zero target
Carbon removals
8
31
27
Focused on growing a diverse and
inclusive workforce
IAG has a target of 40 per cent women in
senior executive positions by 2025, and
we end the year at 34 per cent thanks to
the efforts of Group airlines implementing
a range of initiatives to support diversity
and inclusion. These include:
• Reviewing our recruitment processes
to ensure diverse shortlists and
interview panels;
• Mentoring and networking
opportunities for women and ethnic
minority employees; and
• Educational programmes to diversify
the talent pool of those considering
careers in aviation.
INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2022 11
Working together to
deliver our purpose
Nicholas Cadbury
Chief Financial Officer and Interim
Non-Executive Chairman of Cargo
Luis Gallego
Group Chief Executive Officer
Sarah Clements
General Counsel
John Gibbs
Chief Information Officer
The IAG
Management
Committee, led
by Luis Gallego,
is responsible
forthe overall
execution and
delivery of the
strategy of the
Group.
For further information
visit the IAG website
Lynne Embleton
Chairman and Chief
Executive Officer
of Aer Lingus
Javier Sánchez-Prieto
Chairman and Chief
Executive Officer
of Iberia
12 INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2022
Strategic Report
MANAGEMENT COMMITTEE
Julio Rodrigues
Interim Chief
Strategy Officer
Marco Sansavini
Chairman and Chief
Executive Officer of Vueling
Carolina Martinoli
Chief People, Corporate
Affairs and Sustainability Officer
Sean Doyle
Chairman and Chief
Executive Officer
of British Airways
Adam Daniels
Chairman and Chief Executive
Officer of IAG Loyalty
Fernando Candela
Chief Transformation
Officer and Chief Executive
Officer of LEVEL
INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2022 13
We deliver for our
stakeholders and society
Who we are
We are an international airline group, with leading airlines in Spain, the UK and Ireland,
anda series of best-in-class non-airline businesses within our central platform that drive
efficiency and create additional sources of revenue for IAG. Our purpose in the world
istoconnect people, businesses and countries, and we hold innovation, commitment,
carefor people, responsibility, pragmatism, execution, ambition and resilience as key
values that enable us to fulfil our purpose.
Airline operating companies Non-airline businesses and central platform
For more information see the operating
companies’ sections
We have a portfolio of world-class brands and operations
14 INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2022
Strategic Report
OUR BUSINESS AT A GLANCE
Our stakeholders
IAG has the aim to be a force for good
where we operate and, in doing so, create
value for all our stakeholders. This starts
with fostering a culture that makes our
employees feel valued, focusing on
diversity and inclusion and providing our
employees with options to develop within
the Group. Our employees play a critical
role in delivering the service our customers
expect, which is in turn the main driver of
the Group’s ability to create value for all
our stakeholders. Our shareholders, lenders
and other financial stakeholders, and the
broader capital markets are also essential
in supporting us in the delivery of our
purpose, business plans and strategy. In
addition to our employees, customers,
lenders and shareholders, collaboration
with the broader industry, including our
suppliers and regulators, is key to ensuring
that we maintain the high standards our
customers expect and that policy makers
understand the impact of their decisions
on our businesses and customers.
For more information see the Stakeholder
engagement section
EmployeesCustomers
Suppliers
Governments
and regulators
Shareholders,
lenders and other
financial
stakeholders
Where we operate
Total fleet
558
Total employees
66,044
We are committed to sustainable aviation
Our commitment to sustainability underpins
our strategy – it is an important part of how
we do business. We remain committed to
using 10 per cent SAF by 2030 and to
reach the goal of net zero CO
2
emissions for
our Group and its supply chain by 2050. As
a Group, we have clear processes in place
to drive decision-making on the most
important elements driving our
sustainability strategy: use of SAF and fleet
modernisation and efficiency. We will also
continue to prioritise other key
sustainability issues including waste
management, stakeholder engagement and
employee engagement and welfare.
For more information see the
Sustainability section
Africa, Middle
East & South Asia
11.6
Asia Pacific
1.2
North America
31.6
Domestic & Europe
36.6
Latin America
& Caribbean
19.0
ASKs (% of IAG 2022 network)
INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2022 15
Our purpose is fulfilled
with a unique model
We were formed with a model based around consolidation, synergy capture,
leadership inour core markets and financial performance.
Airline operating companies
Define and execute commercial strategy,
network strategy and planning
Ensure operational
efficiency
Define product strategy for target
customer segments
Deep understanding of customer and
competitive environment
Standalone profit centres
and independent credit identities
Individual brands, cultural identities
and management teams
Central platform
Provides common services and allow the Group’s operations to benefit
from scale and world-class expertise
Principles
Operating companies’
execution and accountability
Light structure at the centre
for central functions and
intra-Group coordination
Central execution only where
it provides additional value
Corporate parent
Sets long-term strategy
for the Group
Defines portfolio, M&A
and partnerships
Sets targets, coordinates
transformation plans across
IAG and oversees performance
Allocates capital and
secures funding
Drives ESG agenda
for the Group
Manages investor
relations
Facilitates best
practice sharing
Defines, drives and monitors
response to external shocks
For more information see
the operating companies’ pages
Our operating model
IAG creates value through a unique model
that enables our airlines to perform in the
long-term interests of our customers,
The Group has a unique business model
within the airline industry, based on a light
structure at the centre, agile, empowered
and focused airline operating companies
accountable for their results, and a central
platform providing a competitive
advantage to our airlines through scale
and world-class expertise.
IAG, as the parent company, actively
engages and works collaboratively with its
portfolio of operating companies, sharing
best practices and talent, overseeing
intra-Group coordination and managing
central functions that drive synergies and
value to the Group. Its independence from
the operating companies enables IAG to
implement a long-term strategy for the
Group that is aligned with our purpose and
values, as well as set performance targets
for the operating companies, track their
progress and efficiently allocate capital
within the Group. Our model also allows
the Group to more effectively take part in
industry consolidation, with IAG ensuring
inorganic options are aligned with our
strategy and providing a central platform
to the benefit of new operating companies
joining the Group.
The operating companies, with their
different brand identities and customised
business models, are in turn empowered
toexecute their strategies and are fully
accountable for their financial results.
TheGroup’s structure allows our brands
tofocus their efforts on their addressable
markets, customer proposition, cultural
identities, commercial strategy and their
industrial relations, while its scale supports
innovation and investment in new
products and services to enhance our
operating companies' customer
experience.
The airline portfolio sits on the Group’s
central platform, which drives efficiency
and simplicity across the operating
companies whilst creating additional
sources of revenues for IAG. The IAG
central platform allows the Group to be at
the forefront of innovation and
sustainability in the airline industry,
supporting and scaling top emerging
technologies in travel and aviation.
people, shareholders and society –
knowing that success in each reinforces
the others.
16 INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2022
Strategic Report
OUR BUSINESS MODEL
Efficiency
and innovation
Unrivalled
customer
proposition
Value-
accretive and
sustainable
growth
U
n
d
e
r
p
i
n
n
e
d
b
y
s
u
s
t
a
i
n
a
b
i
l
i
t
y
Strengthening
a portfolio of
world-class
brands and
operations
Growing
global
leadership
positions
3
Enhancing
IAG’s central
platform
1
2
H
o
w
w
e
c
r
e
a
t
e
v
a
l
u
e
O
u
r
s
t
r
a
t
e
g
i
c
p
r
i
o
r
i
t
i
e
s
How we create value
Unrivalled customer proposition
• Ensure our operating companies
collectively deliver an unrivalled
proposition able to fulfil customers’
needs across the full spectrum of travel
occasions
• Lead industry consolidation and develop
organic options to differentiate the
Group from its competitors and ensure
customer demands are met
• Deepen customer-centricity to win a
disproportionate share in each customer
segment
Value-accretive and sustainable growth
• Pursue value-accretive organic and
inorganic growth to reinforce existing or
pursue new leadership positions in our
priority markets
• Attract and develop the best people in
the industry
• Set the industry standard for
environmental and societal stewardship,
whilst always prioritising the safety and
security of our customers and
employees
Efficiency and innovation
• Reduce costs and improve efficiency
by leveraging Group scale and synergy
opportunities
• Engage in Group-wide innovation and
digital mindset to enhance productivity
and best serve our customers
• Promote a culture of high operational
efficiency throughout our portfolio of
operating companies, and leverage the
platform to drive synergies and reduce
costs
Our strategic priorities
Tracking our performance
We use a combination of financial and non-financial metrics
to measure the performance and progress of our strategy:
Financial KPIs: see the Key
performance indicators section
Employees: see the
Sustainability section
Customer NPS: see the Key
performance indicators section
Environment: see the
Sustainability section
Our strategic priorities to
create sustainable value
INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2022 17
Strengthening a portfolio
ofworld-class brands
andoperations
Our activity in 2022
Following the reopening of many international markets
during the second half of 2021, 2022 has been
characterised by strong economic volatility, with high
inflation levels across western nations fuelled by the war
in Ukraine and supply chain disruptions after the
pandemic. The Group’s portfolio of brands has continued
to support local communities in 2022, with British
Airways, Iberia, Vueling and IAG Cargo partnering with
Project Hope and other charities to send 125 tonnes of
humanitarian aid to Ukraine. IAG Cargo, alongside its
sister company British Airways, also offered the free
transportation of 34 tonnes of vital emergency aid to
Pakistan, in the wake of a devastating flood crisis.
Over 2022, air travel has seen a rapid recovery from 2021
levels, which together with supply chain and resource
limitations has led to operational issues across many
airlines and airports around the world, leading to frequent
passenger disruption. Within our airline portfolio, Iberia
and Vueling were able to successfully manage recovery,
with operational performance returning to close to 2019
levels by the end of the year. British Airways had
exposure to some operational challenges during the first
half of 2022, due to staff shortages, COVID-19 check
requirements and terminal capacity limitations at London
Heathrow linked, among other reasons, to an airport-
imposed daily passenger cap during the summer.
However, progress has been made throughout the year
on building operational resilience at British Airways, with
accelerated recruitment and a more agile and
coordinated approach to capacity planning in
collaboration with London Heathrow airport, leading to
an improved punctuality. Our other operating companies
have also improved their disruption management
processes. Iberia, for example, continued to improve its
digital capabilities for passengers that have been
disrupted by cancellations or delays.
Digitalisation plays a key role in how our airlines have
improved customer experience in 2022. During the year,
Vueling launched facial recognition at self-bag drop and
for security access and aircraft boarding, and tested
self-service kiosks at London Gatwick airport.
Iberia partnered with Trip.com group to implement a
shopping engine solution for the New Distribution
Capability air ticket sales channel, offering travellers
additional fare and ancillary options on Iberia’s long and
shorthaul flights. Our brands also continued to improve
the customer experience by enhancing our product
across all stages of the journey. For example, Iberia
enhanced its North and South American lounges while
extending the opening times in its North American ones;
Aer Lingus introduced the Airbus A320neo into its fleet,
providing passengers with an enhanced seat product on
shorthaul, whilst British Airways continued to roll-out its
Club Suite product into its longhaul fleet and restored the
‘Full Club Suite’ meal service. Catering has also been
improved, with Aer Lingus refreshing its longhaul
business cabin food offering and British Airways
refreshing its catering in all longhaul cabins and Club
Europe on shorthaul flights. Additionally, British Airways
and Iberia co-located all flights at New York, JFK with
American Airlines at Terminal 8 from December, which
will considerably enhance the journey for passengers
transferring to an American Airlines flight.
IAG Loyalty continued to enhance its offering to
customers during 2022, for instance, relaunching the
British Airways prepaid Mastercard and launching an
Avios purchase subscription model in British Airways and
a co-branded credit card with Barclays.
Our priorities for 2023
The Group will ensure our businesses can deliver an
unrivalled customer proposition that adapts to meet
changing customer expectations in the context of air
travel recovery after the COVID-19 pandemic. IAG will
remain competitive in its priority customer demand
spaces by continuing to evolve the operating companies’
products and services to best deliver against the needs
of their customers. As an example, Iberia expects to start
introducing new business cabin suites with sliding doors
on its Airbus A350 fleet from December 2023. We will
also focus on further improving operational resilience at
British Airways and a strong emphasis will continue to be
placed on digitalisation across the Group, including
further customer-focused improvements to the digital
experience.
Unrivalled customer
proposition
Strategic
priority
How we
create value
Our
performance
1. Strengthening a portfolio
of world-class brands
and operations
18 INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2022
Strategic Report
OUR STRATEGIC PRIORITIES
Our activity in 2022
In 2022, as airlines across the world rapidly ramped up
capacity, the Group put a special emphasis on
maintaining our existing leadership positions in our home
cities of London, Madrid, Barcelona and Dublin, and our
priority markets. We will continue exploring value-
creating organic growth and consolidation opportunities
where they make sense.
With a strong demand recovery during the year, Vueling,
Aer Lingus and Iberia managed to restore capacity
relatively quickly, reaching higher than or close to 2019
capacity levels in the last quarter of the year, whilst
British Airways’ recovery was slightly slower in 2022 as a
consequence of operational challenges faced by the
airline. Despite ongoing restrictions limiting our recovery
in regions like Asia, our operating companies managed to
also capitalise on a strong yield environment and drive an
even faster revenue recovery. In this context, our airlines
have been able to capture new strategic growth
opportunities organically. For example, British Airways
resumed its operations to key global cities, such as Tokyo
and Hong Kong, as travel restrictions lifted or softened,
whilst Vueling set up a new base at London Gatwick
airport where the low-cost airline’s Spanish network
doubled in the summer with five additional routes. British
Airways also launched its Gatwick-based, low-cost
Euroflyer subsidiary in March, with 35 initial destinations
on offer that increased with the relaunch of three winter
seasonal destinations. Aer Lingus, in turn, announced the
launch of new routes to Cleveland and Hartford in the US
for summer 2023.
IAG’s operating companies have continued to strengthen
their relationships with our partners this year. Aer Lingus
progressed with its integration into the Atlantic Joint
Business, launching a new codeshare agreement with
American Airlines at the beginning of the year to give
customers more choice between Europe and North
America. The Group also continued to expand its
relationship with Qatar Airways, with the expansion of the
Joint Business with British Airways creating the world’s
largest airline joint business in terms of countries covered.
The Joint Business now covers a total of 185 destinations
across 60 countries, offering more access for customers
between destinations in Europe, Africa, Asia, Oceania and
the Middle East, and facilitating seamless connection trips
via London and Doha. Additionally, IAG Loyalty and
Qatar Airways also launched a partnership early in the
year, with the Doha-based airline adopting Avios as its
new rewards currency for Privilege Club members,
increasing Avios’ global reach, further enhancing
customer choice and creating the conditions to expand
the airlines’ frequent flyer programmes through additional
partnerships.
In 2019, the Group announced plans to acquire Air
Europa, which is owned by Globalia, subject to regulatory
approvals. 2022 saw IAG acquire a 20 per cent equity in
the airline, with the ambition to acquire the remaining 80
per cent subject to an agreement with Globalia and
regulatory approval from competition authorities.
Our priorities for 2023
During 2023, the Group will aim to maintain and bolster
its leadership positions in its home cities and priority
markets, and to create further value from our
partnerships. We aim to continue to build back the
frequencies and relaunch routes to destinations we
stopped serving during the pandemic, including recovery
in our Asian flying. One of our key objectives will be to
continue advancing the integration of Aer Lingus into the
Atlantic Joint Business and the expansion of our Qatar
Airways Joint Business and loyalty partnership. In
addition, the Group will continue to leverage its other
joint businesses, alliances and partnerships and, where
appropriate, form new joint businesses or participate in
the industry's consolidation by entering into value-
accretive merger and acquisition (M&A) deals.
Value-accretive and sustainable
growth
Strategic
priority
How we
create value
Our
performance
2. Growing global leadership
positions
INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2022 19
Efficiency and innovation
3. Enhancing IAG’s central platform
Our activity in 2022
This year has been one of volatility across the global
economy. Pandemic-related effects, high inflation,
increased staff costs and unfavourable exchange rate
evolution against the US dollar have all impacted our
businesses, increasing fuel prices and putting pressure on
supplier costs. In spite of this, our companies have
demonstrated resilience, continuing to advance with their
transformation plans to ensure we remain efficient for the
future, and leveraging our non-flying segments and
businesses to generate additional revenue.
IAG Loyalty has continued to show a very strong
contribution to the Group. Our loyalty business
accelerated its customer engagement, with more newly
enrolled customers this year than in 2019 and stronger
remuneration from our American Express partnership and
British Airways co-brand account acquisitions. Apart
from the expansion with Qatar Airways to increase Avios’
global reach, IAG Loyalty continued to expand its
partnership portfolio, launching its largest Avios
promotion ever in October with the Barclaycard Avios
Plus Mastercard offer. Other non-air partnerships
launched by IAG Loyalty during the year include the ones
with Uber and Reward Gateway. Additionally, IAG Loyalty
launched its brand new venture ‘The Wine Flyer', an
online wine delivery business that will give customers the
possibility to collect Avios on their wine buying.
IAG Cargo had another strong year in 2022, experiencing
ongoing demand for its services. In spite of passenger
travel returning and cargo transport progressively shifting
back to scheduled airline flights, the business delivered
strong revenues and contribution to the Group throughout
the year, with transformation efforts positively impacting
the business. Performance was also supported by a strong
yield environment in 2022, which is however expected to
moderate, along with global air cargo volumes, in 2023.
Iberia Maintenance, our third-party Maintenance, Repair and
Overhaul (MRO) and engine services division has also
contributed additional asset-light revenues to the Group. In
October, Iberia Maintenance obtained a licence from Pratt &
Whitney to provide engineering and maintenance services
for the GTF engines, which power the Airbus A320neo
aircraft family. This strategic step allows Iberia Maintenance
to consolidate its position as a shorthaul engine service
provider, with licences covering the main Airbus and Boeing
shorthaul platforms. Additionally, the division won strategic
contracts during the year such as with Qatar Airways for its
V2500 engines, with Volotea for its C-checks and with
Vueling for airframes, engines and parts.
Our IAG GBS segment has also been key in managing our
more than 13,000 suppliers, ensuring a secure, sustainable
and efficient supply chain, and delivering efficiencies across
the Group that have been key in mitigating sector-wide
inflation. Additionally, the segment has played a key role in
supporting IAG in its aspiration to achieve Scope 3 net zero
emissions by 2050. IAG Tech, in turn, continued its focus on
enhancing new technology capabilities across the Group,
including improving disruption and self-service
management solutions for customers and increasing
efficiency through process automation.
Another key focus during 2022 has been to drive
innovation across the Group. Following our Hangar 51
accelerator programme, British Airways and Iberia started
a collaboration with the start-up CHOOOSE, focused on
corporate sustainability insights and helping the airlines to
provide customers with options to offset their flight
emissions. Another example of innovation was the
additional investment the Group made in July in ZeroAvia,
a company that works in shorthaul hydrogen-electric
options for the industry. This investment followed a
previous investment from British Airways.
Our priorities for 2023
During 2023, IAG will continue to focus on delivering the
transformation plans for its different business segments and
accelerate our operating companies’ digital transformation
plans, which will ensure the Group remains in an efficient
shape for the future. Additionally, the Group will ensure our
non-airline businesses continue to capture available
opportunities and bring additional sources of revenues and
cost synergies and efficiencies to our airlines and the Group.
Our central functions will continue to support IAG Loyalty in
growing organically and inorganically, including through
partnerships or the launch of new potential value-accretive
ventures. The Group will also collaborate with Iberia
Maintenance to establish itself as a best-in-class shorthaul
engine service provider and with IAG Cargo to maintain its
strong revenues and high contribution to the Group.
Crucially, IAG will continue to invest in our IT infrastructure
and cyber security to ensure we reduce commercial and
operational risk at our operating companies.
Strategic
priority
How we
create value
Our
performance
20 INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2022
Strategic Report
OUR STRATEGIC PRIORITIES CONTINUED
Tracking the
Group’sperformance
We use key performance indicators (KPIs) to assess and to monitor the Group’s performance.
Weevaluate opportunities based on the strategic objectives of the Group and use the KPIs to
identify and generate sustainable value for our shareholders. Our financial metrics are before
exceptional items to allow comparability between periods.
Operating margin
(%)
1 2
A
2
Definition and purpose
Return on Invested Capital (RoIC) is defined as EBITDA before exceptional
items, less adjusted fleet depreciation, other depreciation and software
amortisation, divided by average invested capital. We use 12-month rolling
RoIC to assess how well the Group generates returns in relation to the
capital invested in the business, together with its ability to fund growth and
to pay dividends.
