INTERNATIONAL
AIRLINES
GROUP
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Connecting
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and countries
ANNUAL REPORT AND ACCOUNTS 2021
Contents
Strategic Report
Corporate governance
Stakeholders engagement
Committee
1
2
4
6
8
Our purpose
Connecting people
Connecting businesses
Connecting countries
Chairman’s letter
10
Chief Executive Officer’s review
14 Management Committee
16
Business model
18 Our strategic priorities
Key performance indicators
22
24
34
35
Financial overview
Financial review
48 British Airways
50
Iberia
52 Vueling
54 Aer Lingus
56
58
60
61
62
63
IAG Cargo
IAG Loyalty
LEVEL
IAG GBS
IAG Tech
Sustainability
100 Risk management and
principal risk factors
122 Regulatory environment
124 Chairman’s introduction to corporate
governance
126 Board of Directors
128 Corporate governance
144 Report of the Nominations
Committee
148 Report of the Safety, Environment
and Corporate Responsibility
Committee
152 Report of the Audit and Compliance
Committee
162 Report of the Remuneration
Financial Statements
190 Consolidated income statement
191 Consolidated statement
of other comprehensive income
192 Consolidated balance sheet
193 Consolidated cash flow statement
194 Consolidated statement
of changes in equity
196 Notes to the consolidated
financial statements
263 Alternative performance measures
269 Group investments
Statement of Directors’ Responsibilities
Independent Auditors’ Report
Additional Information
284 Glossary
286 Fleet table
287 Operating and financial statistics
IBC 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:
10
Business model
18 Our strategic priorities
22 Key performance indicators
34 Financial overview
35 Financial review
63 Sustainability
100 Risk management and principal risk
factors
122 Regulatory environment
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).
Our role in the
world is to connect
people, businesses
and countries.
We enable this and create value
through a unique model that
enables our airlines to perform
in the long-term interests of our
customers, people, shareholders
and society – knowing that success
in each reinforces the others.
Join us as we delve into what
connecting people, businesses
and countries means to IAG.
We believe in the power
of aviation as a social
good. Being face-to-
face matters deeply:
for the moments that
matter in work and life,
for people with family in
other countries, for the
chance to experience
new cultures and
landscapes, and to
transport vital cargo.
INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021
1
OUR PURPOSE
Connecting
Connecting people goes beyond
building strong, trusted relationships
between our employees, customers
and suppliers.
It means bringing our customers
together through travel – reuniting
families and friends, or bringing work
colleagues and students together.
But often, there doesn’t have to
be a reason beyond giving our
customers the chance to experience
new cultures and landscapes.
Reconnecting families and
friends across the Atlantic
We were so proud to reunite
families and friends following the
lifting of the US travel restrictions on
November 8, 2021. British Airways
operated the first transatlantic flight
powered by 35 per cent Sustainable
Aviation Fuel. There were emotional
scenes in New York as families reunited,
with some meeting new family members
for the first time after being separated
for more than 18 months.
Flying to places that needed us most
Throughout the pandemic we operated
around 167 repatriation flights from 33 cities
across 21 countries to bring our customers
home. Each time travel restrictions were
eased, we laid on additional flights to more
destinations so we could fly passengers where
they needed to be.
2
INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021
Strategic Report Supporting humanitarian missions
Working with the UK Government and
UNICEF Spain, IAG Cargo flew 25 tonnes of
aid to help the recovery efforts in Haiti
following the earthquake that struck the
country in August 2021.
Transporting aid to those in need:
millions of doses of vaccines carried
during the pandemic
We have continued to support countries’
efforts to combat the pandemic, helping
out wherever we could. Having carried
20,000 tonnes of PPE and humanitarian aid
in 2020, in 2021 we flew millions of doses
of COVID-19 vaccines — delivering to
almost every corner of the world on a
regular basis. In May 2021, when India
continued to battle rising COVID-19 cases
with dwindling oxygen supplies, IAG Cargo
and British Airways joined forces to fund
two special charters delivering 45 tonnes
of aid from different charities.
Helping to rescue four-legged
family members
On routes such as Larnaca and Athens to
London and Dublin to Toronto, alongside
several global organisations, we transported
hundreds of rescue dogs to their forever
homes, giving them the chance of a new life
with a new family.
people
INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021
3
OUR PURPOSE
Connecting
Connecting businesses allows companies
to thrive no matter where they are based.
It means giving people the chance to
do business when only a face-to-face
meeting will do, transporting goods
from one place to another so we can all
benefit from international trade. We are
working with our suppliers to develop
the new technologies that will enable
us to reach net zero by 2050, together.
Global network that enables
businesses to thrive
The pandemic has shown the importance of
meeting people in person. We’ve played an
important role in reconnecting businesses
through facilitating face-to-face meetings,
flying goods around the world and
continuing to keep vital air links open
across our extensive global network. We’ve
also made it as simple as possible for our
customers to fly with us, through driving
changes in technology including digital
apps to verify the necessary health and
travel documents.
Supporting Spanish economic recovery
Supporting the economic recovery in the
countries in which we operate remains a key
priority for us. Iberia gave a new boost to its
air shuttle service between Madrid and
Barcelona, the most important route for
corporate traffic in Spain. Iberia is operating
around 68 weekly frequencies on this route,
which means up to 11 flights each way from
Monday to Thursday, the busiest days. Vueling
has also been supporting the recovery of
Spanish tourism by increasing its domestic
capacity by up to 114 per cent of 2019 levels in
the year. The airline operated more than 310
routes, 42 of which were added to its network
to support Spanish connections with countries
such as Denmark or Sweden.
4
INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021
Strategic Report Embracing start-ups and innovation
Through IAG’s core innovation platform
Hangar 51, our Group has supported 60
start-ups and invested in more than 10 tech
players. Many of these are helping to make
aviation greener.
Reconnecting businesses on
both sides of the Atlantic
With more than 800 US companies in Ireland,
employing 180,000 people, and over 650 Irish
companies with a base in the US, we’re
reconnecting businesses on both sides of the
Atlantic. Aer Lingus’ new Manchester base,
which opened in October, offers a daily
service to New York operated by its new
Airbus A321neo LR aircraft, in addition to
connections to Orlando and Barbados.
e-Connecting businesses
Now, more brands are connected with our
eStores and reward apps enabling more
members to collect through everyday
spending. In 2021, IAG Loyalty launched new
partnerships with Nectar, CaixaBank, bp and
Barclays and renewed its Amex and Endesa
agreements.
businesses
INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021
5
OUR PURPOSE
Connecting
Connecting countries means having a
wide range of routes and partnerships
to connect all corners of the world.
As an international airline group with
leading airlines in Spain, the UK and
Ireland, our combined network and
scale allows us to connect destinations
through a wide range of airline models –
from full service, to value, to low-cost.
Supporting Paralympic athletes
Supporting Paralympic athletes on their
flights from the UK, Spain and Ireland to
and from Tokyo was a real honour. Our
people worked tirelessly to ensure the
teams and all their equipment travelled
safely. Everyone at our airlines couldn’t
be prouder of the athletes’ great
achievements at the Tokyo 2020
Paralympic games.
75 years connecting Europe
and Latin America
Iberia’s commitment to Latin America
has been key in supporting trade and
connectivity across the South Atlantic.
In 2021, the airline celebrated the 75th
anniversary of its flights between Madrid and
Buenos Aires. It became the first weekly air
bridge connecting Europe and Latin America,
making Madrid the gateway for travellers
in both directions.
6
INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021
Strategic Report Our commitment to endangered species
Our global network has allowed us to
partner with animal welfare charities to
save and relocate endangered species.
IAG Cargo worked with SEA LIFE and flew
an injured Olive Ridley sea turtle to her
new forever home in Scotland after she
sustained life-changing injuries. She was
entangled in ghost netting with a plastic
bag around her neck which resulted in her
losing a flipper. This initiative was aimed at
raising awareness of the impact of plastic
pollution.
Boosting European connectivity
We have taken opportunities to expand
our services and increase connectivity
throughout our European network.
Vueling has introduced 32 new European
destinations at Paris-Orly, becoming the
second-largest operator at the airport.
The airline was previously operating 22 routes,
mainly to Spain and Italy. Now it offers 54
routes that connect France
with more than 13 countries.
countries
INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021
7
CHAIRMAN’S LETTER
Connecting people,
creating sustainable value
It is now more than two years since the
beginning of the COVID-19 pandemic.
These two years have seen our lives
change immeasurably. Around the world,
people have been forced to respond to the
changing environment and find new ways
to do things in all aspects of their lives. We
have all had to adapt to different ways of
working, different ways of maintaining
family life and different ways of spending
our leisure time. All of these have impacted
IAG as an international airline group.
It has been the most challenging time in
our history, particularly for our people. I am
proud of the resilience and creativity that
they have shown. Despite the difficulties
we have faced, it is thanks to their work
that we can look to the future with
confidence. IAG’s strength comes from its
people, and I would like to thank them all
for the contribution they have made during
this time.
My thanks also go to our shareholders.
Their continued support has provided
IAG with a strong foundation on which
to rebuild the business and reshape it for
the future.
One thing that the pandemic has not
changed is IAG’s purpose – to connect
people, businesses and countries around
the world. IAG was created as a unique
platform that enables us to fulfil that
purpose. Our strategy is to use that
platform to deploy our strengths so that
we can recover better and stronger
than before.
We know that despite the difficulties faced
by everyone over the past two years, the
desire to travel and connect in person is as
strong as ever. Being unable to see friends,
family or business contacts face-to-face
has reminded us all how important those
bonds are. We saw that as restrictions
were lifted throughout the course of 2021
and the pent-up demand was released,
particularly once the long-closed North
Atlantic travel corridor was re-opened.
One could not fail to be moved by the
images and stories of families reunited
after so long apart, some meeting new
family members for the first time. It was a
reminder that what we do matters.
Javier Ferrán
Chairman
“One thing that the pandemic has
not changed is IAG’s purpose. Our
business model is designed in a way
that enables our airlines to perform
in the long-term interests of our
customers, people, shareholders
and society.”
8
INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021
Strategic Report Our business model therefore is designed
in a way that enables our airlines to
perform in the long-term interests of our
customers, people, shareholders and
society. We know that successfully and
sustainably delivering for one reinforces
our success in delivering for the others.
The pandemic has proved the strength of
our business model, which allows each of
our airlines to benefit from our financial
scale, while retaining their own agility to
evolve and adapt to changing markets.
That model is defined by shared capital
strength, disciplined allocation of capital
and diversification, each of which has
served the business well over the
past year.
The diversity of our airlines, ranging from
full service to low cost, and their leadership
positions in the markets in which they
operate, has provided us with the
resilience to meet the current challenges
head on. Each airline is able to respond to
changes in customer demand in its
individual market, while being supported
by the Group as a whole, which provides
the shared best practice, talent and
opportunities to collaborate where we can
create advantage and value.
These attributes were front and centre of
our operations in 2021. During the year
each airline undertook a variety of actions
needed to preserve its strengths, while
also working closely together to innovate
and promote efficiency.
So, while the impact of the pandemic led
to a significant reduction in both revenue
and profitability in the year, our platform
ensured that we were able to take every
opportunity to develop our business in the
short term. That means that we remain
well positioned to make the most of the
recovery and are set up to return to
profitability in 2022.
Despite the pandemic, sustainability
remains a key priority for IAG. We continue
to fiercely pursue our net zero targets and
we have made long-term investments to
support the development of the emerging
technologies that will be required to
support our green transition.
Aviation may be one of the most difficult
sectors to decarbonise, but we have a
clear plan and roadmap for one of the
most pressing challenges facing our planet.
We have led the industry in setting
ambitious goals for carbon reduction and
the adoption of sustainable fuels. In 2019,
we became the first airline group
worldwide to commit to net zero carbon
emissions by 2050. We have since become
the first European airline group to commit
to powering 10 per cent of its flights by
sustainable aviation fuel by 2030. And
we are investing in new aircraft that are
up to 40 per cent more fuel efficient than
those they replace.
We cannot do this alone. While our airlines
are innovating to respond to
environmental challenges, we are also
working in partnerships with governments,
suppliers and other industry stakeholders
to accelerate the development of the
solutions that we need.
To be truly sustainable, we must also
address societal challenges. We know that
diverse teams are more successful and
drive effective leadership and decision-
making. I am pleased that 42 per cent of
our Board members are female, but we
know there is more to be done to further
embed diversity throughout the
organisation. Last year, we set a new
target of having at least 40 per cent of
senior roles held by women.
We can never be sure exactly what the
future holds. The emergence of the
Omicron variant affected our path to
recovery and there are potential
headwinds but I’m confident that we have
the right business model and an
experienced leadership team to face the
challenges ahead. We know COVID-19 will
remain part of our lives for years to come,
while the changing climate will also affect
our industry structurally. Airlines will need
capital strength, combined with flexibility
and agility to adapt to this new
environment. These are all building blocks
that IAG possesses.
As people return to the skies, our ambition
is to ensure that they do so with one of our
airlines. We know our customers have a
choice as to who they fly with, and we
compete hard to win their trust. But as we
compete, we will always think and act for
the long term and operate with safety,
security and ethical behaviour as our key
principles. We will do the right thing to
deliver sustainably for our customers, our
people and our shareholders, connecting
people, businesses and countries and
providing the jobs, prosperity and cultural
benefits that travel has always created
now, and well into the future.
Javier Ferrán
Chairman
Use this QR code
to watch our
Chairman discuss
how IAG is
delivering on its
purpose.
INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021
9
CHIEF EXECUTIVE OFFICER’S REVIEW
Transforming our business
to take it to its full potential
The COVID-19 pandemic has led to one of
the most difficult periods in aviation
history. In 2021, we continued to work hard
to ensure our business remained resilient in
the face of global travel restrictions.
Our people’s exceptional work and
dedication has been key to weather this
crisis.
Financial performance
Clearly our financial performance
continued to be severely impacted by
travel restrictions worldwide. Throughout
the year, individual markets were affected
at different times and in different ways.
The uncertainty caused by the emergence
of the Omicron variant in late November
affected overall traffic with bookings
declining mainly due to tightened entry
requirements imposed by some countries.
Although demand slowed down for very
near-term trips, bookings remained strong
for Easter and summer 2022.
Prior to this, longhaul had seen the highest
booking activity in October and November
at over 80 per cent of 2019 figures. This
was better than previously expected
driven by the re-opening of the US border
to European travellers on 8 November and
the strength of longhaul leisure markets.
The opening of the North Atlantic corridor
proved a pivotal moment for our industry
and demonstrated that a significant
recovery was underway. It was fantastic to
see families and friends reunited and
business travellers being able to meet face
to face after many months of separation. It
led to transatlantic bookings reaching
nearly 100 per cent of 2019 levels. We
expect North Atlantic routes to reach full
capacity by summer 2022.
We started the year flying 19.6 per cent of
our 2019 capacity in the first quarter. As
pent-up demand was released, both leisure
and corporate, we continued to restore
capacity across our network. In the fourth
quarter we were operating at 58.3 per cent
of our pre-pandemic level, in line with
previous guidance, while seat load factor
was 71.5 per cent compared to 84.3 per
cent two years ago. In total, we flew 36.1
per cent of our 2019 capacity in 2021.
Luis Gallego
Group Chief Executive Officer
“Our people’s exceptional work and
dedication has been key to weather
this crisis.”
10
INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021
Strategic Report Our teams across the Group worked hard
to take every opportunity to develop our
business while capitalising on the surge in
bookings when travel restrictions were
lifted. Premium leisure performed strongly
at both Iberia and British Airways, while we
saw early signs of a recovery in business
travel from the third quarter and continued
into quarter four especially on North
Atlantic routes.
At a Group level, we reported an operating
loss of €2,970 million before exceptional
items, an improvement on the
€4,390 million loss recorded in 20201.
However, there were significant variances
in the performance of our individual
airlines, which benefited from the lifting of
travel restrictions at different times in their
home markets.
The best performers within the Group
were Iberia and Vueling. The third quarter
marked an inflection point with Iberia
returning to profitability and Vueling
reaching breakeven at the operating level.
Both have seized opportunities to
strengthen their positions in their
respective markets1.
British Airways reduced its operating loss
in 2021 and focused on restoring capacity
throughout the year.
Aer Lingus was the most challenged due
to the tougher travel restrictions in Ireland.
Our unique and diversified model has
enabled us to make the most of the
recovery. For example, IAG Loyalty
continued to be profitable and cash
generative as it has been throughout the
pandemic. New partnerships with
Caixabank in Spain and with bp in the UK
were successfully launched in 2021.
September was the best ever month for
customer Avios collection through our
non-airline partners while the re-launch of
British Airways’ co-branded American
Express card contributed to there being
over 15 per cent more customers with a
card than before the pandemic.
During the year, as well as weathering this
crisis, we have also tried to help wherever
we could. We put all our experience,
efforts and resources into flying to places
that needed us most. We have carried over
20,000 tonnes of PPE and humanitarian
aid and delivered millions of doses of
1 See Alternative performance measures section
for statutory measures.
vaccines to almost every corner of the
world on a regular basis.
The decisions that we took on costs and
capital have enabled us to retain our
financial strength. At the end of the year,
our liquidity remained strong at
€11,986 million, as a result of the reduced
operating loss and improved forward
bookings, together with actions we took to
raise debt and facilities. In the third
quarter, our operating cash flow
significantly improved and was positive for
the first time since the start of the
pandemic with a further increase in quarter
four.
As we continue rebuilding IAG’s financial
strength in the coming years, I would like
to welcome our new CFO Nicholas
Cadbury and look forward to his
contribution to our Group. I would also like
to thank Steve Gunning for all he has done
over the years and during these very
challenging times.
Transforming our business
We devoted significant efforts during the
year to reshaping our business both for the
short and long term. Our initial focus was
to ensure operational readiness so that we
are prepared to return to the skies at short
notice once restrictions are eased.
We have also continued to innovate,
developing user-friendly digital solutions
to provide the tools and reassurance
customers need to travel. These included
digital travel passes which can verify
testing or vaccines to speed up check-in
and boarding, which proved very useful for
our customers.
In parallel, we have been transforming our
business to be fit for the long term.
Aviation has faced the biggest crisis any of
us have seen in our lifetime and we know
that in the future our industry will look very
different. Transformation is no longer an
option, but an imperative.
At IAG we have been resetting our
business to take it to its full potential. This
has led to a number of transformation
projects that will help us to be stronger
after COVID.
And all the while we are taking every
opportunity to develop the business.
Notable among these was our decision to
"We have been
transforming our
business to be fit
for the long
term."
establish a new competitive shorthaul
operation at Gatwick for British Airways,
which will begin flights in March 2022.
Aer Lingus launched its Manchester
subsidiary with flights to New York,
Orlando, and Barbados. Vueling expanded
its operations at Paris-Orly, introducing
dozens of new routes and becoming the
second largest operator at the airport. And
Iberia reinforced its leadership on routes to
Latin America while expanding its US
destinations with the addition of Dallas and
Washington from April 2022. We have also
developed a new approach to aircraft
maintenance by bringing together the best
of Iberia and Vueling to maximise
synergies at El Prat Airport.
These are great examples of the strengths
delivered by our unique model:
collaboration between our airlines, shared
capital strength and creation of synergies
while retaining the agility to be innovative.
Sustainable value creation
Our ambition is to create sustainable value
and to deliver for all our stakeholders. This
starts with our employees. We want to
foster a culture in which all our people feel
valued. This means a focus not just on
diversity but also inclusion. This allows us
to be a place where everyone’s talents are
nurtured, where skills and capabilities are
developed, and where the leaders of the
future are created. The jobs we create are
part of the economic contribution that we
make to society and to local communities.
In all our operations, we seek to be an
active partner for positive change,
recognising, managing and reducing our
impact on the planet. We are determined
to meet our climate commitments.
INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021
11
CHIEF EXECUTIVE OFFICER’S REVIEW CONTINUED
IAG was the first airline group worldwide
to commit to achieving net zero emissions
by 2050. We are setting ourselves
demanding targets to drive the system-
wide change that is needed to tackle
climate change.
"We were the first airline group
worldwide to commit to achieving
net zero emissions by 2050."
We have a clear roadmap to achieve these
targets spanning a wide range of initiatives
including investment in new fleet,
operational efficiency, sustainable aviation
fuels (SAF), new technologies and carbon
removal. SAF is an important tool in
decarbonising aviation and we have been
leading its use by partnering with
emerging sustainable fuel technology
companies such as LanzaJet, Velocys and
Phillips 66. British Airways operated the
first commercial transatlantic flight
powered by 35 per cent SAF while Iberia
and Vueling were pioneers in Spain. We
have pledged to invest $400 million over
the next 20 years to support the
development of SAF.
However, to scale up the production of
sustainable aviation fuels government
support is critical in attracting the
necessary investment to construct the
plants needed to deliver enough supply for
the whole industry. This requires all of us
to work together. The whole ecosystem
needs to work as one. Aircraft
manufacturers, start-ups, suppliers and
governments must come together to make
a lasting difference to the world.
We’re also investing in new technologies.
So far, through our core innovation
platform Hangar 51, we have supported 60
start-ups and invested in over 10 tech
players. Many of these are helping to make
aviation greener, including ZeroAvia which
is working on the world’s first hydrogen
powered plane.
It is through these partnerships and
collaborations with the wider aerospace
industry including our peers, suppliers and
policymakers, that we will transform our
industry to meet the climate challenge.
We´re pleased that our work tackling
climate change continues to be recognised
as industry-leading. For the second year
running, IAG was the only European airline
to receive a Leadership grade (A-) from
the Carbon Disclosure Project (CDP). This
puts us in the top 6 per cent among nearly
12,000 global companies assessed in 2021.
We also received the joint-highest score of
any airline from the Transition Pathway
Initiative (TPI) which assesses companies'
readiness to transition to a low carbon
economy.
Despite the crisis, we remain resolute in
our climate commitments and have taken
steps to create a truly sustainable business.
I would like to thank our people across the
Group for their remarkable commitment
during these difficult times. Through hard
work, we have demonstrated our resilience
and innovation, and we are on track to
return to sustainable profitability in 2022
and beyond.
We are building a better and more
competitive business for the long term and
one that is well placed to seize the
opportunities that the future holds.
Luis Gallego
Group Chief Executive Officer
Use this QR code
to watch our CEO
discuss how IAG is
transforming to
achieve its full
potential
12
INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021
Strategic Report COP26: Momentum behind
aviation’s green transition
COP26: Momentum behind aviation’s
green transition
2021 was a year of global climate action,
including the landmark COP26 global
climate conference hosted in November in
the UK. It attracted over 35,000 delegates
from nearly 200 countries with the aim of
building momentum in the fight to limit
global warming to 1.5⁰C above pre-
industrial levels.
While aviation is regulated through the
separate UN agency International Civil
Aviation Organisation (ICAO), several
developments at the conference have a
direct impact on the airline industry. These
include:
• further momentum around net zero
emissions, with almost 90 per cent of
global emissions now covered by net
zero commitments;
• clarification of the rules supporting
global trading of offsets via carbon
markets;
• the UK Government’s launch of the
International Aviation Climate Ambition
Coalition to advocate for a net zero goal
by ICAO in 2022; and
• continued work by the UK Government
on its upcoming net zero aviation
strategy in 2022.
IAG had an active and supportive presence
at COP26 itself, participating in 12 events
hosted by groups including industry
associations, governments and
manufacturers. The Group was also closely
involved with the UK Government in its
ongoing efforts to support net zero
aviation, with IAG staff chairing both the
SAF Delivery group and COP26 subgroups
of the Jet Zero Council in the year leading
up to COP26.
British Airways partnered with Air bp to
source the equivalent amount of SAF to
replace 100 per cent of the fossil fuel used
to operate all its flights between London
and Glasgow and Edinburgh during
COP26. In Spain, both Iberia and Vueling
ran SAF demonstration flights during the
two weeks of the conference.
Flying is magic – one of humankind's greatest achievements. It connects us with the rest of our world, brings loved ones closer together and opens our
eyes to new experiences and cultures. It supports our economy, creates quality jobs and delivers aid when and where people need it most. But we
recognise that flying comes at a cost to the environment and we are determined to take urgent action to tackle the impact it has on our planet. We're on a
journey to create a better, more sustainable future.
INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021
13
Strategic Report
MANAGEMENT COMMITTEE
Working together to
deliver our purpose
Javier Sánchez-Prieto
Chairman and Chief Executive
Officer of Iberia
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
Steve Gunning
Chief Financial Officer
Marco Sansavini
Chairman and Chief Executive
Officer of Vueling
Luis Gallego
Group Chief Executive Officer
Management Committee member not
pictured: Fernando Candela, Chief
Transformation Officer and Chief
Executive Officer of LEVEL
14
INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021
Strategic Report Adam Daniels
Chairman and Chief Executive
Officer of IAG Loyalty
Chris Haynes
General Counsel
Sean Doyle
Chairman and Chief Executive
Officer of British Airways
David Podolsky
Chief Strategy Officer and
Chief Executive
Officer of IAG Cargo
Carolina Martinoli
Chief People, Corporate Affairs
and Sustainability Officer
Lynne Embleton
Chairman and Chief Executive
Officer of Aer Lingus
INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021
15
Strategic Report
BUSINESS MODEL
A unique model that enables
us to connect the world
We are an international airline group, with leading airlines in Spain, the UK and Ireland. We were formed to create a unique model
in the industry based around consolidation, strategic flexibility and financial performance.
Our purpose and values
Our role in the world is to connect people,
businesses and countries. We do this and create
value through a unique model that enables our
airlines to perform in the long-term interests of
our customers, people, shareholders and society
– knowing that success in each reinforces the
others.
We hold ambition, teamwork, innovation,
pragmatism, efficiency and responsibility as key
values that enable us to fulfil our purpose.
Our operating model
The Group has a unique and innovative business
model within the airline industry, based on a light
structure at the centre and agile, empowered and
focused airline operating companies who benefit
from the Group’s scale and are accountable for
their results.
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
adding incremental 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. The
neutrality of IAG’s platform and independence
from the brands supports the Group in taking part
in industry consolidation processes.
The operating companies, with their unique
identities and customised business models, are in
turn able 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 customer
experience.
The airline portfolio sits on the Group’s common
integrated platform, which drives efficiency and
simplicity across the operating companies whilst
creating additional sources of revenues for IAG.
The IAG 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.
Our operating model
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 to
deliver the vision for the
Group
Defines portfolio, M&A
and partnerships
Sets targets and oversees
operating companies’
performance
Allocates capital and
secures funding
Drives ESG agenda
for the Group
Manages investor relations
Shares
best practice
Defines, drives and
monitors response to
COVID-19
Airline operating companies
Drive and execute
commercial strategy
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 brand, cultural identity
and management teams
Common integrated platform
Provides common services and allows the Group’s operations to benefit
from cost reductions and synergies by leveraging the Group’s scale
For more information see the operating companies pages.
16
INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021
The role of the Centre
The role of the Centre is to oversee intra-Group coordination, manage and execute central functions, and leverage its central
platforms to create additional synergies for the Group. This is underpinned by a role to foster collaborative working between the
operating companies and the sharing of best practices across the Group.
INTERNATIONAL
AIRLINES
GROUP
Central platforms
Intra-group coordination
Fleet
Maintenance, repair and overhaul
Fuel
Network
Commercial
Customer
Investor relations
Finance
People
Sustainability
Communications
Legal
Strategy
Merger and acquisition
Central functions
The role of the Centre during the
COVID-19 pandemic
The Group’s corporate parent has had a
crucial role during the COVID-19
pandemic, managing the crisis and
coordinating the Group’s response,
taking action to secure the business in
the short term, and driving the
transformation of IAG and its operating
companies to ensure we emerge
competitive from the crisis.
Our common integrated platform also
provided strong support to the Group
during the crisis, helping control costs,
driving synergies and bringing additional
sources of non-flying revenue to the
Group.
Some of the key actions taken at IAG
and by its central platforms and central
functions during the COVID-19 pandemic
have been to:
• Secure funding for the Group to
maintain a strong liquidity position,
secure the business and exit the crisis
in a competitive shape
• Lead and coordinate capital
expenditure, working capital and
operating cost initiatives to minimise
cash outflows
• Renegotiate deals and deferrals with key
suppliers to support the business
• Increase our sources of revenue and
raise additional cash through the launch
of new and renewal of existing loyalty
partnerships, including our agreement
with American Express
• Engage in aircraft deferrals, lease
payment renegotiations, and sale and
leaseback transactions to preserve cash;
and collaborate with the operating
companies to temporarily park and retire
older aircraft from their fleets
• Continuously track, monitor and forecast
market re-openings and air travel
demand to optimise capacity plans,
including the deployment of additional
cash-generative cargo capacity and
cargo-only flying
• Provoke and oversee business
transformations at the operating
companies, coordinating plans and
setting targets for the Group and its
businesses to emerge more efficient
from the crisis
• Engage with our existing oneworld,
joint business and other airline
partners to maintain, adapt and
strengthen our relationships during
the crisis and collaborate with the
operating companies to further
expand our partnership portfolio
• Engage closely with national
governments, regulators and
industry associations to support the
development of safety and security
guidance, as well as best practices
that allowed travel to continue
• Drive IAG’s sustainability strategy
by collaborating with partners and
regulators to take further steps in
the industry’s decarbonisation
roadmap, playing a leading role in
setting and progressing towards
ambitious carbon targets and
building industry momentum
towards a net zero world.
INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021
17
OUR STRATEGIC PRIORITIES
Purposefully delivering our
strategy in a sustainable way
Our strategic priorities
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
platforms to drive synergies and
reduce costs
Underpinned by sustainability
The Group’s strategy is underpinned by its
target to be the leading airline group on
sustainability. We remain committed to
reducing our carbon footprint and to reach
the goal of net zero CO2 emissions for the
Group and its supply chain by 2050, as well
as to continue to prioritise other key
sustainability issues including waste
management, stakeholder engagement and
employee engagement and welfare.
Unrivalled
customer
proposition
1
Strengthening
a portfolio of
world-class
brands and
operations
2
Growing
global
leadership
positions
3
Enhancing
IAG’s common
integrated
platform
Value-
accretive and
sustainable
growth
U
n
d
erpinned by environm e n t a l
Efficiency
and innovation
b ilit y
a
a i n
t
s u s
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
18
INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021
Strategic Report
Strategic priority
1
Strengthening a portfolio of world-class
brands and operations
How we
create value
Our
performance
Unrivalled customer proposition
Our activity in 2021
The COVID-19 pandemic has
continued to impact our lives
throughout 2021. During this time,
the Group’s portfolio of brands
continued to support the wider
community in tackling its impacts,
with the operating companies
supporting local communities with
charitable work and flying critical
equipment and essential medical
supplies across the world. The
different brands continued to
implement measures aimed at
enhancing safety on board and
reducing the complexity of
vaccination and testing
documentation and check-in
processes. British Airways, Iberia
and Aer Lingus partnered with the
VeriFLY app and, along with
Vueling, have been trialling the
IATA Travel Pass, allowing
customers to easily upload and
verify COVID-19 documentation
before their flights and reducing
journey times at the airport. Our
operating companies have
additionally made other digital
solutions available to increase
customer confidence and reduce
journey times, such as ‘Digital
Heatmaps’ showing the status of
travel restrictions and requirements
by destination.
The operating companies
implemented agile approaches to
aircraft deployment, optimising
and adapting their networks to
changes in travel restrictions, whilst
ensuring we maintain our presence
in our priority markets and keep
offering an unrivalled proposition
to our customers. British Airways
continued to roll out its newest
business cabin seat Club Suite in its
Boeing 777 fleet, and committed in
October to operate all future flights
to JFK exclusively with aircraft
featuring this new product,
reflecting the strategic importance
the North Atlantic market has for
the airline. This year Iberia
celebrated its 75th anniversary of
flights to Latin America, where it
operated a relatively high level of
capacity in 2021, announcing an
increased winter schedule to the
region compared to last year and
providing more choice to
customers.
IAG Loyalty has significantly
enhanced Avios redemptions to
give our airlines’ loyalty
programme members more choice,
for example doubling the number
of Guaranteed Avios Reward Seats
on British Airways and Iberia
flights.
Our priorities for 2022
Whilist the Group will continue its
leading work on safety, we will
also ensure our businesses can
deliver an unrivalled customer
proposition that adapts to meet
changing customer expectations
in the context of air travel
recovery after two years of
border closures due to the
COVID-19 pandemic. IAG will
continue to ensure
competitiveness in its chosen
priority customer demand spaces,
evolving the operating
companies’ products and services
to best deliver against the needs
of their customers. Strong
emphasis will continue to be
placed on digitalisation, including
further customer-focused
improvements to the digital
experience.
INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021
19
STRATEGIC PRIORITIES CONTINUED
Strategic priority
2
Growing global leadership
positions
How we
create value
Our
performance
Value-accretive and sustainable growth
Our activity in 2021
In 2021, the Group’s focus on
securing its financial position
continued, with the aim to exit the
crisis well-placed to maintain the
existing leadership positions it
holds in its home cities of
Barcelona, Dublin, London,
and Madrid, as well as take
advantage of value-accretive
organic and inorganic growth
opportunities that may arise.
