The world's leading inTernaTional airlines group

204 Pages·2012·7.6 MB·English

AnnuAl report And Accounts 2011 InternatIonal
aIrlInes
group
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Cre ting
The world’s leading inTernaTional airlines group
Formed in January 2011, international
airlines group (iag) is the parent
company of British airways and iberia.
iag is one of the world’s largest airline
groups with 348 aircraft flying to
200 destinations and carrying more
than 51 million passengers each year.
it is the third largest airline group in
europe and the sixth largest in the
world, based on revenue.
it is a spanish registered company
with shares traded on the london
and spanish stock exchanges. The
corporate head office for iag is in
london, uK.
OUR AIMS ARE...
P roviding
an exemplary service to our customers
d elivering
on our objectives through a focused strategy
M n ging
our business in a responsible way
Striving
to achieve sustainable returns
Chieving
strong performance for future growth
XcXXXoXXXXntents
08 Group oVerVIeW
3 2011 highlights
4 chairman’s letter
PROVIDING an
exemplary service 6 Q&A with Willie Walsh
to our customers 10 our networks and hubs
12 our products
14 Broader customer benefits
16
BusIness reVIeW
DELIVERING on our
18 the right team to deliver
objectives through
a focused strategy 20 Integration and business model
22 the right strategy
24 chief executive officer’s review
28
26 Key performance indicators
MANAGING our GoVernAnce
business in a 30 corporate social responsibility
responsible way
34 chairman’s introduction
to corporate governance
62 36 Board of directors
39 Management team
40 corporate governance
STRIVING to achieve
46 report of the Audit and
sustainable returns
compliance committee
47 report of the nominations committee
78 48 report of the safety committee
MAnAGeMent report
ACHIEVING strong
performance for 49 report of the remuneration committee
future growth 64 operating and market environment
66 Financial review
75 risk management and risk factors
FInAncIAl stAteMents
81 consolidated income statement
82 consolidated statement of other
comprehensive income
83 consolidated balance sheet
84 consolidated cash flow statement
85 consolidated statement of changes in equity
87 notes to the consolidated
financial statements
140 spanish corporate Governance report
193 Group investments
stAteMent oF dIrectors’ responsIBIlItIes
Independent AudItors’ report
AddItIonAl InForMAtIon
199 operating and financial statistics
200 Glossary
shareholder information
go online for more information
www.iairgroup.com
international airlines group – annual report and accounts 2011
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2011 HiGHLiGHTS – CoMBiNeD reSuLTS1 u
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+10.4 €485 €74
% m m
reveNue (MiLLioN) operaTiNG profiT NeT SyNerGieS
Combined group revenue is up from (before exceptional items) The net synergy benefit recognises the
€14,798 million to €16,339 million. Combined operating profit before contributions from the revenue and cost
exceptional items for the year is synergy work streams, after deducting
up 116% from €225 million to the implementation costs to deliver
€485 million. these benefits.
0
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17,8 17,188 98 6,339
56 4,7 1 01
4 1 4
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30 25 74
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€:£ 10.476 10.287 10.192 11.017 1.1115 07 08 10 11 Target Actual T2a0rg15et
2011
0)
91
(
uNiT reveNue uTiLiSaTioN proDuCTiviTy NoN-fueL uNiT CoSTS
Total revenue divided by This is how we measure the This measures the amount This is a measure of how
capacity (available seat amount of time our aircraft of capacity (asKs) that we manage costs, which to
Kilometres ‘asKs’), this are in the air and generating our employees deliver on a large extent are under our
reflects both the changes revenue for the group. average each year (asKs control. it is total non-fuel
in prices we charge and divided by average number costs divided by capacity
the change in volume of of employees). (asKs).
our sales.
+3.8%
lonGHAul
+3.1% +3.7% +6.7% -5.6%
sHortHAul
1 iag Combined results include the operations of British airways plc (British airways), iberia líneas aéreas de españa, s.a. operadora (iberia)
and iag (the Company) for the full year to december 31, 2011 and 2010.
3
CHairMaN’S LeTTer
contInuInG to GroW
stronGer toGetHer
ia m delighted to welcome you to
international airlines group’s first
annual report and accounts.
iag has the strategy, This document records a year of
considerable success for iag, despite
focus and capability
difficult economic conditions, and
to become much maps out both our progress to date
more competitive – and our growth plans.
a group equipped
i hope it will convey why we feel
to face and overcome
positive about our industry’s
the significant prospects and explain why we
challenges that lie think iag can play a leading role
in shaping the future of aviation.
ahead for our industry.