Performance
The Group’s RoIC rose by 20.9 points to 4.5 per cent, returning to positive
levels reflecting the Group’s significantly improved operating performance,
with EBITDA before exceptional items of €3.3 billion. Invested capital was
higher by 2.4 per cent, reflecting aircraft deliveries and investment in
customer product and IT. The weighted average age of fleet was higher at
11.3 years versus 10.6 years in 2021, reflecting the net impact of the ageing
of the existing fleet, aircraft withdrawn from service and 27 new aircraft
delivered in 2022.
RoIC (%)
1 2
A R
2
Definition and purpose
Operating margin is the operating result before exceptional items as a
percentage of revenue. We use this indicator to measure the efficiency and
profitability of our business and the financial performance of the individual
operating companies within the Group.
Performance
The Group’s operating margin before exceptional items was 5.3 per cent
driven by the Group’s operating profit before exceptional items of
€1.2 billion in the period. Total revenue was up €14.6 billion to €23.1 billion,
reflecting passenger capacity at 78.0 per cent of 2019, versus 36.1 per cent
the previous year, with stronger yields driven by demand recovery. Cargo
revenue was flat versus prior year at €1.6 billion, despite the significant
reduction in cargo-only flights with the resumption in the passenger
schedule. The Group’s non-passenger businesses, such as IAG Loyalty,
Iberia Maintenance, Iberia Handling and British Airways Holidays, all
produced positive performances.
2019 2022
2020
2021
14.6
4.5
4.64.6-16.4-16.4
-22.5-22.5
2019 2022
2020
2021
12.7
5.3
XX.XXX.X-35.1-35.1
-55.8-55.8
Key
Measure linked to remuneration
of Management Committee
R
Alternative performance measure
A
Link to our strategic objectives
2 3
1
1 For further detail refer to the Alternative performance measures section
of the financial statements.
2 The 2019 and 2020 results have been restated for the treatment
ofadministration costs associated with the Group’s defined benefit
pensionschemes.
INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2022
21
Capacity
(ASKs millions)
2
Gross CAPEX
(€m)
2
2
Definition and purpose
Gross capex (capital expenditure) is the total investment in fleet, customer
product, IT, ETS allowances and infrastructure (including leased right of use
assets) before any proceeds from the sale of property, plant and
equipment. We track the planned capital expenditure through our business
planning cycle to ensure it is in linewith achieving our other financial
targets.
Performance
Gross capex for 2022 was €3.9 billion. Fleet and fleet-related capex
represented 81 per cent of the total capital expenditure and included final
delivery payments related to 25 aircraft, together with pre-delivery
payments and maintenance spend. The higher capex reflects prior-year
agreements with Boeing and Airbus to defer deliveries and pre-delivery
payments from 2020 and 2021 to 2022. Other spend included customer
product, property and IT investments, together with ETS allowances. In
addition, the Group took delivery of two aircraft on direct leases, which do
not result in capital expenditure.
Levered free
cash flow (€m)
1
A
2
Definition and purpose
Levered free cash flow is the cash generated in the year including
movements in borrowings and before returns to shareholders. It is used, in
conjunction with leverage (measured as net debt to EBITDA before
exceptional items), to measure the underlying cash generation of the
business.
Performance
The Group’s levered free cash flow for 2022 was €1.7 billion. The reduction
versus the prior year is predominately due to lower borrowings in 2022,
with no new non-aircraft debt drawn in 2022, versus €4.4 billion in 2021.
Gross capex was also higher, although the impact was offset by strong
operating cashflows of €4.8 billion, linked to EBITDA and booking intakes
for travel in 2023.
Definition and purpose
Capacity in the airline industry is measured in Available Seat Kilometres
(ASKs) which is the number of seats available for sale multiplied by the
distance flown.
Performance
IAG was able to significantly increase capacity during the year, as COVID-19
restrictions were lifted, with a strong pent-up demand for travel. Overall for
the year passenger capacity was at 78.0 per cent of 2019, increasing from
65.1 per cent in quarter 1 to 86.6 per cent in quarter 4. Load factors reached
81.8 per cent, again increasing across the year, from 72.2 per cent in quarter
1 to 83.2 per cent in quarter 4. Shorthaul capacity restoration was ahead of
longhaul, with most longhaul regions substantially restored by quarter 4,
but with the Asia Pacific region lagging others, due to continued COVID-19
restrictions in certain countries.
2019
2020
2021 2022
338
113
122
264
33.5%
36.1%
78.0%
2019
2020
2021 2022
3,465
1,939
744
3,875
2019
2020
2021 2022
1,496
1,6671,667
1,8221,822
-3,047-3,047
% of 2019 capacity
22 INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2022
Strategic Report
KEY PERFORMANCE INDICATORS CONTINUED
Key
Measure linked to remuneration
of Management Committee
R
Alternative performance measure
A
Link to our strategic objectives
2 3
1
Adjusted EPS
(€cents)
1 3
A R
3
Definition and purpose
Adjusted Earnings Per Share (EPS)represents the diluted earnings for the
year before exceptional items attributable toordinary shareholders.
Performance
Adjusted earnings per share turned positive to 5.6 € cents from an adjusted
loss per share of 61.2 € cents in 2021, as the result of earnings after tax
before exceptional items improving significantly in line with the restoration
of capacity and the Group’s trading performance. The effect of the
assumed conversion of the IAG €500 million convertible bond 2022 (up
until the repayment date), IAG €825 million convertible bond 2028 and
outstanding employee share schemes is dilutive for the year, compared to
being antidilutive in the prior year and therefore not included in the diluted
earnings per share calculation for 2021.
Net Promoter Score
(NPS)
R
1
Definition and purpose
At IAG a transactional NPS is measured: customers respond about their
likelihood of recommending an IAG operating carrier no more than seven
days after taking a flight. Including NPS targets in the Group’s employee
bonus scheme has driven a stronger focus on improving the customer
experience which, together with customer advocacy, drives competitive
advantage, leading to faster organic growth.
Performance
In 2022, IAG’s NPS decreased 13.8 points versus 2021. The quick ramp up of
air travel demand, a lack of staff to manage these volumes at airports as
well as in some of our airlines, and operational issues negatively impacted
our NPS. To mitigate this impact our airlines reduced their schedules to
increase stability, undertook a vast recruitment process and re-trained
colleagues to support where necessary. Positive impacts to the NPS came
from enhancements to the customer proposition, particularly those made
to the catering and on-board experience. This led to an increase of the
Group NPS during the final quarter of the year.
Net debt to
EBITDA before
exceptional items
1 3
A
3
Definition and purpose
Net debt to EBITDA before exceptional items (leverage) is calculated as
long-term borrowings (both current and non-current), less cash, cash
equivalents and other current interest-bearing deposits at December 31,
which is divided by EBITDA before exceptional items
4
for the year. IAG
uses this measure to monitor leverage, to assess financial headroom.
Performance
The Group’s leverage was 3.1 times compared to a negative leverage of 11.5
times in 2021, driven by EBITDA before exceptional items of €3.3 billion on
net debt lower by €1.3 billion. Gross debt rose by €0.4 billion, including an
adverse currency impact of €0.5 billion due to the strengthening of the US
dollar. During the year, the Group repaid its €500 million convertible bond
and €100 million of a debt facility from the Ireland Strategic Investment
Fund.
2019 2022
2020
2021
76.4
5.6
-61.2-61.2
-122.9-122.9
2019 2022
2020
2021
XX.XXX.X-11.5-11.5
-4.3-4.3
1.4
3.1
2019
2020
2021 2022
25.8
36.7
32.2
18.4
1 For further detail refer to the Alternative performance measures section
of the financial statements.
2 Gross CAPEX is defined as Acquisition of property, plant and equipment
and intangible assets.
3 The 2019 and 2020 results have been restated for the treatment
ofadministration costs associated with the Group’s defined benefit
pensionschemes.
4 See Section e of the Alternative performance measures.
INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2022
23
Connecting with
our stakeholders
Our key stakeholders
We believe that IAG thrives in the
long-term when the interests of different
stakeholders are appropriately balanced
so that they all share in our success. It is
therefore important that we fully
understand all stakeholders’ priorities,
expectations and concerns.
Our long-term commitment to
sustainability and corporate social
responsibility is embedded in all we do at
Group and operating company level, from
our interactions with our customers
through to employees and shareholders,
so we do not identify our communities or
the environment as a distinct stakeholder
group. Our aim is to be a force for good in
the communities in which we operate and,
in doing so, create value for all our
stakeholders. More detailed information is
provided in the operating companies and
sustainability sections of this report.
How we engage
• Daily “Voice of Customer” survey to collect
feedback on their experience
• Brand surveys (to understand needs and
expectations)
• Channels to raise claims and make suggestions
• Contact Centre services and digital channels
1
• Corporate websites, email and social media accounts
• On-board and airport colleagues
How we engage
• Operating companies’ communication channels
adapted to their cultures and profiles (formal and
informal channels, including employee forums,
internal social networks, local cascade meetings,
newsletters, workshops, engagement surveys)
• Each operating company engagement surveys,
atleast annually, across full workforce
2
• Employee-led network groups
• Collective bargaining arrangements
• European Works Council (EWC)
3
Key topics/interests during 2022
• COVID-19 travel restrictions and requirements
• Customer service and personalisation capabilities,
particularly when there is disruption
• Airports’ challenges, including congestion,
staff shortages, and baggage issues
• Digitalisation of customer journey
• Flexibility measures, such as our “Book with
Confidence” policy
• Expansion of our partnerships
• Sustainability
Key topics/interests during 2022
• Future plans including modernisation of our fleet
• Recruitment, resourcing and capacity
• Fair reward, cost-of-living crisis, pay conditions
• Terms and conditions including flexible working
practices
• Safety and well-being, including specific
COVID-19 measures (where applicable)
• Building the right culture including diversity,
equity and inclusion
• Training and career development
• Corporate purpose and impact on the world
• Sustainability
Customers
Employees
An overview of the relevance for IAG’s
business model and strategy of these key
stakeholders, and the key topics of interest
during the reporting period are
summarised in the following table. In
addition, on the following pages, we
include a more detailed analysis of each
stakeholder and its relationship with IAG.
1 In 2022, a key focus has been developing new digital channels and enhancing existing ones, such as meta-chat bots in our websites or WhatsApp 24/7,
for customers to raise queries in an accessible and relevant way, which will also help us to ensure that our contact centre agents are focused on the
most complex cases.
2 In 2021 IAG undertook an Organisational Health Survey with managers across the Group to benchmark our working practices against world-class
companies. In 2022 this survey has been extended to all colleagues with over 22,000 colleagues sharing their views. These surveys have helped
management teams to refresh their people strategies and to adapt processes and policies to best support colleagues.
3 The EWC brings together representatives from the different European Economic Area (EEA) countries in which the Group operates. EWC
representatives are informed about and, where appropriate, consulted on transnational matters which may impact employees in two or more EEA
countries. IAG completed an election and appointment process for the new Select Committee and Chair in early 2022, and the transition was completed
in May.
24 INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2022
Strategic Report
STAKEHOLDER ENGAGEMENT
How we engage
• Customary procurement processes, and pre-
established periodic senior business reviews
• Industry conferences
• Supplier workshops
How we engage
• Regular one-to-one meetings and interviews
• Contacts through our various industry associations
(Asociación de Líneas Aéreas (ALA) in Spain, Airlines
UK, IATA and A4E)
• Participation in the International Civil Aviation
Organisation (ICAO)
How we engage
• Calls and online and in-person meetings
• Formal meetings held every year (Annual General
Meeting and four quarterly results briefings)
• Investor conferences and roadshows
• Contacts with equity, credit and ESG research
analysts
• Regular interactions with credit analysts, global
banks, debt investors and credit rating agencies.
• Interactions with aircraft operating lessors
• Mailbox for institutional and individual shareholders
Key topics/interests during 2022
• Global inflationary challenges
• Airport capacity and resources
• Fair engagement with suppliers
• Compliance with regulations
• Global supply chain issues
• Responsible and robust supply chain
• Sustainability, with a focus on delivering upon
the Group’s Scope 3 commitments
Key topics/interests during 2022
• Safety and security, including COVID-19 related
measures
• Impacts of conflict, especially the war in Ukraine
• Consumer rights
• Sustainability, including climate change
• Diversity and inclusion
• International relations including air service
agreements
• Infrastructure regulation including airspace
modernisation, airport charges and slot allocation
policy
Key topics/interests during 2022
• Progress of demand recovery and plans to restore
capacity after removal of Government travel
restrictions
• Recovery from operational ramp-up challenges
• Outlook for unit cost with the recovery of
capacity, higher fuel prices and increasing inflation
and the ability to pass these on
• Negotiations with employee groups concerning
pay, cost-of-living, productivity, competitiveness
and financial performance
• Cash flows, funding sources, financial leverage
and liquidity
• Known capital spending and debt repayment
commitments
• Short- and medium-term outlook for operating
profitability
• Impacts on consumer and business demand of a
potential global economic recession, especially in
Europe
• Environmental, social and governance
performance, including climate change initiatives.
• M&A and industry consolidation including Air
Europa
Suppliers
Governments
and regulators
Shareholders,
lenders and other
financial
stakeholders
INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2022 25
Customers
Rebuild from COVID-19 pandemic
IAG’s NPS in 2022 decreased 7.4 pts
versus the 2019 reported figure. Following
two years of turbulence as a result of the
COVID-19 pandemic which severely
impacted the aviation industry, in 2022 we
continued to focus on the recovery and
transformation of our businesses. This
rebuild phase was an extremely
challenging period. Disruption in its many
forms had the biggest impact on our 2022
NPS. The quick ramp up of air travel
demand resulted in huge volumes of
passengers going back to travel, and a lack
of staff to manage this demand. This,
together with remaining COVID-19 sickness
levels among staff, generated some
operational issues including long queues at
security and check-in desks as well as an
increase in mishandled baggage issues or
flight cancellations, some of them without
adequate notification to the customer.
Despite all the above-mentioned
challenges, our airlines have made
relentless efforts to mitigate these through
various actions such as reducing schedules
to provide otherwise compromised
stability and certainty for customers,
re-training office-based colleagues to
enable them to help at the airport or
improving communications to disrupted
passengers through new channels to assist
customers, and, in the particular case of
British Airways, speeding up the biggest
recruitment drive in the airline’s history.
Additionally, our airlines have continued
their commitments to invest and enhance
on our customers’ experience, by re-
introducing their full catering propositions
and developing entirely new ones,
upgrading content on our in-flight
entertainment platform through new
partnerships or enabling in-seat order
solutions for our customers.
In response to the feedback received,
and based on the tracking of key
performance metrics, our operating
companies have launched different
initiatives to address our customers’
needs. Throughout the year, our airlines
have made tremendous efforts to
enhance their customer propositions
through:
• Driving forward customer
transformation and digitalisation
initiatives some of these include: the
launch of the first meta-chat bot to
allow customers to raise issues that
are relevant to them; implementation
of a LiveChat on one of our airline’s
websites to quickly address simpler
queries and ensure agents focus on
the more complex ones; introduced
more automation in our customer
engagement centres; rolled out an
i-coupon solution for customers to use
at the airport when there is disruption;
developed a new online functionality
to enable customers to report and
track mishandled baggage through
some of our airlines’ websites; rolled
out new kiosks for check-in and bag
drop at London Gatwick and other
European airports; trialled new
biometric technology for domestic
and international flights to speed up
the experience and remove friction
from airport travel; trialled a virtual
queue system for customers to use
during disruption.
• Improving the food and drink
proposition: some of our airlines
re-introduced their full catering
proposition, while others developed an
entirely new one for their longhaul
cabins (premium and non-premium).
Other culinary improvements included
the introduction of enhanced menus
across all cabins and new in-seat order
alternatives for customers.
• Starting customer first training:
developing and starting to deliver
training for cabin crew and all other
front-line staff to ensure service
received by our customers is aligned
to each Group airline’s purpose,
values, mission and vision.
• Other product and service
improvements: include the
continuation of on-board WiFi roll-out
and development of a new on-board
free text messaging solution, the
roll-out of a “report my bag”
functionality in one of our airlines
websites, the content upgrade on our
in-flight entertainment with new
partnerships (e.g., Paramount Plus),
increase of our contact centre teams
to provide a better customer care
service as the airlines faced industry-
wide challenges, or the continuation of
the business Club Suite roll-out.
• Co-locating our New York operations:
alongside American Airlines to
enhance the customer proposition
with our Atlantic Joint Business and
oneworld alliance partner, offering our
customers easy onward connections
to 30+ destinations in the US and
Caribbean.
• Supporting our customers and
front-line colleagues during the
disruption peaks: office-based
colleagues at our different airlines
have supported our front-line
operational colleagues with different
tasks including checking-in customers,
marshalling them to aircraft from
remote stands, or repatriation of
mishandled baggage.
• Environmental, social, and
governance: IAG continues to develop
more environmentally sustainable
products and services for customers.
For example, all airlines now have
online platforms enabling customers
to mitigate the environmental impact
of their flights, and IAG Cargo sold
sustainable aviation fuel to the cargo
customer Kuehne + Nagel. Other
services help customers to mitigate
the environmental impact of their
meals or contribute to wider
sustainability goals.
Results from engagement with our customers
26 INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2022
Strategic Report
STAKEHOLDER ENGAGEMENT CONTINUED
Employees
Rebuild from COVID-19 pandemic
The commitment, resilience, flexibility and
support of our employees has been
fundamental to our ability to navigate
through the unprecedented challenges of
the last few years. Throughout the
pandemic, we have had to react to
changing regulations and travel restrictions
and implement changes to policies and
ways of working, often at short notice, and
we have relied on our colleagues to keep
our customers and each other safe, and to
continue to deliver the best customer
experience possible.
During 2022, as restrictions eased, we have
continued to ensure colleagues remained
safe and supported, and to enable them to
manage the different and changing
regulations and working practices required
in the countries in which we operate.
The pace with which restrictions have
been removed, and the surge in demand
we have experienced across all markets,
has placed additional challenges on
colleagues, as IAG and the broader
industry built up resources and capacity.
At times, this has placed additional
demands and challenges on colleagues,
and we are incredibly grateful for their
continued commitment and support.
In 2022 we have seen around an additional
17,400 colleagues join our business, and
thousands more have applied and will join
in the months ahead. We are delighted by
the high volume and quality of applicants
applying and joining the Group. Ensuring
we can on-board and train new colleagues
effectively and obtain the required security
clearance has been a major focus in 2022,
so that they can be deployed operationally
to support the increasing demand.
At IAG, we hold innovation, commitment,
care for people, responsibility, pragmatism,
execution, ambition and resilience as key
values that enable us to fulfil our purpose;
colleagues have consistently demonstrated
these values in responding to the various
challenges that they have been faced with
across the year.
Crew Swaps
In 2020 British Airways Crew Swap facility was
switched off as part of a broader review of
working practices and the introduction of new
terms and conditions, combined with IT issues
in managing the facility. Following feedback
from crew about the importance of this feature
in terms of balancing work and personal lives
and being trusted and empowered to make
changes that work for them, this feature has
been re-introduced. It enables the business to
continue to serve customers, whilst providing
more flexibility and choice to colleagues.
Catering
As offices have reopened during the pandemic,
we have continued to look to provide the right
working environment and facilities, and to
balance this with the changing working
patterns for colleagues, often with lower
building occupancy than pre-pandemic. Based
on feedback from colleagues in our Waterside
office in London Heathrow, we have opened
‘street food’ stalls and a new ‘salad bar’ to
provide a range of hot and cold snacks, with a
variety of options across the week. This change
included the introduction of more casual
seating, providing colleagues with space to
connect and work in a more informal setting.
IAG Loyalty
In response to feedback from contact centre
teams seeking greater flexibility (particularly
from those with caring responsibilities), IAG
Loyalty implemented a new system,
Availability Point, enabling colleagues to add
preferred shift options five to nine weeks out,
with the planning team generating schedules
and confirming shifts at four weeks. This
allows people to build shifts around their lives
and has been extremely positively received
and a key to retaining talent and to attract
more candidates.
Iberia
Iberia has introduced new tools to support
colleagues with career development including
the Aircraft Maintenance Technician career
path system, AQCESS, and the launch of
IBTalent, an intranet portal for managers and
specialists to develop their careers and access
tailored training.
INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2022
27
Shareholders, lenders and
other financial stakeholders
The Chairman hosted a combined in-
person and virtual roadshow with six key
shareholders in April and May to discuss a
range of ESG matters, in particular on
climate change, diversity, remuneration
policy and Board governance matters, as
well as the recovery from the pandemic
and strategic issues.
The former and current Chair of the
Remuneration Committee consulted with
our main shareholders and proxy advisers
during the year on remuneration policy
issues. A first consultation process took
place prior to our annual shareholders’
meeting on a proposal to amend our policy
to increase the quantum on the Restricted
Share Plan for IAG Chief Executive. Based
on the feedback received, the Board
decided to reduce the initially proposed
increase of 175 per cent to 150 per cent.