Whilst the pandemic had a severe
impact on capacity levels across
the world, our airlines have been
able to capture new strategic
growth opportunities. In October,
Aer Lingus launched a new base at
Manchester Airport to offer
transatlantic services from the UK,
a strategic base for the Irish airline
that will have a largely variable
cost base. Vueling was granted 18
daily slot pairs at Paris-Orly airport
that will be transferred from Air
France, which will help strengthen
Vueling’s pan-European network in
one of the continent’s largest
markets. British Airways
announced in December the launch
of its new subsidiary, BA Euroflyer,
which will operate shorthaul
services at Gatwick Airport under
the British Airways brand. The
company will restart shorthaul
services at Gatwick in summer
2022 after a break of almost two
years and will provide customers
with access to a premium service
at competitive prices.
IAG’s airlines have continued to
strengthen their relationships with
partners. For example, Alaska
Airlines joined the oneworld
alliance in March 2021, and
launched a codeshare agreement
with Iberia and LEVEL later in the
year. British Airways also extended
the number of codeshare routes
with the Seattle-based airline,
whilst Aer Lingus continued its
frequent flyer collaboration. IAG
has also further developed its
partnerships with Atlantic Joint
Business members American
Airlines and Finnair, particularly
with the continued integration of
Aer Lingus into the Joint Business.
The Group continued to expand its
relationship with Qatar Airways,
which extended its codeshare
agreement with Iberia early in the
year, and jointly with British
Airways announced plans to
expand their Joint Business to offer
customers access to a greater
choice of destinations and route
options. Vueling took important
action in the partnership space by
leveraging its digital versatility and
launching a global interlining
platform, ‘Vueling Global’, to
increase connections between the
airline and its partners and expand
its customer offering. In 2019, the
Group announced plans to acquire
Air Europa, which is owned by
Globalia, subject to regulatory
approvals. In December 2021, IAG
and Globalia announced the
termination of the agreement
under which Iberia had agreed to
acquire Air Europa, but noted that
the parties intended to evaluate
alternative structures. Any future
deal would be subject to regulatory
approval.
20
INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021
Our priorities for 2022
In 2022, the Group will aim to
maintain and bolster its
leadership positions in its home
cities and priority markets. As and
when the global aviation industry
recovers from the impact of the
COVID-19 pandemic, IAG will
progress investment in value-
accretive organic and inorganic
growth opportunities. IAG will
continue to progress the
integration of Aer Lingus into the
Atlantic Joint Business. 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 process
by entering into value-accretive
merger and acquisition (M&A)
deals.
Strategic Report Our priorities for 2022
In 2022, IAG will continue to
focus on delivering the
transformation plans for its
different business segments,
which will ensure they remain
competitive as the recovery from
COVID-19 continues. IAG will also
keep investing in enhancing its
common integrated platform, to
provide quality services and
solutions across the Group at
faster pace and lower unit cost,
and continue to support its
operating companies to
accelerate their digital
transformations, which will be
critical as the Group recovers
from the COVID-19 pandemic.
Strategic priority
3
Enhancing IAG’s common
integrated platform
How we
create value
Our
performance
Efficiency and innovation
Our activity in 2021
The COVID-19 pandemic has tested
the airline industry’s resilience like
no other crisis before in the history
of commercial aviation. Despite the
pandemic causing capacity levels
to remain depressed throughout
2021, particularly during the first
half of the year, IAG has proved the
Group has a resilient business
model, being able to reduce its
cost base and adapt to the
circumstances, leveraging its
common integrated platform to
generate additional revenue.
IAG’s airlines embarked on
transforming their businesses to
emerge from the crisis in a more
efficient shape as the recovery
from COVID-19 continues, reducing
their costs and capturing new
opportunities where available. All
the airlines took action to
restructure their cost bases,
structurally changing and
renegotiating handling,
maintenance and other supplier
arrangements in coordination with
the IAG GBS procurement team
and maximising the use of furlough
and wage support schemes where
possible. As an example, Vueling
has transitioned to a new handling
and maintenance model, including
launching a joint venture for line
maintenance with provider Nayak.
IAG Cargo has experienced
ongoing demand for its services in
2021, contributing additional
revenue to the Group with an
increased schedule compared to
last year, co-sponsoring flights with
the passenger airline businesses
and operating a high level of
cargo-only flights. The cargo
segment has also arranged large
charter programmes with strategic
customers, considerably
supporting the Group’s
cash generation.
IAG Loyalty has also been key in
supporting IAG’s revenues during
the crisis and has been profitable in
2021 due to a high level of spend
and Avios collection through our
non-airline partners. The loyalty
segment expanded its partnership
portfolio by successfully launching
new agreements with Barclays
Premier, Sainsbury’s/Nectar,
Santander and bp, as well as a new
co-branded credit card with
Vueling and CaixaBank in Spain.
IAG Tech continued its focus on
enhancing new technology
capabilities across the Group,
including improvement to the
operating companies’ loyalty
platforms, changes to the
platforms and systems to allow for
frictionless travel (e.g. health
passports), and enhancement to
disruption and self-service
management solutions for
customers. Furthermore, IAG Tech
delivered initiatives to reduce
operating costs and improve
efficiency through process
automation.
INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021
21
KEY PERFORMANCE INDICATORS
Tracking the Group’s
performance
RoIC
(%)1 3
A R
Targeting sustainable
15%
14.6
Operating margin
(%)1 3
2
Capacity change
(% ASKs)
2
Gross CAPEX
(€m)2
2
2
A
Targeting
12-15%
-22.5
-16.4-16.4
12.7
-55.8
-35.1
-66.5%
+7.7%
3,465
1,939
744744
'19
'20
'21
'19
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'21
'19
'20
'21
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'21
Definition and purpose
Return on Invested Capital
(RoIC) is defined as EBITDA, 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 improved
6.1 points versus last year to
-16.4%. The increase reflects the
improvement in EBITDA of
€1.3 billion on similar levels of
invested capital. The average age
of fleet of 10.6 years increased
from 9.8 years in 2020, as there
were only small changes in the
fleet.
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
improved 20.7 points to
-35.1 per cent. Total revenue
before exceptional items was up
7.4 per cent as restrictions eased in
the second half of the year and
passenger volumes increased.
Cargo revenue was at a record high
of €1,673 million due to the
operation of 3,788 cargo-only and
charter flights and strong yields.
Costs benefitted from the initiatives
implemented in 2020 and 2021 to
reduce spend and increase cost
variability.
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’s capacity was up 7.7 per cent
versus 2020 and down
63.9 per cent versus 2019 as
operations continued to be
impacted by global travel
restrictions. The easing of
restrictions over the year meant
last quarter capacity reached
58.3 per cent of 2019 operations
compared with only 19.6 per cent
in the first quarter.
The operating companies have
the flexibility within fleet and
operational plans to be able
to adapt capacity and can react
quickly to changes in demand
and restrictions as necessary.
Definition and purpose
Gross CAPEX (capital expenditure)
is the total investment in fleet,
customer product, IT 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 2021 totalled
€0.7 billion, which is significantly
lower than the planned spend
announced in 2019 of €4.3 billion,
reflecting the agreements with
Boeing and Airbus to defer fleet
deliveries and pre-delivery
payments. During the year 11 aircraft
were delivered, of which six were
direct leases and therefore not
included in capital expenditure.
In 2021, spend on property, IT and
other reflected the investment
needed to maintain core IT
infrastructure and cyber projects.
22
INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021
Strategic Report
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. These adjustments
improve the understanding of the
Group’s performance and the
comparability between periods.
Key
A
R
Alternative performance measure
Measure linked to remuneration
of Management Committee
1
2 3
Link to our strategic objectives
1 For further detail refer to the Alternative
performance measures section of the financial
statements. RoIC has not been included for
the main airline operating companies, as with
negative EBITDA the measure is less
meaningful than in prior years.
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.
Levered free cash flow
(€m)1
2
Adjusted EPS
(€ cents)1 3
Net debt
to EBITDA1 3
3
Net Promoter
Score (NPS)
3
1
A
A R
A
1,496
1,822
1,822
-3,047
76.4
-122.9
-61.1
-61.1
Targeting ceiling
1.8x
1.4
-4.3
-11.5-11.5
36.7
32.232.2
25.8
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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),
to measure the underlying cash
generation of the business.
Performance
The Group’s levered free cash flow
for 2021 was €1,822 million,
€4.9 billion higher than 2020, due
mainly to an increase in net
non-aircraft related borrowing of
€4.1 billion and the operating loss
before exceptional items being
€1.4 billion lower than in 2020.
Definition and purpose
Adjusted Earnings Per Share (EPS)
represents the diluted earnings for
the year before exceptional items
attributable to ordinary
shareholders. This indicator reflects
the profitability of the business and
the core elements of value creation
for IAG's shareholders.
Performance
Adjusted loss per share improved
significantly from €122.9 cents to
€61.2 cents as the result after tax
before exceptional items improved
by €1.0 billion. The effect of the
assumed conversion of the IAG
€500 million convertible bond
2022, the IAG €825 million
convertible bond 2028 and
outstanding employee share
schemes is antidilutive for the year
due to the reported loss after tax
for the period, and therefore has
not been included in the diluted
earnings per share calculation.
Definition and purpose
Net debt to EBITDA is calculated as
long-term borrowings (both current
and non-current), less cash, cash
equivalents and less other current
interest-bearing deposits. This is
divided by EBITDA4.
IAG uses this measure to monitor
leverage, to assess financial
headroom.
Performance
The Group’s leverage remained
negative in 2021 at 11.5 times. Net
debt rose by €1.9 billion, driven
primarily by negative EBITDA of
€1.0 billion and capital expenditure
of €0.7 billion, together with the
revaluation of US dollar debt. In the
year, the Group drew debt facilities
agreed in 2020, namely a
£2.0 billion Export Development
Guarantee (EDG) term loan for
British Airways from UK Export
Finance and €75 million for
Aer Lingus from the Ireland
Strategic Investment Fund. IAG
closed a dual-tranche senior
unsecured bond issuance in March,
raising €1.2 billion, with €500 million
maturing in 2025 and €700 million
maturing in 2029. In May, IAG raised
€825 million by issuing a
convertible bond, maturing in 2028.
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 2021 IAG’s NPS decreased
4.5 points versus 2020. However,
the score remained significantly
above 2019 levels. While this
result represents high levels of
customer satisfaction across all
IAG airlines, this score must be
viewed in the context of the
pandemic.
The appearance of new COVID
strains and the further restrictive
measures imposed by some
governments including
lockdowns, quarantines or testing
requirements, have impacted the
flying experience negatively
versus the positive experience
for those few who did fly in 2020.
Increased volatility in the flying
schedule throughout 2021
heightened stress for customers,
as did longer queues at the
airports due to ever-changing
documentation requirements,
and the continued suspension
of certain products such as the
delivery of full premium services.
INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021
23
STAKEHOLDER ENGAGEMENT
Connecting with our
stakeholders
Our key stakeholders
These last two years have been
exceptional for our Group and for our
industry, as it has been for our society. The
information about our key stakeholders
reflects those circumstances. The
identification of who our key stakeholders
are, and to some extent, the ways of
relating to them or the issues and shared
interests discussed with them, are
inevitably conditioned by the challenges of
the pandemic.
We are not identifying our communities or
the environment as a distinct stakeholder
group; 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.
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.
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.
Customers
Employees
Fit in our business model and strategy
• Our customers are central to our success. They are at the core of our
purpose, our business model and our strategy. Customers are the
reason why we exist.
Key topics/interests
• COVID-19 related safety
measures
• COVID-19 travel restrictions
• They are fundamental to achieving our strategic priority of
and requirements
strengthening our portfolio of world class brands and offering
unrivalled customer propositions.
• Flexibility measures considering
COVID-19 related situations
• IAG recognises the importance of our most loyal passengers through
our frequent flyer programmes. This ultimately creates long-term value
for both IAG and our customers.
• Customer service
• Digitalisation
• Sustainability
Fit in our business model and strategy
• Across the Group, employees play a vital role in delivering the service
Key topics/interests
• Safety, wellbeing and mental
experience that customers expect, whether on the ground or in the air.
• Our employees bring a diverse range of talent and perspectives that
contribute to the values and culture of our companies.
• Creating an environment where employees feel motivated, safe and
able to thrive and deliver for customers is central to the continued
success of the Group.
• We recognise the critical role that employees will play in the recovery
and transformation of IAG and across the Group we are focusing on
improving employee engagement.
health, including specific
COVID-19 measures
• Diversity and inclusion
• Training and career
development
• Fair reward
• Corporate purpose and impact
on the world
• Sustainability
24
INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021
Strategic Report
Shareholders and
other financial
stakeholders
Fit in our business model and strategy
• They enable IAG to both invest in and grow the Group’s businesses.
• As a capital-intensive business, IAG requires a substantial amount of
capital expenditure to replace existing assets and to enable growth.
The Group is dependent on external funding to meet these capital
expenditure commitments, to be able to replace or grow our fleet at
the rate required to deliver our strategy and business plan.
Key topics/interests
• Government restrictions on
travel demand
• Prospects of demand recovery
and plans to restore capacity
• Cost restructuring
• Cash flows, funding sources
• Provision of efficient external capital allows us to fund our operations
and liquidity
and invest in our asset base in a cost-effective manner, supporting the
delivery of our business plan and the Group’s strategy.
• Their views are critical in supporting the Group to formulate its
strategy, which drives operational and financial performance in order to
generate and optimise returns in a sustainable way.
• The availability of external capital has shaped the Group’s decisions
through the pandemic as liquidity has been a key consideration. The
ability to access external capital on competitive terms has influenced
recovery plans and the financial strength and positioning of the Group
and its operating companies.
• Short-term outlook for capacity
and operating profitability
• Environmental, social and
governance performance,
including climate change
initiatives
• Known capital spending and
debt repayment commitments
Suppliers
Governments
and regulators
Fit in our business model and strategy
• Our suppliers are fundamental to ensuring our companies meet the
high standards that customers and other key stakeholders expect. Any
deviation from our expected standards could impact on the Group’s
operational and financial performance as well as disrupting our
customers, leading to significant reputational damage for the operating
company and the Group.
• It remains the case that the airlines’ operations are dependent on a
number of suppliers to ensure reliable performance and efficiency of
the operation.
• Supply chain integrity remains critical to our business as we rely on our
suppliers to help meet our customers’ needs, ensure the reliability of
our services and support IAG’s sustainability agenda.
• The Group has several internal and external measures in place to
ensure supply chain resilience. We actively monitor potential supplier
risks and/or changes to relevant markets to ensure a continued robust
supply chain.
Key topics/interests
• COVID-19 impact
• Fair engagement with suppliers
• Compliance with regulations
• Responsible and robust supply
chain
• Inflation challenges
• Global supply chain issues
• Sustainability, with a focus on
delivering upon the Group’s
Scope 3 commitments
Fit in our business model and strategy
• Very many aspects of IAG’s business are affected by government
policy and decision making, since the aviation industry is a strategic
industry in the eyes of policy makers. Public policies, regulations and
political decisions condition IAG’s strategy, performance and even our
customers’ experience.
• Essential requirements for safety and security of operations are the
highest priority of IAG’s operating companies but are also subject to
regulatory oversight by national authorities, requiring on going
compliance.
• International air services are still governed by treaties agreed between
states. These include provisions to determine market access and often
regulate frequency and capacity, which is essential to our business.
• These and other aviation policy issues mean that IAG must engage with
policy makers, elected representatives, government bodies and
specialist aviation, economic and competition regulators since the rules
they establish and decisions they take directly affect our operations
and commercial practices.
Key topics/interests
• Safety and security, including
COVID-19 related measures
• Travel and quarantine
restrictions
• Consumer rights
• Sustainability, including climate
change
• Diversity and inclusion
• International relations including
air service agreements
• Infrastructure regulation
including airspace
modernisation and airport
charges
INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021
25
STAKEHOLDER ENGAGEMENT CONTINUED
Customers
As stated before, customers are at the
heart of our purpose, the reason why we
exist. Our customers travel with or connect
through our portfolio of IAG brands, which
are based in the UK, Spain and Ireland, our
home countries and where an important
number of our passengers start their trips.
The different passenger segments include
leisure, VFF (visiting friends and family)
and business passengers (travelling on
their own) and corporate accounts.
Additionally, customers from our Loyalty
programmes are fundamental to us and
key to our success. Last but not least,
some of the world’s best-known brands
trust us to transport their valued cargo,
whatever form this might take.
Another key stakeholder that is connected
to our customers is our employees, either
if they directly interact with our customers
or those indirectly involved, they are key to
support and provide our customers the
best service, as well as being responsible
for resolving any customer complaints or
claims through our customer relations
teams. In addition to this, those employees
with a day-to-day interaction with our
customers represent our Group and their
respective companies’ culture and identity
in front of them. Having an engaged
workforce is key to the Group from a
customer experience point of view.
Suppliers are another stakeholder group
that is relevant to customers, as a timely
and safe procurement of aircraft and
introduction of different products is key to
our customer proposition.
How we engage
• Every day, we send the “Voice of
Customer” survey to our passengers,
designed to collect our customers
feedback on their experience. It helps us
understand key pain points throughout
their journeys and to inform our product
and service strategy decisions.
• We conduct brand surveys to help us
understand the needs and expectations
of different customer types and meet
those specific requirements through our
diverse portfolio of brands.
• We provide different channels for our
customers to raise claims and
complaints, and closely monitor these to
accommodate our customers and take
action where necessary.
• We offer Contact Centre services and
have developed other digital channels
such as Chat bots in our websites or
Whatsapp 24/7 to ensure that
customers can reach out to us whenever
they need to, and we constantly
enhance them so that their experience is
best in class. However, COVID-19 has
hugely increased pressure in our call
centres, especially regarding date
changes and voucher requests. This has
made it very challenging for us to deliver
the “best in class” experience that we
aimed for, and while the experience has
improved throughout the year, it will
continue to be a key focus for 2022.
• We keep our customers informed of the
latest changes in our service, product
enhancements or any other relevant
information through various channels,
including our websites, e-mail and our
very dynamic social media accounts.
• Our customers receive guidance and a
high standard of customer care
throughout their journey from our
distinguished on-board and airport
colleagues.
Impact of the COVID-19 pandemic
Due to the COVID-19 pandemic, the
relationship between our operating
companies and customers has become
stronger than ever. Because of the
increased uncertainty around the ability to
fly to some destinations, as well as the
ever-changing restrictions and
requirements to fly, our customers rely
more than ever on our guidance. As a
result of this, one of our main priorities
throughout the past year has been on
reassuring customers throughout their
whole journey. The airlines have launched
different initiatives for doing that, such as
increasing the level of communication to
customers, from communications prior to
flying (website instructions, emails to
customers) or even announcements made
by pilots in the cabin.
In addition to this, and as we experienced
in 2020, the COVID-19 environment and
travel restrictions have distorted our
performance metrics, in particular NPS. As
was the case in 2020, in 2021 IAG’s NPS
remained significantly above 2019 levels.
While this result represents high levels of
customer satisfaction across all IAG
airlines, this score must be viewed in the
context of the pandemic, as customer
expectations and the flying experience
have remained altered throughout 2021.
26
INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021
During 2021, the flying experience has
continued to be impacted by restrictive
measures imposed by some governments
including lockdowns, quarantines or
testing requirements. These circumstances
entailed volatility in the flying schedule,
changes in documentation requirements,
with resulting increased stress for
customers, and longer queues at the
airports, and finally, the continued
suspension of certain products such as the
delivery of full premium services (full meal
service, hot towel). We had to respond
and adapt our services to this situation,
introducing measures to reassure our
customers and improve our services to the
extent possible. Some examples are
implementation of documentation
verification apps, specific check-in and
arrivals procedures, or initiatives aimed at
further digitalising the journey. The
customer response to these measures in
our surveys, as reflected in the NPS
performance, has been very positive.
For further detail see Our strategic
priorities section.
IAG Cargo continued to align its network
to customer demand, supporting
customers with cargo-led flying, increasing
frequencies on important trade routes and
implementing an active charter
programme. IAG Cargo also moved large
volumes of what are typically seen as
non-airfreight commodities as shippers
favoured shorter delivery times and
volumes shifted from sea to air against a
background of supply chain disruption,
port congestion and low inventories.
Strategic Report • IAG operates a number of employee-led
network groups which provide peer
support and help us understand the
experiences and challenges faced by
colleagues, enabling the Group to take
action to make our business more
inclusive.
• Collective bargaining arrangements are
in place for 89 per cent of our workforce.
In addition, IAG has a European Works
Council (EWC) which 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. Reflecting the changing
geopolitical landscape and the specific
role of the EWC to manage transnational
issues for EEA Member States, the UK
will cease to have representatives within
the EWC, and we will continue to
engage with UK employee
representative groups on matters
relevant to them through existing
national channels. The EWC election and
appointment process for the new Select
Committee and Chair will be completed
in early 2022.
Employees
IAG employs around 55 thousand people
across our portfolio of airlines and platform
businesses. The majority of our staff
directly support customers with cabin
crews and pilots making up 46 per cent of
our workforce, and airport and
maintenance teams representing a further
35 per cent. IAG staff are based
throughout the world, with the highest
concentration in our major hubs in the UK,
Ireland and Spain.
How we engage
• Each company in the Group has its own
communication channels adapted to its
culture and profile. In general terms,
communication with employees is made
using formal and informal channels,
which include performance reviews,
specific consultations, employee forums,
internal social networks, local cascade
meetings, newsletters, workshops,
engagement surveys and confidential
and independent Speak Up channels.
These channels have been critical to
ensure we understand what matters to
colleagues and to ensure they
understand and can access the support
available to them. We have continued to
tailor our approach throughout the year
to reflect the travel and working
restrictions in place.
• Each operating company undertakes
engagement surveys, at least annually,
across its full workforce, and this year, in
addition, IAG undertook an
organisational health survey with
managers across the Group to
benchmark our working practices
against world class companies. These
surveys have helped management teams
to refresh their people strategies and to
adapt processes and policies to best
support colleagues.
Results from the
engagement with our
customers
In response to the feedback received,
and based on the tracking of key
metrics performance, our operating
companies have launched different
initiatives to address our customer
needs. Some examples of it are:
• Different initiatives aimed at further
digitalising the way customers make
and manage their trips. For example,
in relation to document verification,
which was especially challenging for
customers throughout the year due
to ever-changing documentation
requirements. All our airlines either
developed their own solutions to
verify documentation or signed up to
existing ones, including Verifly and
IATA travel pass.
• In addition to digitising the way
customers can manage their trips, we
are also digitising our business.
Leveraging digital solutions is a key
area of advancement and continued
focus for all our airlines. Examples
include transitioning our CRM to
Salesforce, implementing a lounge
food ordering system, launching the
first European fully biometric airport
journey, introducing new providers of
our call centres, and developing
inflight pre-order solutions.
• In 2021, we launched new training
methods coupled with a long-term
training plan for all customer-facing
staff and their management teams.
• Some of our airline brands developed
new culinary proposition across all
cabins as well as introduced new
pre-order solutions for some cabins.
• Some airlines also looked at
improving their Lounges experience
through the creation of new and
exciting partnerships.
• We also finished the roll out of the
new initiatives that were put on hold
due to COVID-19.
INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021
27
STAKEHOLDER ENGAGEMENT CONTINUED
We recognise the critical role that
colleagues will 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
2021, we refreshed our diversity and
inclusion strategy, introducing a new
integrated framework to assess the
sufficiency of our plans and to support
operating companies with setting
priorities. 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 also recognise
the impact of the pandemic in terms of
workforce composition and gender pay,
reflecting both the temporary and
structural changes across the Group.
As we emerge from the pandemic, we are
seeing resourcing demands increase and
recruitment recommencing in a number of
areas. IAG’s unique operating model
provides fantastic opportunities for career
development and progression and we are
building on our strengths in this regard
with a more rigorous and structured
approach to talent management and
succession planning and to ensure we
retain key talent.
Impact of the 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 two years. Throughout the
pandemic, we have had to react to
changing regulations and travel restrictions
and implement changes to policies and
ways of working at breakneck speed, 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.
Our colleagues have experienced the
personal impact of the pandemic in terms
of their roles, through both voluntary and
agreed changes to terms and conditions
and through participation in furlough and
job protection schemes. Further,
colleagues have seen significant change in
the composition and structure of our
workforce, as we have taken the necessary
steps to protect cash and remain
competitive. At all times we have strived
to be open and transparent about these
changes, consult with colleagues and
employee representatives, and to support
colleagues with a focus on physical and
mental wellbeing.
At IAG, we hold ambition, teamwork,
pragmatism, efficiency and responsibility
as key values that enable us to fulfil our
purpose and colleagues have consistently
demonstrated these values in responding
to the various challenges that they have
been faced with across the year.
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 last year we introduced an
organisational health survey to better
understand colleagues’ experiences and
perceptions.
Based on feedback from colleagues we
have taken action to review and update
our parental leave policies, making them
more progressive, inclusive and
supportive. We are also working hard to
ensure that career opportunities in each
of our operating units are more visible
across the Group.
We have invested in the right channels
for communication and information to
improve advocacy and engagement
and ensure information is available on a
range of employee related issues. Whilst
the strength of our brands and career
opportunities at IAG is compelling in the
recruitment market, we have faced
challenges in attracting and retaining
talent for some critical roles given the
uncertainty and perceived risks in
aviation relative to other sectors less
impacted by the pandemic
28
INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021
Strategic Report Shareholders and
other financial stakeholders
As an IBEX 35 and FTSE 100 company,
IAG prides itself on being a multicultural
group that has inherited the legacy of
long-standing listed companies in Ireland,
Spain and the United Kingdom. As a
company listed on two of the largest stock
markets in the world, IAG has investors
from all around the world as well as from
its major markets.
The Group has a wide range of
shareholders. The largest shareholder is
Qatar Airways with a 25.1 per cent holding
acquired between 2015 and 2020. Other
shareholders comprise individual retail
investors, institutional investors and the
Spanish state holding company, Sociedad
Estatal de Participaciones Industriales
(SEPI), which has a 2.5 per cent
shareholding. Apart from Qatar Airways,
most shareholders are located in Europe,
mainly in Spain and the United Kingdom,
and in the United States.
To fund investment and capital
expenditure commitments, in addition to
equity, the Group requires access to debt
capital markets. This has been particularly
relevant during the pandemic and has
resulted in the Group currently having
significant financial leverage. We have
raised debt liabilities in a range of markets
using different structures including, but not
limited to, senior unsecured bonds,
convertible bonds, secured bonds, private
placements, finance leases, mortgage loans
and operating lease arrangements. The
providers of debt capital span commercial
and investment banks, institutional
investors and aircraft lessors. The
providers of capital are geographically
diverse as the Group accesses markets
globally.
How we engage
• We actively and frequently
communicate with shareholders and
other financial stakeholders through an
open and transparent dialogue so they
can understand performance and also
raise any possible concerns.
• IAG usually holds at least six formal
meetings every year (Annual General
Meeting, Capital Markets Day and four
quarterly results briefings), where
shareholders, investors and equity and
credit analysts have the opportunity to
interact with management.
• Management and Investor Relations
attend numerous investor conferences
throughout the year. Investor Relations
organises roadshows around the world
to meet investors with diverse
perspectives and from different
locations. Some of these include both
management and Board members and
have a business focus as well as a
corporate governance and ESG focus.
• The Investor Relations team maintains
an ongoing dialogue with equity, credit
and ESG research analysts to
understand investors’ and shareholders’
views of the Group. The Group Treasury
team has regular interactions with credit
analysts, global banks, debt investors
and credit rating agencies. Finally, the
Group Fleet Investments team and the
Fleet teams of each operating company
have regular interactions with aircraft
operating lessors, who are either
specialist aircraft leasing companies or
the leasing arms of global banks. New
commitments with these lessors are
managed centrally through the Group
Fleet Investments team.
Impact of the COVID-19 pandemic
Throughout the pandemic, the Group has
maintained as frequent contact with
institutional shareholders and investors as
before the pandemic, the main difference
being the use of virtual meetings and
events replacing in-person meetings and
events. The AGM was held virtually for the
second consecutive year. The Group’s
management hosted four quarterly results
calls for analysts and investors during the
year. For a second year, however, the
Group did not host a Capital Markets Day,
given lack of uncertainty of the recovery
from the pandemic and the considerable
management time required to deal with
the operational and financial impacts of
COVID-19. Unfortunately, IAG was unable
to distribute a dividend to shareholders
because of the negative impact of the
pandemic and government travel
restrictions on the Group’s financial
performance.
The pandemic has resulted in an
unprecedented decline in operating
performance and resulted in material cash
outflows. To maintain a suitable level of
liquidity the Group has been forced to
raise external capital and has as a
consequence been reliant on providers of
debt financing to support the liquidity
position. The Group’s relationship banks
have provided capital in a number of
formats to support liquidity.
The deterioration in our credit rating has
seen the Company move out of investment
grade into high yield and thus a different
segment of the capital market. Expected
terms and conditions in the high-yield
market tend to be more punitive than
investment grade owing to the weaker
credit quality of the issuer, however we
have been able to execute several capital
markets transactions through the year on
terms aligned with our investment grade
issuances, for example the senior
unsecured and convertible bonds issued in
2021.
During this difficult period, we have raised
substantial funds from the debt capital
markets. In March 2021, the Group raised
€1.2 billion in a two-tranche senior
unsecured bond issuance. In May 2021, IAG
raised a further €825 million through a
single tranche Convertible Bond issuance.
Both transactions provided additional
financial flexibility for the Group as the
pandemic evolved. As far as our airlines
are concerned, British Airways has been
able to access the capital markets to
support its financial position throughout
the year. The company raised £2.0 billion
through a term loan with commercial bank
partners supported by an 80 per cent
guarantee from the UK Export Finance
Agency. A further £1.0 billion was raised in
October in the form of an undrawn Credit
Facility, again provided by a syndicate of
relationship banks with a 80 per cent UK
Export Finance Agency guarantee. In
March 2021, British Airways, Iberia and
Aer Lingus secured $1,755 million of
committed funding in the form of a
Secured Revolving Credit Facility provided
by the Group’s relationship banks. The
facility enhances the companies‘ liquidity
positions and provides committed funding
that can be drawn and repaid as and when
required.
For further detail see the Financial review
section.
INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021
29
STAKEHOLDER ENGAGEMENT CONTINUED
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.
Investor Relations concluded in
February 2021 an investor survey sent
to the 100 largest institutional
shareholders. The survey, launched in
December 2020, had the objective of
better understanding investors’
approaches towards ESG issues so that
IAG can more closely align its ESG
strategy, plans, reporting frameworks
and disclosures with the interests and
priorities of investors. The findings of
this survey and its conclusions and
recommendations were shared with
IAG’s sustainability team and the
Group’s Sustainability Steering Group
and presented to the Safety,
Environment and Corporate
Responsibility Committee of the Board.
The findings of the ESG survey have
been incorporated in IAG’s disclosure
frameworks, approaches to ESG rating
agencies and ESG communications,
including a planned ESG focused media
and investor event for 2022.
Suppliers
IAG GBS provides a centralised
procurement function for the Group and
manages supplier engagement for 13,272
suppliers. In 2021, IAG GBS Group
Procurement helped deliver over 1,500
initiatives to further optimise IAG’s supply
chain.
Aircraft and engine manufacturers are one
of our key suppliers groups. Our aircraft
suppliers include Airbus, Boeing and
Embraer, and we have engines provided
by CFM, GE, Pratt & Whitney and Rolls
Royce, who also provide IAG with long
term engine maintenance services, as well
as support with spare parts and repairs
used in our own maintenance facilities.
The Group is dependent on the
performance of key suppliers that provide
services to our customers and the
business, including aircraft, engine,
maintenance, airport operations and
catering suppliers. Key suppliers are
defined based on their importance to IAG,
both in terms of economic impact and the
complexity or risk of supply markets and
include any service provider or third party
that could significantly impact business
operations if there is any disruption to the
services or product provided.
How we engage
• The Group engages with suppliers using
customary procurement processes and
through joint projects, including the
Hangar 51 accelerator programme,
independent review partners, industry
conferences and supplier workshops.
• The relationship with aircraft
manufacturers and lessors is managed
centrally by Group Fleet Investments
who work closely with the fleet teams in
the Group companies and with the MRO
(Maintenance, Repair and Overhaul)
Procurement Team in IAG GBS.
• In relation to airframe manufacturers,
IAG has well established relationships
with both Airbus and Boeing, whose
aircraft make up most of the Group fleet,
as well as with Embraer whose regional
aircraft are operated by British Airways
CityFlyer.
• All other suppliers are managed centrally
by IAG GBS Group Procurement in
conjunction with relevant business
stakeholders.
Results from the
engagement with
shareholders and other
financial stakeholders
In conjunction with the Investor
Relations team, IAG’s Chairman, Senior
Independent Director, Chief Executive
Officer and Chief Financial Officer have
engaged on many occasions with
shareholders and equity investors.
The Chief Executive Officer and Chief
Financial Officer hosted two virtual
roadshows following the full year and
half year results in March and
September, respectively, and discussed
with investors a range of strategic,
financial, operational and ESG topics,
in particular the prospects and plans for
a recovery from COVID-19. In addition,
the Chief Executive Officer and Chief
Financial Officer 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 Chairman hosted a virtual
roadshow with key shareholders in April
to discuss a range of ESG matters, in
particular on climate change, diversity
and Board governance issues. In
addition, the Chairman and Senior
Independent Director, who is also Chair
of the Remuneration Committee,
consulted with key shareholders on
remuneration policy in April.
