registration document of international consolidated airlines group, sa

549 Pages·2010·3.35 MB·English

REGISTRATION DOCUMENT OF
INTERNATIONAL CONSOLIDATED
AIRLINES GROUP, S.A.
This document has been approved by the Spanish National Securities
Market Commission (Comisión Nacional del Mercado de Valores) on
October 26, 2010
Pursuant to the provisions of Royal Decree 1310/2005, of 4 November, and Ministry of Economy and
Finance Order EHA 3537/2005, of 10 November, this document has been drawn up in accordance with
the models set forth in Annexes I and II of Regulation (EC) 809/2004 of 29 April 2004, implementing
Directive 2003/71/EC of the European Parliament and of the Council.
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This is an English translation of the registration document in the Spanish language approved by the Spanish National
Securities Market Commission (Comisión Nacional del Mercado de Valores or CNMV) on 26 October 2010 in
respect of International Consolidated Airlines Group, S.A. ("IAG" and the "Registration Document"). The English
translation of the Registration Document has been prepared for information purposes and has not been and will not be
registered with the CNMV or any other equivalent regulatory authority. No document other than the Spanish
language Registration Document registered by IAG with the CNMV may be considered as having any legal effect
whatsoever in respect of the shares of IAG. No representation, warranty or undertaking (express or implied) is made
and no responsibility or liability is accepted by IAG as to the accuracy of the English translation of the Registration
Document. In the event of any discrepancy between the English translation of the Registration Document and the
original Registration Document in the Spanish language, the latter will prevail. Investors should rely solely on the
Spanish language Registration Document when making any decision in relation to the proposed merger between
British Airways plc ("BA") and Iberia Líneas Aéreas de España, S.A. ("Iberia"). Copies of the Spanish language
Registration Document are available on the web sites of the CNMV (www.cnmv.es), BA (www.bashareholders.com)
and Iberia (www.iberia.com). In addition, the Spanish language Registration Document contains translations of the
financial statements and other financial information of British Airways. Spanish and English accounting terms differ
in certain respects, and the accounting terms used in connection with the British Airways financial information should
be construed to be the English accounting terms. In certain financial tables footnotes have been included describing
an accounting term when used in the context of British Airways to the extent such term differs to a material extent
from common Spanish accounting term.
The release, publication or distribution of this document in or into jurisdictions other than Spain and the United
Kingdom may be restricted by law and therefore any persons who are subject to the laws of any jurisdiction other
than Spain or the United Kingdom should inform themselves about, and observe, any applicable restrictions. Any
failure to comply with the applicable restrictions may constitute a violation of the securities laws of such jurisdiction.
UNITED STATES
Securities may not be offered or sold in the United States of America unless they are registered under the US
Securities Act of 1933 (the “US Securities Act”), as amended, or are exempt from such registration. The IAG Shares
will not be, and are not required to be, registered with the US Securities and Exchange Commission (the “SEC”)
under the US Securities Act of 1933, as amended, in reliance on the exemption from registration provided by Rule
802 thereunder. Neither the SEC nor any other United States of America federal or state securities commission or
regulatory authority has approved or disapproved the IAG Shares or passed an opinion on the adequacy of this
document. Any representation to the contrary is a criminal offence in the United States of America.
The Merger involves the securities of a foreign company. The Merger is subject to disclosure requirements of a
foreign country that are different from those of the United States of America. Financial statements included in the
document, if any, have been prepared in accordance with foreign accounting standards that may not be comparable to
the financial statements of United States of America companies.
It may be difficult for you to enforce your rights and any claim you may have arising under the federal securities
laws, since IAG is located in a foreign country, and some or all of its officers and directors may be residents of a
foreign country. You may not be able to sue a foreign company or its officers or directors in a foreign court for
violations of the U.S. securities laws. It may be difficult to compel a foreign company and its affiliates to subject
themselves to a U.S. court's judgment.