Although the votes cast against the
proposed amendment were below the 20
per cent threshold, the new Chair of the
Remuneration Committee wrote to several
major shareholders and proxy advisors,
and held various meetings in December
and January this year to follow up on
concerns raised in relation to this proposal.
Further detail is provided in the Directors’
Remuneration Report.
We held two shareholders’ meetings in
2022, our annual general meeting on June
16, and an extraordinary meeting on
October 26, to approve fleet orders. Both
meetings were hybrid, allowing for in
person attendance and to participate
remotely through the electronic meeting
platform arranged for such purpose.
Shareholders were invited to submit
questions before or at the meeting, all of
which were addressed. In addition, any
requests for information, clarifications or
questions made in writing and the written
replies provided were posted on the
company's website unless the information
requested was already available on the
company's website. Both meetings were
also webcast live on the IAG website.
In conjunction with the Investor Relations
team, IAG’s Chairman, the Remuneration
Committee Chair, as well as the Group’s
Chief Executive and Chief Financial Officer
have engaged on many occasions with
shareholders, equity investors and lenders.
The Chief Executive and the Chief Financial
Officer hosted two in-person roadshows
following the full-year and half-year results in
March and September. These roadshows
took place over a period of five days in
March and five days in September and
covered investors in Germany, Spain, the
United Kingdom and United States. In
addition, they also held virtual meetings with
a number of our key institutional investors
and the Investor Relations team attended
numerous investor meetings and broker
conferences for investors throughout the
year.
The discussions in these meetings were
wide-ranging on a number of strategic,
financial, operational and ESG topics. In
March, the main focus of investors
concerned the prospects and plans for a
recovery from the Omicron variant of
COVID-19, the implications of the Russian
invasion of Ukraine on demand and fuel
prices and IAG’s relatively high level of
financial leverage, despite a high level of
liquidity. The focus of investor discussions
subsequently shifted to the operational
ramp-up challenges, especially in the UK, the
strength of pent-up demand, rising inflation
and cost-of-living issues and implications for
collective bargaining agreements.
We recognise the critical role that
colleagues continue to play in the recovery
and transformation of IAG and are
constantly looking at how we support
them and to create a diverse and inclusive
culture. In 2022, we refreshed our Equality,
Diversity and Inclusion Policy, building on
the diversity strategy and framework that
was established in 2021. We are proud of
the progress we have made to make IAG
more diverse and inclusive but know we
have further to go to achieve our ambition.
We continue to focus on our ambition as
the composition of our workforce changes.
IAG’s unique operating model continues to
provide fantastic opportunities for career
development and progression, and our
strengthened approach to talent
management and succession planning is
enabling us to fill the majority of our roles
with talent from across the business.
Results from the
engagement with our
employees
We use a range of channels to
understand what matters to our
colleagues and to help us improve our
people policies. Each operating
company runs regular engagement
surveys, and across IAG we conduct
an organisational health survey to
better understand colleagues’
experiences and perceptions.
We continue to evolve our channels
for communication and information,
toimprove advocacy and engagement
and ensure information is available
ona range of employee-related issues.
Feedback from these channels have
highlighted that resourcing and
operational challenges, flexibility and
choice, development and careers and
fair pay remain the most important
issues for colleagues.
Environmental, social, and
governance
ESG continues to be an area of focus
for engagement with investors. The
Investor Relations team has an ongoing
dialogue with ESG research analysts
and has hosted several meetings for
the Group Head of Sustainability with
key shareholders and institutional
investors. In May, for the first time, the
Group Chief Executive hosted an ESG
Investor Day, which was an in-person
event, for analysts, investors and other
financial stakeholders. The focus of the
day was of IAG’s progress on climate
change and people developments. This
was the first ESG-specific event hosted
by a major European airline. The
feedback from several shareholders
and investors is that IAG is leading
other European and global airlines in
terms of focus on climate change
issues and climate change-related
targets and disclosures.
28 INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2022
Strategic Report
STAKEHOLDER ENGAGEMENT CONTINUED
Suppliers
Global supply chain challenges
The Russian invasion of Ukraine and the
impact of COVID-19 on certain markets
have impacted the global supply chains in
many of IAG’s key supplier groups.
In the case of aircraft and engine
manufacturers, access to raw materials
such as titanium and certain sub-
components including semiconductors has
slowed the delivery of key components
required in the manufacture and
Maintenance, Repair and Overhaul (MRO)
of aircraft and engines. It is also the case
that many of our suppliers reduced the
size of their skilled workforces during the
slow-down experienced during COVID-19
and have struggled to build either
manufacturing output or MRO capacity to
pre-pandemic levels.
This, together with the same difficulties
from other key manufacturers, has led to
delays in the delivery of aircraft to IAG and
has slowed down MRO activities on our
existing fleet impacting their availability.
IAG has worked closely with our suppliers
to understand and mitigate this impact
and where this has not been possible,
fleets have been re-planned to extend
existing aircraft for a short period to fill
gaps left by delayed deliveries.
In 2021, IAG led the industry by
becoming the first airline group
worldwide to extend its net zero
commitment to Scope 3 (supply chain)
emissions by 2050, and a 20 per cent
reduction by 2030, relative to 2019.
Since that ambitious target was set, IAG
Global Business Services (IAG GBS) has
started to engage with, support and
monitor suppliers to ensure all products
and services provided to IAG are on a
path to net zero.
The IAG GBS Group procurement team
leads the Supply Chain Sustainability
Programme by delivering across four
key areas:
• The Supplier Code of Conduct
• Independent risk screening and
Sustainability Assessments
• Corporate Social Responsibility (CSR)
audits
• Embedding sustainability as standard
in the procurement process
The Supplier Code of Conduct clarifies
the standards of behaviour expected
from all 13,000 suppliers working with
any part of our business across every
category and emphasises the
importance and requirements of our
sustainability journey. It has already been
issued to the existing supply chain and
integrated into the new supplier
onboarding process.
In 2022, IAG GBS has embedded
sustainability aspects into the day-to-
day operation of the organisation, by
establishing an enhanced training
programme for procurement employees,
further building and driving sustainability
awareness and performance. In addition,
all IAG GBS employees have
sustainability targets embedded as part
of their performance objectives.
EcoVadis, a market-leading provider of
business sustainability ratings, has
continued to partner with IAG GBS to
support the Group’s supply chain
sustainability roadmap, including
environment, labour and human rights,
and ethics.
Together with EcoVadis, we assess
suppliers using a holistic Environmental,
Social and Governance (ESG) scorecard.
This provides valuable insights to
identify opportunities to improve
sustainability performance, which gives
IAG, and its suppliers, a baseline for
improvements across ESG. We want to
work with suppliers who share our vision
and are committed to joining IAG on our
journey to net zero.
Additionally, once assessed, suppliers
receive a scorecard that can be used
with their other customers. This benefits
wider industry supply chains on their
journey to sustainability.
As a minimum, all suppliers undergo
annual screening for any legal, social,
environmental and financial risks. The
procurement and compliance teams
assess any suppliers identified as having
potentially higher levels of risk and
implement mitigation plans where
necessary. Any issues are flagged to the
risk owners within the Group to jointly
take appropriate action.
Results from the engagement with our suppliers
Extraordinary shareholders meeting
for the acquisition of aircraft
We held a shareholders’ meeting on
October 26, 2022 to propose the
approval of the acquisition of 50 Boeing
737 family aircraft and 37 Airbus
A320neo family aircraft. Given the size
of the proposed transactions, these
purchases constitute a Class 1
Transaction under the UK Listing Rules
and were therefore subject to the
approval of IAG's shareholders. The
circular published by the Company in
relation to these transactions provided
shareholders with information about the
proposed agreements, the background
to and reasons for the proposed
acquisitions and the reasons why the
directors believe that these acquisitions
are in the best interests of shareholders.
Further details of this Board decision
from a stakeholder perspective point of
view are provided as part of the section
172 statement included in the corporate
governance report.
INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2022 29
Governments
andregulators
and local operating company teams
continues in order to understand, comply
with, and where appropriate influence the
lifting of the most onerous rules.
IAG observes that the close government
control of the industry exerted during the
pandemic led to increased scrutiny of the
sector and demands for information on
operational matters as consumer demand
was allowed to return. The unforeseeable
difficulties in recruiting staff after the
pandemic, fast enough to provide planned
service levels, caused significant disruption
in major western aviation markets and was
a particular source of interest to
governments, which sought detailed
information on resilience planning. IAG has
supported operating companies in
providing consistent inputs as required.
The tragedy of the war in the Ukraine
surpasses all airline interests but the
impact of Russia’s invasion has also been
to generate further challenges
commercially and operationally. Russian
airspace is closed to UK and EU carriers
resulting in considerably longer flight times
for services to Asia. Among other impacts
this adds complexity to rostering and
congestion in the airspace of countries
providing alternative routes, all of which
necessitates further contact with
regulators and policy makers.
Rebuild from COVID-19 pandemic and
global challenges
The COVID-19 pandemic meant that
regulators and national governments took
a different but also closer involvement
than ever before in the operation of airlines
as travel restrictions were imposed and
specific aspects of air travel regulated. In
turn, requirements for information about
passengers or measures on the handling of
customers on-board, e.g. the need to wear
masks, became more common.
Although COVID-19 related impacts have
largely become easily manageable, final
restrictions in the UK and Spain were only
lifted in March and September respectively
this year. Additional requirements remain
in place in many jurisdictions whereby
vaccinated status is a standard in many
countries to allow unrestricted entry. This
leaves a legacy of continued need for
careful engagement with both regulators
and customers to facilitate information
sharing and ongoing monitoring of
standards around the world.
In some markets, particularly in Asia,
requirements over crew movement and
testing, intended to manage the spread of
the virus, are still severe enough to have
delayed IAG operating companies
resuming services. In such cases ongoing
engagement with national governments
and regulators by IAG government affairs
In addition, the supply of certain narrow-
bodied aircraft has been limited by the
inability of aircraft and engine
manufacturers to recover to pre-pandemic
capacity. IAG has taken important steps to
secure access to new aircraft that will be
required in the 2020s and has the option
of delivery positions to secure access to
narrow-bodied and wide-bodied aircraft to
protect the future requirements of IAG.
IAG’s long-term commitments with key
engine suppliers have limited the impact of
these supply chain challenges on the MRO
operations of the Group’s airlines.
Environmental impact
A key feature of IAG achieving its
environmental and social targets is access
to more fuel-efficient aircraft with lower
carbon emissions, reduced community
noise, and improved local air quality
through reduced Nitrogen oxides
emissions. To achieve this, IAG has secured
access to the efficient aircraft it requires.
IAG’s fleet and environment teams have
engaged in detailed discussions with the
major aircraft manufacturers to
understand and inform their future
product developments to ensure we are
well-placed to take advantage of new
technology and to stress the role of these
suppliers in supporting the delivery of our
environmental targets.
IAG has also engaged with key suppliers to
understand the emissions in their own
supply chains to understand and influence
the related Scope 3 emissions from their
manufacturing activities.
30 INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2022
Strategic Report
STAKEHOLDER ENGAGEMENT CONTINUED
The first aim of engaging with policy
makers, and often with sector-specific
regulators, is to increase understanding
of the potential impacts of policy
measures and of the benefits of IAG’s
proposed positions.IAG has done so
directly and through inputs to its trade
associations on a range of topics. In many
cases successes are measured in the
effect of mitigating or preventing
potentially adverse regulations and in
building trust and positive relationships
to support our specific arguments.
Sustainability
In 2022 the IAG government affairs team
led a programme of engagement with
officials and parliamentarians in the
institutions of the European Union
addressing the EU’s Fit for 55 policy. This
included discussions with the cabinets of
European Commissioners in several
directorates, Members of the European
Parliament from Spain and Ireland and
other Member States and (working with
other airlines and trade associations)
directly with the Transport
Commissioner.From these direct
meetings we have been able to explain
the Group’s leadership in this field and
canvass support for our positions.
In the UK, IAG’s sustainability team has
engaged regularly with the Government
directly and through trade associations,
in particular to support the Group’s policy
on SAF. This included providing senior
level representation working groups of
the government’s cross departmental Jet
Zero Council on SAF and through the
British Airways’ Chief Executive’s
membership of the Jet Zero Council
itself. During the year, the UK adopted
two key measures that IAG had
promoted when the Government
declared in July a mandate for 10 per
cent SAF by 2030 (in line with IAG’s own
target); and in December stated a
commitment of £165 million support for
the planning and production of five SAF
plants in the country.
More widely, ICAO’s adoption of its
Long-term Global Aspirational Goal
(LTAG) onnet-zero carbon emissions by
2050 was a success for the whole airline
industry. As a leader in the sustainability
field, IAG played its part in industry
working groups contributing to the UK,
US and other government positions in
support of the proposals.
Customer service and resilience
Frequent engagement was required in
2022 on customer service and resilience
matters following the removal of travel
restrictions and the subsequent
challenges in meeting fast-returning
demand. IAG and its operating
companies engaged closely to ensure
policy makers understood the
interconnected nature of aviation
operations and to campaign for
intervention to be directed fairly and in a
constructive way. In the UK this resulted
in positive relationships with officials in
relevant Government departments during
a summer of disruption for the whole
industry. British Airways also provided
evidence to two parliamentary select
committee hearings to increase the level
of knowledge of the industry and explain
the approach to maintaining resilience
and customer service for the airline.
Slot policy
The impacts of the pandemic continued
to be felt in the issue of airport slot
allocation and the need for regulatory
relief from the usual slot usage rules that
require airlines to operate each slot 80
per cent of the time to retain it in the
following year.IAG representatives played
a key part in the development of an
agreed industry position on relief, with
airports and slot coordinators, to support
temporary requests for waivers that were
granted in the EU and the UK.IAG is also
engaging with the European Commission
in its on-going review of the Slot
Regulation that was launched in
September.
Airport charges
IAG and its operating companies made
the case for strong regulation of
monopoly providers of airport services so
that reasonable levels of charges are set.
In Spain airline contributions to the
discussion helped secure a decision by
the regulator to keep charges flat until
2026 and a specific decrease in charges
for 2022 of 3.17 per cent. The UK CAA,
having allowed charges to increase by
over 50 per cent in setting an interim
price cap for 2022, subsequently
extended to 2023 at the same rate,
recognised airline arguments in reaching
its welcome Final Proposals that require
Heathrow Airport to reduce its overall
yield per passenger by a rate of RPI 5.75
per cent over the remaining three years
of the regulatory period.
Market access
IAG continues to support individual
operating companies in securing market
access. This included attendance at or
contribution to international air service
agreement talks to support IAG
operating company positions. IAG also
provides ongoing support to British
Airways in securing operating permits
and code-share expansion to deliver
market access and revenue benefits, all
of which activities require close
engagement with governments and their
negotiators.
Results from the engagement with government and regulators
INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2022 31
Building back our
financial strength
In my first year at IAG it has been very encouraging to see the
Group return to profitability, whilst continuing to focus on its
investment needs, balance sheet and strong liquidity.
Return to profit
In 2022, our markets opened up steadily through the year,
particularly from the second quarter onwards. The Group turned
profitable at the operating level from the second quarter,
delivering an operating profit before exceptional items for the
year of €1,225 million, versus an operating loss before exceptional
items of €2,970 million in 2021.
The Group focused on deploying capacity to those areas of
strongest demand, with routes flying west from Europe to North
America and South America performing particularly well. There
was also strong demand for European travel in the summer
period.
“I look forward to working
with the team to return the
Group to historical levels of
profit and to continue to
strengthen the balance
sheet.”
Nicholas Cadbury
Chief Financial Officer
32 INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2022
Strategic Report
FINANCIAL OVERVIEW
The recovery has evolved differently across the Group, in line with
government and operating restrictions and demand, with Spanish
markets being ahead of Ireland and the UK. The industry has
experienced resourcing and operational constraints as capacity
has been restored and these were notably seen at London
Heathrow. Despite these challenges, colleagues at each operating
company have focused on rebuilding operations market by
market.
Whilst the Group has felt the impact of considerably higher fuel
prices and inflation it has also focused on optimising load factors
and yields, with passenger unit revenues higher than 2019,
particularly in the second half of the year. The recovery in leisure
traffic has been ahead of business and the premium leisure
segment has performed very well.
The strength seen in the second half of 2022 has not abated in
early 2023 and although business travel is recovering slowly, there
continues to be strong demand across the leisure segment. The
Group remains focused on taking actions to offset as much of the
impact of high global inflation and fuel prices as it can through its
transformation programmes.
Balancing investment and debt
The Group continues to make important investments in its aircraft
fleets, customer products and services, IT infrastructure and
sustainability. In 2022 the Group took delivery of 27 new aircraft,
as aircraft deferred in 2020 and 2021 started to be delivered. The
Group also placed orders for a total of 109 shorthaul aircraft from
Airbus and Boeing, which will allow it to replace older aircraft with
more fuel-efficient modern technology, with fuel savings of up to
20 per cent.
Whilst investment in the business is key, we have also been
focusing on our balance sheet and levels of debt. The Group
raised additional debt and boosted liquidity during the most
impactful period of COVID-19 in 2020 and also raised €2.7 billion
of equity in 2020. In 2022 no additional debt for general
corporate purposes was drawn and the Group repaid
€600 million of non-aircraft debt. As profitability improves, IAG is
targeting a reduction in debt and leverage, which will allow the
Group to return to its previous leverage target, based on net debt
to EBITDA before exceptional items, in the medium-term. We are
also monitoring carefully the mix of our net debt between total
borrowings and cash, to ensure sufficient liquidity to offset
economic uncertainty whilst managing interest expense and
metrics based on gross debt.
Cash generation and liquidity
The year 2022 saw strong cash generation, with Net cash flows
from operating activities of €4,835 million, driven by the
operating profit and significant working capital inflows, as the
airlines’ schedules were restored and average yields increased,
leading to higher forward bookings for travel in 2023.
The Group successfully sourced regular, long-term financing
arrangements for all of its 27 aircraft deliveries in 2022, with
financing for five of these to be drawn in 2023.
At the end of 2022, the Group had Cash, cash equivalents and
interest-bearing deposits of €9,599 million, with committed and
undrawn aircraft and general facilities leading to Total liquidity of
€13,999 million, an increase of €2,013 million from December 2021.
This position will stand us in good stead to repay near-term debt
maturities and face future risks, such as refinancing, inflation and
interest rates.
It is a great privilege to join IAG, and I look forward to working
with the team to return the Group to historical levels of profit and
to continue to strengthen the balance sheet.
Nicholas Cadbury
Chief Financial Officer
INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2022 33
IAG capacity
The year 2022 was a year of rebuilding capacity, with COVID-19
related travel restrictions eased or removed in most of the
Group’s markets, allowing the airline industry to substantially
restore capacity towards levels seen in 2019, in line with strong
pent-up demand for travel. For the year, IAG capacity, measured
in available seat kilometres (ASKs), reached 78.0 per cent of 2019.
Each airline had a different recovery path, reflecting its respective
network, markets served and constraints at hub and other
airports. Group capacity increased steadily over the quarters,
starting at 65.1 per cent of 2019 in quarter 1 and reaching 86.6 per
cent of 2019 in quarter 4.
Proportion of 2019 passenger capacity operated by quarter
Year to December 31,
2022 (per cent) Q1 Q2 Q3 Q4 Total
Aer Lingus 69.0 85.6 89.9 98.5 86.8
British Airways 57.4 69.1 74.2 79.8 70.3
Iberia 84.7 87.0 84.2 92.8 87.1
Level 30.3 60.7 55.5 51.3 50.5
Vueling 72.9 100.2 102.9 111.3 98.2
Group 65.1 78.0 81.1 86.6 78.0
Capacity operated as a percentage of 2019 by quarter by region
Year to December 31,
2022 (per cent) Q1 Q2 Q3 Q4 Total
Domestic 90.1 105.1 101.5 104.0 100.6
Europe 63.3 84.7 88.2 96.0 84.0
North America 62.6 83.8 92.0 94.0 83.9
Latin America
andCaribbean 90.2 81.0 75.0 85.5 82.8
Africa, Middle East
and South Asia 64.3 73.9 79.0 88.8 76.4
Asia Pacific 5.9 9.5 10.4 19.2 11.3
Total network 65.1 78.0 81.1 86.6 78.0
The impact of COVID-19 and related travel restrictions was
significantly less than in 2021, when many countries were still in
lockdown or had severe travel restrictions in place. The strong
recovery in demand and traffic was reflected in the Group’s
passenger load factor, which reached 81.8 per cent for the year,
down just 2.8 points from 2019. The recovery increased across the
year, with the passenger load factor in quarter 1 at 72.2 per cent
and quarter 4 rising to 83.2 per cent.