30
INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021
Strategic Report Impact of the COVID-19 pandemic
Faced with the challenges of the COVID-19
pandemic, we have strengthened many
supplier relationships working side by side
with the businesses we operate with to
ensure mutual success. Equally, we have
worked hard to identify those suppliers
who may have been heavily impacted by
the crisis and assisted in developing quick
and effective solutions to ensure support
was given where it was needed. This has
included the timely management of
payments.
In 2021, we have leveraged synergies
within the IAG supply chain, benchmarking
requirements and simplifying the supplier
base wherever appropriate. There has
been extensive collaboration with our
suppliers to switch from fixed to variable
costs enabling flexibility in the difficult
business environment.
The COVID-19 pandemic required IAG GBS
Group Procurement to change focus. The
level and frequency of engagement with
key suppliers increased and plans were
implemented to mitigate the impact of the
crisis until we had further clarity about the
extent of the impact on the Group. We
updated our procurement supplier
engagement plan and worked in close
partnership with our suppliers to defer
spend and reduce costs. Wider measures
were also implemented to temporarily
waive minimum volume commitments
across our contracts and we stopped or
postponed capital investment projects that
were no longer needed during the
pandemic. The Group’s goal is to ensure its
supply chain is secure; for any risks
identified at key suppliers, timely analysis is
performed to understand the situation and
define a potential business continuity plan.
Our relationships with our aircraft
manufacturers were also key to us during
the pandemic. It has been necessary to
reschedule many of our aircraft deliveries
and the Group worked closely with our
aircraft manufacturers to mutually agree
terms for this. The Group Fleet and Group
Procurement teams also worked with
aircraft lessors and engine suppliers to
align our spend more closely with the use
of the fleet during the period where flying
was heavily reduced. As we now plan for
the recovery from the pandemic, it is
equally important that we re-align our
requirements working closely with our
aircraft suppliers and lessors to be
prepared for the recovery and to retain
sufficient flexibility in an uncertain world.
and not unlawfully discriminated
against. We expect our suppliers to
promote and provide work
environments free from abuse,
intimidation and harassment and that
allow people to raise concerns freely
and without fear of retaliation. IAG will
only work with businesses which share
our standards and ways of working.
Performance and metrics
As a minimum, all suppliers undergo
bi-annual screening for any legal, social,
environmental and financial risks. IAG
GBS carries out in-depth supplier audits
as part of the Group’s commitment to
sustainability. These audits are based on
potential geographical and
procurement category risk and
performed by independent inspectors
with corporate social responsibility
(CSR) expertise using the SEDEX
Members Ethical Trade Audit (SMETA)
methodology. The findings from the
audits are discussed with the suppliers
and corrective actions are agreed,
if necessary.
To identify, manage and mitigate
potential bribery and corruption risks,
IAG uses risk-based third-party due
diligence which includes screenings,
external reports, interviews and site
visits depending on the level of risk that
a third-party presents. Any risks
identified during the due diligence
process are analysed and a mitigation
plan put in place as necessary. Certain
risks could result in termination of the
proposed or existing relationship with
the supplier. Business-critical suppliers
are highlighted to the Group companies
in regular risk alerts. The IAG Audit and
Compliance Committee receives an
annual update on the anti-bribery
compliance programme.
In addition to the above, Group
Procurement is working to deliver
our Scope 3 commitment of net zero
(supply chain) emissions by 2050,
and 20 per cent emission reduction
by 2030, in support of the Group’s
sustainability programme.
Results from the
engagement with
our suppliers
In 2021, IAG became the first airline
group worldwide to extend its net zero
commitment to its supply chain. The
Group will continue to liaise with,
support and monitor suppliers to ensure
net zero emissions by 2050 for
products and services provided to
the business.
IAG GBS has partnered with EcoVadis,
a market-leading provider of business
sustainability ratings, to support the
understanding and delivery of
sustainability targets in our supply
chain, including environment, labour
and human rights, and ethics.
In 2021, IAG GBS continued to engage
in initiatives that have led to a further
reduction of onboard single-use
plastics, including a switch from plastic
cutlery sets to a sustainable wood
cutlery pack. This switch delivered a
plastic reduction of 185 tonnes per year
across the Group. All plastic packaging
was also removed from the BA Club
World soft proposition, such as blanket
and pillow wrapping.
IAG GBS Supplier Code of Conduct
The IAG GBS Supplier Code of Conduct
clarifies the standards of behaviour
expected from any supplier working
with any part of our business and
emphasises the importance of
sustainability and fair treatment of
employees. IAG and its suppliers must
ensure that workers are treated fairly
INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021
31
STAKEHOLDER ENGAGEMENT CONTINUED
Governments
and regulators
Government and regulator stakeholders
include a wide range of organisations and
individuals. Our airline operating
companies are subject to regulation by
civil aviation regulators in the countries in
which they are registered (Ireland, Spain
and the UK) requiring very frequent
engagement on practical matters, in
particular safety and security but also
consumer rights and other policy issues.
Our airlines must also conform to
regulatory requirements in all the countries
in which they operate, necessitating
involvement directly with many different
aviation authorities around the world on a
range of topics from administrative
processes necessary to secure operating
licences to slot applications and diplomatic
discussions as well as, in this year, to
comply with COVID-19 restrictions.
The nature of IAG’s business, including its
strategic goal of consolidation in the airline
sector, means that regulatory stakeholders
include competition authorities such as
DG-COMP in the European Union and the
Competition and Markets Authority in the
UK. The wide range of policy subjects
means that government stakeholders
include national ministries responsible for
(among others): transport, trade, finance,
tourism, skills, the environment and
international relations, as well as the
European Commission’s DG-MOVE and
other directorates. IAG also seeks to build
relationships with members of national
parliaments and of the European
Parliament across the political spectrum to
enhance understanding of, and support
for, our policy positions.
In building these relationships and
undertaking engagement we work closely
with our national and international trade
associations in particular the International
Air Transport Association (IATA) and
Airlines For Europe (A4E).
Government engagement is not an isolated
activity. There is a clear relationship with
customer stakeholders since government
and regulatory stakeholders are concerned
with matters such as consumer rights, and
with employee stakeholders since
colleagues are responsible for delivering
customer service and are also affected by
policy decisions relating to the aviation
industry. IAG’s government affairs team
works closely with operating companies to
ensure work in these areas is consistent
and informed.
How we engage
• With all these we seek to arrange one to
one contact but also work through our
various industry associations, including
the Asociación de Líneas Aéreas (ALA)
in Spain, Airlines UK, IATA and A4E. We
aim to take a leading role in each
organisation with representation on the
relevant executive committees and
boards. These associations reflect and
amplify IAG’s positions in our “home”
countries – but also provide additional
resource in key markets further afield.
• We also work to influence the relevant
supra-national organisations such as the
International Civil Aviation Organisation
(ICAO), in particular on COVID-19 or in
support of its sustainability initiative
CORSIA, largely through our home
countries’ national government inputs
and directly where possible.
Impact of the COVID-19 pandemic
The involvement of regulators in aviation
has never been so relevant as during the
COVID-19 pandemic where governments
have sought to control the spread of the
virus through travel restrictions. A range of
measures have been imposed on airlines,
from simple requirements to wear masks
on board to outright prohibition of flights.
As a result, IAG’s usual close engagement
with the national governments, regulators
and parliamentarians in the states in which
its airlines are based has been
exceptionally intense during the two-year
duration of the pandemic.
Government precautions and regulatory
decisions have had direct and immediate
impacts on our operating companies.
Close engagement has therefore been
essential in order to monitor and
understand the actions that governments
have taken, to ensure compliance with new
rules and to allow our operating
companies to make operational changes
and decisions about when and where to
operate. It also allows operating
companies to provide information to
customers and colleagues in a timely and
effective way.
The frequent and sudden changes in policy
and regulations have made this activity
32
INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021
really challenging and essential to allow
the smooth operation of IAG’s airline
companies in 2021. The nature of the
pandemic with constantly changing
regulatory requirements around the world
has meant a greater degree of interaction
than in previous years.
The unprecedented level of engagement
with governments and regulators during
2021 included Corporate Affairs and
operating company staff taking part in
regular national fora such as, in the UK, the
Department of Transport’s Expert Steering
Group established to manage its response
to the pandemic. Iberia representatives in
Spain have engaged with government
stakeholders, in particular with AESA
(Agencia Estatal de Seguridad Aérea) in a
similar way as have Aer Lingus senior
executives with the Departments for
Foreign Affairs, Transport and the
Economy in Ireland. There has been
extensive interaction both direct and
indirectly with authorities in important
markets for IAG’s operating companies
such as India, China, Hong Kong and the
US in support of relaxing COVID-19
restrictions and reopening markets.
To manage the impacts of the pandemic,
especially given multiplicity of changes
and, among other issues, the emerging
need for technological solutions to
verifying travel documentation, IAG
established internal working groups, both
cross department within the operating
companies and across Group companies,
which continued to operate during 2021
and which allowed IAG to manage the
process of implementing rule changes.
These groups drew on the wide range of
experience and expertise across the
Group’s operating companies and allowed
a common position to be adopted in
response to several proposed travel
restrictions, strengthening IAG’s position. It
has also ensured that updates on new
requirements and restrictions, as well as
expertise, can be more rapidly shared
across the Group.
Strategic Report Sustainability, and the EU’s Fit for 55
package in particular as well as the UK’s
Net Zero strategy, have potentially a
very significant impact on the industry
and IAG – it is the key public policy
issue facing the Group. In this area, we
engage with regulators and
governments to ensure the Group’s’
leadership in the sustainability field is
clear and to influence changes to policy
both to support our priorities as a
Group and to support an effective
approach to ensure aviation
decarbonisation is adopted.
International relations
IAG’s Corporate Affairs team engages
with international multilateral and
bilateral discussions with the EU and
third countries and the UK government
in its talks with aviation partners and
joins international fora such as the ICAO
ICAN Conference on behalf of IAG
operating companies. IAG aims to
encourage open and liberal air service
agreements that promote competition
and consumer benefits and to secure
access for our operating companies in
new markets.
Results from the
engagement government
and regulators
Our direct efforts, but also those
undertaken collectively with trade
associations and – unusually, but given
the unprecedented impacts of the
pandemic – on several occasions
together with competitor airlines, have
often been challenging given the speed
of change and the multiplicity of
regulations. Success has often come in
the form of mitigating even more
restrictive measures. Other positive
outcomes have included helping the
European Commission to shape its
official guidance on COVID-19 measures
and the development and integration of
digital travel apps into the border
process in the UK and successes in
influencing the design of UK
documentation, in a staged way,
to benefit consumers. Waivers from
the “use it or lose it” slot rules in
Europe and the UK for the summer and
winter 2021 seasons were also secured
after intensive influencing work by the
sector, in which IAG teams played
a significant role.
Although policy and regulation on
COVID-19 response has dominated the
year, we have continued to engage on
many other issues in our home
countries and in Brussels. These include
airspace modernisation, aviation taxes,
consumer rights, slot policy and airport
charges among others. Decisions by
government and regulators in these
areas have potential to affect our
operations in various ways, so
responding to them can present an
opportunity for our Group.
We also engage on all policy topics
affecting our business in the EU
(Brussels), Spain, Ireland and in the UK,
where our staff have met government
ministers and officials to provide input
on a range of issues including the UK
government’s potential aviation
strategy, Heathrow’s price review by
the Civil Aviation Authority and with
government departments in all the
home countries on the topic of airport
charges. Where appropriate the Group
(or IAG) engages with and seeks to
influence policy developments in key
overseas markets, including the US
in particular.
During 2021 positive outcomes ranged
from policy changes to operational
specifics: IAG took a prominent part in
collective influencing activity that
resulted in a reduced rate of Air
Passenger Duty on domestic flights in
the UK and working individually, directly
secured access for British Airways to
Linate after leaving the EU through
positive engagement with the Italian
authorities. IAG also successfully
supported the European Commission in
its signing of a Comprehensive Air
Transport Agreement with Qatar.
Sustainability
The Corporate Affairs team is delivering
a programme of engagement in the EU
for the IAG Sustainability Team in
response to the EU’s Fit for 55 policy.
This includes identifying appropriate
contacts in the institutions of the EU
and managing engagement.
In 2021, this has included direct
meetings with senior officials in three
different Directorates of the European
Commission; around half of the
permanent representatives
(ambassadors) of Member States to the
EU and many members of the European
Parliament as well as ministers in Spain
and Ireland in a number of departments.
INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021
33
FINANCIAL OVERVIEW
Well-positioned for recovery
£2.0 billion (€2.3 billion) for British
Airways, partly guaranteed by UK Export
Finance (UKEF) and an additional
€75 million from Ireland’s Strategic
Investment Fund. In March, IAG issued two
unsecured bonds, totalling €1.2 billion and
then followed this with a €825 million
convertible bond in May. The Group also
secured additional credit facilities, with a
$1.755 billion (€1.6 billion) revolving credit
facility for British Airways, Iberia and
Aer Lingus, which was agreed and
executed in March, together with a further
£1.0 billion (€1.2 billion) UKEF credit facility
for British Airways in November. The
Group did not need to draw on any of its
general facilities and ended the year with a
very strong cash balance of €7.94 billion.
As a result, total liquidity, including
€4.04 billion of committed and undrawn
general and aircraft facilities, ended the
year at €12.0 billion.
At the time of last year’s full-year results
announcement in February 2021, capital
expenditure for 2021 was expected to be
€1.7 billion, including the delivery of seven
wide-bodied aircraft, with four Airbus
A350s and three Boeing 787s due for
delivery in the year. None of these
wide-bodied aircraft was delivered, due to
delays at Airbus and Boeing. This was the
principal driver of the record-low capital
expenditure of €0.7 billion for the year.
The Group does still expect to take
delivery of the aircraft it has on order,
which are needed to restore capacity as
the recovery takes hold.
Quarter 3 of 2021 proved to be an inflexion
point for net cashflow from operating
activities, which turned positive for the first
time since Quarter 1, 2020. Operating
cashflow increased further in Quarter 4,
linked to positive EBITDA and increased
forward bookings. Net cashflow from
operating activities for the second half was
€989 million positive, resulting in a net
outflow for the year of only €141 million,
versus an outflow of €3,432 million in
2020.
In November, the Omicron variant of
COVID-19 was a further reminder of the
uncertain shape of the recovery and has
validated the actions taken in 2021 to
preserve and further boost liquidity. These
actions leave the Group well-positioned to
benefit from the recovery, as it develops.
Steve Gunning
Chief Financial Officer
Steve Gunning
Chief Financial Officer
“The Group took, and continues to
take, decisive actions to preserve
liquidity.”
A year ago, I wrote that the timing and
shape of recovery was uncertain and
hence the Group remained focused on
preserving liquidity and transforming its
businesses for the future. The events of
2021 demonstrated that uncertainty very
clearly and were a reminder of the need to
continue to preserve liquidity, together
with a focus on exploiting the
opportunities the future will offer.
In 2021, the recovery was slow to take
hold, as many markets were subject to
severe travel restrictions well into the
second quarter and the US did not re-open
its borders to any meaningful degree until
November. Where markets opened up
there was evidence of strong pent-up
demand for travel, both from leisure and
corporate customers. The Group continued
to focus on cash generation when planning
capacity, including addressing the cargo
opportunities that arose due to lower
volumes of passenger aircraft capacity
worldwide than pre-pandemic. IAG Loyalty
saw an increase in volumes versus 2020,
as membership increased and consumer
spending rose.
The operating loss for the year was
€2,765 million, with an operating loss
excluding exceptional items of
€2,970 million, which, whilst still
substantial, was reduced by €1,420 million
versus 2020. The greatest progress was
made in Spain, where travel restrictions
were less severe than in Ireland and the
UK.
In the face of uncertain travel restrictions
and demand, the Group took further
actions to preserve liquidity. These
included a continued focus on operating
and capital expenditure, together with
successfully raising new general debt and
new committed credit facilities,
demonstrating its continued access to
funding markets. The Group successfully
financed all 45 aircraft delivered in 2020
and 2021 using long-term aircraft financing
arrangements.
The Group raised €4.4 billion of additional
non-aircraft related debt in 2021, including
34
INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021
Strategic Report FINANCIAL REVIEW
COVID-19 impact and IAG’s response
The main impact of COVID-19 materialised
as a significant drop in the demand for
passenger flights, linked to both the
pandemic itself and the travel restrictions
introduced, which changed many times
throughout 2020 and 2021, often with no
or very short notice, thereby creating
uncertainty for customers. Capacity
started to recover from the third quarter of
2021, in line with easing of restrictions and
there was a strong increase in bookings for
future travel once the US government
announced it was easing its travel
restrictions, which had operated largely
unchanged from March 2020 to November
2021.
As a result of the significantly reduced
flying programme, in 2020 aircraft had to
be temporarily grounded, with some
retired early. Jet fuel consumption in 2020
and 2021 was significantly lower than that
on which the Group’s hedging programme
was based, leading to the discontinuation
of hedge accounting for the related
derivative financial instruments. In addition,
the commodity price of jet fuel fell sharply,
leading to significant losses related to the
hedging programme, with an exceptional
charge of €1.7 billion net of gains on
related foreign exchange derivatives and a
cash outflow in 2020 of €1.1 billion. In 2021
the remaining overhedged derivatives
were settled, with a gain of €0.2 billion,
reducing the total net loss to €1.5 billion.
From early 2020 and throughout 2021 the
Group acted to mitigate the impact of
COVID-19 on its liquidity and results,
through reductions in operating and
capital expenditure, together with working
capital initiatives and additional funding.
Structure of Financial Review
Due to the continued impact of
COVID-19 and governments’ travel
restrictions, many of the usual variance
analysis and measures are significantly
less meaningful than in previous years
and in some cases, measures used
previously no longer provide relevant
insight into understanding the
performance of the Group. As a
consequence, and in keeping with the
Financial Review of 2020, in this review
there is no detail on industry growth
rates and GDP by market; in 2021 the
main drivers of capacity and revenue
were COVID-19 and the related
governmental travel bans and
restrictions, rather than broader
economic factors. This review,
therefore, is structured to provide detail
about the impact of COVID-19 on the
Group, including the measures the
Group has taken to mitigate the
financial impact of the pandemic.
Where variances exceed 100 per cent
they have been substituted with ‘nm’
for ‘not meaningful’ and the absolute
values are shown.
The Group entered into new credit
facilities, including a $1.755 billion
(€1.6 billion) facility for British Airways,
Iberia and Aer Lingus and a further
£1.0 billion (€1.2 billion) via an additional
UKEF facility for British Airways, agreed in
the final quarter of 2021. Neither of these
facilities was drawn in the year and, as at
February 24, 2022 the Group had fully
committed and undrawn general facilities
of €2.9 billion and €1.1 billion of aircraft
financing facilities, bringing total facilities
to €4.0 billion.
In 2020, the Group successfully completed
a capital increase of €2.7 billion and raised
non-aircraft related debt of €1.4 billion,
together with negotiating a new contract
with Amex, which resulted in a one-off
payment of €830 million, including a
significant pre-payment.
The Group also protected liquidity through
working capital initiatives to defer
payments into 2021 and by offering
customers the choice of vouchers for
future travel, in place of cash refunds. The
net impact of vouchers issued and
redeemed in 2021 was broadly neutral.
Funding initiatives continued in 2021, with
a further €4.4 billion of non-aircraft related
debt raised, including a £2.0 billion
(€2.3 billion) UK Export Finance (UKEF)
backed loan for British Airways and at IAG
unsecured bonds of €1.2 billion and a
convertible bond of €825 million. The
Group also repaid £300 million
(€350 million) of one-year commercial
paper issued under the UK’s CCFF
mechanism.
INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021
35
FINANCIAL REVIEW CONTINUED
Capacity
IAG capacity
In 2021, IAG capacity, measured in available seat kilometres
(ASKs), was lower by 63.9 per cent versus 2019, with the impact
of the COVID-19 pandemic felt across all regions. However, Group
capacity was up 7.7 per cent versus 2020, as global travel
restrictions began to ease as vaccine programmes progressed.
Capacity was increasingly restored during the year, in line with the
easing of travel restrictions, although with some impact of the
Omicron variant of COVID-19 felt in December.
Proportion of 2019 passenger capacity operated by quarter
Aer Lingus
British Airways
Iberia
LEVEL
Vueling
Group
Q1
15.2%
14.8%
37.5%
10.0%
14.7%
19.6%
Q2
10.9%
14.1%
43.5%
4.3%
32.2%
21.9%
Q3
27.1%
31.7%
62.7%
15.5%
76.6%
43.4%
Q4
44.3%
52.7%
75.3%
10.8%
79.4%
58.3%
Across the year, the travel restrictions for Ireland and the UK were
greater than for Spain and consequently Iberia and Vueling were
able to increase capacity earlier than the other Group airlines, with
both reaching over 75 per cent of 2019 capacity in the final
quarter of the year.
In the first three months of 2021, IAG capacity, measured in
available seat kilometres (ASKs), was restricted to 19.6 per cent of
that in the first quarter of 2019, with reductions across all regions.
Capacity was significantly affected by the travel restrictions put in
place, including new national lockdowns in the UK and Ireland in
response to the third wave of infections at the start of the year.
Passenger capacity for quarter 2 was up marginally at 21.9 per
cent of 2019, with capacity increased where limited easing of
travel restrictions allowed. Quarter 3 saw the highest passenger
numbers and load factors since the start of the pandemic, but
capacity was still severely constrained at 43.4 per cent of 2019.
Capacity continued to increase in quarter 4, up to 58.3 per cent of
2019. The emergence of the Omicron variant impacted demand,
mainly in December, as governments introduced stricter travel
requirements and border restrictions in response.
The IAG passenger load factor was down 20.1 points from 2019 to
64.5 per cent, also impacted by travel restrictions, which changed
frequently, together with low demand and a higher than normal
level of passengers not checking in for flights that were still
operating (’no-shows’). The passenger load factor for 2021 was up
marginally on the 63.8 per cent seen in 2020. Some flights were
operated mainly for cargo purposes, with low passenger load
factors, but still cash-positive for the Group. The reduction in
capacity across the industry continues to benefit cargo operations
with favourable cargo yields and record cargo revenues.
IAG regional capacity
ASKs
higher/
(lower)
v2019
Year to
December 31,
2021
ASKs
higher/
(lower)
v2020
Passenger
load factor
Higher/
(lower)
v2019
Higher/
(lower)
v2020
Domestic
Europe
(26.5)% 46.3%
(64.7)% 19.3%
74.9
69.1
(12.3) pts
3.9 pts
(14.5) pts
4.5 pts
North America
(71.3)% (6.8)% 49.4
(34.7) pts (3.8) pts
Latin America
and Caribbean (52.3)% 33.7%
69.8
(16.6) pts (2.9) pts
Africa, Middle
East and
South Asia
(66.8)% (14.0)% 67.4
(15.6) pts
0.2 pts
Asia Pacific
(87.9)% (58.7)% 39.4
(46.4) pts (21.9) pts
Total network
(63.9)% 7.7%
64.5
(20.1) pts
0.7 pts
Domestic and Europe
Together, IAG’s Domestic and European markets continue to
represent the Group’s largest region. However, capacity across
both was, and continues to be, significantly impacted by travel
restrictions and quarantine requirements.
Capacity in IAG’s Domestic markets recovered to a greater extent
than other regions, with capacity lower by only 26.5 per cent
versus 2019 and 46.3 per cent higher than in 2020. British
Airways’ capacity reflected demand from UK holidaymakers
avoiding overseas destinations, which were subject to quarantine
restrictions and expensive testing requirements. Vueling
operations focused on connecting the Spanish peninsula with
both the Canary and Balearic Islands and Iberia maintained similar
Domestic routes for connectivity. Aer Lingus maintained its route
between London and Belfast and benefitted from UK citizens
opting for domestic holidays. Passenger load factor for the region
was the highest for the Group at 74.9 per cent, down only 12.3
points versus 2019.
The Group’s capacity in Europe was 64.7 per cent lower than
2019, however it recovered 19.3 per cent above 2020 as
vaccination rates increased and travel restrictions eased.
Aer Lingus, Vueling and Iberia benefitted from the introduction of
the EU Digital Covid Certificate in the summer, allowing EU
travellers to avoid self-isolation on travelling to other member
states, with passenger load factors in the second half of the year
significantly higher as a result. British Airways had a good
performance throughout the summer on the routes operated to
destinations included on the UK Government’s ‘Travel Corridor’
Green and Amber list countries, once self-isolation requirements
for double-vaccinated passengers were removed.
North America
IAG’s North American capacity was severely limited by the United
States government’s COVID-19 restrictions, which for a large
portion of the year only allowed residents and nationals to enter
the country. These restrictions were only lifted for EU and UK
citizens on November 8, 2021. Prior to the entry requirements
being relaxed, flights were operated primarily for cargo purposes.
British Airways and Aer Lingus operated regular flights to New
York, Boston, Washington and Chicago. Iberia operated flights to
Miami and New York and LEVEL resumed operations to San
Francisco and New York. Passenger load factor for the region was
down 34.7 points versus 2019 to 49.4 per cent, reflecting the US
government’s strict border restrictions.
36
INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021
Strategic Report Latin America and Caribbean (LACAR)
IAG’s capacity in LACAR was still down significantly on 2019, but
increased 33.7 per cent on 2020, as routes re-opened and
benefitted from significant visiting friends and relatives (VFR) and
leisure demand. British Airways operated regular flights to
Caribbean destinations, benefitting from leisure travel demand
during holiday periods. Routes to Sao Paulo and Buenos Aires
only resumed in December. Iberia benefitted from significant VFR
travel during 2021 and load factors reached over 80 per cent from
September onwards. Aer Lingus launched operations from
Manchester in October 2021, with flights to Barbados starting in
October. Passenger load factor for the region was down 16.6
points on 2019 at 69.8 per cent.
Africa, Middle East and South Asia (AMESA)
British Airways operated to multiple destinations including Dubai,
India, South Africa and Pakistan. Capacity and demand were
impacted by the emergence of new COVID-19 variants, including
the Delta variant, which resulted in additional travel restrictions on
certain destinations. Iberia operated regularly to Dakar and
restarted operations to Israel and Morocco when travel
restrictions were eased. Vueling also re-opened routes as
restrictions eased, restarting routes to Morocco and Tunisia whilst
continuing regular operations to Senegal and Algeria. Passenger
load factor for the region was down 15.6 points versus 2019 at
67.4 per cent.
Asia Pacific
The Asia Pacific region was the most capacity-constrained region
in 2021, as strict travel restrictions in the region continued to
severely impact demand. British Airways operated routes to Hong
Kong, Singapore and Tokyo regularly, mainly for cargo purposes.
Iberia operated charter flights to China and Tokyo. Passenger load
factor for the region was the lowest for the Group, down 46.4
points versus 2019 at 39.4 per cent.
Basis of Preparation
Based on the extensive modelling the Group has undertaken in
light of the COVID-19 pandemic, including considering plausible
but severe downside scenarios, the Directors have a reasonable
expectation that the Group has sufficient liquidity for the going
concern assessment period to June 30, 2023 and accordingly the
Directors have adopted the going concern basis in preparing the
consolidated financial statements.
There are a number of significant factors related to the status and
impact of COVID-19 worldwide that are outside of the control of
the Group. These include the emergence of new variants of the
virus and potential resurgence of existing strains of the virus; the
speed at which vaccines are deployed worldwide; the efficacy of
those vaccines; the availability of medicines to combat the impact
of the virus and the restrictions imposed by national governments
in respect of the freedom of movement and travel. Due to the
uncertainty that these factors create, the Directors are not able to
provide certainty that there could not be more severe downside
scenarios than those that have been considered in the modelling,
including the sensitivities the Group has considered in relation to
factors such as the impact on yield, capacity operated, cost
mitigations achieved and the availability of aircraft financing to
offset capital expenditure. In the event that such a scenario were
to occur, the Group may need to secure sufficient additional
funding over and above that which is contractually committed as
at February 24, 2022.
The Group has been successful in raising financing since the
outbreak of COVID-19, having financed all aircraft deliveries in
2020 and 2021 and secured an additional €5.5 billion of non-
aircraft related debt, in addition to a fully subscribed equity raise
of €2.7 billion in 2020. The Group has negotiated and executed
€2.8 billion of committed general facilities during 2021; these
facilities were undrawn as at February 24, 2022 and would be
available over the going concern period. However, the Directors
cannot provide certainty that the Group will be able to secure
additional funding, if required, in the event that a more severe
downside scenario than those they have considered were to
occur and accordingly this represents a material uncertainty that
could cast doubts upon the Group’s ability to continue as a going
concern. Refer to note 2 of the consolidated financial statements
for further information.
Summary
The COVID-19 pandemic continued to have a significant impact
on the Group’s results, although there were meaningful signs of
recovery in the second half of the year, as travel restrictions were
eased and the US lifted its severe restrictions (imposed in March
2020). Passenger capacity and passenger revenue were 7.7 per
cent and 5.9 per cent higher than 2020 respectively, with cargo
revenue 28.1 per cent higher. Passenger capacity rose from 19.6
per cent of 2019 in first quarter of 2021 to 58.3 per cent in the final
quarter of the year. The Group continued to take action to
mitigate the impact of COVID-19 by reducing costs and benefitted
from the full-year impact of restructuring programmes
implemented in the second half of 2020.
The net result was an operating loss for the year of €2,765 million,
versus an operating loss of €7,451 million in 2020. The loss after
tax for the year was €2,933 million, versus a loss of €6,935 million
in 2020.
Loss for the year
Statutory results
€ million
Operating loss
Loss before tax
Loss after tax
2021
20201
(2,765)
(3,507)
(2,933)
(7,451)
(7,827)
(6,935)
Higher/
(lower) vly
4,686
4,320
4,002
1 2020 comparative figures have been restated for the treatment of
administration costs associated with the Group’s defined benefit pension
schemes. See note 2 to the financial statements for further information.
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, the
Group recorded a number of exceptional items arising as a direct
result of COVID-19. During the course of 2021, the Group
continued to record the fair value movements on derivatives
de-designated from hedge accounting in 2020 as exceptional. In
addition, new exceptional items arose in 2021, including the
reversal of the impairment of certain aircraft stood back up in
2021, following the Vueling successful slot allocation at Paris Orly,
together with adjustments to previously recorded restructuring
provisions.
A summary of the exceptional items relating to 2020 and 2021 is
given below, with more detail in the Alternative Performance
Measures section, including a breakdown of the exceptional items
by operating company.
INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021
37
FINANCIAL REVIEW CONTINUED
Summary of exceptional items
Income
statement line
Passenger
revenue
Employee
costs
Fuel, oil and
emissions
costs
Engineering
and other
aircraft costs
Property, IT
and other
costs
Property, IT
and other
costs
Depreciation,
amortisation
and
impairment
Non-
operating
costs
Tax
Exceptional item description
Discontinuation of hedge
accounting for foreign
currency derivatives for
revenue
Restructuring costs
18
(313)
Discontinuation of hedge
accounting for fuel and
associated foreign
exchange derivatives
Inventory write-down and
charge in relation to
contractual lease
provisions
Legal costs associated with
employee restructuring
programmes
Settlement provision in
relation to the theft of
customer data at British
Airways in 2018
Impairment of fleet and
associated assets
Payment to Globalia
related to termination of
Air Europa acquisition
154
(1,694)
7
–
–
(108)
(6)
(22)
21
(856)
(75)
–
Tax on exceptional items
(25)
463
In 2020 all items were associated with the impact of COVID-19,
except the settlement provision in relation to the theft of
customer data at British Airways in 2018.
In 2021 all the exceptional items, apart from the termination
payment to Globalia, relate to adjustments made to the COVID-19
related exceptional charges in 2020, reflecting movements in fuel
prices and foreign exchange rates, changes to fleet plans and
adjustments to provisions. See the Alternative Performance
Measures section for further information.
Excluding the impact of the exceptional items shown above, the
operating loss for 2021 was €2,970 million, €1,420 million lower
than 2020, reflecting the recovery in capacity, particularly in the
second half of 2021, when travel restrictions were eased, notably
for travel to the US from November 8, 2021. The loss after tax and
before exceptional items was €3,038 million, €1,299 million lower
than 2020.
38
INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021
Credit/(charge) to the
Income statement
€ million
2021
5
2020
(62)
Alternative
Performance Measures
(before exceptional items),
€ million
Operating loss
Loss before tax
Loss after tax
Higher/
2021
20201
(lower) vly
(2,970)
(3,637)
(3,038)
(4,390)
(4,766)
(4,337)
1,420
1,129
1,299
1 2020 comparative figures have been restated for the treatment of
administration costs associated with the Group’s defined benefit pension
schemes. See note 2 to the financial statements for further information.
Revenue
Statutory results
€ million
Passenger revenue1
Cargo revenue
Other revenue
Total revenue
2021
5,835
1,673
947
8,455
Higher/
(lower) vly
Higher/
(lower) vly
323
367
(41)
649
5.9%
28.1%
(4.1)%
8.3%
1 Includes an exceptional credit of €5 million (2020: exceptional charge of
€62 million related to discontinued hedge accounting of revenue foreign
currency derivatives). Further information is given in the Alternative
Performance Measures section.
Passenger revenue
Passenger revenue increased by 5.9 per cent on 2020, driven by
an increase in the second half of the year, in which 80 per cent of
passenger revenue was generated, as travel restrictions reduced
and passenger capacity increased. Passenger unit revenue,
measured as passenger revenue before exceptional items per
available seat kilometre (PRASK), was down 2.9 per cent versus
2020 (in which the main impact of COVID-19 was only seen from
March). PRASK rose significantly in the second half of 2021, with
an increase in the passenger load factor. Passenger revenue for
the year was 74.1 per cent lower than in 2019, with PRASK down
28.1 per cent versus 2019.