Shared history
i put our success to date down to the
history British airways and iberia have
shared in the last 12 years or so.
British airways took a strategic stake in
iberia shortly after iberia’s privatisation
in 1999. in 2005 the two airlines started
a joint business on flights between
london, madrid and Barcelona. in 2008
iberia took a stake in British airways.
This experience was invaluable when
we later formed the three-way Joint
Business with american airlines on the
north atlantic. we are, of course, also
partners in the oneworld alliance.
Robust governance
in creating our merger, we spent
significant effort developing a structure
which would allow us to meet our
many regulatory obligations while
retaining the flexibility needed to
respond to the challenges of our
industry. i am very happy with the way
that the Board of iag has established
itself in its first year of existence,
focusing on the key strategic issues
facing the group, including delivery of
merger synergies, while the British
airways and iberia Boards retain their
focus on operational management.
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international airlines group – annual report and accounts 2011
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i am committed to ensuring that the as a result our two operating airlines, our priorities are to reinforce our
iag Board complies with the highest British airways and iberia – in common leadership on atlantic routes and
standards of uK and spanish corporate with their competitors – faced some develop our leadership at london
governance and believe we have tough challenges in 2011. so to be heathrow and madrid Barajas,
achieved this during the year, subject able to report a combined operating by building an efficient shorthaul
to some limited exceptions which profit before exceptional items of business to feed a growing longhaul
are largely a legacy of the merger €485 million on combined revenues operation. we also see huge growth
arrangements. we have carried out of €16.3 billion is a result of which we potential in africa and think we are well
a thorough Board evaluation process can be very proud. placed to meet escalating demand on
and intend to act upon the results. routes via europe between asia and
as willie walsh explains in his Ceo the americas.
we have created an excellent blend of Q&a on page 6, we’ve made good
executive and non-executive talent, progress starting to extract synergies i’m convinced that, as a combined
drawing on the strengths of both airlines from the merger, so much so that group, iag has the strategy, focus
and bringing in valuable expertise from we have raised our target for revenue and capability to become much more
outside. i am grateful for the support of and cost synergies by €100 million competitive – a group equipped to
all my colleagues, and particularly glad to €500 million by 2015. face and overcome the significant
to be working closely with sir martin challenges that lie ahead for our
Broughton as deputy Chairman. These synergies translate into real industry. For that reason, we face the
advantages for our customers and future with a sense of real confidence.
A flexible business model we’re determined to continue looking
The timing of our merger and the for better ways to serve them. Social responsibility
creation of iag has been ideal at this The role we play in society is also
juncture in aviation history. we are equally determined to provide important. a large group like iag
consistent and attractive returns to needs to dedicate a significant part
The industry is moving towards our shareholders. as we said in our of its efforts to social responsibility.
consolidation and while this is still merger prospectus it is our intention i want to highlight the role played
within a rigorous regulatory framework, to distribute regular dividends to for many years by the association
the pace of activity is now quickening shareholders in the medium and of iberia employees with disabled
and iag wants to be in pole position. long term in amounts appropriate Children (apmiB in spanish). it was
to market conditions. created in 1977 and today is the
By providing a shareholding structure second biggest association in spain
under which different airline brands can Growth opportunities dedicated to helping people with
be efficiently managed, we have created iag now stands as the third largest disabilities. it offers support to more
a uniquely flexible model which means airline group in europe and the sixth than 2,200 children and provides
that new airlines joining iag can easily largest in the world by revenue. we them with treatment and therapy.
slot into our group. They can preserve are a global group with a significant
their identity, culture and brand while presence in five continents, ideally The main focus of British airways’
benefiting from the efficiencies that placed to serve our target markets community programme is Flying start
come from being part of one group with in north america, latin america, asia which is a partnership with Comic
a first-class management team and a and africa from two of europe’s most relief. Flying start raises money for
robust system of corporate governance. important long-haul hubs, london children in the uK and around the
heathrow and madrid Barajas. world and last year collected more
we’re already proving that this is a than £1.9 million. as well as fundraising,
very workable model. The fact that Clearly the current trading environment the programme enables British airways
some of our competitors are now is tough and our organic growth is being staff to get involved in the charity
seeking to follow this model is kept at low levels. however the current through visits to Comic relief’s projects.
compelling evidence of that. climate provides us with low cost
opportunities to add to our network via
Strong performance consolidation, but any options must be
we could perhaps have chosen a scrutinised rigorously to ensure that they
calmer economic environment for our are viable and add value to the group.
first year of operation. The oil price
remained very high at an average of
$110 a barrel through the year and the Antonio Vázquez Romero
pick-up in economic activity witnessed chairman
in late 2010 and early 2011 tailed off in
some markets in the second half of
the year.