Capacity operated out of London Heathrow airport was lower
than originally planned at the start of the year. British Airways’
capacity was capped by Heathrow Airport and along with limited
access to South Asia, capacity reached 70.3 per cent of 2019
levels. In addition, there was an impact from the Omicron variant
of COVID-19 in January and February. As global travel restrictions
eased, British Airways restarted routes such as Sydney, San Jose
in California, Tokyo and Hong Kong. In March 2022 British Airways
also launched its new shorthaul Gatwick subsidiary, BA Euroflyer,
operating to 35 new destinations in the summer, flying under the
British Airways brand.
Iberia’s capacity saw increasing recovery over the course of the
year, after quarter 1 was negatively impacted by Omicron.
Performance improved steadily, especially in the Latin America
and Caribbean (LACAR) region, North America and Europe. For
the year, Iberia significantly grew its capacity in LACAR versus
2021 by increasing frequencies to destinations such as Mexico and
Colombia. Load factor was at 84.6 per cent in this region, only 0.8
points lower than 2019. The increase in capacity versus 2019 was
lower in quarter 3 than quarter 2, as in 2019 the seasonal increase
in Iberia’s schedule to LACAR for the peak summer months was
greater than in 2022.
Vueling adopted a new strategy to reduce its seasonality and
increase aircraft utilisation during the winter travel months. The
airline started seeing the results of this strategy in quarter 4, when
Vueling had capacity growth above 2019 levels by 11.3 per cent,
despite fewer aircraft in service, with new routes and growth into
existing markets such as the Canary Islands.
Aer Lingus was able to restore the majority of its transatlantic
services and in addition operated three transatlantic services from
its new Manchester Airport base in the UK, all of which started in
late 2021. These services represented 13 per cent of Aer Lingus’
transatlantic capacity and 8 per cent of its total network in 2022.
The Manchester base supported Aer Lingus in restoring longhaul
passenger capacity to similar levels to 2019 by the end of the
year.
IAG regional capacity
Year to
December 31,
2022
ASKs
higher/
(lower)
v2019
ASKs
higher/
(lower)
v2021
Passenger
load
factor
(per cent)
Higher/
(lower)
v2019
Higher/
(lower)
v2021
Domestic 0.6% 36.9% 85.5 (1.7)pts 10.6pts
Europe (16.0%) 138.2% 81.5 (2.1)pts 12.4pts
North America (16.1%) 192.9% 79.3 (4.8)pts 29.9pts
Latin America
and Caribbean (17.2%) 73.5% 85.1 (1.3)pts 15.3pts
Africa, Middle
East and
South Asia (23.6%) 130.0% 81.1 (1.9)pts 13.7pts
Asia Pacific (88.7%) (7.1%) 84.0 (1.8)pts 44.6pts
Total network (22.0%) 116.1% 81.8 (2.8)pts 17.3pts
Domestic and Europe
Capacity in IAG’s Domestic markets recovered to a greater extent
than other regions, with capacity slightly higher than 2019 by 0.6
per cent and higher than 2021 by 36.9 per cent. Iberia and Vueling
benefited from strong leisure demand to the Canary and Balearic
Islands, with capacity increases above 2019. Passenger load factor
for the region remained the highest for the Group at 85.5 per
cent, down 1.7 points versus 2019 and up 10.6 points versus 2021.
The Group’s capacity in Europe was 16.0 per cent lower than 2019;
however, it recovered to 138.2 per cent above 2021 as demand for
travel increased. Outside of Russia and the countries neighbouring
Ukraine, the impact of the conflict has been relatively limited in
this region. Vueling expanded its operations from Paris Orly in
November 2021, with an additional 18 slots that allowed Vueling
34 INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2022
Strategic Report
FINANCIAL REVIEW
tobase an additional four aircraft at the airport, taking its total to
nine at an airport which is highly slot-constrained. British Airways
launched a new route to Nuremberg in Germany and BA Cityflyer
launched a number of new routes from London City, including to
Barcelona, San Sebastian and Thessaloniki. Iberia reopened its
route to Bergen in Norway. Passenger load factor for the region
was down 2.1 points versus 2019 to 81.5 per cent and was up 12.4
points versus 2021.
North America
IAG’s North American capacity was 16.1 per cent lower than 2019
and was up significantly versus 2021, by 192.9 per cent. The United
States Government eased its COVID-19 travel restrictions in
November 2021 for vaccinated passengers and removed the need
for a COVID-19 test prior to arrival in June 2022. British Airways
was able to substantially restore its network to North America by
the end of the year by reopening seven routes and adding a new
service to Portland, Oregon. During the year, Iberia reopened
flights to San Francisco and launched new routes to Washington
and Dallas. Aer Lingus reopened six routes to North America
during the year. Passenger load factor for the region was down
4.8 points versus 2019 to 79.3 per cent and was up 29.9 points
versus 2021.
Latin America and Caribbean (LACAR)
IAG’s capacity in LACAR was down 17.2 per cent on 2019 but
increased 73.5 per cent on 2021. Demand in this region was
strong, with the Group benefiting from pent-up demand as
COVID-19 travel restrictions to LACAR were lifted earlier than in
other regions. Iberia significantly increased its capacity to LACAR
during the year, with Mexico up to three flights daily and
increased frequencies for Bogotá, Colombia from 10 to 14 flights
per week in February 2022. Passenger load factor was down 1.3
points versus 2019 at 85.1 per cent and was up 15.3 points versus
2021.
Africa, Middle East and South Asia (AMESA)
Capacity to this region was down 23.6 per cent versus 2019 and
up significantly versus 2021. British Airways had restored almost
90 per cent of its 2019 capacity to AMESA by quarter 4 and
during the year reopened routes to Morocco, Doha and Cape
Town. Iberia had strong results in Israel as Tel Aviv recovered
faster than expected, and North Africa also performed well with
good recovery to Morocco. Vueling launched new routes to Cairo,
Alexandria and Amman. Passenger load factor for the region was
down 1.9 points versus 2019 at 81.1 per cent and was up 13.7 points
versus 2021.
Asia Pacific
During 2022, the Asia Pacific region remained the most capacity-
constrained region, as strict travel restrictions continued to
severely impact demand. Australia opened its borders to
international travel in February 2022, while other countries such
as Singapore, Japan and Hong Kong lifted travel restrictions later,
while China did not lift restrictions until January 2023. During the
year, British Airways restarted routes to Sydney, Hong Kong and
Tokyo. Passenger load factor for the region was down 1.8 points
versus 2019 at 84.0 per cent and was up 44.6 points versus 2021.
Basis of Preparation
At December 31, 2022, the Group had total liquidity of
€13,999 million, comprising cash, cash equivalents and interest-
bearing deposits of €9,599 million, €3,284 million of committed
and undrawn general facilities, and a further €1,116 million of
committed and undrawn aircraft-specific facilities. The Group has
been successful in raising financing since the outbreak of
COVID-19, having financed all aircraft deliveries in 2020, 2021 and
2022. The Group continues to secure aircraft financing on
long-term arrangements.
In its assessment of going concern over the period to June 30,
2024 (the ‘going concern period’), the Group has prepared
extensive modelling, including considering a plausible but severe
downside scenario and further sensitivities to the downside
scenario. Having reviewed these scenarios and sensitivities, the
Directors have a reasonable expectation that the Group has
sufficient liquidity to continue in operational existence over the
going concern period, and hence continue to adopt the going
concern basis in preparing the consolidated financial statements.
In adopting the going concern basis of accounting, the
consolidated financial statements have been prepared without the
inclusion of a material uncertainty, which has been removed since
the 2021 Annual Report and Accounts. The removal of the
material uncertainty arises from the reduction in uncertainty over
the going concern period due to both the continued recovery
subsequent to the COVID-19 pandemic and the strength of the
Group’s liquidity at December 31, 2022.
Summary
The Group was able to substantially restore its capacity by the
end of the year, having operated a significantly reduced schedule
in 2020 and 2021 due to the impact of the COVID-19 pandemic.
As capacity was increasingly restored through the year the
operating result improved, with the third quarter, which includes
the airlines’ summer peak seasons, approaching levels of
profitability seen in 2019. Fuel prices were significantly higher than
both the previous year and 2019 and the airline sector also
experienced high supplier price inflation. Due to the strong
demand, passenger unit revenues also rose above those in 2019,
thus allowing the airlines to recover a substantial portion of the
fuel price increase and other cost inflation.
The net result was an operating profit for the year of
€1,256 million, versus an operating loss of €2,765 million in 2021.
The profit after tax for the year was €431 million, versus a loss of
€2,933 million in 2021.
INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2022 35
Profit/(loss) for the year
Statutory results
€ million 2022 2021
Higher/
(lower) vly
Operating profit/(loss) 1,256 (2,765) 4,021
Profit/(loss) before tax 415 (3,507) 3,922
Profit/(loss) after tax 431 (2,933) 3,364
The biggest driver of the year-on-year changes in revenues and
costs was the significant restoration of the airlines’ flying
programmes, linked to the opening of markets and recovery from
the substantial impacts of COVID-19 in 2020 and 2021. Passenger
capacity, measured in ASKs, was more than double the level of
the previous year, up 116 per cent on 2021. Such an increase has
made percentage increases not meaningful and hence they are
excluded from the tables below.
Summary of exceptional items
The Group uses Alternative Performance Measures (APMs) to
analyse the underlying results of the business excluding
exceptional items, which are those that in management’s view
need to be separately disclosed by virtue of their size or incidence
in understanding the entity’s financial performance.
In 2020 and 2021, the Group recorded a number of exceptional
items arising as a direct result of COVID-19, which during 2021
principally related to the fair value movements on derivatives
de-designated from hedge accounting and the reversal of the
impairment of certain aircraft stood back up in 2021. In 2021 all
items were associated with the impact of COVID-19, except for
the termination payment to Globalia.
During the course of 2022 the Group recorded exceptional credits
relating to the partial reversal of a fine issued to British Airways in
2010 and the reversal of the impairment of certain aircraft
returned to service in 2022.
A summary of the exceptional items relating to 2022 and 2021 is
given below, with more detail in the Alternative Performance
Measures section, including a breakdown of the exceptional items
by operating company.
Income
statement line Exceptional item description
Credit/(charge) to the
Income statement
€ million
2022
2021
Passenger
revenue
Discontinuation of hedge
accounting for foreign
currency derivatives for
revenue
- 5
Employee
costs
Restructuring costs - 18
Fuel, oil and
emissions
costs
Discontinuation of hedge
accounting for fuel and
associated foreign
exchange derivatives
- 154
Engineering
and other
aircraft costs
Inventory write down and
charge in relation to
contractual lease
provisions
- 7
Property, IT
and other
costs
Reversal of fine 23 -
Depreciation,
amortisation
and
impairment
Impairment reversal of
fleet and associated assets
8 21
Non-
operating
costs
Termination payment to
Globalia
- (75)
Tax Tax on exceptional items (2) (25)
See the Alternative Performance Measures section
for further information.
36 INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2022
Strategic Report
FINANCIAL REVIEW CONTINUED
Cargo revenue
Cargo revenue, at €1,615 million, was only 3.5 per cent lower than
in 2021, which was a record year for cargo revenue and was linked
to the number of additional cargo flights that were operated due
to the severely restricted passenger flying programmes. In 2022,
as passenger flying schedules were restored, there were
significantly fewer cargo-only flights operating, with 502 during
the year, compared with 3,788 in 2021. The early part of 2022
experienced global supply chain disruption, which eased across
the year as shipping capacity returned, with cargo volumes,
measured in cargo tonne kilometres (CTKs), 15.9 per cent higher
than the previous year in quarter 1, but lower than in the previous
year by 3.5 per cent by quarter 4; total cargo carried for the year
was almost the same as in 2021, up 0.3 per cent. Cargo yields,
measured as cargo revenue per cargo tonne kilometre, were 3.7
per cent below those of 2021, although double those of 2019. As
global supply chain issues eased, cargo yields also declined across
the year, with quarter 1 up 6.5 per cent on the previous year but
quarter 4 being 17.2 per cent lower than in quarter 4 2021. The
yield environment is expected to moderate, along with global air
cargo volumes, in 2023.
Other revenue
The largest Other revenue streams for the Group are BA Holidays,
Iberia’s Maintenance, Repair and Overhaul (MRO) and Handling
businesses and IAG Loyalty. Other revenue from activities linked
to the volume of passenger flying rose significantly with larger
flying programmes, resulting in Other revenue more than double
the level in 2021 and 3.7 per cent higher than that of 2019. BA
Holidays bookings benefited from an increase in British Airways’
flying schedule and the strong demand for leisure travel. Iberia’s
third party MRO and handling businesses improved, reflecting
higher activity. IAG Loyalty improved (on both 2019 and 2021),
with a significant growth in the number of Avios issued linked to
its partnerships, including with American Express, resulting in an
increase in customers collecting Avios and with higher average
numbers of Avios collected per customer. IAG Loyalty also
launched a new partnership with Barclays in 2022.
Operating costs
Total expenditure on operations rose from €11,220 million in 2021 to
€21,810 million in 2022, linked to the higher volume of flights and
passenger numbers, together with adverse foreign currency
movements of €1,104 million, which were mainly due to the
strengthening of the US dollar against the euro and pound sterling.
Excluding the impact of the exceptional items shown above, the
operating profit for 2022 was €1,225 million, €4,195 million better
than the operating loss of €2,970 million for 2021, reflecting the
continued recovery in capacity. The profit after tax and before
exceptional items was €402 million, €3,440 million higher than
the 2021 loss of €3,038 million.
Alternative Performance Measures
(before exceptional items)
€ million 2022 2021
Higher/
(lower) vly
Operating profit/(loss) 1,225 (2,970) 4,195
Profit/(loss) before tax 384 (3,637) 4,021
Profit/(loss) after tax 402 (3,038) 3,440
Revenue
€ million 2022 2021
Higher/
(lower) vly
Passenger revenue
1
19,458 5,835 13,623
Cargo revenue 1,615 1,673 (58)
Other revenue 1,993 947 1,046
Total revenue 23,066 8,455 14,611
1 For 2021 includes an exceptional credit of €5 million related to
discontinued hedge accounting of revenue foreign currency derivatives.
Further information is given in the Alternative Performance Measures
section.
Total revenue increased €14,611 million versus 2021, of which
€782 million was due to favourable exchange rate movements.
Passenger revenue
The increase in passenger revenue of €13,623 million was
significantly ahead of the increase in passenger capacity, driven
by higher yields and higher load factors than in 2021, linked to the
reopening of markets, strong pent-up customer demand and
increases in ticket prices to reflect a higher cost environment, with
higher fuel prices and supplier price inflation, particularly following
the outbreak of the war in Ukraine in February 2022.
The passenger load factor for the year of 81.8 per cent was 17.3
points higher than in 2021 and only 2.8 points lower than in 2019,
with recovery increasingly seen as the year progressed and the
final quarter of the year just 1.1 points lower than in 2019.
Passenger yields, measured as passenger revenue per revenue
passenger kilometre (RPK) were 21.7 per cent higher than in 2021
and up 14.7 per cent on 2019. The resulting passenger unit
revenue (passenger revenue per ASK) for the year was 54.4 per
cent higher than in 2021 and 11.0 per cent higher than in 2019.
Passenger unit revenue also steadily rose as capacity was
restored, being 11.7 per cent lower than 2019 in the first quarter,
achieving 21.9 per cent higher than in 2019 in the summer peak of
quarter 3 and still 16.4 per cent higher than 2019 in the fourth
quarter.
INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2022 37
Employee costs
€ million 2022 2021
Higher/
(lower) vly
Employee costs
1
4,647 3,013 1,634
1 For 2021 includes an exceptional credit of €18 million related to the
release of restructuring provisions. Further information is given in the
Alternative Performance Measures section.
The rise in Employee costs to €4,647 million versus €3,013 million
in 2021 reflected an increase in employee numbers as the Group
restored capacity and the end of the various government
schemes to support employees and businesses during the most
intense periods of the COVID-19 pandemic. The use of
government wage support and related schemes in 2022 was
limited to a small residual amount of €14 million, all in the first
quarter, versus €555 million for the year in 2021. The Group
agreed pay deals with the substantial majority of its bargaining
groups and employees during 2022.
Fuel, oil and emissions costs
€ million 2022 2021
Higher/
(lower) vly
Fuel, oil costs and emissions
charges
1
6,120 1,781 4,339
1 For 2021 includes an exceptional credit of €154 million related to the
discontinuation of hedge accounting for fuel derivatives and fuel foreign
currency derivatives as a result of the impact of COVID-19. Further
information is given in the Alternative Performance Measures section.
Fuel, oil and emissions charges were up significantly on 2021, up
€4,339 million, reflecting increased flying volumes and the
significant rise in commodity prices for jet fuel, most notably
following the Russian invasion of Ukraine early in the year. Foreign
exchange movements accounted for €505 million of the increase,
principally due to the average US dollar exchange rates being
stronger versus the euro and pound sterling in 2022 compared
with 2021. Average spot prices in 2022 were 80 per cent higher
than the previous year, with prices at the end of 2022 39 per cent
higher than at the start of the year.
Jet fuel price trend ($ per metric tonne)
Oct-18
Apr-18
Jul-18
Oct-19
Apr-19
Jul-19
Oct-20
Apr-20
Jul-20
Jan-18
Jan-19
Jan-20
Oct-21
Apr-21
Jul-21
Jan-21
Oct-22
Dec-22
Apr-22
Jul-22
Jan-22
100
300
500
700
900
1,100
1,300
Fuel hedging
The Group seeks to reduce the impact of volatile commodity
prices by hedging prices in advance. The Group’s fuel hedging
policy was approved by the Board in May 2021 and is designed to
provide flexibility to respond to both significant unexpected
reductions in travel demand or capacity and/or material or
sudden changes in jet fuel prices. The policy allows for
differentiation within the Group, to match the nature of each
operating company, and the use of call options for a proportion of
the hedging undertaken. The policy operates on a two-year rolling
basis, with hedging of up to 60 per cent of anticipated
requirements in the first 12 months and up to 30 per cent in the
following 12 months, and with flexibility for low-cost airlines within
the Group to adopt hedging up to 75 per cent in the first
12 months. For all Group airlines, hedging between 25 and
36 months ahead is only undertaken in exceptional circumstances.
Fuel consumption
The Group continued to benefit from reduced fuel consumption,
associated with the investment in new fleet, together with the
early retirement of older aircraft, including the retirement of 15
Airbus A340-600 and 32 Boeing 747-400 aircraft in quarter 2 of
2020. Increasing passenger load factors versus 2021 also
contributed to reduced carbon intensity.
See Sustainability section
for further information.
Supplier costs
€ million 2022 2021
Higher/
(lower) vly
Handling, catering and other
operating costs 2,971 1,308 1,663
Landing fees and en-route
charges 1,890 923 967
Engineering and other aircraft
costs
1
2,101 1,085 1,016
Property, IT and other costs
2
950 758 192
Selling costs 920 434 486
Currency differences 141 (14) 155
Total Supplier costs 8,973 4,494 4,479
1 For 2021 includes an exceptional credit of €7 million related to the
reversal, due to adjusted fleet plans, of a 2020 inventory write-down and
a charge relating to contractual lease provisions. Further information is
given in the Alternative Performance Measures section.
2 Includes an exceptional credit of €23 million related to the partial
reversal of the historical fine, plus accrued interest, initially issued by the
European Commission to British Airways for involvement in cartel
activity and recognised as an exceptional charge in 2010. Further
information is given in the Alternative Performance Measures section.
Total Supplier costs rose by €4,479 million to €8,973, double the
level of 2021, reflecting the higher capacity operated. Supplier
costs were impacted by higher levels of inflation, although the
impact was partially mitigated by the Group’s procurement
initiatives.
Property, IT and other costs include an exceptional credit of
€23 million, due to the partial reversal of a fine originally issued to
British Airways in 2010.
Supplier costs include a €141 million currency differences charge
in 2022 versus a €14 million currency differences credit in 2021;
currency differences mainly reflect the retranslation of current
financial assets and liabilities at the closing foreign exchange rate
for the period, which in 2022 reflects the strengthening of the US
dollar against both the euro and the pound sterling over the
course of 2022. Total foreign currency impacts on Supplier costs,
including currency differences, were €526 million adverse versus
2021.
38 INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2022
Strategic Report
FINANCIAL REVIEW CONTINUED
Ownership costs
Ownership costs include depreciation, amortisation and impairment
of tangible and intangible assets, including right of use assets.
€ million 2022 2021
Higher/
(lower) vly
Ownership costs
1
2,070 1,932 138
1 Includes an exceptional credit of €8 million (2021: exceptional credit of
€21 million) related to the partial reversal of an impairment relating to
fleet assets that were previously stood down in 2020. Further
information is given in the Alternative Performance Measures section.
