IBA Comments: IAG Full Year Results

“IAG followed in AF-KLMs footsteps this week in reporting healthy 2022 full-year results, swinging up from significant 2021 losses. The airline had a net margin of 1.9% which was slightly behind Air France-KLM with 2.8%. Nonetheless, this was a 173% increase in revenue, a 17.3% increase in Load factor and accordingly a significant improvement from the -36.0% net margin in 2021. It is also noteworthy that all four subsidiary airlines were profitable.

“Interestingly in IAG’s case, they have not used the significant cash generated for the year and from forward bookings, to deleverage, as many other airlines are currently doing. Instead, the airline had a 3.5bn investment cash outflow and strengthened its cash position by 1.3bn. The debt burden appears to be a problem for another year, and the airline is focused on growth. With the 400m EUR agreement to buy the remainder of Air Europa yesterday, that ethos seems to be continuing.

“IBA expects the airline to return to 2019 profitability levels this year, although recently announced Heathrow flight caps, around staffing, will return as a headwind.”