Cargo revenue
2021 was a record year for cargo revenue, for the second
consecutive year, as additional flights were operated in the
absence of passenger capacity and available aircraft were used
for additional cargo-only flying. During the year 3,788 additional
cargo-driven flights were operated. The overall impact of the
cargo operation, including the additional cargo-driven flights, was
an increase in Cargo revenue of €367 million, or 28.1 per cent
higher versus 2020. Cargo revenue for the year was 49.8 per cent
higher than in 2019.
Other revenue
The largest Other revenue streams for the Group in normal times
are Iberia’s Maintenance, Repair and Overhaul (MRO) and
Handling businesses, together with BA Holidays. Revenue from
these activities was also significantly reduced by the continued
impact of COVID-19. In the case of MRO and Handling, these
revenues were affected by lower demand following reduced flight
schedules and significant fleet reductions across the airline
industry and hence lower maintenance requirements, although
the reductions were less than the reduction in the level of
passenger capacity. The BA Holidays business is closely linked to
the passenger business and was therefore impacted by the
significantly reduced passenger operation, although there was an
increase in the second half of the year as operations increased.
Overall, for the year, Other revenue was down €41 million, or 4.1
per cent, versus 2020 and was 50.7 per cent lower than in 2019.
Strategic Report Operating costs
Due to the continued impact of COVID-19 on the Group’s flying
programme, with significantly reduced revenues versus 2019, the
Group continued to take action to offset the financial impact by
reducing costs, together with measures to increase the variability
and flexibility in its cost base. The Group benefitted from the
full-year impact of restructuring and other cost-saving
programmes implemented during 2020.
Total expenditure on operations fell from €15,257 million in 2020
to €11,220 million in 2021. Excluding the impact of exceptional
items, Total expenditure on operations fell by €838 million, or 6.8
per cent versus 2020, despite a 7.7 per cent rise in passenger
capacity.
Employee costs
Statutory results
€ million
Employee costs1 2
Higher/
(lower) vly
Higher/
(lower) vly
(572)
(16.0)%
2021
3,013
1 Includes an exceptional credit of €18 million related to the release of
restructuring provisions (2020: exceptional charge of €313 million related
to the restructuring programmes in British Airways, Aer Lingus, Iberia
and LEVEL, undertaken to resize the Group as a consequence of
COVID-19.) Further information is given in the Alternative Performance
Measures section.
2 2020 comparative figures have been restated for the treatment of
administration costs associated with the Group’s defined benefit pension
schemes. See note 2 to the consolidated statements for further
information.
Employee costs fell by €572 million versus 2020. In 2020 the
Group recorded a €313 million exceptional charge relating to
Group-wide restructuring programmes, which resulted in
reductions at British Airways of approximately 10,000 employees
(or one quarter of the workforce as at June 2020) and 500 at
Aer Lingus (or approximately 10 per cent of the workforce at June
2020). Excluding the impact of exceptional credits in 2021 and
exceptional charges in 2020, Employee costs reduced
€241 million, or 7.4 per cent, versus 2020, despite the 7.7 per cent
increase in passenger capacity.
National governments continued to provide wage or job support
mechanisms in each of IAG’s main home markets and the
operating companies used these facilities to reduce employee
numbers and costs, although the UK’s support ended in
September 2021. The direct impact of these mechanisms was to
reduce employee costs by approximately €555 million.
Fuel, oil and emissions costs
Statutory results
€ million
Fuel, oil costs and emissions
charges1
Higher/
(lower) vly
Higher/
(lower) vly
2021
1,781
(1,954)
(52.3)%
1 Includes an exceptional credit of €154 million (2020: exceptional charge
of €1,694 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 down €1,954 million, or 52.3
per cent versus 2020; excluding the exceptional net overhedging
credit in 2021 and overhedging charge in 2020, Fuel, oil and
emissions charges were down €106 million, or 5.2 per cent versus
2020 and down €4,086 million or 67.9 per cent on 2019.
Commodity prices
Commodity fuel prices rose steadily over the course of 2021,
having seen a dramatic fall in March 2020 as COVID-19 spread
worldwide and a partial recovery by December 2020. Prices at
the end of 2021 were 60 per cent higher than at the start of the
year.
Jet fuel price trend ($/mt)
800
700
600
500
400
300
200
100
7
1
-
n
a
J
7
1
-
r
p
A
7
1
-
l
u
J
7
1
-
t
c
O
8
1
-
n
a
J
8
1
-
r
p
A
8
1
-
l
u
J
8
1
-
t
c
O
9
1
-
n
a
J
9
1
-
r
p
A
9
1
-
l
u
J
9
1
-
t
c
O
0
2
-
n
a
J
0
2
-
r
p
A
0
2
-
l
u
J
0
2
-
t
c
O
1
2
-
n
a
J
1
2
-
r
p
A
1
2
-
l
u
J
1
2
-
t
c
O
1
2
-
c
e
D
Fuel hedging
The Group seeks to reduce the impact of volatile commodity
prices by hedging prices in advance. In May 2021, the Board
approved a revised fuel hedging policy, which 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 revised policy allows for
differentiation within the Group, to match the nature of each
operating company, and a greater use of call options. The revised
policy operates on a two-year rolling basis, with hedging up to 60
per cent of anticipated requirements in the first twelve months
and up to 30 per cent in the following twelve months and with
flexibility for low-cost airlines within the Group to adopt hedging
up to 75 per cent in the first twelve months. For all Group airlines,
hedging between 25 and 36 months ahead will only be
undertaken in exceptional circumstances.
Exceptional items
In 2020, due to the rapid fall in the commodity fuel price, the
Group experienced losses on its fuel hedging derivatives. These
hedging losses would have normally been offset against the
reduced cost of physical fuel purchased. However, the impact of
COVID-19 led to a significant reduction in the requirement to
purchase jet fuel, due to the significantly reduced flying
programme. As a consequence, the Group had derivative
contracts for which there was no corresponding purchase of jet
fuel, leading to discontinuance of hedge accounting for these
derivatives, with a mark-to-market loss of €1,781 million
recognised as an exceptional charge in the Income statement.
There was also a related mark-to-market gain recognised in the
Income statement related to foreign exchange hedging of
€87 million, bringing the net exceptional charge to €1,694 million
for the year. These values were calculated based on the fuel curve
and foreign exchange rates as at December 31, 2020 and the
anticipated capacity to be operated for 2021 and 2022. During
2021, there was limited further de-designation necessary, as
capacity operated was broadly consistent with the volume of fuel
hedged. However, due to the increase in the commodity fuel
price, the losses on the remaining contracts were lower than
anticipated and the Group recognised an exceptional credit of
€154 million.
INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021
39
FINANCIAL REVIEW CONTINUED
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 full-year impact of
the retirement of 15 Airbus A340-600 and 32 Boeing 747-400
aircraft in quarter 2 of 2020.
Supplier costs
Statutory results
€ million
Handling, catering and other
operating costs
Landing fees and en-route
charges
Engineering and other aircraft
costs1
Property, IT and other costs2
Selling costs
Currency differences
Higher/
(lower) vly
Higher/
(lower) vly
2021
1,308
(32)
(2.4)%
923
5
0.5%
1,085
758
434
(14)
(371)
(24)
29
(95)
(25.5)%
(3.1)%
7.2%
nm
1 Includes an exceptional credit of €7 million (2020: exceptional charge of
€108 million) related to an inventory write-down and a charge relating to
contractual lease provisions, with a related credit in 2021 due to adjusted
fleet plans. Further information is given in the Alternative Performance
Measures section.
2 For 2020 includes a settlement provision in relation to the theft of
customer data at British Airways in 2018 of €22 million and an
exceptional charge of €6 million related to legal costs of the Group-wide
restructuring programme undertaken in the year. Further information is
given in the Alternative Performance Measures section.
Handling, catering and other operating costs were down
€32 million on 2020, or 2.4 per cent, despite the higher volume of
flying in 2021, as the Group continued to focus on reducing its
cost-base and benefitted from the full-year impact of savings
made in 2020 and ground handing contract negotiations in 2021.
Landing fees and en-route charges were up €5 million on 2020, or
0.5 per cent, reflecting the impact of increased flying.
Engineering and other aircraft costs reduced primarily due to the
reduction in fleet since quarter 2, 2020 and the exceptional
charges in 2020. Savings were negotiated for various
maintenance contracts, including a new joint venture in Barcelona.
Excluding the exceptional credit in 2021 and exceptional charge in
2020, Engineering and other aircraft costs were lower than 2020
by €256 million, or 19.0 per cent.
Property, IT and other costs were down €24 million, or 3.1 per
cent, on 2020, which included exceptional charges for a
settlement provision in relation to the theft of customer data at
British Airways in 2018 and for legal costs relating to restructuring
programmes undertaken in 2020. Excluding these exceptional
charges in 2020, Property, IT and other costs were up €4 million
or 0.5 per cent versus 2020.
Selling costs increased by €29 million or 7.2 per cent versus 2020,
reflecting increased booking activity for future travel, particularly
in the second half of the year as travel restrictions eased. Cost
increases were contained by negotiated savings for third party
selling systems and commissions.
Overall, Supplier costs (excluding fuel costs) were €488 million or
9.8 per cent, lower than 2020. Excluding exceptional charges and
credits, Supplier costs (excluding fuel costs) were €4,626 million,
or 50.7 per cent, lower than in 2019.
Ownership costs
Ownership costs include depreciation, amortisation and
impairment of tangible and intangible assets, including right of
use assets.
Statutory results
€ million
Ownership costs1
Higher/
(lower) vly
Higher/
(lower) vly
(1,023)
(34.6)%
2021
1,932
1 Includes an exceptional credit of €21 million related to the partial reversal
of an impairment of fleet assets and other assets in 2020. (2020:
exceptional charge of €856 million related to the impairment of fleet
assets and other assets.) Further information is given in the Alternative
Performance Measures section.
The reduction in ownership costs is mainly driven by the
exceptional impairment charge made as a result of the fleet
reductions brought about as a result of COVID-19 during 2020,
when 82 aircraft were retired early, which led to an impairment
charge of €856 million. For aircraft that were stood down
temporarily as a result of COVID-19, depreciation costs continued
to be charged. During 2021, Vueling was the successful bidder in a
competition for additional take-off and landing slots at Paris Orly
airport, which led to the requirement to return to service four
Airbus A320 aircraft that were previously assumed surplus to
requirements. The return of these four aircraft led to a €14 million
reversal of the exceptional impairment charge recorded in 2020.
There was also a €7 million reversal of an exceptional engine
impairment charge recorded in 2020. Excluding the exceptional
credit in 2021 and exceptional charge in 2020, Ownership costs
were down €146 million, or 7.0 per cent.
Aircraft fleet
In 2021, the in-service fleet reduced by two aircraft, with 11 aircraft
delivered and 13 aircraft removed from service for disposal or
lease return.
Number of fleet
Number of fleet in-service
Shorthaul
Longhaul
2021
363
168
531
2020
367
166
533
Higher/
(lower) vly
(1.1)%
1.2%
(0.4)%
Of the 531 “in-service” fleet at the end of the year, 55 were
temporarily grounded. In addition to the in-service fleet, there
were a further 29 aircraft held by the Group pending disposal or
lease return.
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.
40
INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021
Strategic Report Overall, in 2021 the Group operating loss before exceptional items
was reduced by €98 million due to favourable exchange rate
impacts.
Exchange impact before exceptional items
2021
€ million
Favourable/(adverse)
Translation
impact
Transaction
impact
Total exchange impact on
revenue
Total exchange impact on
operating expenditures
Total exchange impact on
operating loss
220
(163)
(251)
(31)
292
129
2020
€ million
Favourable/(adverse)
Translation
impact
Transaction
impact
Total
exchange
impact
57
41
98
Total
exchange
impact
Total exchange impact on
revenue
Total exchange impact on
operating expenditures
Total exchange impact on
operating profit
84
(31)
53
33
117
(91)
(122)
(58)
(5)
The exchange rates for the Group were as follows:
2021
2020
Higher/
(lower) vly
Translation – Balance
sheet
£ to €
1.18
1.10
7.3%
Translation – Profit & Loss
(weighted average)
£ to €
Transaction (weighted
average)
£ to €
€ to $
£ to $
1.15
1.13
1.8%
1.15
1.20
1.38
1.13
1.13
1.27
1.8%
6.2%
8.7%
Total net non-operating costs
Total net non-operating costs for the year were €742 million,
versus €376 million in 2020. The main driver of the increase was
the net currency retranslation charge of €82 million compared
with a €245 million credit in 2020. Finance costs were up
€160 million (23.9 per cent), related to interest on new debt and
arrangement costs, including the IAG unsecured and convertible
bonds issued in 2021. Non-operating costs also include a
€89 million non-cash credit relating to movements in the fair
value of the €825 million IAG convertible bond issued in the year.
The Group incurred an exceptional non-operating charge of
€75 million in December 2021, relating to a settlement agreement
reached with Globalia to terminate the agreements signed on
November 4, 2019 and January 20, 2021 under which Iberia had
agreed to acquire the issued share capital of Air Europa.
Tax
The tax credit on the loss for the year was €574 million
(2020: €892 million), and the effective tax rate was 16 per cent
(2020: 11 per cent). The substantial majority of the Group’s
activities are taxed where the main operations are based, in the
UK, Spain and Ireland, with corporation tax rates during 2021 of 19
per cent, 25 per cent and 12.5 per cent respectively, which result in
an expected effective tax rate of 20 per cent. The difference
between the actual effective tax rate of 16 per cent and the
expected effective tax rate of 20 per cent is primarily due to
certain current and prior period losses in Iberia and Vueling not
being recognised and the effect of the rate change in the UK.
On March 3, 2021 the UK Chancellor 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 increase in the rate of corporation tax in the UK was
substantially enacted, which led to the remeasurement of
deferred tax balances during the year and will increase the
Group's future current tax charge accordingly.
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.
INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021
41
FINANCIAL REVIEW CONTINUED
Operating profit and loss performance of operating companies
British Airways
£ million
Higher/
(lower)
Higher/
(lower)
(519)
(18)%
207
64
(248)
23%
29%
(6)%
(1,166)
(58)%
(467)
(24)%
(252)
(10)%
(496)
(34)%
2021
307
65
4
376
89
180
305
140
2,133
(55)%
(338)
Post-exceptional
items1
Passenger revenue
Cargo revenue
Other revenue
Total revenue
Fuel, oil costs and
emissions charges
Employee costs
Supplier costs
Ownership costs2
Operating loss
Operating margin
2021
2,321
1,097
281
3,699
830
1,471
2,188
979
(1,769)
(47.8)%
Alternative Performance Measures3
51.1 pts
(90.0)%
30.4 pts
2,316
1,097
281
(578)
(20)%
207
64
23%
29%
3,694
(307)
(8)%
939
1,482
2,188
985
(220)
(235)
(210)
(91)
(19)%
(14)%
(9)%
(8)%
308
65
4
377
99
180
305
140
Passenger revenue
Cargo revenue
Other revenue
Total revenue
before exceptional
items
Fuel, oil costs and
emissions charges
Employee costs
Supplier costs
Ownership costs2
Operating loss
before exceptional
items
Operating margin
before exceptional
items
Aer Lingus
€ million
Higher/
(lower)
Higher/
(lower)
(72)
(23)
4
(19)%
(26)%
nm
2021
1,724
394
666
Iberia
€ million
Higher/
(lower)
Higher/
(lower)
564
154
49%
64%
(193)
(22)%
2021
1,011
–
5
Vueling
€ million
Higher/
(lower)
Higher/
(lower)
442
78%
–
–
–
–
(91)
(20)%
2,784
525
23%
1,016
442
77%
(197)
(69)%
(37)
(65)
(17)
225
(17)%
(18)%
(11)%
(40)%
(74)
(23)
4
(19)%
(26)%
nm
519
723
1,412
350
(220)
(7.9)%
1,724
394
666
(197)
(75)
(132)
(27)%
(9)%
(9)%
(262)
(43)%
1,191
(84)%
54.6 pts
198
200
624
227
(233)
(23.0)%
(116)
(37)%
4
30
2%
5%
(118)
(34)%
(73)%
642
nm
564
154
49%
64%
(193)
(22)%
1,011
–
5
442
78%
–
–
–
–
(93)
(20)%
2,784
525
23%
1,016
442
77%
(43)
(13)
(58)
7
(30)%
(7)%
(16)%
5%
528
728
1,412
350
156
(56)
(80)
(20)
42%
(7)%
(5)%
(5)%
207
200
631
240
47
4
67
30%
2%
12%
(37)
(13)%
(1,900)
449
(19)%
(347)
14
(4)%
(234)
525
(69)%
(262)
361
(58)%
(51.4)%
7.3 pts
(92.1)%
(15.3) pts
(8.4)%
25.2 pts
(25.8)%
82.7 pts
1 2020 comparative figures have been restated for the treatment of administration costs associated with the Group's defined benefit pension schemes.
See note 2 to the financial statements for further information.
2 Ownership costs reflects Depreciation, amortisation and impairment.
3 Further detail is provided in the Alternative performance measures section
42
INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021
Strategic Report Review by operating company
The results for all operating companies continued to be impacted
by COVID-19 in 2021, with the divergence in the relative operating
results of each of the airlines reflecting the travel restrictions
imposed in their markets. Aer Lingus operated the lowest
passenger capacity relative to 2019, with ASKs at 24.4 per cent of
2019, British Airways operated at 28.3 per cent, Vueling at 53.0
per cent and Iberia at 55.4 per cent.
Operating (loss)/profit before exceptional items
British Airways (£ million)1
Aer Lingus (€ million)
Iberia (€ million)
Vueling (€ million)
2021
2020
(1,900)
(2,349)
(347)
(234)
(262)
(361)
(759)
(623)
2019
1,890
276
497
240
1 2020 and 2019 comparative figures have been restated for the treatment
of administration costs associated with the Group's defined benefit
pension schemes. See note 2 to the financial statements for further
information.
Employee costs fell versus 2020, due to the use of wage support
or similar schemes in all the operating companies’ home countries,
in which the substantial portion of employees are based. Support
applied across the year in Ireland and Spain, although reduced as
the year progressed in Spain, with the operation increasing. In the
UK the furlough arrangements ended in September of 2021.
Restructuring programmes were implemented in 2020, including
at British Airways and Aer Lingus, with Iberia also making
reductions in management numbers and reductions outside of
Spain. The full-year impact of these 2020 restructuring
programmes was seen in 2021, as most of the affected employees
had left by the end of 2020.
The operating companies all operate similar hedging programmes,
under a Group policy, which resulted in overhedging of jet fuel
purchases and related currency transactions in 2020. Excluding
the impact of overhedging, fuel costs fell in line with the capacity
reductions, with an additional benefit from the efficiency of
new-generation aircraft versus the aircraft they replace, together
with a reduced effective price net of hedging.
Supplier costs continued to benefit from initiatives in all the
operating companies to reduce expenditure in light of the impact
of the pandemic, including the full-year impact of actions taken
during 2020.
Ownership costs were impacted by the reduction in the Group’s
fleet of aircraft in 2020, leading to the impairment of aircraft and
related assets in each operating company, with 2021 seeing a
full-year benefit of the reduced fleet in depreciation costs.
Operating margins are much less meaningful than in previous
years, given the significant impact of COVID-19, but are included
for completeness; the margins reflect the size of operation each
operating company was able to fulfil in 2021.
Capital expenditure
In November 2019, at its Capital Markets Day, the Group
announced its anticipated capital expenditure for the period
2020-2022 was €14.2 billion. In response to COVID-19, in 2020 the
Group agreed to defer 68 aircraft scheduled for delivery over the
period 2020-2022 and to re-schedule certain pre-delivery
payments to aircraft manufacturers. The result of these changes
was a significant reduction in expected capital expenditure over
the period 2020-2022, with capital expenditure over that period
expected to be below €7 billion. In February 2021 the Group
expected capital expenditure in 2021 to be €1.7 billion.
During 2021, four Airbus A350 aircraft and three Boeing 787
aircraft were not delivered as anticipated and are now expected
in 2022. As a response to the continued impact of COVID-19 and
related travel restrictions, the Group continued to take actions to
preserve liquidity by reducing certain project-related expenditure,
whilst continuing to invest in key projects, including cyber-related
investments. As a result, capital expenditure for 2021 reduced to
€0.7 billion.
The Group did not enter into any new agreements to acquire
additional aircraft in 2021, either from aircraft manufacturers or
lessors.
In 2021 the Group took delivery of 11 aircraft, with six for British
Airways, one for Iberia and four for Aer Lingus. Of these deliveries,
five were aircraft acquired directly from manufacturers and six
were leased from aircraft lessors. The liquidity impact of the
aircraft deliveries in the year was cash-positive, as the value of
financing raised exceeded the final delivery payments made to
the aircraft manufacturers, due to pre-delivery payments for
those aircraft made in previous years.
Aircraft deliveries
Airbus A320 family
Airbus A330
Airbus A350
Boeing 777-300
Boeing 787-10
Embraer E190
Total
2021
2020
8
1
–
–
–
2
11
15
2
7
4
2
4
34
Capital commitments
Capital expenditure authorised and contracted for at December
31, 2021 amounted to €10,911 million (2020: €10,545 million). Most
of this commitment is denominated in US dollars and includes
commitments until 2027 for 110 aircraft including 56 aircraft from
the Airbus A320 family, 10 Boeing 787s, 18 Boeing 777s and 26
Airbus A350s.
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, 2021.
Aircraft future deliveries at December 31
2021
2020
Airbus A320 family
Airbus A330
Airbus A350
Boeing 777-9
Boeing 787-10
Embraer E190
Total
56
–
26
18
10
–
110
64
1
26
18
10
2
121
Working capital and other initiatives
In 2020, as a response to COVID-19, the Group negotiated
deferrals to supplier payments and lease payments, rolled over
fuel derivatives, monetised EU Emissions Trading Scheme credits
and foreign currency derivatives. These initiatives reduced cash
INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021
43
FINANCIAL REVIEW CONTINUED
outflow in 2020 by approximately €625 million, with deferrals to
future years accounting for approximately €375 million, with the
majority due in 2021. In quarter 3 of 2020 a multi-year renewal
was signed with American Express, including an upfront payment
of approximately €830 million (£754 million), with a significant
amount being for the pre-purchase of Avios for future years.
Despite the partial unwinding of these initiatives in 2021, the
working capital cash inflow for 2021 was €473 million higher than
in 2020 at €1,634 million, principally driven by a significant
increase in bookings for future travel in the second half of the
year and an increase in trade payables as the flying programme
increased.
Deferred revenue on ticket sales, which includes loyalty points
(Avios), rose €1,422 million to €6,552 million at December 31, 2021;
€6,161 million is included in current liabilities and €391 million
within non-current liabilities, associated with the renewal of the
IAG Loyalty contract with American Express. The value of loyalty
points (Avios) issued and yet to be recognised in revenue was up
€95 million versus 2020 at €2,820 million, reflecting the net
impact of a partial unwind of the American Express pre-payment
in 2020 and the balance of Avios issued versus redeemed in 2021.
Sales in advance of carriage, related to passenger ticket sales,
were up €1,327 million versus 2020 at €3,732 million. At constant
currency, Sales in advance of carriage were at the same level as
December 2019. The cash impact of cancelled flights continued to
be partially mitigated by customers accepting vouchers for future
travel in lieu of a cash refund, with the outstanding value of
vouchers as at December 31, 2021 at approximately the same level
as December 2020 and representing one third of Sales in advance
of carriage.
Trade receivables rose by €178 million, related to the significantly
increased bookings for future travel versus those taken in the final
months of 2020.
Trade and other payables rose by €902 million, related mainly to
the significantly increased flying schedule and related costs in the
final quarter of 2021, in which the Group operated 58.3 per cent of
2019 passenger capacity, versus only 26.6 per cent operated in
quarter 4 of 2020.
British Airways deferred monthly UK pension deficit contributions
that would otherwise have been due in quarter 4, 2020 to the
value of €125 million, together with contributions of €390 million
relating to the first three quarters of 2021, with the resultant
amounts deferred due for payment in the 12 months ending March
2024. British Airways granted security over certain property
assets to the Trustee of NAPS in respect of these deferred
payments. British Airways has also agreed that it will not make
dividend payments to IAG before the end of 2023 and that from
2024 dividends will be matched by a contribution to NAPS of 50
per cent of the dividend paid until the deferred contributions have
been paid. In October 2021, the funding level of NAPS for the
purposes of an overfunding protection mechanism, agreed in
2019, meant that British Airways made no contributions from
October to December 2021. Should the funding level fall,
contributions will resume at an accelerated rate to recover the
contributions not made during the period the overfunding trigger
applied. The triennial valuation of the scheme, based on
conditions as at March 31, 2021, is expected to be completed in
2022 and will measure the latest funding position of the scheme,
which may lead to a new schedule of deficit contributions.
Funding and debt
IAG’s long-term objectives when managing capital are to
safeguard the Group’s ability to continue as a going concern, to
maintain an optimal capital structure 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; these ratings
remained unchanged up until the outbreak of COVID-19. The
Group’s current ratings (as at February 24, 2022) are: S&P: BB
(3-notch decline), Moody’s: Ba2 (2-notch decline), based on the
impact of COVID-19 on the Group and the airline industry,
together with the expected timing of the recovery of global air
traffic.
Debt and capital
The Group monitors leverage using net debt to EBITDA, in
addition to closely following measures used by the credit ratings
agencies, including those based on gross debt.
See Alternative Performance
Measures section for calculation
44
INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021
Strategic Report The Group had previously set a target of net debt to EBITDA
below 1.8 times.
In 2021, due to the significant impact of COVID-19, EBITDA was
negative, rendering the net debt to EBITDA ratio not meaningful;
the calculation for 2021 results in net debt to EBITDA of minus 11.5
times.
Net debt
€ million
Debt
Cash and cash
equivalents and
interest-bearing
deposits
Net debt at January 1
(Increase)/decrease
in cash net of
exchange
Net cash outflow
from repayments of
borrowings and lease
liabilities
Net cash inflow from
new borrowings
Non-cash impact
from new leases
Increase in net debt
from financing
Exchange and other
non-cash movements
Net debt at
December 31
2021
15,679
2020
14,254
Higher /
(lower)
1,425
(5,917)
9,762
(6,683)
7,571
(766)
2,191
(2,026)
766
(2,792)
(2,265)
(2,514)
249
4,817
3,567
1,250
518
1,179
3,070
2,232
(661)
838
861
(807)
1,668
11,667
9,762
1,905
Gross debt increased by €3,931 million, principally driven by
non-aircraft debt raised by: British Airways (£2.0 billion),
Aer Lingus (€75 million) and by IAG €1.2 billion of unsecured
bonds and an €825 million IAG convertible bond. British Airways
repaid £300 million of debt raised under the UK’s CCFF
mechanism in 2020. 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 2021 the
euro weakened against the US dollar and the pound sterling and
as a consequence €820 million of the increase gross debt was
due to adverse foreign exchange translation. Cash increased by
€2,026 million, leading to net debt €1,905 million higher at
€11,667 million.
Cash
Cash and interest-bearing deposits
The cash balances at December 31, 2021 in IAG and other Group
companies include the impact of additional non-aircraft related
debt raised in the year and the translation of British Airways’ and
IAG Loyalty’s cash balances, which are mainly held in pound
sterling. The pound sterling ended the year 6.9 per cent stronger
against the euro than at the start of 2021.
€ million
British Airways
Iberia
Vueling
Aer Lingus
IAG and other Group
companies
Cash and deposits
2021
1,986
761
441
228
2020
1,389
822
590
266
4,527
7,943
2,850
5,917
Higher/
(lower)
597
(61)
(149)
(38)
1,677
2,026
Debt
The Group has been able to continue to obtain efficient funding
secured against aircraft deliveries. Of the 11 aircraft delivered in
2021, four for British Airways were financed using asset financing
lease arrangements, including three financed through a new
sustainability-linked Enhanced Equipment Trust Certificate
(EETC) financing agreed in July 2021. As at December 31, 2021 the
remaining undrawn balance of this facility was $635 million. One
Iberia aircraft delivered in 2021 and two delivered in late 2020
were financed through sale and leaseback transactions. An
additional six aircraft were introduced through leasing
arrangements direct from lessors. The Group also raised
additional financing against aircraft delivered in previous years
and spare engines
In 2021, the Group drew non-aircraft debt facilities agreed in
2020, namely a £2.0 billion Export Development Guarantee (EDG)
term loan for British Airways from UK Export Finance and
€75 million for Aer Lingus from the Ireland Strategic Investment
Fund. IAG closed a dual-tranche senior unsecured bond issuance
in March, raising €1.2 billion, with €500 million maturing in 2025
and €700 million maturing in 2029. In May, IAG raised
€825 million by issuing a convertible bond, maturing in 2028.
The debt actions above resulted in total ‘Proceeds from
borrowings’ for the year of €4,817 million. Repayments of
borrowings during the year included the repayment of British
Airways’ commercial paper issuance from the UK’s Coronavirus
Corporate Finance Facility (CCFF), which raised £300 million
(€329 million) in March 2020.
INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021
45
FINANCIAL REVIEW CONTINUED
Equity
No equity was raised during the year. In quarter 4, 2020, the
Group successfully completed a capital increase, with gross
proceeds of €2.7 billion.
Liquidity facilities
During the year, the Group signed a committed secured Revolving
Credit Facility (RCF) with a syndicate of banks for $1.755 billion,
available 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 take-off and landing rights at both London
Heathrow and London Gatwick airports. No drawings against this
facility were made in 2021 and the facility remained undrawn at
February 24, 2022. Simultaneous with entering into this new RCF,
British Airways cancelled its US dollar revolving credit facility that
was due to expire in June 2021 and which had $786 million
undrawn and available at December 31, 2020.
On November 1, 2021, the Group agreed and executed a
£1.0 billion committed credit facility for British Airways, partially
guaranteed by UK Export Finance, which was not drawn in 2021
and remained undrawn at February 24, 2022.
The Group also has certain other committed and undrawn general
facilities, bringing total committed and undrawn general facilities
at December 31, 2021 to €2,917 million.
The Group also holds €1,126 million of committed and undrawn
aircraft financing facilities, including the $635 million remaining
undrawn from British Airways’ 2021 sustainability-linked EETC
financing and backstop financing arrangements, which can be
used against certain future aircraft deliveries.
In total, the Group had €4,043 million of committed and undrawn
general and aircraft facilities as at December 31, 2021.
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 in 2021; in 2020 a proposal to pay a
final dividend in respect of 2019, announced with the 2019
financial results in February of 2020, was withdrawn in April 2020.
Liquidity and cashflow
Total liquidity, measured as cash and interest-bearing deposits of
€7,943 million and committed and undrawn general and aircraft
facilities of €4,043 million, was €11,986 million at December 31,
2021. This represented an increase of €1,730 million versus pro
forma liquidity of €10,256 million at the end of 2020, which
included a £2.0 billion UK EF facility agreed in December 2020
and drawn as debt in March 2021.
Cash flow
€ million
Operating loss
Depreciation, amortisation and
impairment
Movement in working capital
Payment related to restructuring
Pension contributions net of
service costs
Provisions and other non-cash
movements
(Realised)/unrealised net loss on
discontinuance of fuel and foreign
exchange hedge accounting
Interest paid
Interest received
Tax received
Net cash outflows from operating
activities
Acquisition of PPE and intangible
assets
Sale of PPE, intangible assets and
investments
Decrease in current interest-
bearing deposits
Other investing movements
Net cash flows from investing
activities
Proceeds from borrowings
Repayments of borrowings
2021
20201,2 Movement
(2,765)
(7,451)
4,686
1,932
1,634
(161)
2,955
1,161
(383)
(15)
(288)
(1,023)
473
222
273
305
486
(181)
(497)
(640)
3
63
569
(548)
22
45
(1,066)
(92)
(19)
18
(141)
(3,432)
3,291
(744)
(1,939)
1,195
544
1,133
(589)
91
2,366
(2,275)
(72)
2
(74)
(181)
4,817
(784)
1,562
3,567
(978)
(1,743)
1,250
194
55
53
Repayment of lease liabilities
(1,481)
(1,536)
Dividend paid
Proceeds from rights issue
Settlement of derivative financial
instruments
Acquisition of Treasury shares and
other financing movements
Net cash flows from financing
activities
Net increase in cash and cash
equivalents
Net foreign exchange differences
Cash and cash equivalents at
January 1
Cash and cash equivalents at year
end
Interest-bearing deposits maturing
after more than three months
Cash, cash equivalents and
interest-bearing deposits
(53)
–
–
2,674
(2,674)
(268)
136
(404)
(49)
–
(49)
2,235
3,810
(1,575)
1,913
205
1,940
(228)
5,774
4,062
7,892
5,774
(27)
433
1,712
2,118
51
143
(92)
7,943
5,917
2,026
46
INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021
1 2020 comparative figures have been restated for the treatment of
administration costs associated with the Group’s defined benefit pension
schemes. See note 2 to the financial statements for further information
2 The 2020 results include a reclassification to conform with the current
period of presentation regarding settlement of derivative financial
instruments. See note 2 to the financial statements for further
information.