The increase in ownership costs versus 2022 is mainly driven by
the increase in the Group’s fleet of aircraft, linked to the
restoration of capacity and 27 deliveries of new aircraft in the
year. An exceptional credit of €8 million was recorded in the year,
reflecting the partial reversal of an impairment related to six
aircraft previously stood down by Vueling in 2020 on the
assumption these aircraft were no longer required and would not
return to service; in 2022 it was determined the aircraft are
required for Vueling’s flying programme and they were stood up
and re-entered service.
Aircraft fleet
In 2022, the in-service fleet increased by 27 aircraft, with 25 of the
new aircraft delivered in 2022 in service by the end of the year;
the remaining two entered service early in 2023. During the year
12 aircraft were removed from service, pending lease return or
disposal, and 14 aircraft re-entered service, having previously been
stood down from active service.
Number of fleet
Number of fleet in-service 2022 2021
Higher/
(lower) vly
Shorthaul 381 363 5.0%
Longhaul 177 168 5.4%
558 531 5.1%
In addition to the in-service fleet, there were a further 18 aircraft not
in service, made up of 16 aircraft held by the Group pending
disposal or lease return and two aircraft delivered late in 2022 and
not in service by December 31, 2022.
Exchange rate impact
Exchange rate impacts are calculated by retranslating current year
results at prior year exchange rates. The reported revenues and
expenditures are impacted by the translation of currencies other
than euro to the Group’s reporting currency of euro, primarily
British Airways and IAG Loyalty. From a transaction perspective,
the Group performance is impacted by the fluctuation of exchange
rates, primarily exposure to the pound sterling, euro and US dollar.
The Group typically generates a surplus in most currencies in which
it does business, except the US dollar, for which capital
expenditure, debt repayments and fuel purchases typically create a
deficit which is managed and partially hedged. The Group hedges
its economic exposure from transacting in foreign currencies but
does not hedge the translation impact of reporting in euro.
Overall, in 2022 the Group operating profit before exceptional
items was reduced by €322 million due to adverse exchange rate
impacts.
Exchange rate impact before exceptional items
€ million
Favourable/(adverse)
2022
Translation
impact
Transaction
impact
Total
exchange
impact
Total exchange impact
onrevenue 97 685 782
Total exchange impact
onoperating expenditures (129) (975) (1,104)
Total exchange impact
onoperating profit (32) (290) (322)
€ million
Favourable/(adverse)
2021
Translation
impact
Transaction
impact
Total
exchange
impact
Total exchange impact on
revenue 220 (163) 57
Total exchange impact on
operating expenditures (251) 292 41
Total exchange impact on
operating loss (31) 129 98
The exchange rates of the Group were as follows:
2022 2021
Higher/
(lower) vly
Translation – Balance sheet
£ to € 1.14 1.18 (2.8)%
Translation – Income
statement (weighted average)
£ to € 1.17 1.15 1.9%
Transaction
(weightedaverage)
£ to € 1.17 1.15 1.9%
€ to $ 1.05 1.20 (12.6)%
£ to $ 1.23 1.38 (10.8)%
INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2022 39
Total net non-operating costs
Total net non-operating costs for the year were €841 million,
versus €742 million in 2021. The main driver of the increase was
Finance costs, which were up €187 million, reflecting a full year of
interest on the debt raised in 2021 and the impact of higher
interest rates on the Group’s floating rate debt.
The net change in the fair value of financial instruments of
€81 million reflects fair value adjustments at December 31, 2022 of
IAG’s convertible bond maturing in 2028, partially offset by the
fair value movements on the convertible loan issued to Globalia
during quarter 2 and converted into a 20 per cent equity stake in
Air Europa Holdings in quarter 3. In 2021 non-operating costs
included a €89 million non-cash credit relating to movements in
the fair value of the €825 million IAG convertible bond.
Other non-operating credits of €132 million (2021: €70 million)
represent net gains on derivative contracts for which hedge
accounting is not applied; in 2021 the credit of €70 million is net
of an exceptional non-operating charge of €75 million, relating to
a settlement agreement reached with Globalia to terminate the
previous agreements signed in 2019 and 2021 for Iberia to acquire
the issued share capital of Air Europa Holdings.
Tax
The tax credit on the profit for the year was €16 million (2021: tax
credit of €574 million), and the effective tax rate was negative 3.9
per cent (2021: 16.4 per cent).
The substantial majority of the Group’s activities are taxed where
the main operations are based: in the UK, Spain and Ireland, which
had statutory corporation tax rates of 19 per cent, 25 per cent and
12.5 per cent respectively for 2022. The expected effective tax
rate for the Group is determined by applying the relevant
corporation tax rate to the profits or losses of each jurisdiction.
The geographical distribution of profits and losses in the Group
results in the expected tax rate being 24.6 per cent for the year to
December 31, 2022. The difference between the actual effective
tax rate of negative 3.9 per cent and the expected tax rate of 24.6
per cent is primarily due to the recognition of previously
unrecognised tax losses in the Group’s Spanish companies.
The profit after tax for the year was €431 million (2021: loss of
€2,933 million).
On March 3, 2021 the UK Chancellor of the Exchequer announced
that legislation would be introduced in the Finance Bill 2021 to set
the main rate of corporation tax at 25 per cent from April 2023.
On May 24, 2021 the Finance Bill was substantively enacted, which
has led to the remeasurement of deferred tax balances and will
increase the Group’s future current tax charge accordingly. As a
result of the remeasurement of deferred tax balances in UK
entities, a credit of €17 million (2021: €78 million credit) is
recorded in the Income statement and a charge of €10 million
(2021: €61 million credit) is recorded in Other comprehensive
income.
On October 8, 2021 the Irish Government announced that it would
increase the rate of corporation tax for certain multinational
businesses to 15 per cent with effect from 2023. This expected tax
rate change has not been reflected in these results because it has
not yet been substantively enacted.
The Group is monitoring the OECD’s proposed two-pillar solution
to address the tax challenges arising from the digitalisation of the
economy. This proposed reform to the international tax system
addresses the geographical allocation of profits for the purposes
of taxation, and is designed to ensure that multinational
enterprises will be subject to a minimum 15 per cent effective tax
rate. On December 15, 2022, the Council of the European Union
formally adopted the EU Pillar Two Directive. Member States are
expected to transpose the Directive into national law by the end
of 2023. The Group is continuing to assess the implications of the
reform and these will be determined when the relevant legislation
is finalised.
40 INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2022
Strategic Report
FINANCIAL REVIEW CONTINUED
Operating profit and loss performance of operating companies
Statutory
British Airways
£ million
Aer Lingus
€ million
Iberia
€ million
Vueling
€ million
2022
Higher/
(lower) vly 2022
Higher/
(lower) vly 2022
Higher/
(lower) vly 2022
Higher/
(lower) vly
Passenger revenue 9,215 6,894 1,679 1,372 4,042 2,318 2,584 1,573
Cargo revenue 1,060 (37) 80 15 347 (47) - -
Other revenue 755 474 10 6 1,122 456 14 9
Total revenue 11,030 7,331 1,769 1,393 5,511 2,727 2,598 1,582
Fuel, oil costs and emissions charges 2,929 2,099 539 450 1,313 794 739 541
Employee costs 2,100 629 393 213 1,161 438 370 170
Supplier costs 4,595 2,407 646 341 2,284 872 1,088 464
Ownership costs
1
1,084 105 146 6 371 21 206 (21)
Operating profit 322 2,091 45 383 382 602 195 428
Operating margin 2.9% 50.7 pts 2.6% 92.6 pts 6.9% 14.8 pts 7.5% 30.5 pts
Alternative Performance Measures
2
Passenger revenue 9,215 6,899 1,679 1,371 4,042 2,318 2,584 1,573
Cargo revenue 1,060 (37) 80 15 347 (47) - -
Other revenue 755 474 10 6 1,122 456 14 9
Total revenue before exceptional items 11,030 7,336 1,769 1,392 5,511 2,727 2,598 1,582
Fuel, oil costs and emissions charges 2,929 1,990 539 440 1,313 785 739 532
Employee costs 2,100 618 393 213 1,161 433 370 170
Supplier costs 4,614 2,426 646 341 2,284 872 1,088 457
Ownership costs
1
1,084 99 146 6 371 21 214 (26)
Operating profit before exceptional items 303 2,203 45 392 382 616 187 449
Operating margin before exceptional items 2.7% 54.1 pts 2.6% 94.7 pts 6.9% 15.3 pts 7.2% 33.0 pts
1 Ownership costs reflects Depreciation, amortisation and impairment.
2 Further detail is provided in the Alternative Performance Measures section.
INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2022 41
Review by operating company
All four of the airline operating companies saw a return to
profitability in 2022, following the significant negative impacts of
COVID-19 in 2020 and 2021. The shape of each airline’s recovery
was linked to the pace of the easing of government travel
restrictions and re-opening of travel in their key markets, together
with operating constraints at their hubs and other airports.
British Airways operated the lowest passenger capacity relative to
2019, with ASKs at 70.3 per cent of 2019, partly linked to constraints
at London Heathrow Airport. Aer Lingus operated at 86.8 per cent
of 2019, including the impact of a new base at Manchester Airport in
the UK, with Iberia at 87.1 per cent and Vueling at 98.2 per cent,
including its expanded operation at Paris Orly.
Operating profit/(loss) before exceptional items
2022 2021 2019
British Airways (£ million) 303 (1,900) 1,890
Aer Lingus (€ million) 45 (347) 276
Iberia (€ million) 382 (234) 497
Vueling (€ million) 187 (262) 240
Iberia and Vueling saw the greatest return to profit versus 2019,
linked to strong demand in the Domestic, Europe and LACAR
regions. Aer Lingus saw an increasing recovery through the year
and a strong quarter 3, in which there was strong pent-up
demand for summer travel. British Airways also experienced rising
profitability through the year, strong pent-up demand and
significantly increased unit revenues versus 2019 in the second
half of the year, as load factors improved and average yields rose.
All of the airlines experienced significantly higher fuel prices than
in 2019 or 2021, although the impact was partly mitigated by the
Group’s hedging policy. Supplier costs were impacted by the high
levels of price inflation and costs to restart the business following
COVID-19 restrictions, with the impact lessened by procurement
and transformation initiatives.
IAG Loyalty showed significant growth in its non-airline partner
revenue streams, together with benefiting from the recovery in
the Group’s airlines, leading to operating profit before exceptional
items of £240 million (€282 million), up from £113 million
(€131 million) in 2021.
Capital expenditure
In 2022 the Group increased investment in its aircraft fleets,
customer products and services, IT infrastructure and sustainability,
as the business recovered, with capital expenditure of €3,875 million,
compared with €744 million in 2021.
During 2022 the Group took delivery of aircraft delayed from 2020
and 2021 due to the impact of COVID-19, together with making
pre-delivery payments for future aircraft deliveries, which had also
been deferred. In 2022 the Group took delivery of 27 aircraft: 10 for
British Airways, 15 for Iberia and two for Aer Lingus. Of these
deliveries, 25 were aircraft acquired from Airbus and Boeing and
two were leased directly from aircraft lessors. This contrasts with
2021, in which only five A320neo family aircraft were acquired from
Airbus, with the remainder of the 11 deliveries in the year on direct
lease arrangements from aircraft lessors.
Aircraft deliveries 2022 2021
Airbus A320 family 12 8
Airbus A330 - 1
Airbus A350 12 -
Boeing 787-10 3 -
Embraer E190 - 2
Total 27 11
Aircraft orders
The Group exercised options for 22 Airbus A320neo family aircraft
in the first half of 2022, for delivery in 2024 and 2025. The Group
entered into direct leasing contracts for and took delivery of two
Airbus A320neo aircraft in the year. In October 2022 an
Extraordinary Shareholders’ Meeting approved the acquisition of a
further 37 Airbus A320neo family aircraft and 50 Boeing 737
aircraft. The aircraft will replace Airbus A320ceo family aircraft and
are up to 20 per cent more fuel-efficient than the aircraft they
replace. These aircraft are expected to be delivered between 2024
and 2028.
Aircraft future deliveries at December 31 2022 2021
Airbus A320/A321 91 42
Airbus A321 XLR 14 14
Airbus A350 12 26
Boeing 737 50 -
Boeing 777-9 18 18
Boeing 787-10 7 10
Total 192 110
Following the orders placed in 2022, at December 31, 2022 the
Group held options to acquire a further 246 aircraft from Airbus
and Boeing.
See Aircraft fleet section
for further information.
Capital commitments
Capital expenditure authorised and contracted for at December
31, 2022 amounted to €13,749 million (2021: €10,911 million), with
the increase attributable to the net of the aircraft deliveries and
orders described above. Most of these commitments are
denominated in US dollars.
The Group has certain rights to cancel commitments in the event
of significant delays to aircraft deliveries caused by the aircraft
manufacturers. No such rights had been exercised as at
December 31, 2022.
Working capital
The Group saw strong booking inflows for travel in 2023 during
the second half of 2022, reflecting expanded flying programmes
as the recovery from COVID-19 continued, with capacity in 2023
expected to approach that of 2019 and with higher average yields.
At December 31, 2022, Deferred revenue on ticket sales, which
includes loyalty points (Avios), had risen €1,092 million on the
previous year to close at €7,644 million. Of this balance,
€7,318 million is included in current liabilities and €326 million
within non-current liabilities, associated with the renewal of IAG
Loyalty’s multi-year contract with American Express in 2020.
42 INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2022
Strategic Report
FINANCIAL REVIEW CONTINUED
Sales in advance of carriage, related to passenger ticket sales,
were up €1,282 million versus 2021, at €5,014 million. Vouchers
issued for future travel in lieu of a cash refund represented 13 per
cent of sales in advance of carriage.
The value of loyalty points (Avios) issued and yet to be
recognised in revenue was down €190 million versus 2021 at
€2,630 million, reflecting the net impact of the unwind of the
remainder of a pre-payment from American Express made in
2020 and the balance of Avios issued versus redeemed in 2022.
Trade receivables rose by €595 million to €1,330 million, related to
the increased flying programmes and higher yields.
Trade and other payables rose by €1,497 million to €5,209 million,
again due to the significantly increased flying schedule and cost
inflation. In quarter 4, 2022, the period to which the Trade and
other payables mainly relates, the Group operated 86.6 per cent
of 2019 passenger capacity, versus 58.3 per cent operated in
quarter 4 of 2021.
Funding and debt
IAG’s long-term objectives when managing capital are: to
safeguard the Group’s ability to continue as a going concern and
its long-term viability; to maintain an optimal capital structure in
order to reduce the cost of capital; and to provide sustainable
returns to shareholders. In November 2018, S&P and Moody’s
assigned IAG with a long-term investment-grade credit rating
with a stable outlook; IAG’s credit ratings remained investment-
grade up until the outbreak of COVID-19. The impact of COVID-19
on the Group and wider airline industry led to ratings falling by
three notches for S&P and two notches for Moody’s. The Group’s
current ratings (at February 23, 2023) are: S&P: BB, Moody’s: Ba2.
Debt and capital
The Group monitors leverage using net debt to EBITDA before
exceptional items, in addition to closely following measures used
by the credit ratings agencies, including those based on total
borrowings (gross debt).
See Alternative Performance Measures
section for calculation.
The Group had previously set a target of net debt to EBITDA
before exceptional items below 1.8 times.
In 2022, net debt to EBITDA before exceptional items was 3.1
times, compared with 1.4 times in 2019, reflecting a partial
recovery in operating profitability in 2022 following the significant
impact of COVID-19 in 2020 and 2021, together with the impact of
debt raised during the pandemic to boost liquidity and resilience.
In 2021, EBITDA was negative, rendering the net debt to EBITDA
before exceptional items ratio not meaningful; the calculation for
2021 resulted in net debt to EBITDA before exceptional items of
minus 11.5 times.
Net debt
€ million 2022 2021
Higher /
(lower)
Debt 19,610 15,679 3,931
Cash, cash equivalents and
interest-bearing deposits (7,943) (5,917) (2,026)
Net debt at January 1 11,667 9,762 1,905
Increase in cash net of
exchange (1,656) (2,026) 370
Movements in total borrowings
Net cash outflow from
repayments of borrowings and
lease liabilities (2,505) (2,265) (240)
Net cash inflow from new
borrowings 1,436 4,817 (3,381)
Non-cash impact of new leases 1,017 518 499
(Decrease)/increase in net
debt from regular financing (52) 3,070 (3,122)
Exchange and other non-cash
movements 426 861 (435)
Net debt at December 31 10,385 11,667 (1,282)
Net debt reduced by €1,282 million, principally due to the
recovery in profitability and positive working capital from
bookings into 2023, partially offset by the capital expenditure of
€3,875 million. Gross debt increased by €374 million during the
year to €19,984 million. Repayments exceeded new borrowings
by €1,069 million, reflecting scheduled repayments of aircraft
debt, new aircraft debt raised during the year and the repayments
of non-aircraft financing as detailed below. Gross debt is subject
to foreign exchange translation movements, as the majority of the
Group’s aircraft debt is denominated in US dollars. Over the
course of 2022 the euro and pound sterling weakened against the
US dollar which increased gross debt by €518 million.
Cash
Cash, cash equivalents and interest-bearing deposits
€ million 2022 2021
Higher/
(lower)
British Airways 2,877 1,986 891
Iberia 2,389 761 1,628
Vueling 766 441 325
Aer Lingus 375 228 147
IAG Loyalty 993 954 39
IAG and other Group
companies 2,199 3,573 (1,374)
Cash, cash equivalents
andinterest-bearing deposits 9,599 7,943 1,656
British Airways, Iberia, Vueling and Aer Lingus all experienced
significant positive operating cash flow in the year. The reduction
in the balance of cash, cash equivalents and interest-bearing
deposits in IAG and other Group companies reflects the
repayment of unsecured debt in IAG and intragroup loan
payments to Iberia and Aer Lingus.
INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2022 43
Debt
Long-term aircraft financing was successfully secured during
2022 for all 27 of IAG’s aircraft delivered in the year; financing for
five of these aircraft for British Airways will be drawn in 2023.
Committed aircraft financing facilities at December 31, 2022
includes an amount of €571 million for these five aircraft, together
with one further Airbus A320neo, which will be delivered in 2023.
Seven aircraft were financed via operating leases, reported as
Lease liabilities, with five Iberia A350-900s financed through sale
and leaseback transactions subsequent to the delivery of the
aircraft and two Aer Lingus A320neos leased directly from
aircraft lessors. All of British Airways’ 10 deliveries and the
remaining 10 Iberia aircraft were financed through finance leases,
reported as Asset financed liabilities.
During 2022 IAG repaid its €500 million convertible bond
originally issued in 2015 and Aer Lingus repaid €100 million of its
loan from the Ireland Strategic Investment Fund (ISIF), thereby
increasing the amount of its ISIF facility that is undrawn and
available to draw in the future, if needed, to €300 million.
The maturity profile of the Group’s Bank and other loans includes,
in 2023, the maturity of a €500 million unsecured bond issued in
2019, along with the first amortisation of the syndicated loans to
Iberia and Vueling drawn in 2020, which were partly backed by
Spain’s Instituto de Crédito Oficial (ICO). In 2026, the main
maturity is a €2.3 billion (£2.0 billion) syndicated loan to British
Airways drawn in 2021, which was partly backed by UK Export
Finance (UKEF).
Maturity profile of Bank and other loans
€ million 2023 2024 2025 2026
After
2026
1
Payment of debt principal 715 287 875 2,738 2,096
1 Includes the €825 million IAG 2028 convertible bond.
Equity
No equity was raised or repaid during the year, nor in 2021.
Liquidity facilities
During the year, the Group extended its facility with Ireland’s ISIF
for Aer Lingus by €200 million, bringing the total facility to
€350 million. At December 31, 2022 €50 million had been drawn
and €300 million was undrawn.
The Group also exercised a one-year extension to the availability
of its $1,755 million (€1,654 million) Revolving Credit Facility
(RCF), which now has committed availability until March 2025.
The facility was originally agreed and executed with a syndicate
of banks in 2021, with availability for three years, plus two
consecutive one-year extension periods, at the discretion of the
lenders. The facility is available to Aer Lingus, British Airways and
Iberia, each of whom has a separate borrower limit within the
overall facility. Any drawings under the facility would be secured
against eligible unencumbered aircraft assets and/or take-off and
landing rights at London Heathrow or London Gatwick airports.
This facility was undrawn at December 31, 2022.
The other major general facility for the Group is a £1,000 million
(€1,143 million) committed credit facility for British Airways,
partially guaranteed by UKEF, which was agreed and executed in
2021 and matures in 2026. This facility was also undrawn at
December 31, 2022.
The Group also has certain other committed and undrawn general
facilities, bringing total committed and undrawn general facilities
at December 31, 2022 to €3,284 million (2021: €2,917 million).