NOTICE TO NEW HAMPSHIRE RESIDENTS
NEITHER THE FACT THAT A REGISTRATION STATEMENT OR AN APPLICATION FOR A LICENCE HAS
BEEN FILED UNDER CHAPTER 421-B OF THE NEW HAMPSHIRE REVISED STATUTES WITH THE
STATE OF NEW HAMPSHIRE NOR THE FACT THAT A SECURITY IS EFFECTIVELY REGISTERED OR A
PERSON IS LICENSED IN THE STATE OF NEW HAMPSHIRE CONSTITUTES A FINDING BY THE
SECRETARY OF STATE OF NEW HAMPSHIRE THAT ANY DOCUMENT FILED UNDER RSA 421-B IS
TRUE, COMPLETE AND NOT MISLEADING. NEITHER ANY SUCH FACT NOR THE FACT THAT AN
EXEMPTION OR EXCEPTION IS AVAILABLE FOR A SECURITY OR A TRANSACTION MEANS THAT
THE SECRETARY OF STATE HAS PASSED IN ANY WAY UPON THE MERITS OR QUALIFICATIONS OF,
OR RECOMMENDED OR GIVEN APPROVAL TO, ANY PERSON, SECURITY OR TRANSACTION. IT IS
UNLAWFUL TO MAKE, OR CAUSE TO BE MADE TO ANY PROSPECTIVE PURCHASER, CUSTOMER OR
CLIENT, ANY REPRESENTATION INCONSISTENT WITH THE PROVISIONS OF THIS PARAGRAPH.
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TABLE OF CONTENT OF THE REGISTRATION DOCUMENT
1. SUMMARY - 34 -
1.1 Introduction - 34 -
1.2 Summary of the terms of the Merger - 34 -
1.3 Background to and reasons for of the Merger - 36 -
1.4 Further details on implementation of the Merger - 37 -
1.5 Information on the IAG Group - 38 -
1.6 Selected financial information on British Airways - 39 -
1.7 Selected financial information of Iberia - 41 -
1.8 Information on settlement and admission to trading of IAG Shares - 41 -
1.9 Information on the Directors - 42 -
1.10 Risk Factors - 43 -
2. RISK FACTORS - 68 -
2.1 Risks related to the Airline Industry - 68 -
2.2 Risks relating to British Airways and Iberia - 81 -
2.3 Risks relating to British Airways - 89 -
2.4 Risks relating to Iberia - 91 -
2.5 Risks relating to the Merger, combination and integration - 92 -
2.6 Risks relating to IAG Shares - 94 -
3. INFORMATION ON THE MERGER - 97 -
3.1 Introduction - 97 -
3.2 Background to the Merger - 99 -
3.3 Reasons for the Merger - 100 -
3.4 Description of the Merger - 101 -
3.5 Conditions to the Merger - 107 -
3.6 Implementation of the Merger - 108 -
3.7 Corporate Governance and Organisation of the IAG Group - 121 -
3.8 Assurances - 127 -
3.9 Shareholder decision making and voting in respect of the Opcos - 130 -
3.10 Suspension of British Airways Shares and Iberia Shares. Delisting of
British Airways and Iberia Shares - 132 -
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4. PERSONS RESPONSIBLE - 132 -
4.1 Persons responsible for the content of this registration document - 132 -
4.2 Declaration of responsibility - 132 -
5. STATUTORY AUDITORS - 133 -
5.1 Names and addresses of the auditors for the period covered by the
historical financial information - 133 -
5.2 Resignation or removal of auditors - 133 -
6. SELECTED FINANCIAL INFORMATION - 133 -
6.1 British Airways - 134 -
6.2 Iberia - 136 -
6.3 IAG Group - 137 -
7. INFORMATION ABOUT IAG AND THE IAG GROUP - 138 -
7.1 Information about IAG and the IAG Group - 138 -
7.2 The structure of the IAG Group - 139 -
7.3 Business overview of the IAG Group - 139 -
7.4 Strategy and strengths of the IAG Group - 139 -
7.5 History and development of IAG - 140 -
7.6 Legislative and regulatory framework - 141 -
7.7 Listing - 147 -
7.8 CDIs, dealings, share certificate and settlement - 148 -
8. INFORMATION ABOUT BRITISH AIRWAYS - 154 -
8.1 Introduction and history - 155 -
8.2 Business overview - 156 -
8.3 Transportation - 157 -
8.4 Ancillary services - 168 -
8.5 Loyalty programmes -169 -
8.6 Exceptional factors - 170 -
8.7 Segment information - 171 -
8.8 Global partnerships and strategic alliances / Co-operation Agreements - 173 -
8.9 Investments and divestments by British Airways - 178 -
8.10 New products and services - 184 -
8.11 Licences and Patents - 185 -
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8.12 Information on trends - 186 -
8.13 Dividend Policy - 187 -
8.14 Legal and arbitration proceedings - 188 -
8.15 Insurance - 190 -
9. INFORMATION ABOUT IBERIA - 193 -
9.1 Introduction and History - 193 -
9.2 Business overview - 196 -