Strategic Report Many of the significant cashflow items are already explained
above, including in the sections on operating costs, non-operating
costs, capital expenditure, working capital and other initiatives
and funding.
Sale of property, plant and equipment and intangibles, in addition
to the aircraft sale and leaseback transactions discussed under
‘Funding’ above, includes the disposal of aircraft financed on sale
and leaseback transactions, spare engines and other disposals.
Restructuring payments principally include payments in Spain
relating to redundancy programmes agreed prior to 2020.
Pension payments in 2020 included nine months of contributions
to the main British Airways pension fund, NAPS. Deferrals of
deficit contributions were agreed with the NAPS Trustee from
October 2020 to September 2021 and from October 2021 to
December 2021 no deficit contributions were required, as the
scheme had reached pre-agreed trigger levels for an overfunding
protection mechanism to apply; this mechanism was agreed in
2019. Deficit contributions could resume should the funding level
fall, or if the ongoing triennial valuation of the scheme, based on
the funding position at March 31, 2021 and updated assumptions,
determines there is a deficit.
See note 32 to the financial statements ‘Employee benefit
obligations’ for further information
Of the exceptional charges for discontinuance of hedge
accounting in respect of passenger revenue of €62 million and
fuel, oil and emissions costs of €1,694 million in 2020,
€1,187 million had been paid, leaving €569 million to be paid in
future years, with the majority due in 2021. As the fuel price rose
in 2021 the required payments were lower than when measured at
the end of 2020.
Other investing movements includes the €75 million payment to
Globalia, due to the settlement agreement to terminate the
agreements under which Iberia had agreed to acquire the issued
share capital of Air Europa.
Repayments of borrowings and lease liabilities includes the
principal element of ongoing lease payments. Based on the share
price at December 31, 2021, the remaining €500 million IAG
convertible bond issued in 2015 will be due for repayment in
November 2022.
The €53 million of cash outflow for dividends in 2020 relates to
the Spanish withholding tax in respect of the 2019 interim
dividend. No dividends were declared in respect of either 2020 or
2021.
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 outflow in 2021 is partly due to gains that would otherwise
have been received in 2021 being accelerated into 2020, as part
of the initiatives to preserve liquidity after the spread of COVID-19
in 2020.
INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021
47
We’re building a brighter
future for British Airways
In July 2021, British
Airways introduced a new
digital ordering platform
for customers to choose
food and drink from its
Speedbird Café to be
delivered to their seat in
the British Airways
lounges
Our people
I am incredibly grateful to everyone at
British Airways for their hard work and
commitment during this period, not only
for their resilience in the most difficult of
times, but for pulling together to go the
extra mile for our customers and to
develop creative solutions to the problems
generated by the pandemic. It was a
difficult and an uncertain year for everyone
in the company and we were absolutely
delighted to welcome back our colleagues
when the Covid Job Retention Scheme
(CRJS) came to an end in September. As
we emerge from the crisis, and look
forward to more meaningful travel and
fewer restrictions, we have started to
recruit again, to help us rebuild our
business as we seek to grow.
I also want to thank the 1,500 colleagues
who gave up their time while on furlough
to volunteer and support organisations
across the UK, including COVID-19
vaccination and test centres, foodbanks
and charities such as the British Red Cross
and St John’s Ambulance.
Our customers
In many ways the pandemic has helped us
to drive radical changes in our customer
experience. These include working with
The airline
is recruiting
thousands of
new colleagues
to support its
summer schedule
Sean Doyle
Chairman and Chief Executive Officer of
British Airways
“We’re working hard to
offer our customers even
more of the choice, value
and unique British
Airways service we know
they love.”
Business overview
The COVID-19 pandemic has remained
the most challenging period of our
102-year history, prohibiting meaningful
travel for almost two years. The
dedication and resilience shown by our
colleagues across the airline has helped
us to get through this crisis, introducing
new safety measures, constantly
reviewing our schedules to respond to
the frequent changes in restrictions and
working dynamically to increase flights to
countries when restrictions eased. We
continued to offer flexibility to our
customers with the guarantee that if their
plans were affected by the pandemic,
they could move their flight to an
alternative date and/or destination or
accept a voucher for future travel.
Despite the financial impact the
pandemic has had on our business we
have continued to invest, in new aircraft,
cabins and food and drink to delight our
customers. We have also put
sustainability at the heart of everything
we do and invested heavily in our new
sustainability programme, BA Better
World.
48
INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021
Strategic Report -51.4%
Operating margin
+7.3 pts vs 2020
-71.7%
ASK change
vs 2019
276
Fleet in service
-1 vs 2020
other customers, and introducing a
dedicated section of ba.com to provide
information about travel restrictions,
discounted testing partners as well as a
new interactive map to help them check
the entry requirements for the destination
they’re travelling to.
In the face of constantly changing travel
restrictions, alongside lockdowns affecting
our global engagement centres, we know
that some of our customers had difficulty
in contacting us via phone and faced
lengthy waits in queues. This is not the
level of service they should expect, and as
we rebuild our business, we are investing
in new technology to address this and
improve the experience we offer our
customers.
VeriFLY to allow health documents to be
digitally, rather than manually, checked at
the airport enabling passengers to check in
online and reducing queue times,
introducing an app for customers to order
food and drink to their table in our lounges,
allowing them to socially distance from
Offering a premium proposition for our
customers is at the heart of our strategy
and we want every customer journey to be
enjoyable and more seamless. Our IT
teams are working on a new baggage
tracing system which will allow customers
to track their bags. In our lounges we have
In September
2021, British
Airways
launched its new
BA Better World
sustainability
programme
British Airways
announced that
all of its Boeing
777 fleet would
feature its new
Club Suite from
the end of 2022
listened to our customers feedback and
have maintained the mobile table
ordering service to ensure a premium
experience. By the end of the year, 34
aircraft were fitted with our new Club
Suite business cabin seat and WiFi
installed on more than 80 per cent of our
fleet. All our Heathrow-based Boeing 777
aircraft will feature our Club Suite by the
end of this year. During the pandemic we
also formed a new partnership with
highly acclaimed chef Tom Kerridge, with
a new menu for our Euro Traveller
customers travelling on shorthaul flights.
Our planet
In September 2021 we launched our new
sustainability programme BA Better
World, acknowledging that this is ‘our
most important journey yet’ and putting
sustainability at our heart. We are
working hard to reduce our emissions
and waste and positively contribute to
the communities we serve to create a
great place for our people to work and
build a resilient, responsible business.
During the year we invested in ZeroAvia
to further develop hydrogen-powered
aircraft, as well as in the development of
Sustainable Aviation Fuel (SAF), with a
new deal with LanzaJet in the US as well
as investment in four UK-based projects,
which also received funding from the
Government during the past year. We are
committed to achieving net zero carbon
emissions by 2050, and worked with bp
to provide enough sustainable aviation
fuel for our flights between London and
Glasgow and Edinburgh during COP26,
as well as for our first transatlantic flight
to New York once restrictions were lifted
on November 8, 2021; operating an
Airbus A350 aircraft using a 35 per cent
blend of SAF reduced emissions by more
than 50 per cent compared to the
now-retired Boeing 747 aircraft that used
to operate that route. We’ve also
championed the use of sustainability
financing, with three credit facilities
linked to sustainability targets.
Looking forward
During the most challenging period in our
history I have been hugely impressed by
the resilience and professionalism of our
colleagues, who are determined to help
us rebuild into an even better airline than
before. We are creating a new subsidiary
at Gatwick to offer more choice to our
customers as well as reviewing our
policies and procedures to ensure we
empower colleagues to do the right thing
for those who fly with us. And we’re
working on new initiatives to make British
Airways an even more attractive place to
work — something we know will drive
even better customer service.
INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021
49
Flexibility and drive
to gain momentum
implementation of the emergency furlough
scheme approved by the Spanish
Government allowed us to protect more
than 15,000 jobs from our workforce.
During the summer we also collaborated
with the Spanish vaccination programme,
by setting up a centre where more than
25,000 people received their jabs,
including our employees and members of
the community in Madrid.
Our customers
At Iberia, as with all IAG’s airlines, our
customers are and will always be at the
centre of our business. To ensure their
utmost comfort, we updated our safety,
prevention and hygiene measures, to
ensure we could recommence travel with
confidence. These measures earned us a
four-star Skytrax rating and ranked us
among the ten safest airlines in terms of
protecting against COVID-19 in the world,
according to the Safe Travel Barometer.
COVID-19 accelerated the digitalisation of
our business, which was already underway
prior to the pandemic. Our goal is to
improve the customer experience through
innovation, and we have been working on
a range of new solutions, such as the Iberia
chatbot on WhatsApp, and digitising the
documentation required to fly.
Three Airbus A330
aircraft will pass
from Iberia to the
Ministry of Defence
to be transformed
into Multi-Role
Tanker Transport
(MRTT). Iberia has
trained the army
pilots who will
operate these
aircraft and has
provided handling
equipment to assist
them
Javier Sánchez-Prieto
Chairman and Chief Executive
Officer of Iberia
“2021 has once again
tested our ability to adapt
to a very challenging
environment.”
Business overview
We have seized opportunities to add
more capacity than our competitors
while strengthening our position on
routes to Latin America. We are now
operating almost 100 per cent of our
pre-pandemic network although our
capacity is still below 2019
Our handling and maintenance divisions
have done a great job and both
businesses have generated positive
results in 2021.
It was very disappointing in December
that we had to terminate an agreement
reached previously with Globalia to
acquire Air Europa. However, we have
committed to analyse alternative
arrangements.
Our people
I am incredibly proud of the commitment
our employees have shown during the
last year, which has helped us weather
this pandemic and stimulate demand in
all the markets in which we operate. Our
people have gone above and beyond to
help where needed, helping repatriate
thousands of people and transporting
more than six million vaccines to the
Spanish islands and across Latin America.
Our priority during this crisis has been
looking after our employees. The
50
INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021
Iberia’s maintenance team
has provided preservation
services to more than 150
IAG aircraft and third-
party customers in
Madrid, Palma, Malaga
and Seville
Strategic Report -8.4%
Operating margin
+25.2 pts vs. 2020
-44.6%
ASK change
vs 2019
87
Fleet in service
-2 vs 2020
Our planet
In November, Iberia and Repsol operated
the first flight in Spain using sustainable
aviation fuel made from waste which
reduced emissions by 1.4 tonnes of CO2
emissions than a flight operated with fossil
fuel. We flew one of the most efficient
aircraft in the world, the Airbus A320neo,
which reduces noise by 50 per cent and
produces 50 per cent less NOx.
Iberia also completed the construction, at
its maintenance facilities, of the largest
self-consumption solar panel plant of the
IBEX companies. Built in partnership with
specialist firm Getting Greener, the new
facility is part of an ambitious plan to
generate a total 10MW of power over the
next three years, with production of more
than 13 million kWh, generating the
equivalent power consumed by more than
4,000 homes.
Looking forward
We expect Iberia's recovery to be
consolidated in 2022. We will focus on
returning the airline to profitability while
continue working to make significant
progress on the decarbonisation of
aviation. Our teams will take every
opportunity to strengthen Iberia´s position
in all the markets we operate, offering its
customers a more personalised service
using innovation.
Repsol and Iberia have
completed the Madrid
−Bilbao route with
sustainable fuel
produced from waste
at the Petronor refinery.
The flight was operated
with the Airbus
A320neo, one of the
airline's most efficient
aircraft
Contributing to the recovery
Iberia Express has once again
demonstrated its flexibility and
efficiency.
Iberia Express has set ambitious
targets to reduce its environmental
footprint. In March 2021 the fourth
Airbus A321neo aircraft was added
to its fleet. This is the most efficient
short- and medium-haul Airbus
model and represented a further
step in its fleet renewal as part of its
roadmap towards zero net emissions
by 2050.
Together with Iberia and IAG Cargo,
Iberia Express contributed to the
transport of vaccines to the Canary
Islands and the Balearic Islands
throughout the year. Additionally, it
carried humanitarian aid to support
the crisis caused by the eruption of
the volcano on La Palma, an example
of the company's commitment to the
islands.
Throughout the COVID-19 pandemic,
Iberia Express has always
guaranteed connectivity with the
Canary Islands. Last summer the
number of seats offered to the
Canary Islands and Balearic Islands
was higher than in the same period
of 2019. In summer 2021, the airline
launched the new seasonal route to
Kefalonia, landing for the first time
on the Ionian island in July and
expanding its network of more than
30 domestic and international
destinations.
Iberia Express ranked among the
most punctual airlines in Europe
Iberia’s Express team is the airline’s
greatest asset. Despite the complex
environment, they did their best to
provide excellent customer service,
achieving the best NPS in the
company's history.
Iberia and
Getting Greener
begin operating
the largest
self-
consumption
plant of the Ibex
in La Muñoza
INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021
51
Transforming
to emerge stronger
initiatives aim to unlock the full potential of
our airline by generating more value for
our shareholders, our employees, our
customers and ultimately society.
For example, we transformed our
maintenance model by launching a new
joint venture company that manages
Vueling Line Maintenance; we changed the
structure of our fare families and
introduced new ancillaries such as
Guaranteed Hand Bag, giving more
flexibility to our customers to choose the
services they exactly need; and we
redefined our Mission Vision and Values to
lead our people through this period of
uncertainty.
Our people
I’m incredibly thankful to all our people at
Vueling: the impressive resilience and
commitment that they demonstrated all
through the year has been the driving
force behind our achievements at a time
where many were required to make
personal sacrifices.
In its 17 years of history, Vueling has faced
several challenges and, has always been
able to emerge stronger afterwards. Once
again, this crisis demonstrated what
Vueling people are capable of and that the
ability to rise to a challenge is in our DNA.
Vueling has received the
prestigious Skytrax award
and has been designated
as the Best European
low-cost carrier
As a result of the
creation of a new
joint venture
company that
manages Vueling
Line Maintenance,
a new warehouse
has been built
Marco Sansavini
Chairman and Chief Executive Officer
of Vueling
“While withstanding an
unprecedented situation
due to the pandemic,
Vueling is undertaking an
ambitious transformation
plan to emerge stronger.”
Business overview.
For the second year in a row, around
4,000 Vueling employees faced the most
unprecedented crisis in our industry’s
history.
In terms of managing the crisis, we
focused on four key priorities.
First, our main objective has been to
protect the health and well-being of our
employees and customers. Second, we
enhanced flexibility to enable us to
constantly adapt our capacity to match
demand, identifying any new
opportunities to fly, which generated
cash. Third, we had to rigorously adapt
our costs as much as possible to meet
the level of flight activity. Finally, we had
a constant focus on cash, working capital
and financing.
However, while managing the crisis, we
also began preparing to emerge even
more efficient and competitive in a
post-pandemic environment by
implementing the 19 initiatives included in
our Plan ‘Vueling Transform’. These
52
INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021
Strategic Report -25.8%
Operating margin
+82.7 pts vs 2020
-47.0%
ASK change
vs 2019
117
Fleet in service
+4 vs. 2020
Our customers
We are honoured that thanks to all the
efforts made by Vueling´s people we were
rewarded by our customers with the
prestigious Skytrax award as Europe´s
best low-cost carrier. This is a reflection of
the continuous hard work made to help
our customers throughout difficult
circumstances, for instance being the first
European low-cost airline to implement the
IATA travel pass and offering digital
solutions to simplify the customer
experience.
This was combined with another
unprecedented achievement in 2021:
Cirium named Vueling as The Most
On-time European Airline in 2021.
For us, achieving these awards in a year
that required so many sacrifices and
efforts is a clear testimony of the
exceptional level of commitment and
dedication of all our people at Vueling.
Since 2013, Vueling has
been the leading
commercial airline in
Spain in the transport
of organs for
transplantation
Vueling has
recently signed
an agreement
with Repsol on
Sustainable
Aviation Fuel
procurement
and we
operated our
first green flight
on a Barcelona-
Seville route
Another key milestone in our progress to
offer a stronger customer proposition has
been to expand our offering in Orly: the
European Commission assessed Vueling’s
proposal as the best for the 18 Air France
slots that became available at Paris-Orly
Airport, following a competitive process.
As a result of obtaining these slots,
Vueling becomes the second-largest
operator —after the Air France Group—
which allows us to offer our customers 32
new destinations from Paris-Orly airport.
Similarly, our efforts to strengthen our
Spanish domestic network have been
well received by our local customers. Last
summer, we operated a level of capacity
up to 114 per cent of 2019 levels and
opened 42 new routes both in domestic
and international markets.
Still, in a year of so many achievements,
we believe it has not been always easy to
adjust our level of capacity as rapidly as
demand was changing, and we have in
time improved our agility to be able to
react even more quickly that we did at
the beginning of the crisis.
Our planet
Sustainability forms a key part of Vueling
Transform, reflecting all the actions we
are undertaking to reach our net zero
commitment and, to achieve 10 per cent
usage of Sustainable Aviation Fuels
(SAF) by 2030. In this respect we
recently signed an agreement with
Repsol for the supply of SAF and we
operated our first green flight on a
Barcelona-Sevilla route on November 10,
2021.
In terms of diversity, Vueling continues to
increase the ratio of women in
management positions with the
percentage of women in leadership roles
now 38 per cent.
Furthermore, we are proud to be the
leading airline in the transport of human
organs for transplantation in Spain.
Looking forward
In conclusion, while recognising that 2021
continued to be an extremely challenging
year, we are confident that we are closer
to recovery, and are well placed to
successfully adapt to market conditions
as they evolve. Vueling Transform is
preparing us for the future and
achievements such as the Skytrax award,
and the attainment of slots at Paris-Orly,
reinforce our confidence that, with the
commitment of our Vueling employees,
we will be able to emerge from the crisis
stronger.
INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021
53
Navigating the crisis,
readying for recovery
Aer Lingus has signed a
deal with Daon to extend
the use of the VeriFLY
app, following the
successful rollout of the
technology across its
network
Following constructive discussions with
our pilot and cabin crew communities we
have agreed structural changes covering
both pay scales and working practices.
These will make us more cost competitive
and support future investment and growth.
2021 also saw a significant milestone with
the creation and launch of our new
subsidiary airline. This allows us to pursue
longhaul market opportunities out of the
UK and we commenced our first
transatlantic services from Manchester in
October.
The focus on liquidity continued
throughout the year and a series of debt
facilities were made available through the
Ireland Strategic Investment Fund (ISIF)
and IAG. Consequently, we finished the
year in a firm liquidity position.
Our people
The low number of flights operated in 2021
belies the effort, teamwork and creativity
of our Aer Lingus colleagues. It was a year
of re-planning, re-booking, re-training, and
returning aircraft to service, compounded
by COVID-related supply chain issues and
staff absences. Despite these challenges,
the commitment to strong punctuality and
high levels of customer service prevailed.
Many office-based colleagues have not
returned to the workplace since March
2020. Whilst our people have adapted to
Team Ireland
athletes onboard
the Aer Lingus
flight ahead of
their Paralympic
homecoming
Lynne Embleton
Chairman and Chief Executive Officer of
Aer Lingus
“In a rollercoaster year we
have laid the foundations
to emerge stronger from
the pandemic.”
Business overview
During the COVID-19 pandemic, Ireland
had the most stringent travel restrictions
within Europe. The non-essential travel
ban in Ireland was in place until well into
the summer season. The inbound travel
bans to the US — which covered the
entirety of the Aer Lingus longhaul
network — remained in place for over ten
months of the year.
The impact has been profound:
international travel to and from Ireland
was less than 25 per cent of 2019 levels in
2021.
However, Ireland is an island nation. Irish
people love to travel. And Ireland’s
geographic position is a natural location
for a successful North Atlantic hub.
Therefore, whilst navigating the crisis, we
have been readying ourselves for the
recovery.
Our schedule for summer 2022 triples our
capacity compared to summer 2021 and
reaches 90 per cent of 2019 levels by the
summer peak. We are reintroducing
capacity during the first quarter of 2022
to be operationally ready for this summer
peak.
54
INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021
Strategic Report -92.1%
Operating margin
-15.3 pts vs 2020
-75.6%
ASK change
vs 2019
47
Fleet in service
-3 vs. 2020
working from home, this hasn’t been
without challenge. We look forward to
re-establishing face-to-face engagement
and embracing flexible working following
the Government’s announcement in
January 2022 that workers can return to
the workplace on a phased basis.
Throughout the crisis we sought to retain
the employment of as many of our people
as possible. That required significant salary
reductions across the organisation. Payroll
savings were reached by agreement with
our workforce in 2020 and 2021 and the
Irish government Employee Wage Subsidy
Scheme (EWSS) provided important
support.
Departure of the
airline’s first ever
non-stop direct flight
from Manchester to
Barbados
Our customers
The social and economic benefits of air
travel are compelling. We have
consistently challenged the government
to insist any COVID restrictions are
evidence-based, proportionate and in
place for the minimum amount of time.
When restrictions have been lifted the
customer response has been positive. In
order to support consumer confidence,
we have introduced market-leading
flexible booking policies. Additionally,
investment in digital solutions provide
customers clarity of travel requirements,
confidence in being ready-to-fly and a
smoother experience through the airport.
We further developed our digital
capability in areas such as disruption
management, baggage, ancillary
revenues and readiness to participate in
the Atlantic Joint Business.
Following the sudden collapse of Stobart
Air – the franchise operator of Aer Lingus
Regional – Aer Lingus stepped in to
provide rescue flights and open new
routes in order to minimise customer
impact. We have successfully developed
a new franchise partnership with Emerald
Airlines and Aer Lingus regional service
operations will restart from March 17,
2022.
Our planet
We continue resolute in our commitment
to sustainability. In 2021 we took delivery
of three fuel-efficient Airbus A321 LR
aircraft to operate across the Atlantic
and support the sustainable development
of our Dublin hub. We are working with
IAG and the other operating companies
to develop a comprehensive
sustainability programme.
Looking forward
Our customer research tells us that Irish
people are very keen to get back flying.
The Aer Lingus team have laid the
foundations for recovery, we have an
ambitious schedule planned and a
competitive product. Our vision is to be
at the heart of travel to, through and
beyond Ireland for generations to come.
We look forward to more and more
customers experiencing the warm
welcome for which Aer Lingus is
renowned.
Aer Lingus
extends ‘Book
with Confidence’
policy to offer
additional
flexibility to
customers
INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021
55
Unlocking every
possible opportunity
IAG Cargo's people went
above and beyond to find
solutions to the global
capacity crunch
In the second half of the year we saw
momentum build. Capacity started to
return, and the business began to take
increasingly confident steps towards a
more stable future as the economic
recovery from the COVID-19 pandemic
gained ground. IAG Cargo also saw
conversions from sea freight as shippers
turned to air cargo to minimise the impact
of supply chain disruption. We are still
endeavouring to utilise available fleet and
crew to align our network to cargo
customer demand, with cargo-only flying.
Our people
We would not have achieved the results
we did without the determination and
creativity of our people, who faced the
challenges of the pandemic head on. Our
people have shown significant flexibility as
they have adapted to the changing
demands of the industry and business
environment.
We are grateful for the key role our
frontline operational colleagues have
played, ensuring we were always
delivering. During the year, we launched
our Operational Leadership programme to
further strengthen the resilience and
management capabilities of our business.
IAG Cargo and Iberia
celebrate the second
anniversary of the
multi-million-euro
pharmaceutical centre
in Madrid, as it takes
centre stage in the
COVID-19 vaccine
roll out
David Podolsky
Chief Strategy Officer and Chief
Executive Officer of IAG Cargo
“Our people have worked
tirelessly to adapt our
business to the
opportunities presented
by a strong cargo market,
unlocking every possible
opportunity for the Group
and achieving record
revenues.”
Business overview
In 2021 the role of air cargo remained
very much in the spotlight. Our people
went above and beyond to find solutions
to the global capacity crunch and
airfreight restrictions and, in turn, we
were able to keep world trade moving,
delivering essential supplies and the vital
components of everyday life. Our ‘always
moving’ mantra enabled us to deliver for
our customers as passenger flying
continued to be disrupted.
We reshaped our business to take
advantage of the strong cargo market
and actively repurposed Group capacity
when appropriate. The business delivered
record revenues of €1,673 million, up 28
per cent from 2020, with a sustained
resurgence in the volume of flights and
yields exceeding 2020 levels.
56
INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021
Strategic Report Our customers
Despite ongoing restrictions affecting
passenger movements, we were able to
provide cargo capacity where our
customers most needed it, with cargo-led
flying and co-sponsored activity with our
passenger counterparts. We aligned our
network to customer demand, increasing
frequencies on important trade routes.
We invested in improving the functionality
of our online offering and expanded our
partnerships with third-party platform
providers. Both actions supported online
channel shift and digital bookings whilst
providing more flexibility to our customers.
Strengthening our collaboration with our
largest customers we launched our Global
Partnership Programme, embarking on
more strategic joint endeavours and
aligning our sustainability ambitions.
Supporting customers, we also enhanced
our Customer Relationship Management
(CRM) capabilities to provide more
effective communications to help them
build their businesses with us.
Charters remained popular. In 2021 we
operated 745 charters, opening new
stations in Haiti, USA and Canada to
service bespoke requests including
keeping an automobile production line on
schedule, keeping supermarket shelves
stocked, supplying global communities
with PPE and delivering ballot papers for
elections. We also created further capacity
for our charter customers by removing the
seats from the cabins of three Airbus A330
LEVEL aircraft.
IAG Cargo announces
it will grow its
workforce with more
than 500 new roles, in
its biggest recruitment
drive to date
Our planet
In 2021 our cold chain service, Constant
Climate was responsible for shipping
millions of doses of lifesaving COVID-19
vaccines to almost every corner of the
world. IAG Cargo started a partnership
with UNICEF, committing its support to
the organisation’s COVAX programme,
the global effort aimed at providing
equitable access to COVID-19 vaccines.
In addition, IAG Cargo also funded
several relief flights. Joining forces with
British Airways, IAG Cargo’s teams
worked around the clock to transport
emergency aid to Delhi to support the
Indian government as the country battled
rising COVID-19 cases with dwindling
oxygen supplies. Working with the UK
Government and UNICEF Spain, IAG
Cargo helped support the recovery
efforts in Haiti, flying 25 tonnes of aid to
help the recovery efforts following the
earthquake that struck the country in
August 2021.
We are constantly looking at ways to
reduce our impact on the environment
whilst improving our customer offering
and to that end, we were delighted to
complete our first Sustainable Aviation
Fuel (SAF) charter chain of 16 flights
from Stuttgart to Atlanta. Working with
our partner Kuehne+Nagel, IAG Cargo
sourced 1.2 million litres of sustainable
aviation fuel. The collaboration marked
the first time ever that passenger-
freighter charter flights were operated
with net zero carbon emissions.
Looking forward
In 2022 as passenger traffic numbers
recover, our flexibility to optimise
towards customer demand and provide
bespoke solutions will become more
constrained. We will work with our Group
airlines to allocate capacity with the aim
of maximising return from Group assets.
The team at IAG Cargo is excited to enter
2022, starting a new and ambitious phase
of activity.
In December 2021 we reached Practical
Completion on our new Premium facility
at London Heathrow, which will allow us
to not only begin to increase capacity in
2022 also but add new product
capability. Next year, we will also be
investing in our pricing systems,
distribution and the continued
development of our people.
IAG Cargo partners
with Kuehne+Nagel to
complete its first
charter chain from
Stuttgart to Atlanta in
the United States using
Neste MY Sustainable
Aviation Fuel (SAF)
INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021
57
Positioned for growth
We have moved to a
hybrid model of working,
including new space for
our team to collaborate in
We have new long-term agreements with
IAG airlines and secured a doubling of our
guaranteed reward seats in the process.
Our role of providing the Group airlines
with a pioneering centre of excellence for
loyalty continues to develop at pace.
In 2021, customers collected over 54 billion
Avios. Avios collected from flying was
down 80 per cent versus 2019, though
collection from everyday spend with our
partners was less impacted by the
pandemic, being down by 27 per cent
versus 2019. Of our 2021 issuance, 77 per
cent came through customers collecting
with non-air partners.
Our people
As a non-airline operating company,
we often require different expertise
and skillsets. To meet this need we have
created an Employer Value Proposition
and Employer Brand to amplify our
strengths and differentiators. We’re
delivering a compelling people plan and
a broad range of initiatives spanning all
aspects of the people agenda, ensuring
we have the right capabilities, culture
and opportunities in place for colleagues
to thrive.
Our people have embraced significant
change during the year with hybrid
working, moving to a new office in central
London and the implementation of agile
ways of working to enable the business to
For the first time
ever, British
Airways Executive
customers can
convert their
Avios and
Nectar balances
both ways
Adam Daniels
Chairman and Chief Executive Officer of
IAG Loyalty
"Our Loyalty business has
continued to demonstrate
resilience. We have now
established the required
foundations for our long-
term success and to
deliver a step change in
the role of loyalty for our
customers and the IAG
airlines."
Business overview
Throughout the pandemic IAG Loyalty
has demonstrated the resilience of our
model and the value of being able to
maintain engagement with our
customers. We remained profitable and
cash generative throughout the
pandemic.
2021 has been a year of modernising our
infrastructure to enable us to accelerate
our business plan. We continued to invest
in our customer propositions and
technology development to ensure our
loyalty asset was ready for the lifting of
global travel restrictions.
We have enhanced our ways of working
and made new appointments in the
management team that are enabling us
to deliver more initiatives at speed.
58
INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021
Strategic Report deliver value that’s highly aligned to our
customer needs and is outcome driven.
This has empowered our people to be
curious and innovative in our approach to
delivery and I’d like to thank them for their
energy and commitment through this
transition.
Our customers
In the UK, our British Airways cobrand
credit card was relaunched, implementing
a number of changes agreed during our
renegotiation with American Express in
2020. We have added enhanced
availability in business cabins for Premium
Plus card members. This builds on the
already industry-leading Companion
Voucher card benefit and is proving
popular with customers.
It has been a challenging year, particularly
in the UK, managing the level of customer
calls for redemption flight bookings during
the changing travel restrictions globally.
We have a high focus on improving the
speed of answer and first call resolution.
Whilst the volumes are a positive sign of
demand and engagement with Avios, we
are aware this has been a frustration for a
number of customers
Our Aer Lingus AerClub customers are
now able to settle their purchases, e.g.
commercial tickets, seats and extra
baggage, in full with Avios. This is live
across Aer Lingus booking channels and
proving exceptionally popular with
customers as an enhancement from the
previous part-payment options.
The Checkout the
World campaign
projected onto Marble
Arch, London, launched
in partnership with
British Airways and
American Express
In Spain, Santander, a key partner for our
Iberia Plus members, continues to grow
across credit card and banking products.
We also launched a cobrand card
between CaxiaBank and Vueling to give
additional Avios collecting opportunities
for customers.
Our innovation
2021 has seen the migration of British
Airways and Iberia to our Global Loyalty
Platform, holding over 38 million
customer records and many billions of
Avios. The scale, complexity and
challenge of this migration led to a delay
in being able to reactivate some of the
entry points for our customers to access
their account for several days. Despite
this challenge the migration was
successful and this concludes the
initiative to bring Group airline
programmes onto a single, more capable
and agile platform.
We created new innovative proprietary
products, for example, the platform that
enables customers earning Nectar points
to exchange for Avios. We have seen
strong engagement from customers to
link their accounts and exchange.
We have recently announced a new
agreement with Qatar Airways that will
see Avios adopted as the currency of the
Privilege Club, Qatar Airways’ loyalty
programme. This is a new and innovative
way to globalise our currency. The new
relationship will increase customer
acquisition and value, through an
enhanced earning and redemption
proposition.
Looking forward
Our business is in growth mode and
ready to realise the full potential of
loyalty for our customers and the Group.
Focus and development in our
technology and data capabilities will
continue to enable deep digital expertise
and delivery of best-in-class products.
We will be expanding the reach of the
Avios currency globally by developing
new ventures, delivery of new
partnerships and earning opportunities
for customers.
Our Vueling
Club members
are now able to
earn Avios from
their everyday
spend on the
new cobrand
card with
CaxiaBank
INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021
59
Strengthening Barcelona’s
longhaul connectivity
one of the most challenging years in
aviation history, our commitment to the
reactivation of the sector has strengthened
our position in Barcelona.
Our people
Destination equality. In 2021 we
consolidated the team in Barcelona and
solidified our way of doing things:
disruptive thinking and a start-up culture
to reinvent both processes and work
dynamics. At LEVEL, diversity and
inclusion run in our DNA, with 41 per cent
of the senior roles held by women. During
the month of March, we led an important
campaign for gender equality: we focused
our efforts to create an equalitarian
company, being the first airline in adopting
inclusive language in all our Spanish
communications and empowering women
to fly their way by creating a digital
community to connect female travellers.
Our customers
Unfortunately, during 2021 we were still
forced to readjust our operations, which
left many customers without their flight of
choice. The high volume of requests meant
it was not always possible to maintain the
expected standard of quality. For that
reason, we strengthened digital
distribution and opted for 360°
communication channels that allowed us
to be where we were needed: close to our
customers. Since then, more than 30 per
cent of enquiries were made through our
digital channels such as social networks,
live chat, or chatbot. In 2021, we went a
step further in the customisation of travel
with LEVEL thanks to new web
developments, which have allowed us to
offer an easy and tailor-made experience.
We have guaranteed very competitive
departure prices and complementary
products designed to meet the
preferences of every customer. We
launched flights to Punta Cana and Cancun
to offer attractive alternatives to
destinations opened to tourism.
