HomeAir LineIAG commits to cash dividend in 2024 after multiplying profit by six

IAG commits to cash dividend in 2024 after multiplying profit by six

The company generates 1,400 million operating income in Spain, more than double that of 2022

British Airways and Iberia planes, both from IAG.

The path for the return of dividends at IAG seems to be clear after years of drought caused by the collapse of the business due to the pandemic. The 2023 financial year has ended for the group with a net profit of 2,655 million euros (431 million in 2022). The increase in income is 27.7%, up to 29,453 million, which leaves an operating profit of 3,507 million. This last figure compares with the 1,278 million obtained in 2022. The improvement is reflected in an adjusted profit per share that is multiplied by ten: it goes from 5.6 cents a year ago to the current 50.6 cents.

With the market awaiting announcements, the company says it is confident in its ability to generate significant free cash flow and claims to be committed to “sustainable value creation and cash returns for the shareholder” in 2024. No There is no date and much less the amount for shareholder remuneration, but an important step has been taken with respect to the silence that prevailed at the recent investor day. IAG shares consequently advance 1.4% in the first hour of trading.

CEO Luis Gallego has expressed that “we will implement our strategy, generating value in the business in the long term. “We will focus on strengthening our airlines and developing IAG Loyalty, as well as other low-capital-intensive growth opportunities, and we will do so while operating under a strong financial and sustainability framework.”

The conglomerate that brings together British Airways, Iberia, Vueling and Aer Lingus explains that its results have been supported by solid and sustainable travel demand, along with continued investment in transformation. Passenger unit revenues have improved by 8.2%, while unit costs fell by 4.4% excluding fuel, which rose by 0.7%.

In the words of Gallego, “in 2023, IAG more than doubled its operating margin and profits compared to 2022, generated excellent free cash flow and strengthened its balance sheet.” The first executive explains that “capacity recovered to approach pre-Covid 19 levels in most of the main markets.”

Among the milestones of the year is the generation of nearly 1,400 million euros of operating profit from businesses in Spain, more than double that of 2022, when it reached 600 million. For IAG, the key is the greater balance of the business portfolio in this country, where it operates through Iberia, Vueling and Level.

In terms of airlines, the two main Spanish airlines considerably increased their business figures. Iberia achieved sales of 6,958 million, with an increase of 1,447 million, for an operating profit of 940 million. This figure is 551 million higher than that of 2022 and almost doubles the operating profit it reaped in 2019. Vueling earns 3,198 million, with an operating result of 396 million, up to 200 million above 2022.

The resuscitation of British Airways represents an improvement in its income of almost 3,300 million, up to 14,323 million euros. The operating profit of the British company stands at 1,431 million with an increase of 1,100. Aer Lingus, finally, declares sales of 2,274 million (505 million more), which leaves an operating profit of 225 million euros (168 million more than in 2022).

Spanish brands stand out for operating margins, with 13.5% for Iberia after adding 6.4 points in 2023, and 12.4% for the Catalan Vueling, which gains 4.9 points. British’s operating margin advances by seven points compared to 2022, up to 10%. And the Irish Aer Lingus achieved 9.9%, with an increase of 6.7 points.

IAG’s operating margin has gone from 5.4% to 11.9% in the last year. It also highlights the reduction in leverage, to 1.7 times (debt versus Ebitda) from a previous multiple of 3.1. The current ratio is below the target of 1.8 times, which gives the group room to continue investing comfortably. The investment budget for 2024 amounts to 3.7 billion.

Liquidity decreases from 14,000 million to 11,624 in the last 12 months. The financial debt, after an important amortization exercise of loans signed to withstand the pandemic, has decreased to 16,082 million (19,984 million in 2022), while the net debt is 9,245 million (10,385 million in 2022).

From an operational point of view, IAG has increased its capacity by 22.6% in the last year, focused on the corridors to America, and was already close to 99% of the offer it deployed in 2019. Of note is the 45% of market share that it maintains, together with its shared business partners, between Europe and North America. And regarding demand, it speaks of solidity, especially in the leisure travel segment. Its airlines have 92% of the revenue expected for this first quarter of 2024 already covered, and more than 62% for the semester.

The new forecast for this year is to increase the supply of seats by 7%, with the pending issue of recovering 100% of British Airways’ long-haul capacity by 2025. New growth for Iberia in its destinations is also planned. to Latin America and this morning the development of the low cost Level at the base of Barcelona El Prat. The young airline, which will have its own flight certificate (AOC), will receive three A321 XLR aircraft, will open a route this year to Miami and will be reinforced in New York and Boston. With clear positions in Madrid-Barajas, IAG seeks Level to be its great tool in the long radius from El Prat.

“Once Level has formalized its new AOC, the group will have greater flexibility when considering its options in short-haul operations,” IAG states in the documentation sent to the CNMV. The possibility of Level competing in the point-to-point market puts high pressure on Vueling, which also has its headquarters in Barcelona.

Without credits that limit shareholder remuneration

IAG stated this morning in its results report that the board proposed not paying any dividend for the year ending December 31. And it explains that its ability to remunerate the shareholder depends on the liquidity needs and distributable reserves of its airlines, as well as their ability to remunerate the parent company.

However, there are no longer debt-related barriers. At the end of 2022 the holding company It had obligations related to credits obtained to support the health crisis that put a veto on the companies’ dividend to IAG itself.

They were essentially talking about the loan signed by British with public guarantee from the British UKEF, and the credits from Iberia and Vueling backed by the ICO. These have been returned and the aforementioned restrictions have been lifted. Of course, British Airways has financing lines not used at the moment that set conditions depending on the remuneration that the British airline decides to deliver.

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Source: Cincodias



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