The Group also holds €1,116 million of committed and undrawn
aircraft financing facilities (2021: €1,126 million), including
€620 million remaining undrawn from committed and undrawn
sustainability-linked aircraft financing for British Airways agreed
and committed in 2022 and to be drawn in 2023. The Group also
has certain backstop financing arrangements, which can be used
against certain future aircraft deliveries.
In total, the Group had €4,400 million of committed and undrawn
general and aircraft facilities as at December 31, 2022
(2021: €4,043 million).
The facilities values above do not include the balance of certain
shorter-term working capital facilities available to the Group’s
operating companies.
Dividends
No dividends were proposed or paid in 2022 (2021: nil).
Liquidity and cash flow
Total liquidity, measured as cash, cash equivalents and interest-
bearing deposits of €9,599 million and committed and undrawn
general and aircraft facilities of €4,400 million, was €13,999 million
at December 31, 2022. This represented an increase of
€2,013 million versus total liquidity of €11,986 million at the end of
2021.
Cash flow
The Group saw strong cash flow generation in 2022, mainly linked
to a return to profitability and positive working capital
movements, including an increase in bookings for future travel as
the airlines’ schedules increased and yields rose in the light of
higher fuel prices and inflation. The resulting net cash flows from
operating activities of €4,835 million was significantly higher than
the net cash outflows from investing and financing activities,
leading to an increase in Cash, cash equivalents and interest-
bearing deposits of €1,656 million to €9,599 million.
Condensed cash flow summary
€ million 2022 2021 Movement
Net cash flows from
operating activities 4,835 (141) 4,976
Net cash flows from
investing activities (3,463) (181) (3,282)
Net cash flows from
financing activities (56) 2,235 (2,291)
Net increase in cash
and cash equivalents 1,316 1,913 (597)
Net foreign exchange
differences (12) 205 (217)
Cash and cash equivalents
at January 1 7,892 5,774 2,118
Cash and cash equivalents
at year end 9,196 7,892 1,304
Interest-bearing deposits
maturing after more than
three months 403 51 352
Cash, cash equivalents and
interest-bearing deposits 9,599 7,943 1,656
44 INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2022
Strategic Report
FINANCIAL REVIEW CONTINUED
Many of the significant cash flow items are already explained
above, including in the sections covering operating costs, non-
operating costs, capital expenditure, working capital and other
initiatives and funding. Further detail of other movements is
provided below.
Cash flows from operating activities
€ million 2022 2021 Movement
Operating profit/(loss) 1,256 (2,765) 4,021
Depreciation, amortisation
andimpairment 2,070 1,932 138
Movement in working capital 1,884 1,634 250
Payments related
torestructuring (81) (161) 80
Pension contributions net
ofservice costs (5) (15) 10
Provision and other non-cash
movements 627 305 322
Settlement of derivatives
where hedge accounting
hasbeen discontinued - (497) 497
Interest paid (824) (640) (184)
Interest received 42 3 39
Tax (paid)/received (134) 63 (197)
Net cash flows from
operating activities 4,835 (141) 4,976
Restructuring payments principally include payments in Spain
relating to redundancy programmes in Iberia agreed prior to 2020.
In December 2022, British Airways agreed the valuation of its main
defined benefit pension scheme, the New Airways Pension Scheme
(NAPS), with the scheme’s Trustee, which resulted in a deficit as at
the valuation date of March 31, 2021 of £1,650 million
(€1,887 million). As at December 31, 2022, the scheme was over 100
per cent funded on the 2021 valuation basis and an overfunding
protection mechanism agreed with the NAPS Trustee meant that
no contributions were due. Deficit contributions could resume
should the funding level fall in the future. Previously British Airways
had agreed deferrals of deficit contributions with the NAPS Trustee
from October 2020 to September 2021. From October 2021 to
December 2022, an overfunding mechanism agreed as part of the
previous triennial valuation led to no deficit contributions being
required. The pension cash flows shown above represent payments
to various smaller schemes within the Group.
See note 32 to the financial statements Employee benefit
obligations for further information.
Provision and other non-cash movements mainly relate to
restoration and handback provisions for leased aircraft and ETS
allowances.
The cash outflow for the Settlement of derivatives where hedge
accounting has been discontinued of €497 million in 2021
represented cash payments relating to overhedging of fuel and
foreign exchange in 2020, linked to the significant fall in airline
capacity in 2020, due to the impact of COVID-19.
The increase in interest expense in 2022 reflects the full year
impact of additional debt raised in 2021 and higher interest rates.
Approximately one quarter of the Group’s total debt is on floating
rate arrangements.
Cash flows from investing activities
€ million 2022 2021 Movement
Acquisition of PPE
andintangible assets (3,875) (744) (3,131)
Sale of PPE, intangible assets
and investments 837 544 293
(Increase)/decrease in other
current interest-bearing
deposits (351) 91 (442)
Payment to Globalia for
convertible loan (100) - (100)
Other investing movements 26 (72) 98
Net cash flows from
investingactivities (3,463) (181) (3,282)
The €837 million of cash inflow from Sale of property, plant and
equipment and intangible assets and investments is mainly due to
the aircraft sale and leaseback transactions discussed in the Funding
and debt section above, together with the disposal of surplus assets,
principally aircraft being retired from service. The increase from 2021
is due to the value of aircraft financed through sale and leaseback
transactions being higher, as in 2022 it includes five wide-bodied
A350-900 aircraft.
In March of 2022 IAG entered into a convertible loan with Globalia
for €100 million, convertible into an equity stake in Air Europa
Holdings of 20 per cent. The conversion option was exercised in
August 2022.
Cash flows from financing activities
€ million 2022 2021 Movement
Proceeds from borrowings 1,436 4,817 (3,381)
Repayment of borrowings (1,050) (784) (266)
Repayment of lease liabilities (1,455) (1,481) 26
Settlement of derivative
financial instruments 1,036 (268) 1,304
Acquisition of treasury shares
and other financing
movements (23) (49) 26
Net cash flows from
financingactivities (56) 2,235 (2,291)
Proceeds from borrowings reflect the cash inflows from aircraft
financing as described in the Funding and debt section above.
There was no non-aircraft financing raised in 2022, whereas in
2021 British Airways raised £2.0 billion (€2.3 billion) through a
loan guaranteed by the UKEF, Aer Lingus drew a further
€75 million from ISIF and the Group raised €1.2 billion through
unsecured bonds and issued a €825 million convertible bond.
Repayments of borrowings and lease liabilities includes the
repayment of IAG’s 2015 €500 million convertible bond,
€100 million to the Ireland’s ISIF and the principal element of
ongoing lease payments.
Settlement of derivative financial instruments relates to
settlements of foreign exchange instruments taken out to hedge
long-term debt payments, including US dollar lease payments.
The significant inflow in 2022 relates to the strengthening of the
US dollar versus the euro and pound sterling.
INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2022 45
Engagement context
IAG continued to face considerable
uncertainty in the political and regulatory
environment during 2022, not least
because travel restrictions designed to
limit the spread of COVID-19 remained in
place around the world to varying degrees.
Throughout the year, therefore, IAG
engaged with policy makers to understand
and manage changes to travel rules, as
well as to explain the benefits of a return
to normal travel. We encouraged focus on
key issues, in particular sustainability,
where policy intervention can provide
mutual benefit to customers and all
stakeholders in wider society as well as to
IAG itself.
The impacts of the pandemic in 2022 have
been felt not just in the practical
implications of travel restrictions but in
impacts on other specific areas of aviation
policy and in the approach of regulators.
The pace of political change in the UK,
with its wider impacts on business, has
also required monitoring and re-
engagement with new ministerial teams.
IAG aims to make the case for the
economic and social benefits of aviation
through connecting people and
businesses, facilitating trade and enabling
positive international relationships. To do
so, the Group directs its engagement
largely towards governments and
regulators in the countries of its operating
airlines and with the institutions of the
European Union, working closely with our
trade association Airlines 4 Europe. We
have also contributed to supra-national
policy fora such as ICAO (through IATA)
and directly with governments in key
world markets to support market access or
manage doing business issues for our
operating companies.
COVID-19
Travel restrictions
The removal of travel restrictions has been
a staged process through the year, with
changes at irregular intervals. For example,
while the European Commission advised
on March 1 that all EU countries should
essentially allow all travel by those with an
approved vaccination, a variety of
requirements existed across the EU
through 2022. While travel to Spain in the
summer season was enabled, full entry
restrictions were not lifted until September.
Ireland saw the removal of requirements
for passenger locator forms and proof of
vaccination for inbound travel to Ireland
onMarch 6. This was followed by the
withdrawal of the Irish Government’s
Aviation Protocol covering remaining
COVID-19-related restrictions on May 16.
In the UK, all travel requirements were
lifted on March 18 with the UK Government
explicitly recognising the importance of
travel to the country by removing them in
time for the busy Easter holidays.
The requirement for travellers to be
vaccinated against the disease remains a
standard one in many key markets,
including the US. The necessary customer
communications have been embedded in
IAG’s operating companies but variations
in the details of rules around the world
continue to mean monitoring of changes is
needed.
In some countries, largely in Asia,
restrictions on travel still present
significant barriers to resuming normal
operations. In these cases, where there are
complex requirements on airlines, IAG and
its operating companies continue to
engage, both directly and through their
relevant national regulators, with the
relevant authorities to simplify and lift
legacy rules.
Other impacts in 2022
Although the safety-critical and strategic
nature of international aviation has always
meant there is a role for government and
regulators in the sector, IAG observes that
one legacy of the pandemic is the
tendency for governments to seek to be
more closely involved in the operation of
the aviation industry than before. In the UK
this has resulted in increased scrutiny and
demands for information. IAG has worked
with British Airways and its other
operating companies to reduce the
associated administrative burden through
positive and regular engagement.
During 2022, demand returned largely as
IAG had anticipated but, in contrast, the
very significantly increased time that it
took to provide resources to meet that
demand could not have been foreseen and
presented a serious challenge to all parts
of the aviation system. Airlines, airports,
ground handlers and air navigation service
providers in different parts of the world
saw considerable operational difficulties,
resulting in delays and flight cancellations
in the spring and early summer as
restrictions were lifted. Airlines reduced
capacity to lower the risk of short-notice
Positive engagement
tosupport recovery
impacts on customers and airports and
inthe case of London Heathrow and
Amsterdam Schiphol, even imposed caps
on passenger numbers.
IAG engaged with governments to
highlight the real causes for shortages.
Inthe UK, where the impact was felt most
severely, these causes included a smaller
pool of labour from which to recruit but
also that the time to complete security
references tripled. Variations in
employment patterns, with applicants
having more jobs due to the instability
inthe employment market, meant that
very many more checks with previous
employers were required and applicants
often had to wait over three months for
roles to be confirmed.
IAG and British Airways were also able to
provide governments with a clear picture
of the knock-on effects in the industry
where, for example, lack of air traffic
controllers in parts of Europe can cause
delays at UK airports.
War in Ukraine
The impact on the aviation industry of
Russian’s invasion of Ukraine in February is
not to be compared with the human
tragedy of the war but there are significant
impacts on airline operations by
preventing European and UK airlines from
accessing Russian airspace. IAG has
engaged with its government stakeholders
to keep them apprised of the impacts on
both operations and on other policy areas.
Sustainability
IAG has continued to champion the cause
of sustainable aviation and to share its
plans for reducing carbon emissions as the
industry recovers. To explain and promote
its sustainability position, the Group and its
individual companies have engaged with
representatives of the institutions of the
EU and governments of Spain, Ireland and
the UK.
IAG welcomes the EU Green Deal and its
objectives, with which the Group is aligned,
as a powerful package for change.
Accelerating the pace of decarbonisation
will, however, require support from all
stakeholders in the industry and the
involvement of all national governments
and European institutions. In this regard, a
targeted design of the elements of the
package, together with that of other
relevant EU aviation regulations, is key to
ensuring the sector’s ability to invest in
reducing its carbon footprint.
46 INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2022
Strategic Report
REGULATORY ENVIRONMENT
IAG has made clear in its advocacy that the
Group does not support the removal of the
current jet fuel tax exemption. This is not a
solution for decarbonisation but will reduce
the sector’s ability to invest in more
effective measures with a significant impact
for citizens and the economy. Instead, we
are firmly of the view that policy should
focus on increasing the use of SAF and
market-based measures such as the EU ETS
and ICAO’s Carbon Offsetting and
Reduction Scheme (CORSIA).
IAG contends that increasing the use of
SAF, which reduces lifecycle CO
2
emissions
by 70 per cent, provides the primary
near-term opportunity to drive down
industry emissions. In April 2021, IAG
became the first European airline group
tocommit to fulfilling 10 per cent of its fuel
needs with SAF by 2030 and the Group
supports a 10 per cent mandate for SAF
for 2030 for all flights within the EU. We
call for a global SAF commitment covering
all international flights through ICAO. We
also encourage the EU and its Member
States to include a package of investment
incentives to enable scaled-up production
of SAF alongside the blending mandate
requirement that the Green Deal
introduces.
In engaging with UK policy makers,
wepromote the same public policy levers.
Weare encouraged that the UK
government confirmed its commitment
of£165 million to its Advanced Fuels Fund,
established to support planning and
production of five SAF plants in the
country. In December the first £82 million
of the fund was awarded to five projects,
including three with which IAG is
partnering. IAG also welcomed the UK’s
declaration in July of a mandate for 10 per
cent SAF by 2030 (in line with IAG’s own
target) and we encourage the government
to pass the necessary legislation as soon
as possible.
Throughout 2022, IAG has promoted a
further policy step necessary to progress
towards net zero. In conjunction with
industry partners, we advocate adopting
aprice stability mechanism in the UK for
SAF. The successful development of the
offshore wind sector in the UK was due to
the introduction of Contracts for
Difference and IAG recommends this tool
should be adopted for SAF to reduce the
risk for investors and so boost investment
in new technology.
On the international stage IAG has long
been an advocate for and contributor to
the design of CORSIA. We welcomed the
October commitment by ICAO to a
Long-Term Aspirational Goal for
international aviation of net zero carbon
emissions by 2050. The Group believes the
EU Green Deal must work alongside global
measures, not duplicate them, and that the
EU ETS should apply to intra-EU flights
and CORSIA to extra-EU flights. Applying
both systems to flights between EU
Member States risks undermining support
for CORSIA outside Europe. Similarly, we
encourage the use of emissions trading
system revenues (in the EU and UK) for
investment in carbon reduction measures,
as originally envisaged at the creation of
the ETS.
Slot allocation
Regulations introduced to restrict air
services during the pandemic meant that
some aviation policies that are essential in
normal circumstances were not effective
or appropriate for crisis conditions. Rules
that govern the allocation of slots at
airports with scarce capacity provide a
good example since low demand made
them unnecessary.
Although the capacity of the sector was
restored to a considerable degree in 2022,
there was still need for global regulatory
relief from the elements of slot rules that
require airlines to operate 80 per cent of
any one slot in order to retain it in the
following year. The continued relief
granted this year recognised that there
were divergent recovery rates worldwide
and continuing COVID-19 restrictions in
some regions. IAG worked with IATA to
advocate the adoption of industry-agreed
relief measures, as developed jointly with
airports and slot coordinators. These
guiding principles recognised the value to
consumers of allowing temporary waivers
from, or more flexible application of, ‘use it
or lose it’ rules so as to maintain long-
established airline networks for future
seasons.
The UK, the EU and other jurisdictions
sensibly adopted a range of alleviation
measures, but the patchwork of market-
based approaches adopted worldwide
introduced further inconsistencies and
complexity to the sector during the
recovery phase. Such waivers have been
gradually lifted so that from summer 23
the industry is effectively returning to
pre-COVID-19 rules. IAG continued to
support the use of the proven and
effective global policies and procedures
set out in the IATA Worldwide Airport Slot
Guidelines both while the need for waivers
remains but also in the long-term. Through
2022 we continued to advocate this
internationally agreed system as a way to
provide certainty for investors and
consumers as well as to maintain global
networks and to introduce competition
and is engaging with the European
Commission in its on-going review of the
Slot Regulation that launched in
September.
Infrastructure charges
The effective and fair regulation of airport
and air navigation service charges, set at a
reasonable level, continued to be an
important regulatory issue in 2022 with
consultations in each of IAG’s home
markets.
IAG and British Airways made detailed
representations to the UK CAA in response
to its consultation on the price cap for
Heathrow Airport’s charges. Having
allowed Heathrow Airport Limited (HAL)
to increase charges by over 50 per cent in
setting an interim price cap for 2022,
subsequently extended to 2023 at the
same rate, the CAA’s Final Proposals
required the airport to reduce its overall
yield per passenger by RPI -5.75 per cent
over the remaining three years of the
regulatory period. This will return charges
to roughly the same level in 2026 as they
are in 2022. IAG considers that the 2022
and 2023 interim price cap is too high but
welcomes the overall position the CAA has
adopted with the trend of reducing
charges. We continue to provide
information to the regulator as we await
confirmation of the final position, expected
in at the end of the first quarter of 2023.
IAG also continues to advocate the need
for greater transparency of HAL’s capital
plans and regulatory asset base in future
regulatory reviews.
In Spain, Iberia and Vueling, together with
IATA, participated in the consultation
process on airport charges to minimise
cost increases, and secured a decision by
the regulator to keep charges flat until
2026 with a specific decrease in charges
for 2022 of -3.17 per cent. In Ireland,
Aer Lingus engaged with the Commission
for Aviation Regulation which is
conducting its third interim review of the
2019 regulatory decision. In December, IAG
responded to the UK CAA’s consultation
on an increase to NATS En Route Limited’s
(NERL) charges, which initially proposed
an increase of up to 27 per cent.
Market access
IAG continues to support individual
operating companies in securing market
access, expanding partnerships with other
airlines and enabling operations on new
routes. This included attendance at, or
contribution to, talks on international air
service agreement talks and other bilateral
discussions, as well as support for new
Group initiatives, such as the creation of
British Airways Euroflyer subsidiary at
London Gatwick Airport.
INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2022 47
“We’re focused on our
recovery and
transformation to ensure
we continue tobe the
airline ofchoice for our
customers.”
Sean Doyle
Chairman and Chief Executive
Officer of British Airways
We’re continuing to build
abetter British Airways
Business overview
Following two years of turbulence,
in 2022 we continued to focus on our
recovery and the transformation of
our business. This was an extremely
challenging period as we sought to
bring our grounded aircraft back into
service, recruit and re-train colleagues,
and ramp up our schedule.
Disruption events throughout the year
caused by factors including adverse
weather and systems issues, alongside
resourcing and capacity restrictions,
significantly impacted operations at
times. Despite these challenges, we are
building a more robust operational
performance, with a renewed focus on
punctuality, and continue to invest in
our transformation, the customer
experience and our BA Better World
sustainability programme.
Our people
We know our people are key to our
success and we’re incredibly grateful for
their dedication, commitment and hard
work during a very challenging year to
ensure we could deliver for our customers.
We’re focused on rebuilding
pride and trust with our colleagues and
creating a more colleague-centric culture,
by recognising their contributions to
our business through our enhanced
recognition programme, creating a
high-performing culture that makes
colleagues feel valued and empowered
to do the right thing for our customers.
Diversity and inclusion are a key part of
our strategy and this year we outlined new
gender and diversity targets, for at least 12
per cent of our leaders to be from
ethnically diverse backgrounds by 2025,
rising to 14 per cent by 2030. We’ve also
committed to increase the representation
of women in senior roles, with a target
of 40 per cent by 2025. To supercharge
our ambitions, we launched a reverse
mentoring programme for senior
management from across the airline and
committed to 100 per cent open
recruitment for all roles.
As well as investing in our people by
unveiling a new, modern uniform designed
by Savile Row tailoring expert Ozwald
Boateng, we’ve also updated our uniform
guidelines, allowing our people to express
more of their personalities at work, which
we know they appreciate.
Throughout the year we’ve built more
constructive relationships with the
trade unions that represent our people,
enhanced our staff travel and family
leave policies, and our recent employee
survey results show we are making
good progress.
Our customers
We continued to invest for our customers
and remain focused on improving our Net
Promoter Score. In 2022, we took delivery
of 10 new fuel-efficient aircraft and
continue to fit our Club Suite onto our
Heathrow longhaul fleet. We’ve unveiled
new menus across all cabins and
reintroduced our full catering proposition
in Club World.
We’ve also ramped up our transformation
programme, which includes innovations
across every part of our business. The 57
initiatives currently underway range from
introducing electric vehicles into our
operation as part of our goal to achieve
net zero by 2050, to biometric trials on
select international flights departing from
Heathrow to improve our operational
efficiency and enhance the customer
proposition.