5
Q
&
at the end of iag’s first full year of operation,
Ceo willie walsh gives the top-line answers to some
of the questions most frequently asked by investors.
For greater detail on these issues, follow the links
below to the relevant sections of the report.
Qhow will iag play a Qhow does the creation Qhow successful has Qwhat is your global
leading role in the of iag benefit the your cost and revenue strategy?
consolidation of the customers of British airways synergy programme been
international airline industry? and iberia? this year and what does it awe’ve tried to articulate
indicate for the future? our strategy in a very
awe created iag when awe’ve been able to simple way – we want to
we did because our deliver on the promises aThe area that has be the leading international
clear expectation was we made to customers at pleased all of us most airline group.
that consolidation would the time of the merger. in this first year has been
accelerate and that’s exactly That’s very important to our ability to deliver real we are clear which areas
what we’re seeing. i believe us. This is a business that revenue synergies through of the world are strategically
we’ve got the right structure depends on customer loyalty. bringing British airways and important for us and we
in place, the right people iberia together; this has intend to focus on them
and, most importantly, it’s clear to us that been our biggest area of closely – namely north
the right attitude towards customers are benefiting success. These synergies are america, latin america
consolidation to succeed. from the revenue synergies real and tangible and they’re where we are leaders, asia
we’re achieving. They are important because they into europe, from asia over
we can make a big difference enjoying a seamless transfer not only benefit the group europe to north and latin
because, unlike some of between British airways financially, but really benefit america, and africa, where
our competitors, we really and iberia services, better the customer as well. we see huge potential.
understand what will make benefits through our Joint That’s about building and
iag better as a group. Business with american Cost synergies are easier developing our longhaul
we’re clear about the areas airlines and now, through to identify in advance, but business. But to be
we want to focus on and the launch of avios, a really always more difficult to successful we also need to
what we need to do to add first-class customer loyalty extract. But here again have a viable and profitable
value for our shareholders, scheme. so, taken together, we’ve made tremendous shorthaul business feeding
our customers, our i think we can say we’ve not progress and, as with into our two longhaul hubs
employees and all of only met our promises to revenues, we’re confident at london heathrow and
our other stakeholders. customers, but actually we can not only meet our madrid Barajas.
exceeded them. initial targets, but improve
on them. on the strength
Find out more about Find out more about our
of that, we’ve now increased
delivering our objectives Find out more about strategy on page 22
on page 20 our products on page 12 our 2015 target for total
annual synergy benefits
from €400 million to
€500 million.
Find out more about our
synergy achievements
on page 26
6
international airlines group – annual report and accounts 2011
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Qhow prepared are Qhow is the group Qwhat makes your
you to withstand the managed? business sustainable?
current economic crisis?
awe’ve put a very aFor the business to be
ai think we are well effective and, i think, sustainable we’ve firstly
positioned. we’ve successful management got to have a sustainable
demonstrated in the past Team in place drawing on business plan. i think we’ve
our ability to take the the internal strengths of addressed that well, both
necessary action to tackle both British airways and individually and collectively,
economic shocks – our track iberia, but also, importantly, over the recent years. To watch a video
record on that score is very drawing on external talent. interview online go to
good. also we’ve spoken The strength of the iag Both airlines are focused on www.iairgroup.com
with greater confidence management Team lies in environmental sustainability.
than a lot of commentators the fact that we understand They’re doing that in slightly
about the current economic the specific challenges different ways, of course,
environment because faced by both British but actually with the same
our business, particularly airways and iberia and the goal. That is to demonstrate
in london, has performed general challenges facing that they can grow in an
well in 2011 and we’re the airline industry as a environmentally sustainable
confident our plans are well whole. The combination of way and we’ve had a
founded and appropriate that internal and external number of important
for the conditions we talent, backed by well successes here. so
expect to see in 2012. thought through corporate sustainability for us is both
governance structures, a question of economics
having said that, the fuel means we have a and the environment and
price will be a challenge in strong and cohesive we’re focusing equally
the current year. But we’re management Team. strongly on both.
well prepared for that and
believe we can meet our
Find out more about our Find out more about our
ambitious long-term targets management Team on sustainability on page 30
on earnings and operating page 18
profit, despite the current
economic turmoil.
For more information
see our Financial review
on page 66
7
proVIdInG An
exeMplAry serVIce
to our custoMers