Our planet
Optimise processes to reduce their
environmental impact. We have worked to
put technology at the centre, to improve
efficiency and reduce waste. To that end,
we designed a pre-order portal that has
allowed us to adjust the amount of food
we load to the specific demand on each
flight. With this project, only what is going
to be consumed is loaded on the plane,
reducing leftovers and minimising waste.
Looking forward
We will continue to strengthen Barcelona
as a hub between United States and
Europe, reviewing every process and
rethinking each aspect so that every trip
on board LEVEL is the personalised, warm,
and digital experience that the new
generations demand.
Fernando Candela
Chief Executive Officer of LEVEL
“LEVEL has moved
decisively towards the full
reactivation of longhaul
flights from Barcelona. It
has adapted to the
pandemic, seeking
alternatives that have
allowed it to maintain its
operations and fulfil its
raison d’être: to connect
the world and people.”
Business overview
At LEVEL we have played a crucial role in
maintaining Barcelona’s connectivity,
adapting our operations to the varying
restrictions, offering our clients an
alternative choice of destinations.
Reactivation commenced as soon the
restrictions were lifted in our
consolidated routes, peaking during
the summer months when we attained 24
per cent of the seats flown to the United
States out of Barcelona. Our commitment
to air cargo allowed us to maintain
operations in the most difficult months of
the year. True to the model, we combined
the most competitive fares with a boost
in the sale of ancillary products. In
addition, and thanks to the sale of
connections with Vueling, we expanded
the reach of our services. During the third
quarter of the year, 16 per cent of sales
were connecting flights. Despite facing
60
INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021
Strategic Report Delivering through times
of challenge and change
Learning Academy: a place to share
and store knowledge and expertise,
evaluate and enhance competencies,
and create a pipeline for future skills
and career growth.
Fundamentally, we have empowered
our teams to think differently, find
better solutions and this gives us all
even more reasons to be proud of our
work and our people.
Our planet
We led the initiative, and IAG’s
subsequent commitment, to be the first
airline group in the world to set the
target of achieving Scope 3 (supply
chain) net zero emissions by 2050. This
follows the industry-first Scope 1 and 2
targets that IAG set in 2019. Scope 3
emissions are those produced by our
suppliers and partners and represent
around 23 per cent of our total
emissions. We have set an interim
measure of a 20 per cent reduction in
Scope 3 emissions by 2030 and are
confident in our ability to achieve this
challenging target.
Looking forward
IAG GBS will continue to focus on
driving transformation across the Group
by creating and delivering innovative
centralised solutions through our four
core transformation pillars, all
underpinned by our people.
to improve efficiencies in our financial
processes leading to better performance
and analytics.
We utilised our unique position as the hub
of working capital activity for the Group,
providing valuable insight and a constant
overview.
2021 has been the year we defined and
started to deliver on our four core
transformation pillars:
• Driving further synergies by leveraging
the existing platform and onboarding
additional services, including managing
the critical Right to Fly services for
British Airways and Iberia
• Continuing the in-depth restructure of
the Group's cost base to optimise unit
costs; to partner with suppliers who
share our values and ways of working;
and to manage supplier performance
• Delivering automation and analytics,
while using our insights from around the
Group to optimise the mix of onshore,
nearshore and offshore work
• Proactively monitoring any potential
supplier risks to mitigate emerging
issues, and leading on our supplier
sustainability commitments
We continue to seek additional
opportunities to leverage our established
platform and deliver further synergies for
the Group.
Our people
With a diverse global organisation, we
are focused on continuing to create a
high-performing team, attracting,
engaging, developing and retaining
industry experts with initiatives in place
to support them on their journey. This
includes establishing our own Internal
INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021
61
Zoe Davis
Director of IAG GBS
“IAG GBS delivered
support and significant
savings during 2021,
pivoting and adapting to
the challenges we faced
and helping the Group to
come out of the
pandemic right-sized for
the future.”
Overview
In 2021, through our established central
platform, we used our scale and agility
to continue supporting every part of the
Group. We used our expertise to deliver
centralised services for procurement,
finance and airport operations.
With our constant focus on delivering
IAG’s Cost per Available Seat Kilometre
(CASK) targets, we monitored, managed
and simplified the supply chain;
mitigated costs; and ensured the Group
had a robust supply chain during a very
challenging global environment.
Our specialists delivered automation and
innovation to drive industry-leading
process improvements right across IAG.
We introduced the Integrated Support
Centre leveraging new chatbot
functionality and AI ticketing technology
to better support employees and
suppliers with their queries. The
automation programme also accelerated
Driving towards
technology excellence
we have maintained our focus on
increasing the maturity of our cyber
security capabilities, including
strengthening our Security Operations
Centre and the start of a new Group-wide
identity and access management solution.
Our people
We have launched a new IAG Tech
website as part of our strategy to create a
thriving technology community that
attracts and retains the very best talent.
We now have over 1,500 active members
of our guilds sharing best practice and
knowledge, supported by a learning
academy that is developing our future
digital leaders. We also welcomed our
second intake of graduates and
apprentices.
Our Digital Factory is rapidly deploying
Robotic Process Automation and Low
Code Solutions to automate processes and
help our employees, for example, chatbots
that can answer questions on our Ground
Operations Manual. This automation is
being accelerated through a Digital
Champions network that identifies the
opportunities and seeks to exploit this
technology.
We continue to modernise our internal
systems, for example, the upgrade of our
call centre technology for British Airways
in UK and Hong Kong. We are improving
decision-making through use of artificial
intelligence, machine learning, data
analytics and dashboards including the
deployment of a digital boardroom for our
IAG GBS management team.
Our customers
We introduced a wide variety of solutions
to assist with travel in a COVID-19 world
including automating the validation of
customers’ travel documentation, pre-
ordering of onboard food and drink, and
biometric boarding.
Our omni-channel strategy saw the
introduction of voice recognition, chatbots
and WhatsApp used by our Iberia
customers. In parallel, enhancements have
been made to all .com platforms including
dynamic pricing capability for fares and
ancillaries. We increased self-service
capabilities such as introducing disruption
management onto airport kiosks. We also
introduced new distribution channels for
our travel agent partners.
We have supported partnership launches
and the delivery of the Global Loyalty
Platform for Aer Lingus, Iberia and
Vueling, providing a more customised
and better experience for our customers.
We migrated Vueling onto our Salesforce
platform which enabled us to deploy
chatbots to handle routine tasks and
answer many of our customer’s
questions. This resulted in a 60 per cent
reduction in back office workload and
improved customer satisfaction to over
90 per cent.
Our planet
Our fifth Hangar 51 innovation accelerator
platform explored how new technologies
can help us meet our sustainability
commitments, and improve operational
efficiency, performance, safety, and
customer experience.
Many of our technology investments also
contribute to our sustainability plan. This
included investments in network, aircraft
and operational planning systems to
reduce the environmental footprint of our
flights; the introduction of pre-ordering
of food and drink onboard that has
reduced waste; and the launch of three
data centre migration programmes that
will move all of our systems onto new
infrastructure hosted in the cloud,
providing enhanced resilience,
performance and an 80 per cent lower
CO2 footprint for our technology.
Looking forward
We have three main priorities in 2022, in
our pursuit of Technology Excellence. We
will accelerate the delivery of the new
technology capabilities required to
support the Group’s transformation,
including making significant progress on
our data centre migration and replacing
obsolescence. We will continue to embed
and improve the IAG Tech operating
model. We will continue to develop a
culture where we value the diversity
across our technology professionals,
ensure that everyone feels included and
is treated equally, and that we have a
thriving and supportive community with
a strong sense of belonging.
John Gibbs
Chief Information Officer
“In 2021, we completed
the work on our new IT/
Digital operating model
and are focused on
driving continuous
improvements to our
ways of working,
including creating an
environment where our
technology professionals
can thrive.”
Overview
Our new IAG Tech operating model is
now live, with improvements to the
products and services we offer the
business; increased efficiency and
effectiveness of our value streams and
processes; adoption of modern methods
and tools; a leaner organisation structure;
clearer roles and accountabilities, and
improved governance with enhanced
reporting. This has resulted in new
capabilities being delivered faster and
more regularly due to the adoption of
agile methodologies. We also saw
reductions in the number of incidents
affecting our customers and a decrease
in the time to restore services. Progress
was hampered though, by our need to
support the business in responding to
COVID-19, for example reducing
investments to preserve cash. However,
62
INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021
Strategic Report INTRODUCTION TO SUSTAINABILITY
Driving change to create
truly sustainable aviation
We are committed to
creating and delivering
long-term sustainable value
for our stakeholders, who
include our colleagues, all
those we do business with,
the communities where we
operate, investors,
regulators, customers, and
our society.
We ensure that we understand the needs
of all of our key stakeholders to prioritise
their requirements in our plans to deliver a
fully sustainable business.
A critical aspect of delivering a fully
sustainable business is recognising,
managing and reducing our impact on the
planet, which is critical to driving change
across the industry so that we can play our
full part in tackling climate change.
Having previously set clear and ambitious
targets relating to our most material issues,
we worked this year to embed our net
zero transition pathway within our
business strategy and shift our focus to
delivery of our plans this decade.
We have done this by accelerating
progress in sustainable aviation fuels and
operational efficiency and by continuing
our investment in green technologies such
as hydrogen-powered planes and carbon
removal as well as new aircraft which are
up to 40 per cent more fuel efficient than
those they replace.
Meanwhile, we also stepped up in the
delivery of our social targets, including
improving our diversity performance, our
employee engagement and the
implementation of our programme to
reach all our stakeholders. As part of our
commitment to ensure we are a diverse
and inclusive organisation last year we set
a new target of having at least 40 per cent
of senior roles held by women by 2025.
We are determined to support the
long-term prosperity of the communities
we serve. In 2021, we continued to support
countries’ efforts to combat the pandemic
by helping out wherever we could,
"We are
determined
to support
the long-term
prosperity of
the communities
we serve."
transporting vaccines and humanitarian aid
to places that needed us most.
To ensure we fully understand our
stakeholders’ concerns, in 2021 we
completed a comprehensive review using
an independent, specialist third party,
Simply Sustainable, to analyse 26 different
environmental, social and governance
(ESG) topics that are crucial to our
operations. With these issues as the
foundation, we then conducted 34 internal
and external stakeholder interviews and
gathered a further 131 responses from
stakeholder surveys. We also
benchmarked the results against industry
peers.
The findings led to the production of two
materiality matrices, over three-year and
ten-year timescales respectively, with
issues grouped into four different areas:
People, Planet, Prosperity, and
Governance. By aligning these with our
strategic priorities and measuring our
performance, we are best able to put all
our stakeholders at the heart of our
decision-making to ensure IAG can have a
positive impact on society over the long
term.
Contents of this section:
65 A. Principles of Governance
75
92
B. Planet
C. People and Prosperity
This sustainability report has also been
prepared in reference to GRI
standards, which are listed under
relevant section headings. Criteria for
choosing specific standards are based
on compliance with Spanish Law
11/2018 and on material issues.
INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021
63
INTRODUCTION TO SUSTAINABILITY CONTINUED
Driving efforts to tackle climate change
IAG has been the leading airline group
building global momentum towards net
zero aviation. As well as taking pioneering
actions within our business, IAG has
proactively engaged with other airlines to
build consensus around net zero. This
successful advocacy will enable faster
emissions reductions across the industry.
IAG is delighted that IATA has joined the
journey to net zero emissions. Since IAG’s
net zero commitment in October 2019,
over 290 airlines are now also committed
to net zero, representing over 82 per cent
of global air traffic. This rapid shift within
two years is profound.
IAG was also pleased to gain another
climate ”Leadership” (A-) grade from the
Carbon Disclosure Project (CDP) in 2021.
This placed IAG in the top 6 per cent of
global respondents. We are the only airline
group worldwide to gain three leadership
grades in the past five years.
IAG supports efforts for a long-term target
for aviation at the ICAO General Assembly
in 2022.
The business will continue to lay the
groundwork to accelerate emissions
reductions both for our operations and at
an industry level.
Key achievements and ‘firsts’ include:
• October 2019. First airline group to
commit to net zero carbon emissions
by 2050, setting a precedent for
aviation;
• November 2019. First airline group to
publish a roadmap for achieving this, a
detailed plan which could be emulated;
• February 2020. Actively supported the
first national aviation commitment and
roadmap to net zero (UK, via
Sustainable Aviation);
• January 2021. British Airways was the
first airline to receive a sustainability-
linked loan tied directly to ESG targets;
• February 2021. Actively supported the
first regional aviation commitment and
roadmap to net zero (Europe, via
A4E);
• September 2021. Actively drove the
first global aviation alliance
commitment and roadmap to net zero
(via oneworld);
• April 2021. First European airline group
to commit to 10 per cent sustainable
fuels by 2030; and
• April 2021. First airline group
worldwide to commit to net zero
Scope 3 emissions by 2050.
Our Hangar 51 platform continues to engage with and support innovative companies like ZeroAvia to accelerate new zero
emissions technologies.
64
INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021
Strategic Report A. Principles of Governance
A.1. Defining sustainability and material issues
Reference to GRI, TCFD and SASB
standards:
GRI 102-43, 102-44, 102-46, 102-47
Material issues as identified in 2021
The icons represent UN Sustainable Development Goals (SDGs).
In this context, sustainability covers both
environmental and social issues.
IAG’s sustainability strategy, initiatives and
reporting are based on a rigorous
assessment of which business activities
have a material impact on the environment
and people and what is most important to
key stakeholders.
In 2021, IAG repeated a comprehensive
materiality assessment to assess these
issues. This was facilitated by leading
sustainability consultancy Simply
Sustainable as an independent third party,
with the scope as described in the
introduction to this section.
The internal stakeholders included all IAG
Management Committee members, certain
Board members, and operating company
sustainability representatives. External
stakeholders included investors, corporate
customers, policymakers, trade
associations, fuel suppliers, airports, and
NGOs. The materiality assessment was
complemented by an ESG staff survey
distributed in English and Spanish.
The results have informed our disclosures
and strategy.
Tackling climate change remains our most
material issue in the long run, and
engagement with policymakers, customers
and suppliers was identified as key to this
effort. In the short term, as the business
recovers from COVID-19, profitability and
customer and employee engagement
remain a high priority. In addition,
wellbeing is a material issue and IAG has
elevated its focus on this.
Water consumption, biodiversity and light
pollution were assessed as non-material
for IAG. More information on water and
biodiversity is available in the Additional
Disclosures section of the Non-Financial
Information Statement (NFIS).
IAG does not have specific risk provisions,
targets or guarantees related to these
non-material issues.
Principles of Governance
• Investing in the future
• Planning for climate-resilient operations
• Working with suppliers
Planet
• Reducing our climate impact
• Influencing policy
Prosperity
• Running a profitable business
• Pleasing our customers
People
• Engaging with employees
• Building a diverse, inclusive and
equal workplace
The above four categories are aligned to best practice in the 2020 World
Economic Forum “Measuring Stakeholder Capitalism” report.
Changes in material issues to 2030
To 2023 (Three-year timeframe)
1 Running a profitable business
2 Engaging with our employees
3 Reducing our climate impact
4 Pleasing our customers
5 Investing in the future
6 Planning for climate-resilient
workplace
To 2030 (Ten-year timeframe)
1 Investing in the future
2 Reducing our climate impact
3 Influencing policy
4 Building a diverse, inclusive and equal
5 Working with suppliers
6 Pleasing our customers
operations
Note: the most material issues are assessed using the combination of their
importance to stakeholders, and their residual impact to the business after current
mitigation plans.
INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021
65
SUSTAINABILITY
A. PRINCIPLES OF GOVERNANCE
Supporting UN Sustainable Development Goals to 2030
The UN has identified 17 SDGs to support as part of the global 2030 Agenda for Sustainable Development. IAG has identified four
priority SDGs to support, with examples below. Within the Group, Iberia is a member of the UN Global Compact.
SDG
Description
Gender
equality
See sections
C.1. Workforce overview
C.3. Diversity, inclusion
and equality
Examples of 2021 activities which support SDG
The IAG Board has maintained the same ratio of seven male and five female
directors from 2020 to 2021 (42% female representation)
IAG received the “gender equality” award at the Vocento Business Awards in
Spain for its efforts to encourage diversity
Spotlight: Sustainable
Aviation Fuel
British Airways, Iberia, Vueling and IAG Cargo used SAF in flights for the first
time
C.1. Workforce overview Doubling of staff engagement in Group-wide Occupational Health Surveys
Multiple Sustainable Aviation Fuel (SAF) deals to secure future supply
Affordable
and clean
energy
Decent work
and
economic
growth
Climate
action
A.5. Sustainability
stakeholder engagement
B.1. Climate change and
TCFD disclosures
IAG was instrumental in driving industry coalitions at national, regional and
global levels to set net zero climate targets, and lobbying for UK policy
support for SAF
Sustainability governance structure
Board
Remuneration Committee
Safety, Environment and
Corporate Responsibility (SECR)
Board Committee
Audit and Compliance
Committee
People Working Group
Management Committee
Sustainable Aviation Fuels
Steering Group
Sustainability Steering Group
IAG Sustainability
Introduced in 2020
IAG Sustainability network
66
INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021
Strategic Report A.2. Sustainability governance
Reference to GRI, TCFD and SASB standards: GRI 102-46, 102-48. TCFD Governance a, b
Overview
IAG has multiple levels of governance in
place to ensure robust, aligned and
progressive sustainability decision-making.
In 2021, IAG appointed a Chief People,
Corporate Affairs and Sustainability Officer
(CPCASO) to further drive forward
environmental and social initiatives. The
CPCASO is a member of the Management
Committee and reports into the IAG CEO.
The IAG Group Head of Sustainability and
Group Head of People report into the
CPCASO.
The Group sustainability strategy covers
Group policies and objectives, governance
structures, risk management, strategy and
targets on material issues, sustainability
performance indicators, and
communications and stakeholder
engagement plans. Each individual
operating company within the Group has a
distinct sustainability programme which is
regularly reviewed to ensure alignment
with the Group strategy.
The IAG Board provides oversight and
direction for sustainability programmes.
The IAG Management Committee provides
the key forum for reviewing and
challenging these programmes and setting
strategy.
Key governance structures include:
• quarterly meetings of the Board Safety,
Environment and Corporate
Responsibility (SECR) Committee to
provide dedicated oversight of the
Group’s sustainability programme and a
link between the IAG and operating
company management committees and
the IAG Board;
• quarterly meetings of the Sustainability
Steering Group (SSG), comprised of
senior representatives from each
operating company and key IAG teams,
to provide oversight of environmental
and social initiatives and reporting;
• monthly meetings of the IAG
Sustainability Network, comprised of
sustainability representatives from all
operating companies, to share ideas and
updates;
• regular meetings of the SAF Steering
Group and People Working Group
reporting into the SSG; and
• as part of the Group-wide Enterprise
Risk Management (ERM) process,
bi-annual reporting of the principal
sustainable aviation risks to the IAG
Management Committee and Board’s
Audit and Compliance Committee.
Internal Group-wide policies related to
sustainability help to ensure that wider
decision-making aligns with the
sustainability strategy. These include the
Code of Conduct, Supplier Code of
Conduct and specific policies on
Environmental Sustainability, Modern
Slavery, Anti-Bribery and Corruption, Equal
Opportunities and Selection and Diversity.
These are approved by the Board of
Directors.
Individual airlines are also adopting ISO
14001-aligned internationally recognised
environmental assessment and
management tools. All four main airlines
are working towards Stage 2 accreditation
for the IATA Environmental Assessment
(IEnvA)1 management system. Only seven
airlines worldwide have this accreditation.
British Airways, Aer Lingus and Vueling
have already achieved Stage 1 certification
and Iberia plans to complete Stage 1 in
2022.
Reporting standards
The full contents of this sustainability
report are included in the IAG Non-
Financial Information Statement, which is
third-party independently verified to
limited assurance standards in line with
ISAE3000 (Revised)2 standards.
IAG complies with current and emerging
standards on sustainability reporting.
These include obligations under EU
Directive 2014/95/EU on non-financial
reporting and its transposition in the UK
and Spain, the 2018 UK Streamlined
Energy and Carbon Reporting (SECR)
regulation, and the Task Force on Climate-
related Financial Disclosures (TCFD), and
the EU Taxonomy Regulation (2020/852).
IAG also goes beyond compliance
requirements and voluntarily aligns
sustainability reporting with the
Sustainability Accounting Standards Board
(SASB), the IATA Airlines Reporting
Handbook, and relevant criteria from
external ESG rating agencies. IAG
supported IATA and the Global Reporting
Initiative (GRI) to develop the IATA
handbook.
This sustainability report has also been
prepared in reference to GRI standards,
which are listed under relevant section
headings. Criteria for choosing specific
standards are based on compliance with
Spanish Law 11/2018 and on material
issues. In cases where GRI alignment was
not possible, other standards aligned to
airline industry guidance or internal
frameworks were used and described.
Data governance
Unless otherwise stated:
• The scope of environment performance
data in this report includes all IAG
airlines, subsidiaries and cargo
operations over which IAG has
operational control. This scope is
consistent with environment-related
policies and KPIs;
• LEVEL, IAG Loyalty and IAG GBS
functions are not in scope for
environmental reporting as the
environmental impacts of these business
units are not material; and
• Workforce data includes all IAG
operating companies and support
functions.
Emissions data from intra-European flights
is also independently verified within six
months of the year end, for compliance
with the UK and EU Emissions Trading
Schemes (ETS), and for all flights for the
UN Carbon Offsetting and Reduction
Scheme for International Aviation
(CORSIA).
In specific cases where full year data was
not available, estimates have been applied
based on business forecasts and data from
prior months. Internal governance is in
place to ensure that any estimations made
are robust. Any prior year restatements are
indicated next to relevant metrics with
reasons provided.
1 IEnvA is the airline industry version of ISO 14001, the international standard for environmental management systems. IEnvA is tailored specifically for
airlines and is fully compatible with the International Organization for Standardization (ISO).
2 ISAE3000 is the assurance standard for compliance, sustainability and outsourcing audits, issued by the International Federation of Accountants (IFAC).
INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021
67
SUSTAINABILITY
A. PRINCIPLES OF GOVERNANCE
A.3. Sustainability strategy
IAG has a vision to be the world’s leading
airline group on sustainability. That means
using its scale, influence and track record
to not only transform the business, but
drive the system-wide change required to
create a truly sustainable aviation industry.
IAG is committed to delivering best
practices in sustainability programmes,
processes and impacts, while executing on
Group strategy. Creating a truly
sustainable business is fundamental to our
long-term growth.
IAG has three overall strategic priorities for its business. The environmental strategy is aligned to these:
Strengthening a portfolio of world-class brands
and operations
• Ensuring customers have visibility of, and
are engaged in, our sustainability
programmes
Growing global leadership positions
Enhancing IAG’s common integrated platform
• Demonstrating industry leadership
• Maturing our transition pathway towards
a net zero business
• Leadership in carbon disclosures
• Investing in efficient aircraft fleet and
delivering best practice in operational
efficiency
• Innovating and investing to accelerate
progress in sustainable aviation fuels,
future aircraft and low-carbon
technologies
In 2021, the Board agreed to a broadening of the sustainability strategy and progress is now tracked against nine priorities.
Nine strategic priorities
Key 2021 progress
1. Clear and ambitious targets relating to IAG’s most material issues • See B.1. ‘Climate change and TCFD disclosures’ section
• 2021 materiality review
• New SAF, waste, diversity, Scope 3 emissions targets
2. Low-carbon transition pathways embedded in business strategy • Sustainability budgets form part of operating company
3. Management incentives aligned to delivering a low-carbon
transition plan
4. Leadership in carbon disclosures
5. Accelerating progress in low-carbon technologies including
aircraft technology, SAF, carbon offsets and carbon removals
three-year business plans updated annually. Carbon costs are
integrated into business cases for fleet purchasing and
planning. (see below)
• IAG was the first airline group to explicitly agree climate targets
as part of annual incentive plans. See remuneration section for
more details. These are expected to be reinstated in 2022.
• CDP (climate-specific ranking): A-, top 6% of scored companies
• TPI (climate-specific ranking): Met 17 of 18 criteria, highest level
• Sustainalytics (cross-sector ESG ranking): 9th out of 68 airlines
• See "Spotlight: Sustainable Aviation Fuel"
6. Accelerating innovation in low-carbon technology as above
• Dedicated sustainability category in Hangar 51 accelerator
7. Industry leadership in the innovation and deployment of SAF
including power-to-liquids
8. Stepping up our social commitments including on diversity,
employee engagement and sustainability as a core value
programme
• 10 per cent SAF by 2030 commitment and several new supply
partnerships
• New diversity targets set
9. Industry leadership in stakeholder engagement and advocacy
• Continued leadership positisions in key industry associations
with more action planned for 2022
To embed low-carbon transition pathways in business strategy, IAG concurrently applies internal carbon prices to financial planning
and scenario analysis. Prices are based on market values and reputable external forecasts:
• EU ETS prices are based on market prices and the UK Department for Transport (DfT) Aviation Forecast to 2050; and
• CORSIA prices are based on International Energy Agency (IEA) and ICAO price forecasts to 2035.
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INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021
Strategic Report For the period 2021-35, EU ETS prices of €50-€166/tonne and CORSIA prices of $8-$40/tonne were used for modelling compliance
costs. The Fleet team used updated carbon prices and price forecasts for shorthaul and longhaul fleet purchasing decisions.
To support management incentives, in 2020, climate-related incentives were agreed by IAG’s MC, Remuneration Committee and Board
so that 60 of the most senior executives across the Group, including the IAG CEO, would have a proportion of their annual incentives
linked to achievement of annual carbon intensity targets. More details are in the report of the Remuneration Committee.
To support leadership in carbon disclosures, in 2021 IAG Investor Relations completed a survey of key IAG investors to identify their
expectations, views on best practice in ESG reporting, and those ratings they prioritise. IAG plans to engage with relevant rating
agencies in 2022 to enable more accurate calculations of IAG’s scores and to identify actions to improve the scores.
IAG is the only airline group worldwide to receive three leadership (A-/A) grades from CDP in the past five years and in 2021 received
the joint-highest score of any airline from the Transition Pathways Initiative (TPI), which assesses companies’ readiness for a low-
carbon economy.
A.4. Sustainability risk management
Reference to GRI, TCFD and SASB standards: GRI 102-11, 102-15. TCFD Governance a, b, Strategy a, b, c, Risk Management a, b, c
Sustainable aviation risks have been
collectively identified as one of IAG’s
principal risks.
In 2021, IAG received ‘A’ grades from CDP
for its climate risk and opportunities
disclosures to CDP. This response is
available on the IAG website.
Climate-related risks are considered and
assessed under the Group Enterprise Risk
Management (ERM) framework which is
presented to the Board. More details on
the framework and process for how risks
are assessed, and how Group risks
inter-relate, can be found in the ‘Risk
Management, Principal risks and
uncertainties’ section.
Sustainability risks and opportunities,
including climate-related risks and
opportunities, are also identified and
assessed by the Group Sustainability team,
in conjunction with the Group ERM team.
This assessment includes risks over
medium-term (two to five years) and
long-term (greater than five years)
timescales.
Sustainability enterprise risks are bi-
annually reported to and reviewed by the
IAG Management Committee and the IAG
Audit and Compliance Committee.
Detailed sustainability risks and
opportunities are also reported to the IAG
CPCASO who reports to the IAG CEO.
Plans to mitigate risks are developed by
relevant risk owners in specific areas of the
business.
Sustainability risk assessments have
informed specific decisions related to
business operations and strategy, and IAG
allocates significant resources to
environmental risk management. Examples
include:
• IAG has maintained its commitment to
invest in SAF development, production
and supply as part of its 20-year
US$400 million (€360 million) SAF
commitment, to manage climate policy
risks and take advantage of energy-
related opportunities;
• in 2018, TCFD-aligned scenario analysis
identified a need for more ambitious
action on climate change, which led to
the 2019 decision to design and adopt
the industry-leading Flightpath Net Zero
strategy to deliver net zero emissions
byy 2050;
• in 2021, IAG set a new net zero target by
2050 for Scope 3 emissions and IAG
GBS appointed EcoVadis to help to
track supplier sustainability performance
and mitigate supply chain-related
sustainability risks; and
• all operating airlines to work towards
Stage 2 accreditation of the
environmental management system
IEnvA1, including investments in people
and IT systems, to manage
environmental compliance risks.
IAG is committed to mitigating the impacts
of hazards which, if they occur, have
uncertain but potentially negative
outcomes on the environment or people.
As such, IAG adopts precautionary
measures to mitigate these hazards, an
approach known as the precautionary
principle. The precautionary principle is
applied to the planning of operations and
the development and launch of new
services, by integrating climate
considerations into business plans and
financial forecasts and aligning activities
with the Flightpath Net Zero strategy.
Detailed mitigation for climate-related risks
is outlined in Section B.1.
Related risk: Environmental regulation compliance
Risk description
Mitigating actions
An inadvertent breach of compliance requirements related to ESG
reporting, emissions or waste management, or other
environmental issues, leading to fines and potential reputational
damage.
• Strengthening sustainability governance including reviews of
annual disclosures via the Audit and Compliance Committee
• Internal governance, training and assigning ownership for
environmental compliance obligations
• Working towards IEnvA1 accreditation to improve internal
compliance processes
1 See A.2. Sustainability governance
INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021
69
SUSTAINABILITY
A. PRINCIPLES OF GOVERNANCE
A.5. Sustainability stakeholder engagement
Reference to GRI, TCFD and SASB standards: GRI 102-13, 102-43, 102-44
Engagement with key stakeholder groups
is outlined over the next three pages.
IAG is a member of multiple trade
associations which deal with environmental
and climate-related issues.
If the climate-related positions of trade
associations are inconsistent with internal
stances, IAG representatives take roles on
task forces and working groups and
respond to consultations to communicate
our stances and constructively move to
alignment.
IAG’s stance on climate change is to align
its efforts with the latest science on
achieving 1.5°C pathways. This applies both
to the goal of achieving net zero by 2050
and to pathways aligned to the science.
IAG sees both gross and net reductions in
emissions as crucial elements of aviation
decarbonisation, supports the mechanisms
of fleet modernisation, airspace and
operational efficiency, sustainable aviation
fuels, carbon pricing schemes and
voluntary offsets and removals, and
advocates for effective policies to promote
those that are effective, and fair, and
ideally global. IAG also supports the
principle of carbon pricing, which is to
drive emissions reductions where they are
most cost-effective. IAG does not support
carbon taxes as it has been proven that
these are environmentally inefficient.
IAG has internal governance to ensure that
wider stakeholder engagement on
sustainability is consistent with its material
issues and environmental goals.
Stakeholders
Industry associations
Why we engage
Key 2021 activities
• To develop common policy positions
• To improve advocacy effectiveness
• To ensure consistency between IAG
sustainability goals and the goals of
associations of which IAG or operating
airlines are members
• To share environmental and policy
expertise to drive a more sustainable
industry
• Supporting IATA industry commitment to
net zero emissions
• Key inputs to A4E ‘Destination 2050’
roadmap to net zero for aviation
• Coordinated oneworld roadmap to net
zero and 10% SAF by 2030 commitment
• Working group for new 2030 and 2040
emissions targets for UK aviation industry
• Policy advocacy on evolution of EU ‘Fit
for 55’ climate policies
Government and other regulators
• To support UK and EU commitments to
• Responses to UK SAF Mandate and Jet
net zero emissions
Zero Consultations
• To build support for a net zero emissions
• IAG staff chair two of four groups of the
target for aviation through the UN
aviation regulator ICAO
• To influence UK, Spanish, Irish, EU and
global policies
• To increase research and funding for
low-carbon aircraft, SAF and carbon
removal technologies
UK Jet Zero Council (JZC)
• Direct advocacy with EU policymakers
over proposed EU ‘Fit for 55’ climate
policies
Customers
• To demonstrate IAG’s sustainability
• British Airways, Aer Lingus, Iberia and
commitments to action, initiatives and
leadership
• To facilitate passenger action on the
Vueling continued and updated
sustainability communications to
customers
environment
• To stay attuned to changing customer
demands
• To offer employment opportunities
Workforce
• To align individual airline sustainability
• Occupational Health and Engagement
programmes with Group
Surveys across the Group
• To share ideas and best practice
• To respond to demands from internal
stakeholders
• To drive positive employee engagement
• To improve recruitment and retention
opportunities
• Frequent sustainability presentations at
internal forums
• Vueling created a new Vision, Mission and
Values which included sustainability
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INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021
Strategic Report Stakeholders
Suppliers
Why we engage
Key 2021 activities
• To minimise exposure to ESG risks
• To support manufacturers in improving
• Interviews and surveys of key suppliers as
part of materiality assessment
aircraft efficiency
• To gain support for SAF
• To identify opportunities to reduce
supplier emissions
• IAG GBS appointed EcoVadis to track
supplier environmental performance
Shareholders and other financial
stakeholders
• To understand their approach to ESG, to
enable us to better align our programmes
with their priorities
• Completed ESG investor survey
• 2021 and 2020 CDP scores A-
• 2021 TPI score the joint-highest of any
• To demonstrate action and leadership
airline
Communities
externally
• To maintain and increase transparency
• To respond to legal obligations
• To support vulnerable or under-served
communities via charitable causes
• To increase IAG’s positive wider impacts
• To minimise potentially negative impacts
of aircraft operations, such as noise and
air pollution, on quality of life in
communities near to where airlines
operate
• British Airways receives first financial loan
linked to ESG targets.