9.3 Transportation - 196 -
9.4 Ancillary Services - 209 -
9.5 Loyalty programme - 212 -
9.6 Exceptional Factors - 214 -
9.7 Segment information - 214 -
9.8 Global Partnerships and Strategic Alliances/Cooperation Agreements 218
9.9 Investments and divestments by Iberia 219
9.10 New products and services 230
9.11 Licences and patents 230
9.12 Information on trends 231
9.13 Dividend policy 232
9.14 Court and arbitral proceedings 232
9.15 Insurance 234
10. AIRLINE INDUSTRY OVERVIEW 236
10.1 Airline Industry Overview 236
10.2 Competition 238
10.3 History of the Global Airline Industry and Deregulation 239
10.4 The Global Airline Industry: An Overview 242
10.5 Airline Industry Economics 244
10.6 Key trends in the airline industry 246
10.7 Outlook for Growth 250
10.8 British Airways and Iberia’s distribution channels 250
11. REGULATION OF IAG, BRITISH AIRWAYS AND IBERIA 251
11.1 International Regulation 251
11.2 International Organisations 253
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11.3 Bilateral/Multilateral Agreements 254
11.4 European Regulation 255
11.5 UK Regulation 264
11.6 Spanish Regulation 266
11.7 Environmental Legislation 268
12. ORGANISATIONAL STRUCTURE 270
12.1 Description of the IAG Group and IAG’s position within the IAG
Group 270
13. PROPERTY, PLANT AND EQUIPMENT 274
13.1 Information regarding any existing or planned material tangible fixed
assets, including leased properties, and any major encumbrances
thereon. 274
There are no mortgaged or pledged assets among the land and property
owned by Iberia, except for the calification of the Muñoza Industrial
Area as Airport reserve. 278
13.2 A description of any environmental issues that may affect IAG’s
utilisation of the tangible fixed assets. 278
14. BRITISH AIRWAYS OPERATING AND FINANCIAL REVIEW 281
14.1 Factors affecting British Airways’ and Iberia’s results of operations
and financial position 281
14.2 A description of the key items in British Airways’ consolidated
income statements 299
14.3 A comparison of the results of operations for 3 month period ended 30
June 2010 compared to the 3 month period ended 30 June 2009 306
14.4 A comparison of the results of operations for the financial year ended
31 March 2010 and the financial year ended 31 March 2009 311
14.5 A comparison of the results of operations for the financial year ended
31 March 2009 and the financial year ended 31 March 2008 318
15. IBERIA OPERATING AND FINANCIAL REVIEW 326
15.1 Factors that may influence Iberia’s results of operations and financial
position 326
15.2 Description of the main items in the income statement 328
15.3 A comparison of the results of operations for the 6 month period
ended 30 June 2010 compared to the 6 month period ended 30 June
2009 335
15.4 A comparison of the results of operations for the financial year ended
31 December 2009 and the financial year ended 31 December 2008 341
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15.5 A comparison of the results of operations for the financial year ended
31 December 2008 and the financial year ended 31 December 2007 350
16. CAPITAL RESOURCES 358
16.1 British Airways 359
16.2 Iberia 375
16.3 Treasury policies and financial risk management 380
17. RESEARCH AND DEVELOPMENT, PATENTS AND LICENCES 390
17.1 British Airways 390
17.2 Iberia 391
18. PROFIT FORECASTS OR ESTIMATES 392
19. ADMINISTRATIVE, MANAGEMENT, AND SUPERVISORY
BODIES AND SENIOR MANAGEMENT 392
19.1 Names, business addresses and functions in IAG of IAG Directors and
IAG Senior Managers, and an indication of the principal activities
performed by them outside IAG where these are significant with
respect to IAG 392
19.2 Conflicts of interest 401
19.3 Restrictions on the disposal or acquisition of IAG Directors’ holdings 402
20. REMUNERATION AND BENEFITS 403
20.1 Amount of compensation paid (including contingent or deferred fees)
and in-kind benefits given by IAG and its subsidiaries to IAG
Directors and IAG Senior Managers for services of all kinds provided
by them to IAG or its subsidiaries 403