As travel restrictions eased, we restarted
popular routes such as Sydney and Hong
Kong, helping customers to reconnect with
their loved ones again. In 2022, we
launched new routes from Heathrow to
Nuremberg and Portland and announced
new services from Heathrow to Cincinnati
and Florence, and Gatwick to Aruba and
Georgetown in 2023.
Our planet
We remain fully committed to reducing
the impact flying has on our planet, and
sustainability has continued to be front
and centre of our business strategy.
2.7%
Operating margin
beforeexceptional items
54.1 pts vly
-29.7%
ASK change
vs 2019
89.1 gCO
2
/pkm
Emissions intensity
-12.3% vly
48 INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2022
Strategic Report
British Airways responds to
Pakistan’s emergency appeal
As Pakistan battled devastating
flooding during the summer,
British Airways flew an aircraft full
of vital aid and medical supplies
to the country and redirected 100
per cent of its on-board donations
to the Disaster Emergency
Committee’s appeal, raising more
than £176,800.
BA Better World Community
Fund launched
In March, British Airways
launched its BA Better World
Community Fund, enabling it to
offer vital financial support to a
diverse range of charities, in
areas that align with the
themes of its sustainability
programme: people, planet and
responsible business.
Driving diversity through reverse
mentoring
We know that diverse teams
create the best results. British
Airways launched its reverse
mentoring programme enabling
senior leaders to be mentored by
a colleague from a different
background. This has provided
key insights, understanding and
learnings to help deliver a more
inclusive culture.
“I’m honoured to be a part
of the Customer Experience
Management team,
empowering our colleagues
to go above and beyond.”
Ché Gibbs – British Airways Customer Experience Manager
In March, we took delivery of the first
batch of SAF produced by Phillips 66
Limited, making us the first airline to start
using SAF produced on a commercial
scale in the UK. This step forward means
all British Airways-operated flights
departing from Heathrow now fly with a
small amount of SAF. We also launched
our new carbon offsetting and sustainable
fuels online platform, CO
2
llaborate, to
provide corporate, leisure and colleague
customers with even more choice and
control in addressing their carbon
footprint.
Looking forward
We’ve made a strong recovery from the
pandemic, and although we have much
further to go to reduce our debt burden,
we are continuing to invest in the
customer experience through this exciting
period of transformation, ensuring we
consider our environmental impact at
every step along the way, and work
together with our colleagues, to create a
better British Airways for everyone.
INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2022 49
“In 2022, Iberia has
returned to profitability
and the swift re-
installation of our
network has allowed us
to capture the strong
demand recovery in our
main markets, offsetting
the impact of fuel cost
increases and inflation.”
Javier Sánchez-Prieto
Chairman and Chief Executive
Officer of Iberia
Recovering capacity and
returning to profit
Business overview
In 2022, we continued to recover capacity,
up to 87 per cent of 2019, combined with a
strong operational performance. During
this year we received seven new Airbus
A350-900s, six Airbus A320neos and two
Airbus A321neos; we opened new US
routes, Washington and Dallas; and
reached 100 per cent of 2019 capacity in
our core Latin American & Caribbean
market.
Iberia Express celebrated its tenth
anniversary. Since 2012, more than
44 million passengers have trusted the
company, which has been able to position
itself among the top four operators at
Madrid-Barajas airport. After overcoming
two difficult years for the aviation sector
as a result of the global pandemic, this
year Iberia Express has exceeded its
capacity in 2019 in some markets such as
the Balearic and Canary Islands, ending the
year with 24 aircraft.
Maintenance and Airport services remain
positive contributors, with both on the
path to recovering to 2019 activity levels.
During 2022, we also renewed our
collective bargaining agreements for pilots,
cabin crew and ground staff, a key step
towards building the future of Iberia
together with our employees.
Our people
During this complex year we have
maintained our commitment to connect
Spain with the rest of the world, and all this
has been possible thanks to the effort of
our people. They are the pillars that hold
the company together especially during
challenging times. Being together is what
makes us stronger.
In February, we managed to bring back all
the staff we had before the pandemic and
during the summer season we began
recruiting additional cabin crew, ground
staff and pilots.
In September, we began negotiating
agreements with all staff representatives,
and in just four months, in the midst of a
climate of great labour unrest across
Europe, we succeeded in reaching
agreements with pilots, ground staff and
cabin crew representatives.
Our cultural change project is supporting
diversity in aviation (attracting women into
technical careers), offering greater flexible
working practices, and also recognising
and rewarding people in Iberia who best
embody the company's internal values.
We have also designed a specific plan for
each group based on the findings of the
Organisational Health Index (OHI) survey.
Our customers
During a challenging summer across
European airports, in 2022 Iberia and Iberia
Express were the most punctual airline and
the most punctual low-cost carrier in
Europe, respectively.
We deployed a new in-flight service on
short, medium, and longhaul flights.
Our customers now enjoy a high-value
gastronomic proposition, new amenities,
a wide range of entertainment, and a more
interactive experience with cabin crew.
In 2022, we also introduced free on-board
WiFi, and a new pre-ordering service for
short and medium haul customers, that
improves service and reduces food waste.
We have again maintained Iberia Plus
customers´ status levels until March 2023.
From December 2022, they will earn
increased benefits from a more
transparent and fairer award system.
Our planet
Coinciding with Iberia’s 95
th
anniversary,
we have named our purpose: ‘From Spain,
we generate prosperity by connecting
people with the world.’ We have also
deployed a four-pillar sustainability
strategy:
The first pillar is supporting the green
transition of the aviation sector, which
includes all fleet renewal initiatives,
operational efficiency, and the use of SAF.
In June, in collaboration with REPSOL, we
operated our first transatlantic flights (to
Washington, Dallas, and San Francisco)
using a mix of SAF. We have also signed
an agreement with the Spanish global
energy company CEPSA to develop SAF
and entered a New Fuel Sales Agreement
with Gevo for six million gallons of SAF
for five years.
6.9%
Operating margin
before exceptional items
15.3 pts vly
-12.9%
ASK change
vs 2019
71.7 gCO
2
/pkm
Emissions intensity
-11.6% vly
50 INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2022
Strategic Report
“The pandemic put Iberia's
cadet programme on
holdand when I was
calledtoenrol, Icouldn't
believe it.”
Belén Alegre – Iberia Airbus A320 pilot
The second is creating a more sustainable
travel experience for customers. We are
doing this through the digitalisation
of services, the elimination of plastics
on-board, the development of the
waste management system, and carbon
offsetting. We have launched platforms,
where customers and corporate clients
can offset their flight emissions and
contribute to conserving ecosystems
in Guatemala and Peru.
The third is the team’s participation in
community and volunteering initiatives.
Last October, more than 200 employees
finished planting the Iberia Forest: 4,000
trees at a location near the airport.
In 2023, we will introduce a fourth pillar,
focusing on aviation’s social impact
through connectivity.
Looking forward
In 2023, we will continue building our
capacity through new aircraft deliveries
and deploy a new Premium cabin in
our new Airbus A350s to improve our
customer experience.
We acknowledge some macroeconomic
uncertainty is ahead and will continue to
improve our efficiency while monitoring
costs and selectively investing in
innovating and becoming greener.
Iberia forest
In October 2022, Iberia employees
(including the CEO and
management committee) planted
the last 1,000 trees of the 4,000
that cover an area of eight
hectares in Bosque Iberia. The aim
of this project is to contribute to
the well-being of the communities
near Madrid Airport.
Experience and
competitiveness
Iberia Maintenance has received
authorisation from Pratt &
Whitney to service the GTF
PW1100G-JM engine, powering
the Airbus A320neo family. The
Iberia Engine Shop is one of a
select number of shops
authorised worldwide to overhaul
and maintain this engine model,
demonstrating its high level of
experience and competitiveness.
Commitment to innovation
andsustainability
Iberia Airport Services (IBAS) has
introduced electric remote-
controlled push-back tractors at
Madrid and Barcelona airports.
IBAS is the first handling operator
in the world to use these
pushback tractors with CRJ
aircraft, showing its clear
commitment to innovation and
sustainability.
INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2022 51
“Vueling proudly returned
to profitabilityin 2022,
while surpassing
pre-pandemic capacity
levels from the second
quarter onwards. Atthe
same time, wecontinued
implementing our
ambitious transformation
plan at pace.”
Marco Sansavini
Chairman and Chief Executive
Officer of Vueling
Transforming while
emerging from the crisis
Business overview
Following two years of pandemic-related
losses, 2022 marked a return to
profitability and pre-pandemic capacity,
underpinned by several factors.
Firstly, there was a solid recovery of traffic
due to pent-up demand, following the
virtual elimination of pandemic-related
travel restrictions to the geographies that
Vueling serves.
Secondly, we maintained constant
operational flexibility and readiness.
Asdemand recovered, we were able to ramp
up quickly to pre-pandemic capacity levels,
thereby strengthening our leadership
positions in our core domestic and
international markets.
Thirdly and most importantly, our
transformation plan produced tangible
results. This transformation is unlocking
Vueling’s full potential by creating value
for all stakeholders, creating a profitable and
resilient airline for shareholders, with engaged
and empowered employees, loved by our
target customers, and with a meaningful
impact on society. Ancillary revenues and
load factors reached our highest ever
levels whilst recent expansions at Paris Orly
and London Gatwick performed above
expectations. Our new line maintenance
unit, Yellow Technic by Nayak, and our new
open-books contract with Iberia Airport
Services mitigated cost pressures. Changes
to our operational and network designs
enabled higher aircraft utilisation and fleet
and supplier negotiations drove a reduction
in ownership and supplier costs.
Our people
Above all, our achievements reflect the
exceptional work of our people: cabin
crew, pilots and office staff.
Their dedication is at the heart of Vueling’s
success. Thanks to agreements reached with
Vueling labour representatives, we were able
to fully maintain employment levels. This has
been key for our people and for supporting
arapid, full recovery of our operation when
travel restrictions were lifted.
Our transformation plan delivered several
people-centric improvements in 2022,
including a new and expanded internal
training platform and upgraded talent
acquisition and onboarding models.
Perhaps most visibly, we moved to a new,
larger headquarters building that allowed
us to combine four office locations into
one, reducing cost and bringing our
people together.
During the year we also engaged in collective
labour agreement negotiations. In the fourth
quarter these negotiations led to industrial
action being called by one of our cabin crew
unions in Spain, and we worked diligently to
minimise the impact on our customers.
Our customers
We are steadfastly committed to our
customers, so much so that ’Make it
customer-oriented’ is one of our six values.
As always, one of the most important things
we can do for our customers is deliver a
reliable, on-time operation, and in 2022 we
were the fourth most on-time airline in
Europe according to Cirium with 82.7 per
cent of flights arriving within 15 minutes of
schedule. This is an improvement of 5.1
percentage points versus 2019, despite a
challenging environment at a number of
airports this summer.
We have advanced the transformation of
our customer experience by further
digitalising the Vueling customer journey,
championing great service in every human
interaction, and increasing consistency.
All of these improvements allowed us to
maintain a high Net Promoter Score (NPS)
of 22.8 in 2022.
Our planet
During the year we implemented several
changes to reduce waste and our carbon
footprint. These have included:
The deployment of on-board trolleys that
allow cabin crew to separate waste from
recyclables during the flight, significantly
improving waste segregation and recycling.
Digitalisation of all flight documents,
supporting optimised routes and
reduced emissions.
We became the first low-cost carrier to
allow customers to purchase Sustainable
Aviation Fuel (SAF) during the booking
process. We also matched each purchase
‘euro-for-euro’ and within the first five
months, more than 40,000 customers took
advantage of this opportunity, reducing
carbon emissions by 150 tonnes.
7.2%
Operating margin
before exceptional items
33.0 pts vly
-1.8%
ASK change
vs 2019
83.3 gCO
2
/pkm
Emissions intensity
-11.8% vly
52 INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2022
Strategic Report
Ukraine rescue operation
Following Russia’s invasion of
Ukraine, we were asked by the
Spanish embassy to fly several
aircraft to repatriate women and
children. We utilised the empty
legs by fully stocking the aircraft
with vital aid and medical supplies
for those in need.
Going beyond
During Christmas time the
operation was particularly
complicated with many flights
rescheduled. We provided
impacted customers not only
with accommodation, but also
prepared a dinner, a New
Year's Eve party and a tour to
see the Northern Lights. The
customers told us that, despite
everything, it was a happy and
unforgettable time.
Reconnecting loved ones
Thanks to the close collaboration
between our teams, we have been
able to return operations to 2019
levels by progressively starting
new routes as soon as the
borders re-opened. We have seen
families reconnecting with loved
ones.
“Being part of an airline and
helping stranded customers
get home makes me feel
like I’m fulfilling my
purpose.”
Silvia Maria Manosalvas – Vueling Airport Duty
We demonstrated our commitment to
a sustainable future by completing the
implementation of an environmental
management system under ISO 14001
standards. Vueling has thus completed full
IATA environmental certification (IEnvA
Stage 2), after being the first low-cost carrier
to obtain IEnvA Stage 1 certification in 2020.
Looking forward
Despite a notable recovery in 2022, we
are aware that challenges lie ahead. The
key to Vueling’s competitiveness will lie
in continuing our transformation in all its
dimensions. In so doing, we can not only
withstand these challenges, we can develop
Vueling to its full potential.
INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2022 53
“The anticipated rebound
in peak leisuretravel and
the associated summer
capacity growth
underpinned our
2022profitability.”
Lynne Embleton
Chairman and Chief Executive
Officer of Aer Lingus
Looking forward to continued
recovery and future growth
Business overview
The impact of the COVID-19 Omicron
variant and the prolonged requirement to
work from home in Ireland led to a weak
start to 2022. However, the robust leisure
demand on key sun routes, particularly
Spain and Mediterranean destinations
led to a strong summer performance.
The third quarter’s performance was
key to Aer Lingus returning to profitability
in 2022.
Aer Lingus’ preparations and recruitment
began early. In the summer peak,
Aer Lingus operated over 90 per cent
of its 2019 capacity level with an overall
schedule completion of 98 per cent,
better than most network operators. In
addition, our punctuality outperformed
our key competitors in the Dublin hub
throughout 2022.
As aviation began to recover, the industry,
experienced resource shortages at key
airports affecting terminal facilities,
security screening, baggage and airport
passenger services. The challenges for
Aer Lingus were compounded by a
system outage in September which had
a significant impact on our customers.
We recovered our operations within
hours, rebooked passengers where
possible and increased resources to
expedite processing of customer claims.
2022 marked the first full year of
transatlantic operations at our new
Manchester base and also the start of
operations with our regional franchise
partner Emerald Airlines, the latter greatly
increasing connectivity between the
UK and Ireland and providing strong
flows of connecting passengers onto
our transatlantic network.
Our people
Over the last two years our people have
gone above and beyond in their roles to
deliver for customers and this year our
teams endured a challenging summer as
the industry resumed operations at scale.
We introduced new policies to better
support families and refreshed facilities to
provide a better working environment for
many of our teams. We also made a
once-off payment of €1,700 to all
employees (excluding members of our
executive management committee) in the
context of the challenges faced in the
recovery of the business and the
inflationary pressures facing our
employees.
Our people are key to our success and to
this end we launched the Purpose, Vision,
Mission and Values to guide the delivery of
our strategy and our transformation plan
and to unlock the full potential of
Aer Lingus.
Our customers
Customer satisfaction has remained high
with Aer Lingus’ on-board service and in
2022 we improved the in-flight proposition
with new aircraft and better longhaul
business cabin catering. We also made
a number of technology improvements
for payment functionality and mobile
check-in. Further investment in the digital
customer experience is a core pillar of
our transformation plan.
Our planet
In 2022, Aer Lingus continued to make
good progress on our sustainability
journey. We signed two SAF offtake
agreements commencing from 2025.
From 2026, 50 per cent of our fuel on
flights from California will be SAF.
We secured two Airbus A320neo aircraft
which are significantly more fuel efficient
than the aircraft they replaced, while we
also launched recycling on-board flights,
becoming the first airline segregating
waste flying into Ireland.
2.6%
Operating margin
before exceptional items
94.7 pts vly
-13.2%
ASK change
vs 2019
85.7 gCO
2
/pkm
Emissions intensity
-26.5% vly
54 INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2022
Strategic Report
Rebuilding our network
This summer our people went
above and beyond to help deliver
90 per cent of our 2019 schedule.
Working together, we delivered a
strong summer at Aer Lingus,
completing 98 per cent of our
planned schedule for June and
July and 99 per cent for August.
Celebrating diversity
Diversity and inclusion is
celebrated through our Proud
Flies network. The initiative
works to build an inclusive,
open LGBTQ+ allies community
where employees feel they can
bring their whole selves to
work. As part of this,
Aer Lingus has been a proud
sponsor of the Dublin Pride
Festival since 2018, as the
official airline partner.
“I'm proud to be part
of the Maintenance
team working to
ensure customers
have a safe journey.”
Casey O’Hanlon – Aer Lingus Apprentice Engineer
First Airbus A320neo arrives
inDublin
Accelerating sustainability is a key
pillar in our transformation plan
and taking delivery of two Airbus
A320neo aircraft this year was
key to our journey. The new-
generation aircraft deliver up to
20 per cent reduction in fuel burn
and CO
2
emissions and close to
50 per cent reduction in noise
footprint.
Looking forward
The return to profitability in 2022 was
welcome as we repair the damage of
the COVID-19 pandemic. While there is
much to build on, recovery in business
travel lags that of leisure and the economic
and geopolitical forces causing higher oil
prices, exchange rate fluctuation and rising
interest rates continue to increase the cost
base of airlines.
During 2023, our strategy to build our
Dublin hub will be supported
by network expansion across the North
Atlantic and further developments
with our airline partners. Aer Lingus’
sponsorship of the opening game of the
US College Football Series, which is played
in Ireland, also serves to further strengthen
our brand in the US market.
Growing our North America Leadership
is just one of the six key pillars in our
transformation plan which, along with
accelerating sustainability and developing
our digital customer experience, reflect the
continued innovation, collaboration and
progress that we look forward to in 2023.
INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2022 55
“Our loyalty business had
its best year ever in 2022.
We expect to continue
to achieve significant
growth in 2023, focusing
on our customers and on
the IAG airlines.”
Adam Daniels
Chairman and Chief Executive
Officer of IAG Loyalty
Our strongest
yearever
Business overview
2022 has been a remarkable year for our
business, as we continue to drive deeper
engagement with customers through new
partnerships and improvements to the
Avios proposition. We invested in our
technology and business platforms and
delivered new products for our customers.
Revenue from our external partners was 25
per cent higher than in 2019 and now
accounts for 80 per cent of all billed
revenue; this percentage is slightly down
versus 2021, due to the recovery from the
Group’s airlines, which is also reflected in
the operating margin.
Early in 2022 we launched our new Avios
partnership with Qatar Airways and have
seen a positive reception and engagement
from customers within the British Airways
Executive Club and the Qatar Airways
Privilege Club. We continue to explore
other similar partnerships and in areas
where our combined network and loyalty
proposition can provide increased
relevance to customers.
In the last quarter we launched our first
new business within IAG Loyalty. The Wine
Flyer is a full retail e-commerce platform
enabling us to grow new revenue streams
and capabilities, while offering an
improved customer value proposition.
We expanded at speed in nearly every
area in 2022. One area we would have
liked to move faster was in customer
experience. Achieving a seamless
experience for our customers that adds
value at every touchpoint will be a
continued focus for us.
The pace we moved at also brought about
the additional challenge of building an
operational infrastructure that can keep
up. We will continue to address this and
invest in more effective solutions to ensure
sustained growth in a way that will
positively affect our customers.
Our people
We have continued to invest in a strong
people proposition enabling us to attract
stand-out talent to the business. Our
employer value proposition has come to
life this year, alongside a new set of values
co-designed with colleagues to be truly
representative of who we are.
We have made exceptional progress on
our ambitious people plan, spanning talent
development, people experience and
culture. We have deployed multiple
mechanisms to enable colleagues to play
an active part in work and life at IAG
Loyalty, from weekly all-colleague
meetings, to company-wide agile
workshops, to regular channels for new
ideas to come to the fore.
Combined with our expertise, this has
accelerated our early careers, talent
acquisition, colleague retention, equity,
diversity and inclusion plans. Our colleague
listening indicators continue to be positive,
showing our work in this space is effective.
Our customers
In 2022, 25 per cent more members
enrolled into an IAG airline loyalty
programme than in 2019, further proving
the increased value of loyalty to the
customer as well as the Group.
We launched five new partnerships with
market-leading brands in 2022, including
two new credit cards launched in
partnership with Barclaycard, giving
members more choice than ever before.
Iberia Plus launched a new way for
customers to earn Avios, joining Vueling
and Aer Lingus in a “spend-based earn”
model. The British Airways Executive Club
announced that it will also be making this
change to its programme in 2023. The new
model is a fairer and more transparent way
of rewarding our members and we expect
that we will be awarding more Avios with
this change.