• Multiple IAG airlines supported efforts to
distribute COVID-19 vaccines and aid
• €2.7 million raised for charitable causes
• See Section C.5. ’Community engagement
and charitable support’
NGOs and academic institutions
• For independent reviews of materiality
• To maintain an informed position on
• Updated Group materiality assessment
• Continued engagement with Cranfield
sustainability leadership
• To share sustainability expertise for the
benefit of industry progress on the
environment
University supporting a range of
sustainability projects
• Engaged with the Science Based Targets
initiative (SBTi) as one of 11 airlines on the
aviation Technical Working Group and
one of 84 companies to road-test the
SBTi Net Zero Standard
INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021
71
SUSTAINABILITY
A. PRINCIPLES OF GOVERNANCE
Member of organisation
Scope of organisation
Sustainable Aviation (SA)
Jet Zero Council (JZC)
Royal Aeronautical Society (RAeS)
Grupo Español para el Crecimiento
Verde
UK
UK
UK
Stance on climate
change*
Consistent
Consistent
2021 role and leadership action
• IAG is one of twelve members of the SA
Council, which governs activities for
36 member organisations
• Part of working group which developed
new 2030 and 2040 emissions targets
• IAG staff chair two of the four groups:
SAF Delivery Group, COP26 subgroup
• British Airways CEO a member
Consistent**
• IAG on Executive Committee of Greener
by Design group
Spain
Consistent
• Iberia is one of 53 corporate members
Airlines 4 Europe (A4E)
European
Consistent
• IAG actively supported development of
Destination 2050 net zero roadmap for
European aviation, organised by five
aviation industry organisations
Coalition for Negative Emissions
Global
Consistent
• One of eleven founding members and
oneworld
Global
Consistent
seven steering group members
• Active contributor to landmark Case for
Negative Emissions report, produced in
collaboration with McKinsey
• IAG representative chairs Environment
and Sustainability Best Practice Group
(ESB) consisting of 14 airlines
• Coordinated first roadmap to net zero
• Coordinated 10 per cent SAF by 2030
commitment
Air Transport Action Group (ATAG)
Global
Consistent
• Five staff formally acknowledged for
contributions to Waypoint 2050 global
decarbonisation roadmap
World Economic Forum
Global
Consistent
• Contributed expertise to SAF evidence
base as part of Cleaner Skies for
Tomorrow coalition
• Supported 10 per cent SAF by 2030
ambition statement
IATA
Global
Consistent
• IAG representative chairs the IATA
Sustainability and Environment Advisory
Council (SEAC) of 20 airlines. IATA
represents 290 airlines
• Representatives on four IATA working
groups – SAF, Fuels, Long-Term Targets,
Waste
* In relation to aiming for net zero emissions by 2050. The approaches for achieving this goal can vary by organisation.
** Based on the Greener by Design objectives on their website.
72
INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021
Strategic Report A.6. Supply chain sustainability
Reference to GRI, TCFD and SASB standards: GRI 308-2, GRI 414-2. Supports SDG 12
In 2021, IAG led the industry by becoming
the first airline group worldwide to extend
its net zero commitment to its supply
chain. The Group will liaise with, support
and monitor suppliers to ensure net zero
emissions by 2050 for products and
services provided to IAG.
IAG Global Business Services (IAG GBS)
manages the relationships and interactions
with suppliers on behalf of the Group. This
important supply chain sustainability
programme is being delivered by the IAG
GBS Group Procurement Team, with
relationship owners and buyers closely
involved in the collaboration with suppliers.
Opportunities for impact
The Group supply chain covers
approximately 13,272 suppliers across
every category. Working with key partners,
including fuel suppliers, the business will
target Scope 3 net zero emissions by
2050, and a 20 per cent reduction by
2030 relative to 2019. In 2021, Scope 3
emissions are 23 per cent of IAG’s total
CO2 and 68 per cent of Scope 3 emissions
relate to fuel and energy.
In 2021 the Group appointed EcoVadis, a
market-leading provider of business
sustainability ratings, to support us in
understanding every aspect of
sustainability in our supply chain, including
environment, labour and human rights, and
ethics.
From insight to action
Transparency in sustainable supply chain
performance is right at the top of the IAG
GBS Procurement agenda. We will work
with EcoVadis to assess our suppliers
against a range of measures and identify
opportunities to improve our sustainable
performance. This will give IAG, and its
suppliers, a baseline for collaboration on
emissions reduction and achievement of
the Scope 3 targets. We want to work with
suppliers who share our vision and want to
join us in this vitally important work.
Additionally, suppliers can share the
findings of the EcoVadis assessment with
their other customers via a simple
scorecard, meaning that the overall impact
of this work could reach well beyond IAG.
The Supply Chain Sustainability
Programme includes four other key pillars:
• Code of Conduct
• Risk screening
• Corporate Social Responsibility (CSR)
Audits
• Joint programmes to promote
sustainability initiatives
The IAG GBS Supplier Code of Conduct
clarifies the standards of behaviour
expected from all suppliers working with
any part of our business, emphasising the
importance of sustainability. It has already
been issued to the existing supply chain
and integrated into the supplier
onboarding process. IAG will only work
with businesses that share our standards
and ways of working.
Social and corporate governance is also a
high priority. We expect our suppliers to
provide a safe and healthy environment for
their workforce. Supplier selection
considers potential industry and
geographical risk and where necessary
on-site audits are carried out. These audits
are performed by independent inspectors
with CSR expertise using the SEDEX
Members Ethical Trade Audit (SMETA)
methodology. In 2021, 30 audits were
completed.
As a minimum, all suppliers undergo
bi-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 a mitigation plan where
necessary. Any issues are flagged to the
risk owners within the Group to jointly take
appropriate action.
In 2022, sustainability will be a key part of
the IAG GBS continuous transformation
plan. As well as continuing the measures
outlined above, the plan includes
embedding sustainability KPIs into
procurement processes and the criteria for
awarding new business to suppliers. We
are also developing a wider training
programme for employees, building
sustainability awareness and driving higher
sustainability performance across the
entire organisation.
Year
2021
2020
2019
Total number of
suppliers
Suppliers screened
Suppliers with
additional compliance
assessment
Critical suppliers under
regular risk monitoring
Independent CSR
Audits in year
13,272
22,947
27,033
13,272
22,947
18,369
1,510
1,818
2,912
34
35
n/a
30
25
28
Related risk: Supply chain sustainability compliance
Risk description/impact
Mitigating actions
Potential breach of compliance on
sustainability, human rights or anti-bribery by
an IAG supplier resulting in financial
penalties, legal, environmental, social and/or
reputational impacts.
• IAG GBS procedures including Integrity, sanctions and CSR audits, IAG Know Your
Counterparty due diligence for higher-risk third parties, Supplier Code of Conduct
• Internal governance on supplier management to identify challenges and mitigation
actions
• Supplier screening using external business intelligence databases which actively
monitor supplier status and flag risks including sustainability
INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021
73
SUSTAINABILITY
A. PRINCIPLES OF GOVERNANCE
A.7. Ethics and integrity
Reference to GRI, TCFD and SASB standards: GRI 102-16, 102-17, 205-1, 205-2, 205-3
All Directors and employees are expected
to act with integrity and in accordance
with the laws of the countries in which
they operate.
In 2021, a total of 164 Speak Up reports
were received via the Group’s
independently provided Speak Up facilities,
compared with 193 in 2020.
IAG’s Group Code of Conduct, issued in
2019 and approved by the Board, sets out
the general guidelines that govern the
conduct of all Directors and employees of
the Group when carrying out their duties in
their business and professional
relationships. Mandatory training and
communications activities are carried out
for Directors, employees and third parties
on a regular basis to maintain awareness
and understanding of the principles that
govern the conduct of the Group.
If any employee has a concern about
unethical behaviour or organisational
integrity, they are encouraged to first
speak with their manager or a member of
the Legal, Compliance or Human
Resources teams. Similarly, suppliers are
encouraged to contact their primary
contact within the business. IAG maintains
Speak Up channels provided by
independent third-party providers, Safecall
and Ethicspoint, where concerns can be
raised on an anonymous basis. These
Speak Up channels are available to
members of staff as well as suppliers, with
information on how to access published in
the Code of Conduct and Supplier Code of
Conduct respectively.
The IAG Audit and Compliance Committee
reviews the effectiveness of the Speak Up
channels on an annual basis. This annual
review considers the volume of reports by
category; timeliness of follow-up; process
and responsibility for follow-up; emerging
themes and lessons; and any issues raised
of significance to the financial statements
or reputation of the Group or other areas
of compliance.
These reports concerned issues relating to
employment matters (60 per cent),
dishonest behaviour/reputation (14 per
cent), health and safety (23 per cent) and
regulatory matters (2 per cent). All reports
were followed up and investigated where
appropriate.
Anti-corruption and anti-money
laundering
IAG and its operating companies do not
tolerate any form of bribery or corruption.
This is made clear in the Group Code of
Conduct and supporting policies which are
available to all Directors and employees.
An anti-bribery policy statement is also set
out in our Supplier Code of Conduct.
Each Group operating company has a
Compliance Department responsible for
managing the anti-bribery programme in
their business. The compliance teams from
across the Group meet regularly through
Working Groups and Steering Groups,
under the IAG General Counsel, and
annually they conduct a review of bribery
risks at operating company and Group
level.
In 2021, the main risks identified were
unchanged from the previous year and
relate to the use of third parties,
operational and commercial decisions
involving government agencies, and the
inappropriate use of gifts and hospitality.
No material compliance breaches were
identified in 2021.
Anti-bribery and corruption training is
mandatory for all relevant personnel in IAG
operating companies, Group functions and
the Board and takes the form of e-learning
supplemented by face-to-face sessions as
necessary. Individual training requirements
are set by each operating company and
function and are determined by factors
such as the level and responsibilities of an
employee. The Group-wide anti-bribery
e-learning was rolled out in 2019.
Employees are required to complete this
every three years. In 2021, 1,404 employees
completed the anti-bribery e-learning, This
lower number is as expected due to those
employees who have previously
completed the training not being required
to retrain.
To identify, manage and mitigate potential
bribery and corruption risks, IAG uses
risk-based-third-party due diligence which
includes screenings, external reports,
interviews and site visits depending on the
level of risk that a third party presents. Any
risks identified during the due diligence
process are analysed and a mitigation plan
put in place as necessary. Certain risks
could result in termination of the proposed
or existing relationship with the
counterparty. The IAG Audit and
Compliance Committee receives an annual
update on the anti-bribery compliance
programme.
There were no legal cases regarding
corruption brought against the Group and
its operating companies in 2021 and
management is not aware of any
impending cases or underlying issues.
IAG has processes and procedures in place
across the Group, such as supplier vetting
and management, Know Your
Counterparty procedures and financial
policies and controls which help to combat
money laundering in the business.
Employees completing anti-bribery e-learning
vly
-29%
2021
1,404
2020
1,984
2019
7,933
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INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021
Strategic Report B. Planet
B.1. Climate change and TCFD disclosures
IAG was pleased to be an early adopter of Task Force on Climate-related Financial Disclosures (TCFD) guidance. A high-level summary
of TCFD-aligned activities is below.
TCFD section
Current TCFD-aligned activities and processes
Planned activities
Governance
Strategy
Board oversight of programmes via SECR Committee;
appointed CPCASO; multiple layers of governance;
repeated materiality assessment for 2023 and 2030
Delivering on 2019 Flightpath Net Zero strategy;
TCFD-aligned scenario analysis carried out in 2018 and
2021
Regular SECR meetings planned for 2022; materiality
assessment to be repeated by 2024
Implementing new sustainability strategy approved in
December 2021, rolling TCFD-aligned scenario analysis,
further integration of climate strategy into financial
planning
Risk
management
Sustainable aviation risks are treated as a principal risk;
risk disclosures received ‘A’ rating from CDP
Further work on risk quantification and further integration
of climate-related impacts into financial planning
Metrics and
targets
Clear metrics and targets for 2025, 2030 and 2050; first
airline to set a net zero Scope 3 emissions target
Re-introduction of management remuneration targets. A
focus on performance improvements and policy
advocacy to support delivery of existing targets
IAG has made climate-related disclosures consistent with the eleven recommendations of the TCFD listed below. More details are in the
relevant sections.
TCFD recommendation
Relevant section/s
Governance: Disclose the organisation’s governance around climate-related risks and opportunities.
A. Describe the Board’s oversight of climate-related risks and opportunities.
A.2., A.4.
B. Describe management’s role in assessing and managing climate-related risks and opportunities.
Strategy: Disclose the actual and potential impacts of climate-related risks and opportunities on the organisation’s businesses,
strategy and financial planning where such information is material.
A. Describe the climate-related risks and opportunities the organisation has identified over the short, medium,
and long term.
B. Describe the impact of climate-related risks and opportunities on the organisation’s businesses, strategy
and financial planning.
C. Describe the resilience of the organisation’s strategy, taking into consideration different climate-related
scenarios, including a 2°C or lower scenario.
A.4., B.1.3., ‘Risk
management,
Principal risks and
uncertainties’,
‘Stakeholder
engagement’
Business model
B.1.2.
Risk management: Disclose how the organisation identifies, assesses and manages climate-related risks.
A. Describe the organisation’s processes for identifying and assessing climate-related risks.
A.4., B.1.3.
B. Describe the organisation’s processes for managing climate-related risks.
C. Describe how processes for identifying, assessing and managing climate-related risks are integrated into
the organisation’s overall risk management.
‘Risk management,
Principal risks and
uncertainties’
Metrics and targets: Disclose the metrics and targets used to assess and manage relevant climate-related risks and opportunities
where such information is material.
A. Disclose the metrics used by the organisation to assess climate-related risks and opportunities in line with
its strategy and risk management process.
B.1.4., B.1.6.
B. Disclose Scope 1, Scope 2 and, if appropriate, Scope 3 greenhouse gas emissions, and the related risks.
C. Describe the targets used by the organisation to manage climate-related risks and opportunities and
performance against targets.
INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021
75
SUSTAINABILITY
B. PLANET
B.1.1. Governance
Reference to GRI, TCFD and SASB standards: TCFD Governance a, b
See “Principles of Governance” section for sustainability-related governance, which includes climate-related governance.
B.1.2. Strategy – scenario analysis
Reference to GRI, TCFD and SASB standards: TCFD Strategy c
In 2021, IAG conducted analyses modelling
climate risk scenarios. These included
ongoing analysis of climate mitigation to
2050, detailed modelling of the impacts of
the EU Fit for 55 proposals to 2035; and
TCFD-aligned scenario analysis under a
timeframe of 2030.
Companies choose emissions scenarios for
this analysis. In 2018 IAG chose a 4°C and
2°C scenario. In 2021, a 3°C, 1.5°C orderly1,
and 1.5°C disorderly scenario were used.
This change was based on the impacts of
the latest global emission pledges versus
the goal of the 2015 Paris Agreement.
TCFD analysis is a formal process to
identify ways to strengthen organisational
resilience in the face of climate change and
related impacts. TCFD guidance outlines a
six-step process, where scenarios assess
climate-related impacts on business input
costs, operating costs, revenues, supply
chain, and business interruption. Potential
responses are then mapped out in terms of
changes to business model/s, portfolio
mix, investments in transition capabilities
and technologies and the potential impact
on strategic and financial plans.
Scenario workshops were hosted virtually
to engage IAG representatives in the UK,
Ireland and Spain. A wide range of teams
were represented including Strategy,
Treasury, Finance, Government Affairs,
Commercial Planning, Investor Relations,
People, IAG Tech, IAG GBS, IAG Loyalty
and sustainability representatives from all
operating airlines.
Four categories of TCFD-aligned climate
impacts were explored – physical, market,
technology, and policy.
This exercise identified that key potential
impacts were industry-wide policy and
market shifts. Significant uncertainty also
exists around the global policy, technology
and market pathways for aligning with
1.5°C by 2030.
The business is broadly resilient to the
identified impacts, based on Flightpath Net
Zero plans. However, there are further
opportunities to maximise resilience to
wider societal changes. These results
informed our climate-related risk
assessment and disclosures.
In December 2021, the SSG also agreed
that TCFD-aligned scenario analysis would
become a rolling exercise from 2022
onwards. Ten year time horizons would be
further embedded into sustainability-
related planning wherever relevant.
B.1.3. Climate-related risk management
Reference to GRI, TCFD and SASB standards: TCFD Risk Management a, b, c
See ”A.4. Sustainability risk management”
See “Risk management, Principal risks and uncertainties”
IAG takes a proactive approach to
managing climate-related risks and is
committed to managing the regulatory,
reputational, market and technology
aspects of these.
In 2021, IAG Sustainability and the ERM
team undertook a review of all climate-
related risks and opportunities. This was
informed by the materiality assessment
and TCFD scenario analysis.
A revised summary of risks, trends and
potential impacts over short-, medium-
and long-term timescales are disclosed on
the next page. The risk environment has
changed and this is reflected in the
updated set of risks.
Trends and the external environment
continue to be reviewed on an ongoing
basis. Mitigating actions are also reviewed
on an ongoing basis. Carbon reduction
targets are the key measures for assessing
the mitigation of these risks and other
measures will be reviewed.
1 ”Orderly” and ”disorderly” as defined in the TCFD report ”Guidance on Scenario Analysis for Non-Financial Companies”. These scenarios compare
smooth and idealised climate-related changes with variable, abrupt and disjointed changes.
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INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021
Strategic Report Revised summary of risk trends
Risk trends below are grouped by risk type. Short term is 1-2 years, medium term is 3-5 years, long term is more than 5 years.
Primary
TCFD risk
type
Market
Risk description
*Loss of ESG-conscious customers
Perceptions of aviation industry CO2 progress
Viability of offset projects
Physical
*Resilience to acute weather events
Reduced flying to chronically climate-affected destinations
Policy
*EU Fit for 55 and UK climate policy
*Carbon pricing
Policy asymmetry
Extra regulation on activity not emissions
*Lack of supporting SAF infrastructure or policy
Regulation on non-CO2 effects
Technology Use of lower-emission technologies
Use of lower-emission sources of energy
Timeframe
Trend
Short term
Medium term
Medium term
Short term
Long term
Medium term
Medium term
Medium term
Long term
Medium term
Long term
Medium term
Long term
* Risks as described in the ‘Risk management, Principal risks and uncertainties’ section.
Summary of climate-related risk impacts and mitigation/adaptation
See the table above for risk trends. Specific risks are mitigated through existing processes, additional investments, or specific strategies as
outlined in the table below. The potential for further mitigating actions is reviewed on an ongoing basis.
Market risks
Loss of ESG-conscious customers
Risk description
Potential financial impacts
Mitigating/adapting actions
• Lost revenue due to
corporate or leisure
passengers reducing
flying, or travelling with
other airlines perceived
to be greener.
• ESG concerns becoming
an increasing factor in
customer choices may
mean they choose to
travel less frequently,
less far, or choose
different travel modes.
Corporates may travel
less to meet internal
emission targets.
• A potential loss of
customers to other
airlines with more
comprehensive ESG
programmes.
• IAG refined Group ESG messaging to clarify stances to external
stakeholders
• Continued operating company engagement and collaboration with
corporate customers to identify and address potential environmental
desires or concerns in advance of changes in behaviour
• British Airways launched the BA Better World programme in 2021,
including a voluntary SAF offer to customers and updated
communications across multiple channels
• Iberia planned new communications for 2022
• Aer Lingus launched a new sustainability webpage outlining its ESG
efforts
• Vueling launched an external sustainability challennge to engage
customers
• IAG Loyalty began integrating sustainability objectives into the Avios
proposition
This risk presents an opportunity for IAG to differentiate its brands by showing leadership, innovation and action to mitigate climate
impacts, so attracting climate-conscious corporates and agreeing deals to support green solutions.
INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021
77
SUSTAINABILITY
B. PLANET
Perceptions of aviation industry CO2 progress
Risk description
Potential financial impacts
Mitigating/adapting actions
Perceptions that industry
action is at odds with
national or international
climate goals and publicly
stated ESG progress, could
lead to more restrictive
policies, loss of customers
or funding, or industry-wide
reputational impacts.
Lost revenue due to
corporate and leisure
passengers choosing not to
fly. Costs from extra
regulation as described on
the next page.
• Working to accelerate wider industry progress through trade
associations, by supporting new commitments and roadmaps to net
zero emissions at national, regional and global levels, building
momentum for a net zero target at ICAO in 2022
• Building global momentum around 2030 SAF ambitions of at least 10
per cent, to enable more passengers to reduce emissions from flights
This risk presents an opportunity for IAG to show faster progress than the industry and to attract funding and customers relative to
peers.
Viability of offset projects
Risk description
Potential financial impacts
Mitigating/adapting actions
Offset projects around the
world are used for CORSIA
compliance and voluntary
IAG and customer
offsetting. Spikes in prices
or sudden changes in the
availability or credibility of
these projects could
increase costs, or negatively
impact the ability to meet
net emissions targets,
damaging credibility.
Additional compliance costs
under UK and EU ETS or
CORSIA programmes, or
increased costs associated
with use of voluntary
offsets.
• Working in collaboration with key reputable partners such as the
not-for-profit charity Pure Leapfrog
• Carrying out due diligence to select reputable providers and carbon
reduction projects that meet and align with verified quality standards
such as Gold Standard and Verified Carbon Standard (VCS)
• Using an effective procurement strategy for carbon credits to protect
against price volatility
• Engaging with external organisations like CORSIA and SBTi to clarify
and refine offset eligibility criteria
Mitigating/adapting actions
• Operating airlines continuing to manage multiple forms of disruption
across IAG’s global network within existing roles and processes, such as
flight operations departments and customer call centres
• Continuing to work closely with IATA and other industry bodies to
better understand e.g. the impacts and locations of turbulence and how
the business can mitigate these
Physical risks
Resilience to acute weather events
Risk description
Potential financial impacts
Lost revenue due to
weather-related disruption,
or increased operational
costs due to physical
impacts, that are unable to
be effectively mitigated or
planned for.
Potential low resilience to
increased frequency of
acute weather events such
as high winds, fog events,
storms, turbulence,
sustained extreme heat
events or a stronger jet
stream could increase
operating costs by
increasing delays, fuel burn
and requiring additional
cooling and maintenance
costs above planned spend.
Local climate-related
circumstances such as fires,
algal blooms and droughts
could make destinations
temporarily less attractive.
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INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021
Strategic Report Reduced flying to chronically affected destinations
Potential financial impacts
Risk description
Mitigating/adapting actions
Revenue loss in a scenario
where no changes have
been made to the route
network in the face of
changing physical impacts.
• Operational and network development teams continuing to assess and
understand changes in customer demand globally and managing
network developments and flight schedules to respond to such changes
• Analysis of historical weather-related impacts to support future planning
• TCFD-aligned scenario analysis to better understand potential physical
impacts of climate change in future, and the potential locations of this
e.g. more turbulence on transatlantic flights, fires in Meditteranean
destinations, and hurricanes in the Caribbean
Chronic changes in weather
and physical impacts of
climate change such as
flooding, drought, forest
fires, heat waves, algal
blooms, coral bleaching,
rising sea levels and
reduced snow cover in ski
destinations could make
certain destinations less
desirable and impact
customer demand.
Policy risks
Carbon pricing
Risk description
Potential financial impacts
Mitigating/adapting actions
IAG carries passengers
within the UK and Europe,
where aviation emissions
are subject to carbon prices
due to the UK and EU
Emissions Trading Schemes.
Increases in carbon unit
prices above planned levels,
or unplanned exposure to
carbon pricing, could mean
increasing operating costs.
Additional compliance costs
under UK and EU ETS.
• Minimising emissions and so exposure to carbon pricing, via the
Flightpath Net Zero programme
• Operating airlines factoring carbon prices into operational decisions
• Fleet team using up-to-date models of carbon prices to inform fleet-
purchasing decisions
• Using an effective procurement strategy for carbon allowances and
offsets to protect against price volatility
EU Fit for 55 and UK climate policy
Risk description
Potential financial impacts
Mitigating/adapting actions
Lost demand due to
potential passthrough of
significantly higher
compliance costs to
customers. Traffic lost to
non-EU carriers which don’t
face the same costs.
• Minimising emissions and so exposure to climate-related policies
• Responding to the 2021 ReFuelEU consultation and UK SAF Mandate
consultation to minimise the risks of any mandates creating competitive
distortion or carbon emissions from other flights or regions
• IAG Government Affairs engaging in direct advocacy with EU policy-
makers and via trade associations SA, A4E and IATA to try to ensure
finalised policies address climate change in an effective and fair way
Current and proposed UK
and EU policy includes an
intra-EU kerosene tax, SAF
mandates, and non-
implementation of CORSIA
on intra-EU flights. Policy
risks include layering
(airlines paying for the same
carbon twice) and
competitive distortion
between EU and non-EU
carriers. Taxes increase
compliance and operating
costs without leading to
lower CO2 emissions.
INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021
79
SUSTAINABILITY
B. PLANET
Policy asymmetry and patchwork
Risk description
Potential financial impacts
Mitigating/adapting actions
A patchwork of differing
national and regional
carbon regulations could
lead to duplication of
compliance costs and
effects that distort
competition
between airlines.
Additional compliance
costs, and loss of traffic and
revenue due to competitive
distortion i.e. other carriers
not experiencing the same
costs.
• Advocacy for a global policy approach based on carbon pricing, by
building momentum for a global net zero target for aviation to be
agreed at the ICAO General Assembly in 2022. Actions include
supporting a European roadmap to net zero and oneworld roadmap to
net zero and convergence around a 10 per cent SAF ambition by 2030
• Continuing to support the UN CORSIA scheme as part of policy
advocacy at national and regional levels
• Allocating resources to engage with governments, trade associations,
IATA and ICAO
Extra regulation on activity not emissions
Risk description
Potential financial impacts
Mitigating/adapting actions
Lost revenue due to lower
flying activity, and potential
operational costs due to
need to shrink operations
relative to plan or absorb or
pass through additional
costs.
• Working via Sustainable Aviation to set 2030 and 2040 net reduction
targets and demonstrating credible industry pathways to net zero
without the need for demand management
• Advocacy for a global policy approach based on carbon pricing, by
supporting European and oneworld roadmaps to build momentum for a
global net zero target for aviation to be agreed at the ICAO General
Assembly in 2022
• Allocating resources to engage with governments, trade associations,
IATA and ICAO
The UK Climate Change
Committee has
recommended aviation
demand management by
2050 in the sixth carbon
budget. While the UK
government has not
adopted this approach, it
remains a potential risk in
the long term. Other
long-term risks include
enforced fleet renewal,
additional taxes and
frequent flyer levies, which
are costly and ineffective
policies for reducing CO2.
Lack of supporting SAF infrastructure or policy
Risk description
Potential financial impacts
Mitigating/adapting actions
Higher UK and EU ETS
compliance costs if SAF
supply cannot meet
demand or mandated
volumes.
• Building global momentum for SAF ambitions and policies by working
with trade associations
• Through JZC, lobbying for UK government support in the form of loan
guarantees and financial support for first-of-a-kind SAF plants, and a
price stability mechanism to reduce risks for investors
• €8.6 million invested in 2021 as part of $400 million SAF commitment,
along with multiple SAF projects in multiple regions to secure future
supply and a procurement strategy to minimise price-related risks
Meeting UK and EU SAF
mandates and IAG SAF
commitment in 2030 is
partly contingent on
adequate policy support. A
potential lack of supporting
government policy to
enable infrastructure could
limit SAF supply, leading to
SAF imports with lower
sustainability performance,
or higher ETS costs or
reputational damage.
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INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021
Strategic Report Regulation on non-CO2 effects
Risk description
Potential financial impacts
Mitigating/adapting actions
Lost revenue due to
industry demand impact of
higher compliance costs,
applied to all airlines not just
IAG.
• Working through trade association SA and research partnerships with
the RAeS to identify actionable solutions to reduce non-CO2 impacts
• A 2030 SAF commitment to accelerate uptake of SAF, which early
external research suggests reduces non-CO2 effects
EU or other policy makers
taking a punitive approach
to reducing non-CO2
impacts, by incorporating
them into climate
compliance schemes and
climate-neutral policy
objectives, which could
increase compliance or
operating costs.
Technology risks/opportunities
Use of lower-emission technologies
Risk/Opportunity description
Potential financial impacts
Potential low supply of new
zero-emissions technology
meaning its use is restricted
across the industry or is not
available to IAG. Suppliers
not being ready to use new
technology means uptake is
low or costly.
Limited ability to access or
scale-up new technologies
could lead to increased
operating costs and carbon
compliance costs relative to
competitors.
Lower fuel and compliance
costs from a fleet averaging
80g CO2/pkm, the Group
2025 target
Mitigating/enabling actions
• €10.8 billion committed for deliveries of 110 new fuel-efficient aircraft
between 2022-27
• Hangar 51 platform making early investments in innovative companies to
accelerate their development e.g. work with ZeroAvia
• Ongoing horizon scanning by IAG Tech for new technologies and
opportunities for ventures investment
• A dedicated sustainability category in the Group ten-week accelerator
programmes, to identify low-carbon innovators to work with
There is an opportunity to make use of latest-generation aircraft, which can reduce fuel burn and carbon impact by 15 to 40 per cent
compared with the aircraft they replace.
Use of lower-emission sources of energy
Risk description
Potential financial impacts
Mitigating/enabling actions
Potentially limited global
supplies of SAF could affect
the ability to uptake SAF in
the EU ETS and meet IAG
2030 SAF commitment.
This could also lead to
reputational damage.
Additional operating costs
and compliance costs.
• Ongoing investments as part of $400 million SAF commitment, along
with multiple SAF projects to secure future supply
• IAG staff chairing the SAF Delivery Group of the JZC, lobbying for a
price stability mechanism to reduce risks to investors of scaling up SAF
supply and securing UK Government support to incentivise 10 per cent
SAF in 2030
• An effective IAG SAF procurement strategy to secure early supply and
minimise price-related risks
Securing supplies of sustainable fuel presents a commercial and environmental opportunity, reducing operating costs relative to other
carriers and reducing compliance costs for CORSIA and the UK and EU ETS.
INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021
81
SUSTAINABILITY
B. PLANET
B.1.4. Metrics
Reference to GRI, TCFD and SASB standards: GRI 301-1, 302-1, 305-1, 305-2, 305-3, 305-4, 305-5. TCFD Metrics and Targets a, b,
c
IAG tracks and verifies Scope 1, 2 and 3
CO2-equivalent (CO2e) emissions.
Emissions are calculated by multiplying
fuel and energy use by appropriate
conversion factors that are aligned with
the Intergovernmental Panel on Climate
Change (IPCC) Fourth Assessment Report.
2021 UK Government conversion factors
are applied across the Group as these are
deemed to be the most robust available.
IAG discloses methane (CH4) and nitrous
oxide (N2O) as Scope 1 non-CO2
greenhouse gases (GHGs), in line with
these conversion factors.
Emissions were 65 per cent below 2019
levels due to COVID-related impacts, and
are expected to rise as flying demand
recovers. However, internal forecasts
suggest 2019 could represent peak
emissions, due to future use of a more
fuel-efficient fleet and greater use of SAF.
IAG focuses on reducing CO2 from jet fuel
use, as this represents 99.6 per cent of
CO2e emissions.
Renewable energy was 0.5 per cent of
total energy use due to the low availability
of sustainable jet fuel. Renewable
electricity was 86 per cent of electricity
use.
UK energy use was 55 per cent of total
IAG energy use, based on British Airways
Scope 1 emissions and Group electricity
use in UK-based offices.
5%
174,708
3%
81,017
11%
369,718
Total GHG emissions in tonnes CO2e1
Scope 3 GHG emissions in tonnes CO2e1
13%
424,000
TOTAL
3,316,005
68%
2,266,561
Scope 1
10,918,247 – 76.7%
CO2
10,809,339
N2O
102,150
CH4
6,758
TOTAL
14,242,692
100%
Scope 2
0.1%
8,440
Scope 3
23.3%
3,316,005
5%
174,708
3%
81,017
11%
369,718
13%
424,000
TOTAL
3,316,005
68%
2,266,561
Fuel and energy-related activities
Capital goods
Franchises
Downstream transport and distribution
All other Scope 3 categories
1 Scope 1 MWh is 41,960,297, Scope 2 MWh is 189,013.
Commentary on key metrics
Metric
Description
Fuel and energy-related activities
Capital goods
Franchises
Downstream transport and distribution
All other Scope 3 categories
Commentary
Gross
Scope 1
emissions
Scope 2
emissions
Direct emissions associated with IAG operations including use of
jet fuel, diesel, petrol, natural gas, and halon. Sources of emissions
include aircraft engines, boilers, auxiliary power units and ground
vehicle engines. SAF use is counted as a reduction in gross
emissions in line with globally recognised accounting standards
Indirect emissions associated with electricity use in ground
facilitites like offices, lounges, data centres and hangars. Market-
based emissions are based on the carbon intensity of electricity
purchased from suppliers. Location-based emissions are based on
the carbon intensity of national electricity grids.
CO2e is calculated using gCO2e/kWh factors from national
agencies in the UK, Ireland and Spain, and IEA national electricity
emissions factors.
2021 emissions remained low due to low flying
activity as a result of the COVID-19 pandemic.
The 19% decrease in location-based emissions was
driven by lower electricity use and greener national
electricity grids e.g. from lower use of coal.