20.2 Total amounts set aside or accrued by IAG or its subsidiaries (British
Airways and Iberia) to provide pension, retirement or similar benefits 410
21. MANAGEMENT PRACTICES 414
21.1 Date of expiration of the current term of office of IAG Directors, if
applicable, and the period during which such IAG Directors have
served in that office 414
21.2 Information about service contracts between IAG directors or senior
managers and IAG or any of its subsidiaries (British Airways and
Iberia) providing for benefits upon termination of employment, or an
appropriate negative statement 415
21.3 Information about IAG’s Audit Committee, Nominations Committee,
Remuneration Committee and Safety Committee, including the names
of committee members and a summary of the terms of reference under
which the committee operates 417
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21.4 A statement as to whether or not IAG complies with Spanish corporate
governance regime(s). In the event that IAG does not comply with
such a regime, a statement to that effect must be included together
with an explanation regarding why IAG does not comply with such
regime 425
22. EMPLOYEES 426
22.1 Number of employees and a breakdown of persons employed by main
category of activity and by geographic location, if material 426
22.2 Shareholdings and stock options of IAG Directors and IAG Senior
Managers 428
22.3 Description of any arrangements of British Airways for involving the
employees in the capital of British Airways 433
22.4 British Airways Shares 437
22.5 Iberia Shares 437
22.6 Major Shareholders 438
23. RELATED PARTY TRANSACTIONS 440
23.1 British Airways 440
23.2 Iberia 442
24. HISTORICAL FINANCIAL INFORMATION 444
24.1 IAG 444
24.2 British Airways 445
24.3 Iberia 469
25. PRO FORMA FINANCIAL INFORMATION 493
25.2 Financial statements 511
25.3 Audit of the historical annual financial information 511
25.4 Interim financial information 511
25.5 IAG dividend policy 511
25.6 Significant change in IAG's financial or trading position 512
26. ADDITIONAL INFORMATION 512
26.1 Share capital 512
26.2 Bylaws and public deed of incorporation 522
26.3 Audit of the historical annual financial information 534
27. MATERIAL CONTRACTS 534
27.1 Merger Documentation 535
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27.2 IAG 542
27.3 British Airways 542
27.4 Iberia 545
28. THIRD PARTY INFORMATION AND STATEMENT BY
EXPERTS AND DECLARATIONS OF ANY INTERESTS 545
28.1 Expert reports 545
28.2 Information sourced from third parties 547
29. DOCUMENTS ON DISPLAY 547
30. INFORMATION ON HOLDINGS 548
31. KEY INFORMATION 548
31.1 Working capital statement 548
32. ADMISSION TO LISTING AND TRADING 548
32.1 Regulated markets on which the shares of IAG are admitted to trading 549
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REGISTRATION DOCUMENT
REGISTRATION DOCUMENT DISCLOSURE REQUIREMENTS (EC REGULATION
809/2004) AND WHERE TO FIND THE RELEVANT DISCLOSURES IN THE
REGISTRATION DOCUMENT FILED WITH THE CNMV
Minimum disclosure requirements for the share registration document (schedule)
SECTION(S) OF THE
REGISTRATION DOCUMENT
ANNEX I
WHERE THE DISCLOSURES CAN
BE FOUND
1. PERSONS RESPONSIBLE Section 4
Sections 4.1 and 4.2
1.2 Declaration by those responsible for the registration Section 4.2
document. “Declaration of responsibility”
2. STATUTORY AUDITORS Section 5
“STATUTORY AUDITORS”
2.1 Names and addresses of the issuer’s auditors for the
period covered by the historical financial
information (together with their membership in a
professional body).
2.2 If auditors have resigned, been removed or not been
re-appointed during the period covered by the
historical financial information, indicate details if
material.
3. SELECTED FINANCIAL INFORMATION Section 6
“SELECTED FINANCIAL
INFORMATION”
3.1 Selected historical financial information British Iberia IAG
Airways
Section 6.1 Section 6.2 Section 6.3
3.2 Selected financial information for interim periods British Iberia IAG
Airways
Section 6.1 Section 6.2 Section 6.3
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