Our partnership with American Express
continues to perform very well, with spend
on card higher than 2019 levels and a
record number of acquisitions for British
Airways American Express co-brand credit
cards in 2022, 36 per cent higher
compared with 2019. We also expanded
our current Reward Flight Saver product
for British Airways Executive Club
members to all routes and cabins for UK
and US customers, significantly reducing
the amount of cash needed to redeem.
28.4%
Operating margin
before exceptional items
-1.5 pts vly
80%
External billed revenue
-7 pts vly
83.1 billion
Total Avios redeemed
+138% vly
56 INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2022
Strategic Report
Using innovation to stay
connected
In yet another way of collecting
which fits seamlessly with
members' lifestyles, we
announced our partnership with
Uber in the UK. The partnership
helps collectors get one step
closer to their next dream
getaway.
Investing in an inclusive
workplace
We are investing in our
colleagues to help support and
create an equitable, diverse
and inclusive organisation. Our
women’s development
programme EmpowHER
provides support for both
vertical and horizontal career
growth. Our Male Allyship
programme coaches on
advocating change.
Qatar Airways adopts Avios
Members can now collect and
spend Avios in even more
countries around the world,
as Qatar Airways adopted Avios
in a landmark partnership this
year. It's an exciting moment
as we extend our leading position
in loyalty.
“We've achieved incredible
things in2022, it has
allbeen made possible
by our brilliant people.”
Helen Miller – IAG Loyalty, Chief People Officer
Our planet
Supporting British Airways’ BA Better
World sustainability programme and
providing IAG’s customers with even more
ways to give back, from November 2022
British Airways Executive Club members
have been able to donate their Avios to a
range of causes supported by the BA
Better World Community Fund. IAG
Loyalty has pledged up to £200,000 of
support to match the value of Avios
donations made by members.
British Airways Executive Club members
can continue to use their Avios to
contribute to verified carbon offset
projects on non-domestic shorthaul flights
via the Speedbird Cafe.
Looking forward
We will continue to grow our business in
2023 and beyond, by investing in people,
technology and improved customer
propositions. With more ways to collect
and use Avios, we will build further on the
uniqueness of the loyalty asset for the IAG
airlines and our global brand partners.
INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2022 57
“In 2022 we have
delivered another
strong revenue
performance, where
we focused on
optimising our
commercial
opportunities, whilst
creating the foundations
of a culture that
prioritises customer
needs and makes
IAG Cargo a great
place to work.”
David Shepherd
Managing Director of IAG Cargo
Empowering our people,
building partnerships,
connecting theworld
Business overview
It was another positive year for IAG Cargo
with operating performance ahead of
pre-pandemic levels. The business delivered
revenues of €1,615 million in 2022, up 44.6 per
cent from 2019, despite the Group’s return to
passenger-led flying. The network-shape saw
a significant increase in transatlantic capacity
and a higher utilisation of longhaul aircraft for
normal airline operations making cargo-only
flying less available.
The conflict in the Ukraine and continuing
COVID-19 restrictions in Asia, have led to
challenges in viable network options into the
Asia-Pacific region. In the first half of the year,
severe disruption continued in the sea freight
industry, leading to greater demand globally
for air freight products, with a subsequent
positive impact on yields. In the last quarter of
2022, we saw increased pressure on yields as
global supply chains reopened; this was
consistent with trends seen in the broader
market.
In October, we completed the building
of our new premium product facility
at Heathrow Airport. This will enable us to
expand our existing pharmaceutical capability
through state-of-the-art temperature-
controlled facilities.
Our people
In 2022, we invested in technology to
improve productivity and to support our
people in their roles. We launched CoLAB,
a global programme, created to listen to and
capture the ideas of our people, and we have
already successfully turned numerous ideas
into reality.
We have invested in learning and
development opportunities for our people
with the aim of upskilling our workforce and
supporting talent retention. A new Leadership
course saw 236 managers training to improve
their frontline people management skills. We
have also provided access to a new online
learning platform, available to all colleagues
across the business. In addition, we opened a
24/7 gym at our Heathrow campus and
launched mental health awareness training,
enrolling 59 Mental Health First Aiders.
We have always prided ourselves in
supporting the communities in which we
operate, so this year we launched ‘A day to
make a difference’, our employer-supported
volunteering scheme – where colleagues can
request a day of paid leave to give back to
society through volunteering.
Our customers
The year saw us continue to focus on
enhancing the customer experience, growing
our digital presence, and improving our online
merchandising.
Operational effectiveness has been given
significant attention and we have established
a continuous improvement culture to
enhance the service we provide to our
customers. We invested in new technology,
optimising weight and dimensional checks
of goods to best utilise capacity.
We established a customer satisfaction
programme to listen to the voice of the
customer, tracking sentiment across all key
touch points from booking to delivery and
to promote customer advocacy. Key
initiatives taken this year include proactive
communication to customers at times of
disruption and standardisation of global
recovery. This has resulted in a steady
increase in NPS over the course of the year.
Our Cargo Live, a live stream series focused
on delivering industry insights, continued to
be an effective way to communicate with
our customers, attracting an audience of
over 7,000.
Celebrating its 5
th
anniversary, IAG Cargo’s
loyalty programme FORWARD.REWARDS
for SMEs increased its membership base
by 12 per cent and transactions from small
and medium-sized enterprises grew 8 per
cent in the year.
Our planet
We are committed to making air cargo more
sustainable and our customer partnerships
are instrumental in driving change. In 2022,
we worked alongside long-term partners,
Kuehne + Nagel, Bolloré Logistics, and DB
Schenker to purchase 12.5 million litres of
Sustainable Aviation Fuel reducing their
supply chain emissions on a net lifecycle basis
by approximately 29,600 tonnes of CO
2
.
58 INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2022
Strategic Report
Always looking at ways to
improve how we do business
IAG Cargo is delighted to be
working with IATA, supporting
our customers with innovative
digital solutions. Implementing the
IATA DG AutoCheck platform will
eliminate manual processes to
transform and automate
dangerous goods acceptance
checks whilst increasing safety
and operational efficiency.
IAG Cargo's premium offering
IAG Cargo completed its
brand-new premium product
facility at Heathrow Airport,
New Premia, a building twice
the size of its current premium
facility.
Sustainability in action
IAG Cargo began to trial the first
electric Terberg at London
Heathrow. By replacing an
existing terminal tractor with an
electric version, approximately 30
tonnes of CO
2
will be saved per
vehicle per year – this is the
equivalent of planting over 1,250
trees.
“It’s an exciting time of
transformation forthe
business, andI am looking
forward to working with the
senior leadership to unlock
the potential of our growing
workforce.”
Caroline Andrews – IAG Cargo Chief People Officer
On the ground, we began trialling the first
electric cargo Terberg operating airside at
London Heathrow, with the ambition to
replace all current diesel terminal vehicles
in the near future. We have also launched
the use of a new sustainable film for
wrapping cargo: this solution is 100 per cent
recyclable and biodegradable by landfill.
This is beneficial on a global scale, where
the receiving country of the goods will be
able to sustainably dispose of the film.
Air cargo plays a crucial role in supporting
crises around the world to deliver aid so
desperately needed. In 2022, IAG Cargo
worked with several charity partners to
donate 159 tonnes of capacity to the
Ukraine and Pakistan.
Looking forward
Our vision is clear: to be the first choice for
businesses transporting their cargo across
the world and to make optimal use of the
Group’s cargo assets. We are focused on
developing an environment of continuous
improvement throughout the business,
creating sustainable air cargo solutions,
leading digitalisation and establishing
IAG Cargo as a great place to work.
INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2022 59
“2022 has been a record
year for LEVEL in many
respects. This confirms
the success of the
business model and
represents a key
contribution to the
development of
Barcelona's longhaul
connectivity.”
Fernando Candela
Chief Executive Officer of LEVEL
Consolidating our
position inBarcelona
Business overview
This year we have broken all-time records
in terms of passengers carried (6.4 per
cent more than in 2019
1
), connecting flights
(15 per cent of our total volume) and seats
offered (8 per cent more than 2019
1
and
triple the number from five years ago). All
this while remaining true to our
commitment to offering competitive fares.
In 2022, we consolidated our position as
Barcelona Airport's second-largest
operator to the United States and the
number one operator to Latin America.
Thus, one in four seats between Barcelona
and the United States and one in two seats
between Barcelona and Latin America
were operated by LEVEL.
Moreover, seven of the eight routes we
operated in 2022 were routes offered only
by LEVEL. With a flight regularity of over
99 per cent, we have demonstrated the
resilience to recover to pre-COVID-19
pandemic rates and to do so on time:
around 82 per cent of flights have arrived
on time at their destination.
Our people
In June we celebrated our fifth anniversary,
an important milestone for both our
business, and our team. We also moved
offices, providing the entire team with new,
modern facilities shared with Vueling,
which will result in multiple synergies and
strengthen IAG’s corporate culture.
Throughout the year we took part in a
number of events to increase our visibility,
such as Barcelona Pride in support of our
key values of diversity and equality.
Our customers
In 2022, LEVEL once again proved to be
an airline that listens to its customers and
adapts to their feedback. Through
increased digitalisation we continue to
adapt our product to the preferences of
each individual customer. We have also
resumed routes that were in great
demand, such as San Francisco and
Boston. These routes, together with the
restarting of services between Barcelona
and Santiago de Chile in October and
additional daily flights to Argentina, mean
we are offering direct connections to
destinations of great importance for
Barcelona.
Our planet
We are constantly looking for ways in
which we can reduce our environmental
impact. To name a couple of examples,
thepre-sale platform, used by one in four
of our customers, has enabled us to reduce
the weight of food cargo by 29 per cent.
Inaddition, we have implemented what is
known as the ‘H-30’. This consists of
recalculating fuel requirements 30 minutes
before flight departure, (considering the
weather and the final load on-board the
flight) to adjust the fuel load to the exact
needs of the operation. Doing this has
enabled us to reduce the fuel loaded by
2per cent, which means a reduction of
0.67 per cent of our CO
2
emissions.
Looking forward
We will continue with our strategy and
commitment to be where Barcelona needs
us to be. We’ll continue to support and
promote the city, developing alliances and
synergies with local partners and providing
Barcelona with a solid map of direct
connections to South and North America.
1 Comparison against 2019 is for LEVEL Spain and excludes LEVEL France routes
(nowdiscontinued).
60 INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2022
Strategic Report
“In IAG GBS, we continued
our journey to become
the working capital and
data analytics Centre of
Excellence for the Group,
optimising our unique
platform and position to
provide valuable insights
and analysis and create
further synergies.”
Zoe Davis
Director of IAG GBS
Transforming
for the future
Overview
In 2022, we continued to deliver on our
four transformation pillars (driving further
synergies, continuing the in-depth
restructure of the Group's cost base,
delivering automation and analytics, and
proactively monitoring any potential
supplier risks to mitigate emerging issues)
and were proud to further expand our
scope of work into areas such as direct
operating cost analysis and supplier
sustainability tracking, whilst supporting
the operating companies as they recover
from the effects of the pandemic.
In the current inflationary environment, our
significant role in supporting the delivery
of IAG’s unit cost targets has become
increasingly important as the Group
recovers its operations. By leveraging our
unique position within the Group, we have
driven additional value for the operating
companies and their customers, created
further synergies, and ensured supply
chain continuity in challenging times.
We have also reinforced our focus on
automation and innovation by introducing
new and improved analytics, chatbots, and
process mining tools.
Our people
IAG GBS continues to thrive as a diverse,
global organisation with over 36 different
nationalities represented in our workforce,
and 45 per cent of our senior leadership
positions held by women.
In 2022, we have remained focused on
keeping our people at the heart of our
business, continuing to attract, engage,
develop and retain experts to further
enhance our high-performing team. We
have continued to invest in our Learning
Academy, providing multiple development
opportunities. All this has been reflected in
continually improving workforce
engagement results.
We have delivered numerous mental and
physical well-being initiatives to support
our people, and introduced an equity,
diversity and inclusion policy.
We are proud of our people and the way
they have supported those in need who
have been affected by the war in Ukraine,
opening their homes and collecting
much-needed goods, providing language
courses, and helping with visa applications.
Our customers
Following a comprehensive market review,
we have entered into several new
partnerships to provide enhanced business
process services, data insights and
automation. These will offer greater
opportunities for IAG GBS to further
standardise and increase the level of
touchless processing, ultimately providing
a more efficient and cost-effective solution
for the Group operating companies.
Earlier this year, we were delighted to
launch a new self-service portal that allows
direct analysis and comparison of supplier
cost metrics and performance. The portal
will be further enhanced with operational
statistics such as unit cost and market
intelligence tools, which will further equip
the Group Procurement team with the
insights and data they need to maximise
value for the Group and its customers.
Our planet
IAG GBS plays a vital role in delivering
IAG’s Scope 3 commitment. Through our
Supply Chain Sustainability Programme
and partnership with EcoVadis, we liaise
with, support and monitor suppliers to
ensure the Group is on track to deliver net
zero emissions by 2050 for all products
and services provided to IAG.
We accelerated the assessment of our
supply chain, measuring ESG maturity. This
provides valuable insights to identify
opportunities to improve our supply chain
performance. It also provides a clear ESG
baseline and target to drive the
sustainability performance of our suppliers.
This accepted and recognised
methodology means performance can be
shared beyond IAG and may contribute to
transforming wider industry supply chains.
Looking forward
2023 will see IAG GBS moving towards
establishing ourselves as the analytics
centre for the Group, using our unique
view across IAG to consolidate data and
analyse opportunities to provide
constructive insights and drive increased
value.
INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2022 61
“In 2022, we continued to
evolve our IT operating
model, focusing on
establishing agile
product teams delivering
value toourcustomers,
employees and
otherstakeholders.”
John Gibbs
Chief Information Officer
Delivering further
value tothe Group
Overview
During 2022, we experienced some
significant outages related to both
internally and externally hosted systems.
We are working closely with our partners
to improve the stability of their systems
and in parallel, we continued to modernise
the estate which has improved the overall
resilience and performance. This includes
moving over a third of our IT estate into
the cloud.
In addition, we continued to invest
significantly in our core customer,
commercial, operational and back-office
systems alongside our cyber security and
infrastructure.
We have continued to attract new talent
to our IT teams and develop our existing
talent through the IAG Tech academy,
which is also focused on driving a Digital
First mindset across the whole Group.
Over half of all our delivery is now via
product teams utilising agile
methodologies ensuring we maximise the
value to the business of our IT investments.
Our people
We are proud to have won the Best
Graduate Employer at the UK Women in
Tech Awards earlier in 2022, and we
continue to develop the next generation of
technology experts through our graduate
and apprentice programmes.
We have evolved our IT operating model
by increasing the adoption of product
teams and development, security and
operations (DevSecOps) methodologies to
accelerate digital innovation and delivery
for our customers.
We further strengthened our technology
leadership team as well as recruited
technology talent throughout the
organisation, resulting in 25 per cent ofthe
IT department being new to the Group in
the last two years.
In addition to developing a Digital First
culture through our Academy, we now
have over 1,000 employees across our
Guilds sharing best practice, knowledge,
and insights across the Group.
Our customers
We have made significant investments
inthe modernisation of our customer
platforms with new functionality delivering
real value to our customers:
• we extended the functionality of our
new Global Loyalty Platform, added
newpartners and migrated our British
Airways Executive members onto it;
• we added new functionality to our .com
platforms while streamlining the sales
and order processes resulting in
increased sales of ancillary products and
services;
• we modernised our call centre
technology including the use of
AI(Artificial Intelligence) and
ML(Machine Learning) to provide
amore responsive and intuitive
service;and
• we introduced more efficient disruption
management tools.
In addition, significant investment has been
made into refreshing devices to ensure
Group employees have the right tools
tosupport our customers.
Our planet
We are significantly reducing the carbon
footprint and energy costs of our IT estate
through the decommissioning of systems
and the migration to the cloud. Our Cloud
Centre of Excellence ensures that we drive
the adoption of cloud capabilities, and that
we optimise the use of the cloud.
New operational planning tools are
allowing us to further optimise the network
and the utilisation of our assets. We have
also invested in technology to monitor
andsignificantly improve fuel utilisation.
We are also investing in technology
toidentify and reduce waste such as
pre-flight ordering of food and tools
tohelp customers calculate and offset
carbonemissions, such as the carbon
mitigation tool.
Looking forward
As a priority, we are continuing to
improveour systems and services
toprovide operational stability and
resilience. Inparallel, we are continuing
tomigrate our systems to the cloud,
tomodernise ourcustomer-facing
applications, especially our .com and
mobile platforms, and making significant
investment in cybersecurity tools, services
and capabilities. We will also continue to
evolve our IT operating modeland the
adoption of product andagile ways of
working.
62 INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2022
Strategic Report
B. People and
Prosperity
Key metrics, health, safety
and well-being, human rights
and modern slavery,
community engagement and
charitable support
A. Planet
TCFD summary, transition
plan, metrics and progress,
emissions reduction
initiatives, scenario analysis,
risks and opportunities,
stakeholder engagement
Waste, noise and air quality
C. Principles of
governance
Sustainability strategy,
governance frameworks,
workforce governance,
supply chain governance,
ethics and integrity, ESG risk
management, reporting and
data governance, alignment
with GRI and SASB
standards
The full contents of this sustainability report are included in the
IAG Non-Financial Information Statement (NFIS) which is
third-party independently verified to limited assurance
standards in line with ISAE3000 (Revised) standards.
IAG’s most material environmental metric – Scope 1 emissions
– receives additional verification each year as part of the EU,
Swiss and UK Emissions Trading Schemes (ETS) and
international Carbon Offsetting and Reduction Scheme for
International Aviation (CORSIA), within six months of the
issuance of this report. Any material changes are restated in
future reports.
Compliance with specific frameworks and standards is listed
under relevant section headings and summarised in C.8. While
IAG does not align with the Global Reporting Initiative (GRI)
Core or GRI Comprehensive standards, it aligns with selected
GRI standards based on compliance with Spanish Law 11/2018
and chooses to voluntarily align with other GRI standards on
material issues.
Contents of this section
Sustainability
supporting our purpose
INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2022 63
INTRODUCTION TO SUSTAINABILITY
Our vision
Is to be the world’s leading
airline group on sustainability.
Our strategy
Is to pursue nine sustainability
leadershipKPIs as listed in section C.1.
Our material issues and initiatives
IAG takes a holistic approach to sustainability
1
.
• Reducing our climate impact
• Influencing policy
• Engaging with employees
• Building a diverse, inclusive and equal
workplace
• Investing in the future
• Planning for climate-resilient operations
• Working with suppliers
A. Planet B. People and prosperity C. Principles of governance
• Environmental Sustainability Policy
• Equity, Diversity and Inclusion (EDI)
Policy
• Modern slavery and anti-trafficking
statement
• Code of Conduct
• Supplier Code of Conduct
• Anti-bribery and corruption Policy
• Whistleblowing Policy
• Policy on disclosure of corporate
information and engagement with
shareholders
Key policies
• Flightpath Net Zero strategy
• Climate-related remuneration
• Policy advocacy for green solutions
• Leadership in trade associations
• Organizational Health Index (OHI)
surveys
• EDI and engagement initiatives
• Community giving and fundraising
• Developing a social roadmap
• Accelerator programme and ventures
• Supply Chain Sustainability Programme
• Task Force on Climate-related Financial
Disclosures (TCFD) scenario analysis
Annual initiatives
1 The above pillars align with World Economic Forum ‘Measuring Stakeholder Capitalism’ report in 2020. ‘Running a profitable business’ and ‘Pleasing our
customers’ are material issues relevant to Prosperity which are covered in other sections of the NFIS.
Key material issues
Key UN Sustainable Development Goals
• Net zero Scope 1, 2, and 3
emissions across our full
operations and supply
chain.
• Removals for any residual
emissions
• 11% better carbon efficiency,
to 80 gCO
2
/pkm
• Comprehensive waste targets
• 10% lower noise per takeoff
vs 2020
• 40% women in senior
leadership roles
• 10% Sustainable
Aviation Fuel (SAF)
• 20% drop in net Scope 1
emissions, to 22 MT
• 20% drop in net Scope 3
emissions, to 6.6 MT
Targets
2019
Target Baseline
2025
2030
2050
Our governance
Board-level oversight
IAG Management
Committee oversight Operating company oversight Cross-Group alignment
Safety, Environment and
Corporate Responsibility
Audit and Compliance
Chief People, Corporate
Affairs and Sustainability
Officer (CPCASO)
Management committees
oversee tailored sustainability
programmes
Group sustainability
team updates
Group sustainability strategy
64 INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2022
Strategic Report
SUSTAINABILITY AT A GLANCE