Where the electricity use of overseas offices was
not available, kWh was based on leased space in m2,
multiplied by relevant kWh/m2 factors based on
historical data.
Scope 3
emissions
Indirect emissions associated with products IAG buys and sells.
Twelve out of fifteen Scope 3 categories, as defined by the GRI,
are relevant to IAG. Detailed descriptions of these categories are in
the Additional Disclosures section of the IAG NFIS.
81% of Scope 3 emissions relate to fuel use and
aircraft deliveries and retirements. Total Scope 3
emissions remained low due to low business
activity.
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INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021
Strategic Report Key carbon footprint metric
Scope 1 CO2e
Net Scope 1 CO2e
Scope 2 location-based
Scope 2 market-based
Scope 3
Other metric
Flight-only emissions intensity
Scope 2 emissions intensity
Revenue per tonne CO2e
Jet fuel2
Electricity
Energy
Renewable electricity
Renewable energy
Unit
MT CO2e
MT CO2e
kt CO2e
kt CO2e
MT CO2e
Unit
gCO2/pkm1
gCO2/pkm
€/tonne CO2e
MT fuel
‘000 MWh
Mn MWh
%
%
vly
-1%
-4%
-19%
-9%
-9%
% vly
-11%
-28%
+9%
-1%
-6%
+1%
0%
+0.1%
v2019
-65%
-62%
-47%
-57%
-60%
v2019
+5%
+55%
-7%
-65%
-29%
-42%
+14%
0.3%
2021
10.92
10.50
39.2
8.4
3.32
2021
94.6
0.34
771
3.42
189.0
42.1
86%
0.5%
2020
11.02
10.85
48.2*
9.3*
3.63*
2020
106.2
0.47*
705
3.45
200.1*
41.9*
86%
0.4%
2019
30.13*
26.95*
68.6
21.7
8.20*
2019
89.8
0.20
827
9.65
2018
29.99
27.22
70.4
40.7
8.79
2018
91.5
0.22
811
9.41
2017
28.76
26.17
92.6
61.9
7.88
2017
92.3
0.28
796
9.02
267.7*
234.9
253.2
119.7
72%
0.2%
119.4
54%
nr
114.4
54%
nr
Note: “nr” means “not reported”. * means restated using the latest robust data and assumptions.
Descriptions and commentary on other metrics is available in the ‘Additional Disclosures’ section of the IAG Non-Financial Information Statement.
1 pkm means “passenger-km” as defined in the commentary below.
2 SAF use was 2,350 tonnes of fuel in 2021 and delivered 6,506 tonnes of CO2 savings. See B.1.7. ‘Gross emissions reductions’
Commentary on key metrics
Metric
Description
Flight-only
emissions
intensity
Grammes of CO2 per passenger kilometre (gCO2/pkm) is a
standard industry measure of flight fuel efficiency. It is
calculated by dividing total jet fuel use by total passenger-
km, assuming ten cargo-tonne-km is equivalent to one
passenger-km.
Net Scope
1 emissions
For accuracy, IAG excludes the jet fuel used by franchises,
cargo carried on other airlines, and engine testing, and
excludes no-show passengers.
The passenger-km used in the 2021 calculation is
77,280 million and the cargo-tonne-km is 3,656 million.
Net emissions are calculated based on gross emissions
and then subtracting any carbon savings from EU ETS
compliance obligations, volumes of offsets purchased to
meet CORSIA compliance obligations, and the volumes of
offsets voluntarily purchased.
EU ETS allowances purchased from other sectors equate
to a net reduction as per European Commission guidance.
IAG has been disclosing net emissions since 2017 using
this methodology
Commentary
The 11% improvement in 2021 is driven by a recovery in
passenger load factors, although average load factors remain
below 2019 levels.
Average Group fuel efficiency is forecast to be below 90g
CO2/pkm in 2022 and on track for the 2025 target of 80g
CO2/pkm. IAG remains committed to the 2025 target.
2021 net emissions are reduced by 0.42 MT due to compliance
with the UK, Swiss and EU ETS in addition to voluntary
offsetting by Group airlines and passengers.
Net emissions reductions are also expected to be achieved via
CORSIA credits when global international emissions rise above
2019 levels.
Renewable
electricity
The share of electricity generated by renewable sources
such as solar power and wind, based on volumes procured
from renewable electricity suppliers. In cases where data
on electricity sources was unavailable, the source of
electricity is assumed to be the national grid.
Renewable electricity use across the Group has increased by
32 percentage points since 2017. This percentage is expected
to increase in 2022. It will be difficult to attain 100% due to use
of electricity supplied at airports and at overseas office
locations where renewable electricity is not available.
INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021
83
SUSTAINABILITY
B. PLANET
B.1.5. Transition plan
IAG recognises that all transport modes need to transition to net zero emissions to keep global warming below 1.5°C.
In 2019 IAG was the first airline group to sign the Business Ambition for 1.5°C Pledge and to commit to a transition to net zero
emissions by 2050. The IAG Flightpath Net Zero strategy included a 30-year emissions roadmap to meet this outcome as well as
short- and medium-term targets and a commitment to climate-related management incentives. The roadmap currently informs
ongoing scenario analysis, planning, strategy, and risk management. The latest scenario is shown below with key assumptions on the
next page.
IAG has also been a leader in developing aviation industry transition plans. It was the first airline group to support roadmaps to net zero
emissions across national, regional and global industry alliances, one of only two airlines worldwide to engage in both the SBTi
Technical Working Group for aviation targets and the road-testing of the SBTi Net Zero Standard, and one of only three airlines to be
acknowledged in the ATAG Waypoint 2050 work on global aviation decarbonisation. In 2021, via industry association SA, IAG staff
helped to develop and launch the first 2030 and 2040 climate targets for UK aviation: 20% and 40% net reductions respectively.
IAG will continue working with multiple industry partners, regulators, and stakeholders on pathways for aviation that support global
1.5°C ambitions, and to increase the ability of the industry to deliver emissions reductions.
Million tonnes CO2 (MT)
31
D e m a n d g r o w t h
52
50%50%50%
IAG is working to increase the contribution of
gross emissions reductions to the net zero
target. Each roadmap version reflects this.
22
Gross emissions
Net emissions
% of expected
emissions reductions in
2050
2021
version
2020
version
2019
version
New aircraft and
operations
SAF
Carbon removals
50%
30%
20%
45%
25%
30%
39%
18%
43%
30%30%
13
20%20%
)
0
5
0
2
n
i
l
e
u
f
f
o
%
0
6
s
i
F
A
S
(
s
n
o
i
t
c
u
d
e
r
2
O
C
e
g
a
t
n
e
c
r
e
P
2015
2020
2025
2030
2035
2040
2045
2050
Demand growth
Gross emissions
Net emissions
Sustainable aviation fuels (SAF)
New aircraft and operations
Carbon removals
Market-based measures and offsets
IAG climate targets
Pillar of carbon roadmap
Related actions to accelerate progress and innovation (also see Section B.1.9. ‘Innovation’)
New aircraft and operations
Sustainable Aviation Fuels (SAF)
• Ongoing fleet modernisation
• British Airways was the first airline worldwide to invest in hydrogen, with a Ventures
investment in ZeroAvia at the beginning of 2021
• Venture capital investment in i6 fuel management software company
• See ”Spotlight: Sustainable Aviation Fuel”
• Venture capital investment in leading sustainable fuels company Lanzatech
Market-based measures with offsets
• Support for the global CORSIA scheme to limit net emissions from aviation
Carbon removals
• Horizon scanning of carbon capture and removal opportunities
84
INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021
Strategic Report
B.1.6. Targets
Reference to GRI, TCFD and SASB standards: TR-AL-110a2. TCFD Metrics and targets c. Supports SDG 13
IAG’s net zero emissions by 2050 target will be delivered by working in collaboration with key stakeholders and proactively advocating
for supportive government policy and technology development. In this context, net zero emissions means that all CO2 that IAG
operations emit in a year will be balanced out by an equivalent amount of CO2 removed from the atmosphere.
IAG will review targets on non-CO2 impacts when the science around these becomes robust enough to attribute impacts and
reductions to individual airlines. Key actions to reduce non-CO2 impacts include greater uptake of SAF and route optimisation, and IAG
continues to explore these solutions through its trade associations.
IAG GBS is developing supply chain sustainability targets in conjunction with EcoVadis. To meet Scope 3 targets IAG will focus on
influencing change, identifying collaborative emissions reduction projects and phasing in contractual requirements. Some suppliers will
use a combination of gross and net reductions to meet their own targets and IAG plans to report more detail on this balance in future.
IAG remains committed to science-aligned targets. Independent guidance on 1.5°C-aligned targets for aviation has yet to be published
and we will review future guidance to ensure it accounts for the practical differences between aviation and other sectors. Where
possible, we will also work with the SBTi and other relevant stakeholders to build understanding of these differences and of industry
decarbonisation pathways.
IAG will continue working with other stakeholders to enable delivery of targets.
Current transition plan targets:
Base
year
Target
year
Target
2020 2020 Net zero CO2 emissions for all British Airways UK domestic flights from 2020 onwards. Achieved in 2020 and 2021.
2019
11 per cent improvement in gross fuel efficiency. From 89.8g CO2/pkm in 2019 to 80g CO2/pkm in 2025.
2025
2019
2019
2019
2019
2030 10 per cent SAF. Equivalent to approximately 1 million tonnes of fuel in 2030.
2030 20 per cent reduction in combined net Scope 1 and 2 CO2 emissions. From 27.6 MT in 2019 to 22 MT.
2030 20 per cent reduction in net Scope 3 CO2 emissions. From 8.1 MT in 2019 to 6.5 MT.
2050 Net zero Scope 1, 2 and 3 emissions. Use of removals to mitigate any residual Scope 1 and 2 emissions.
Operating company-specific climate targets for sustainability-linked loans
2019
2025
88.3g CO2/pkm in 2025 for British Airways, an 8 per cent reduction compared to 2019.
In January 2021, British Airways was the first airline worldwide to receive a loan linked explicitly to achievement of ESG targets.
Current transition plan assumptions:
The roadmap chart to the left represents a core Group scenario which assumes continued policy support for aviation decarbonisation,
an overall recovery to 2019 levels of passenger demand by 2023, and then annual demand growth aligned with industry growth
forecasts and external guidance. Scenario and cost analysis is ongoing.
Key roadmap updates in 2021 are:
• A 2040 introduction for zero-emission shorthaul aircraft, based on manufacturer announcements and certification timelines;
• 60 per cent SAF in 2050, based on policy moves in the UK, Europe and USA;
• Net emissions reductions via the compliance schemes the UK and EU ETS, CORSIA and voluntary offset projects;
• A clearer pathway to full use of carbon removals in 2050 for any residual emissions.
IAG is working with relevant stakeholders to accelerate progress in every pillar of the roadmap.
Delivery of current plans, dependent on appropriate policy support, will enable an approximately 70 per cent drop in gross emissions
by 2050 and an 80 per cent improvement in gross gCO2/pkm, relative to 2019. Only 10 per cent of total emissions reductions delivered
between 2020 and 2050 are expected to be from compliance and voluntary offset projects.
IAG will update this core roadmap scenario in 2022 to account for relevant business, policy, scientific and technology developments.
INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021
85
SUSTAINABILITY
B. PLANET
B.1.7. Gross emissions reductions and efficiency
Reference to GRI, TCFD and SASB standards: TR-AL-110a2. GRI 305-5. Supports SDGs 3, 8, 13
IAG is actively driving reductions in its gross emissions. Based on the latest carbon roadmap, these represent 80 per cent of total
emission reductions in the year 2050. There are four main methods of achieving these reductions:
• Modernising the aircraft fleet. Purchasing the latest aircraft models like the Airbus A320neo, Boeing 777 and Airbus A350, which are
up to 40 per cent more efficient than aircraft they replace, whilst retiring older aircraft;
• Optimising the use and efficiency of the aircraft fleet. For example, optimising flightpaths, allocating fuel-efficient aircraft to specific
routes and implementing in-flight efficiency initiatives which save fuel without compromising safety, service or flight schedules.
These initiatives include optimised engine washes, single-engine taxiing, continuous descents, landing flaps and reducing weight
onboard;
• Increasing the use of cleaner energy sources in the fleet. For example, use of SAF displaces fossil fuel use and delivers lower CO2
emissions over a comparable lifecycle. Fuels from bioenergy and non-fossil carbon-rich feedstocks are also used outside the aviation
industry; and
• Increasing the use of renewable electricity and renewable energy for ground faciilities and operations.
IAG continues to develop operational and fuel efficiency initiatives for both aircraft and ground operations.
Metric
GHG reduction initiatives
Fleet age
Unit
CO2e tonnes
years
vly
v2019
2021
2020
2019
2018
2017
247%
+8%
-9%
-2%
59,725
17,208
77,386
65,887
11.2
10.6
11.4
11.3
nr
11.4
Key 2021 emission reduction milestones:
• 6,506 tonnes of CO2 saved due to SAF use in 2021 and a pipeline of projects in support of our 2030 SAF target;
• Regular meetings of an IAG-wide sustainability Fuel Efficiency Working Group to support and enable fuel efficiency practices across
IAG’s global network, including ongoing use of the Honeywell Flight Efficiency software;
• British Airways carried out a “perfect flight” from London to Glasgow on a fuel-efficient Airbus A320neo, delivering emissions 62 per
cent lower than to a similar flight a decade ago due to a 35 per cent SAF blend and maximising on-ground and in-flight efficiency;
• Vueling reduced 1,000 tonnes of onboard weight by using lightweight trolleys and worked with the Spanish air traffic management
provider ENAIRE to improve airspace efficiency;
• Aer Lingus carried out more robust evaluation of fuel efficiency trends;
• Iberia started receiving electricity from 10,000m2 of solar panels on its engine maintenance hangar in Madrid, the largest site to
self-generate electricity of any company in the IBEX 35; and
• IAG Cargo successfully completed trials of new electric vehicles at London Heathrow and Dublin airports.
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INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021
Strategic Report Spotlight: Sustainable
Aviation Fuel
In April 2021, IAG was the first European
airline to commit to 10% SAF by 2030,
dependent on appropriate government
policy support.
This is the equivalent of using 1 million
tonnes of fuel in 2030, with the equivalent
carbon saving of taking over 2 million cars
off the road. IAG has a long-standing SAF
commitment, having committed in 2017 to
invest $400 million in SAF over 20 years,
and is targeting use of at least 19 million
tonnes of SAF between now and 2040
based on the latest roadmap.
IAG is a leader in the development of SAF
projects not only through committed
purchases of SAF, but also by making
direct investments in new and innovative
SAF production capacity, spurring the
wider development of the SAF market. The
Group’s investments are backed up with
SAF purchase agreements which are
critical to the financeability of the new SAF
production capacity. IAG has also been
leading the industry at developing and
advocating for “second-generation” SAF,
which use carbon-rich waste feedstocks
and advanced conversion technologies, as
opposed to first-generation SAF which is
predominantly manufactured using crop
feedstocks.
agreements. British Airways, Iberia and
Vueling all operated flights using SAF
blends, and IAG airlines had uptakes of
mandated SAF volumes in Norway and
Sweden.
Key firsts for the Group:
2021 was a significant year for the Group
SAF programme. It remains on track with a
total of €8.6m million invested in SAF
• Managing the import of the UK’s first
ever bulk SAF to supply IAG Cargo to
operate the world’s first net zero cargo
charter flights between Stuttgart,
Heathrow and Atlanta for its
customer Kuehne+Nagel; and
• Developing the partnership with the UK
refiner Phillips 66 to develop the UK’s
first SAF production facility, with British
Airways the first airline in the world to
receive SAF from this facility from 2022.
Some current SAF projects:
IAG continues to work with technology developers to establish a range of SAF supply options for the future. Below are some of the
projects that are in the public domain and we continue to develop others including carbon capture projects.
Project/Partner
IAG Cargo/Neste
COP26/AirBP
Phillips 66/Phillips 66
Freedom Pines/LanzaJet
oneworld/Aemetis
Project Dragon/LanzaTech
Bayou Fuels/Velocys*
Feedstock
Production location
Planned
production start
Used cooking oil (UCO)
UCO
Europe
Europe
2021 one-off
2021 one-off
UCO/Food waste
Humber, UK
Agricultural wastes
Georgia, USA
Waste wood
California, USA
Waste gases and agriculture
South Wales, UK
Forestry residues
Missisippi, USA
2022
2023
2024
2025
2026
2026
2027
Speedbird/LanzaTech/NovaPangea*
Waste wood, forestry residues
UK
Altalto/Velocys*
Municipal waste
Immingham, UK
*includes carbon capture and storage.
INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021
87
SUSTAINABILITY
B. PLANET
• British Airways and Aer Lingus
continued to offer voluntary carbon
offsetting for passengers and Iberia
created a carbon calculator to enable
passengers to establish their carbon
impact; and
• The British Airways Carbon Fund, in
partnership with not-for-profit charity
Pure Leapfrog, worked to deliver four
high-quality carbon reduction projects in
the UK and Africa. One example was
supporting community-owned
renewable power close to the British
Airways engineering/maintenance base
in Wales.
B.1.8. Net emissions reductions
Reference to GRI, TCFD and SASB standards: TR-AL-110a2. Supports SDGs 7, 9, 13
Net/out-of-sector emissions reductions are
a critical part of aviation decarbonisation
pathways, as airlines proactively lay the
groundwork for faster reductions in gross
emissions in future.
IAG sees carbon offset projects as key to
reducing its emissions in the short and
medium term, en route to full use of
carbon removals in 2050 to mitigate any
residual emissions.
IAG is delivering net reductions via three
key channels:
• Through the EU-regulated Emissions
Trading Scheme, purchasing carbon
allowances from other sectors which
drives and funds additional emission
reduction projects. Airlines have been
participating since 2013;
• Through the UN-regulated CORSIA
scheme, investing in a combination of
fleet modernisation, efficiency, SAF and
offsets to meet the global goal of
keeping net international aviation
emissions at or below 2019 levels; and
• Through voluntary funding of
internationally verified offset or carbon
removal (‘negative emissions’) projects
in the UK, Europe and around the world.
This funding can either come from
customers who choose to mitigate the
impact of their flights, or from IAG or
operating companies funding projects
directly. British Airways has offered
voluntary offsetting since 2003.
When IAG or operating companies choose
to voluntarily invest in carbon avoidance
and removal projects, they work in
collaboration with key partners, carry out
due diligence to select reputable providers
and select projects carefully to meet and
align with verified quality standards such
as Gold Standard- and Verified Carbon
Standard (VCS)-verified carbon reduction
projects.
2021 projects included rainforest
protection in Cambodia, Peru and the
Congo Basin, and sustainable cook stoves
for communities in Sudan and Malawi.
IAG will be required to purchase credits for
CORSIA when global emissions from
international flights rise above 2019 levels.
Key 2021 progress:
• IAG contributed to a landmark report by
McKinsey and the Coalition for Negative
Emissions outlining the Case for
Negative Emissions and the need for
urgent government action to develop
supportive carbon removals policy;
Metric
Unit
vly
v2019
2021
2020
2019
2018
2017
Net emissions reduction through
EU, UK, Swiss ETS
Via voluntary funding and
projects
‘000 tCO2e
n/a
-93%
‘000 tCO2e
+17%
n/a
219
197
0*
3,182
2,634
168
nr
nr
nr
nr
* Emissions levels in 2020 were below the EU ETS sector cap for aviation so no net reductions were delivered.
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INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021
Strategic Report All customers booking flights directly
through British Airways are offered the
choice to voluntarily donate to the BA
Carbon Fund or an option to mitigate the
carbon emissions of their flight through a
standalone website: BA Carbon Neutral.
The British Airways Executive Club also
allows customers to make a Carbon Fund
donation using their Avios points.
In 2021, British Airways became one of the
first airlines in the world to have a
voluntary SAF offer available to customers
including corporates.
All operating airlines are planning to
expand their portfolios of sustainability
products and services in 2022.
B.1.9. Innovation
IAG invests in innovation to meet its
targets, drive decarbonisation in the Group
and to accelerate wider change towards a
more sustainable industry.
Hangar 51 is IAG’s core innovation
platform, which continues to attract the
world’s top emerging technology
companies working on sustainability
solutions.
IAG also has established governance
processes to review new potential
investments in emerging climate
technology and partnerships with start-
ups. This process is overseen by the CSO,
CFO, CIO and General Counsel.
IAG supports climate technology
innovation via its accelerator, incubator,
venture capital investments, university
collaborations, active pilots, supporting
applications for grant funding, and
research and development consortia.
IAG representatives also sit on academic
boards and public-private partnerships to
support new technologies and innovation.
For example, IAG staff sit on the UK
Government’s Jet Zero Council, academic
boards (Cranfield and Heriot Watt
Universities), the Aston Supergen
consortium, and the Steering Board of the
UK Biotechnology and Biological Sciences
Research Council (BBSRC). Iberia
continues the La Cátedra Iberia research
collaboration with the Polytechnical
University of Madrid.
In 2019, the Group launched the first
dedicated sustainability accelerator in the
aviation industry. In 2021, the focus of this
broadened with the inclusion of a new
Future Energy category. From hundreds of
applications the Group chose to work with
12 pioneering start-ups covering topics
such as new hydrogen fuel cell solutions,
electrification infrastructure, customer
engagement tools and carbon removal
technologies.
In 2022, the Group will continue to expand
its focus on sustainability innovation to
accelerate decarbonisation.
B.1.10. Sustainable products
and services
IAG offers customers including corporates
a range of sustainable products and
services to help them to reduce their
carbon emissions and to support wider
sustainability goals. These goals include
community development and protecting
biodiversity.
Within the Group, British Airways currently
has the widest range of sustainability
offers available for customers and has
offered voluntary carbon offsets since
2003.
The British Airways Carbon Fund delivers
carbon reduction projects in the UK and
Africa with community co-benefits. British
Airways receives no revenue from this
fund.
Spotlight: new waste targets
In 2021 IAG developed and approved new “5 through 2025” waste targets. More details are on the next page.
“5 through 2025” focus areas
Single-Use Plastic (SUP)
Onboard waste3
Office waste
Maintenance waste
Cargo waste
2019 generation1
2025 generation target
2019 recycling
2025 recycling target
–
Zero-based2
0.33 kg/pax
96 kg/staff
0.63 kg/person-hour
1.55 kg/kg cargo handled
-20%
-50%
-25%
-25%
–
24%
35%
50%
63%
–
40%
60%
70%
80%
1 Detailed definitions of waste types and metrics are available in the Additional Disclosures section of the IAG NFIS.
2 Zero-based means eliminating as much as possible in all areas of operation, acknowledging that some plastics may still be required in 2025 where
alternatives do not exist.
3 The 40 per cent target is an average across the Group for waste processed at hub airports. Other targets apply to all operating companies as a
minimum level of ambition.
INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021
89
SUSTAINABILITY
B. PLANET
B.2. Waste
Reference to GRI, TCFD and SASB standards: GRI 306-1 (2020), 306-2 (2020), 306-3 (2020)
Supports SDG 12
New targets:
IAG is committed to reducing, reusing and
recycling waste. In 2021, IAG set new and
comprehensive waste reduction targets as
outlined on the previous page.
The “5 through 2025” waste strategy is
expected to save approximately 20,000
tonnes a year from landfill and incineration
compared to 47,728 tonnes sent to landfill
or incineration in 2019.
This strategy covers the five core areas of
single-use plastic (SUP), onboard, office,
cargo, and maintenance waste. Separate
reduction and recycling targets are applied
to all four airlines and to IAG Cargo.
IAG plans to report detailed progress
against these targets in 2022. Currently,
the impacts of the COVID-19 pandemic
make it difficult to establish meaningful
year-on-year trends.
IAG will also advocate to national
governments and via IATA for clear and
supportive waste policies which would
enable the Group to be more ambitious.
Key 2021 progress:
• IAG airlines worked together to identify common sustainable solutions for Group cutlery, to comply with the EU SUP ban which
entered into force in July 2021;
• British Airways and Iberia launched new services (Buy-Before-You-Fly and DeliverFly) to give passengers the choice of buying fresh
and ambient products before departure. These services remove food waste from unpurchased shorthaul economy meals while
maintaining customer choice;
• Vueling developed an internal dashboard to track waste and set a target to segregate 60% of onboard waste by 2023; and
• IAG Cargo increased recycling rates by 6 per cent at both the London and Dublin hubs.
Waste commentary:
Onboard services are IAG’s main source of waste. Key inputs include onboard meals and amenity kits supplied to passengers, and key
outputs include plastic packaging, leftover food waste, drinks cans, and cabin items such as wrappers. Waste is typically offloaded and
processed at airports by third-party caterers, with some materials recovered on-site and other materials incinerated or sent to landfill.
The majority of cabin and catering waste is processed at IAG’s hub airports – London Heathrow, Dublin, Madrid and Barcelona.
Waste regulations limit the amount which can be recycled. For example, Irish regulations require specific categories of onboard waste
to be incinerated.
IAG supports innovation to minimise waste. For example, as part of the 2020 Hangar 51 platform, Iberia worked with Countalytics to
track its flows of onboard waste and develop better onboard services.
Metric
Onboard waste at hub airports
Onboard waste generated per passenger at hubs
Overall waste (onboard, office, maintenance, cargo)
Overall recycled and recovered
Unit
‘000 tonnes
kg/pax
‘000 tonnes
%
vly
-7%
-19%
-10%
+6%
v2019
-54%
+42%
-54%
+9%
2021
12.3
0.47
27.6
30%
2020
13.2
0.58
30.6
24%
2019
27.0
0.33
60.2
21%
Note: 2019 and 2020 values have been restated due to a more rigorous methodology aligned to GRI standards.
Metric
Description
Commentary
Waste/pax at
hubs
• Onboard catering waste generated per passenger,
including volumes later recycled and recovered.
• Passenger numbers are based on those inbound and
outbound passengers who have their waste processed
at hub airports London Heathrow and Gatwick, Madrid,
Barcelona and Dublin.
• Includes waste from all streams – onboard, office, cargo
and maintenance waste – and an extrapolation of waste
processed at overseas airports, where waste
destinations are not always reported by third parties.
• Excludes waste sent to incineration.
Overall waste
Overall
recycled and
recovered
Onboard waste generated per passenger decreased in
2021 due to more predictable passenger behaviour and a
reduced share of longhaul flying, which has more
comprehensive onboard meal services.
This metric is likely to increase in 2022 even with an
enhanced focus on waste reduction across the business.
2021 volumes remain much lower than 2019 due to
reduced flying activity.
Overall recycling/recovery rates have improved due to a
higher share of flying from Spanish hub airports, where
more waste can be recycled at processing facilities.
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INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021
Strategic Report B.3. Noise and air quality
Reference to GRI, TCFD and SASB standards: GRI 305-7. Supports SDGs 3, 11
IAG remains committed to reducing the
impact of aircraft noise and air pollution on
local communities near airports.
The average noise per journey – per
landing and take-off cycle – has reduced
by 19 per cent in the past five years. Due to
the early retirement of Airbus A340s and
B747s in 2020, an 8 per cent drop in
average noise per sector was achieved in
2021 alone, almost meeting the 10 per cent
noise reduction target set for 2025.
IAG will update noise targets in 2022.
Operating companies continue to work to
minimise noise impacts. They regularly
monitor noise and air quality performance
using national databases and global
aircraft noise standards. Improvements are
driven via fleet modernisation and specific
operational practices like continuous
descents. Airlines also engage with
stakeholders such as community groups,
regulators and industry partners and
participate in research and operational
trials.
IAG supports innovation to reduce noise
impacts. In 2021, Iberia participated in the
EU AVIATOR project to better understand
air pollution impacts at airports using
research on real aircraft. In 2022 a testing
campaign will be carried out using SAF.
Detailed descriptions on all noise metrics
are available in the IAG NFIS.
Metric
Noise per cycle
NOx per cycle
ICAO Chapter 14
CAEP Chapter 6
CAEP Chapter 8
Unit
QC per LTO
kg per LTO
% at standard
% at standard
% at standard
Vly
-8%
-8%
-2%
0%
3%
v2019
-12%
-1%
+3%
+2%
+8%
2021
0.88
9.10
56%
80%
43%
2020
0.96
9.84
58%
80%
40%
2019
1.00
9.23
53%
78%
35%
2018
1.07
9.71
50%
74%
29%
2017
1.06
nr
46%
69%
26%
% at standard is based on the fleet position at the end of 2021, including parked aircraft and excluding leased aircraft. Metrics per LTO are based on
operational aircraft during the year.
Related risk: Operational noise restriction and charges
Risk description
Mitigating actions
Airport operators and regulators apply operational noise
restrictions and charging regimes which may introduce additional
costs or restrict airlines’ ability to operate e.g. restrictions on night
flights.
• Investing in new quieter aircraft as part of fleet modernisation
• Continually improving operational practices including
continuous descents, slightly steeper approaches, low-power
low-drag approaches and optimised departures
• Internal governance and training and external advocacy in UK,
Ireland and Spain to manage noise challenges
INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021
91
SUSTAINABILITY
C. PEOPLE AND PROSPERITY
C. People and Prosperity
C.1. Workforce overview
Reference to GRI, TCFD and SASB standards: GRI 403-4, 408-1, 409-1
Supports SDG 12
2021 has been another challenging year for
the Group and for our colleagues as we
continue to navigate the impacts of the
COVID-19 pandemic, aligning our
resourcing levels to the operational needs
of the business, ensuring we are ready to
take advantage of opportunities as
restrictions are lifted, and ensuring we
protect the safety and wellbeing of
colleagues and customers.
IAG aims to create an environment in
which employees feel motivated, safe and
able to thrive as this is central to the
continued success of the Group. Core
principles in the Code of Conduct include
fair and equal treatment, non-
discrimination, fairness and respect for
human rights. This Code applies to all
Directors, managers and employees of the
Group and e-learning training to support it
is mandatory and applicable to all
employees and Directors. In addition to the
Code of Conduct, individual operating
companies have responsibility for policies
and procedures relating to their
employees, including appropriate reward
frameworks to ensure they can continue to
attract and retain the best talent for every
role.
At the end of 2021, 56,658 people were
employed across the Group in 81 countries,
a decline of 2 per cent in the year. Our
voluntary turnover rate for 2021 was 5 per
cent compared with 15 per cent in 2020, a
change that reflects the completion of the
necessary resizing of the business in
response to COVID-19 but also giving
some indication of new hiring and role
creation in 2021. The necessary changes
put in motion in 2020 and 2021 have
positioned the business to a place which
has allowed us to safeguard jobs in key
areas of the business and take advantage
of the opportunities as travel restrictions
ease.
As the business pivots towards recovery
from COVID-19, there has been a key
emphasis and focus on maintaining and
retaining employees during 2021 – which is
reflective in our workforce measures.
There has been no material change in our
headcount position compared to 2020 and
there is some evidence of headcount
growth in areas where we have seen a
more regular pattern of flying return. As
the world begins to open there is the
expectation that our recovery will continue
into 2022 and this will be reflected within
our workforce population and composition.
As public health guidance changed and in
line with operational requirements,
employees across the Group started
returning to our offices and our operating
companies have taken approaches to
coordinate and support the safe and
flexible return of our employees. Our
operating companies have promoted a
balanced, flexible and hybrid working
model which enables the right balance
between flexibility whilst bringing the
benefits of being together as a team. At
Aer Lingus this is being promoted as
“hybrid working” and is guided by the
principles that people are expected to
develop the right balance between home
and office working, reflecting role
requirements and personal circumstances.
Similarly, British Airways has recently
introduced a hybrid model of working,
which allows employees to create a mix of
remote and office working which is right
for them based around the concept of
“neighbourhood” communities for teams
and hot-desking. Iberia has also welcomed
back employees to its offices and has an
individualised return to work programme
for teams – launching targeted managerial
and all employee guidance and mandatory
training for all employees.
Operating companies have also been
making considerable investments in the
workplace and both Vueling and IAG
Loyalty have recently modernised and
moved into new office facilities. These new
facilities have been created to foster a
more open and modern office environment
which will help to facilitate collaboration
and communication between teams.
Measures to support employee satisfaction
and talent management are primarily
managed within operating companies and
each operating company has its own
established methods of measuring
employee satisfaction. In addition, IAG has
introduced an organisational health survey,
initially focused on management
populations across all operating companies
to benchmark management practices
against a globally recognised metric. This
survey was run initially in November 2020
and repeated in October 2021. Insights
from the survey are used to shape and
prioritise cultural development plans.
Individual operating companies are
responsible for learning, development and
talent within their business, to enable them
to ensure they have the right skills and
capabilities required to support their
strategy. In 2021, IAG launched a new
leadership and talent strategy, building on
the work within each operating company
and enabling improved attraction,
retention and mobility of talent across the
Group. IAG is currently working to align
the talent management framework across
the Group, initially focusing at Group level
on the IAG Management Committee and
their direct reports. IAG has a strong track
record of retaining and promoting talent
into senior roles, as evidenced by the
Management Committee appointments
during 2020 and 2021, and this new
approach will improve the rigour and
consistency of talent management across
the Group.
IAG has employees based in European
countries which comply with the
conventions of the International Labour
Organization (ILO), covering subjects that
are considered as fundamental principles
and rights at work: freedom of association
and the effective recognition of the right
to collective bargaining; the elimination of
all forms of forced or compulsory labour;
the effective abolition of child labour; and
the elimination of discrimination in respect
of employment and occupation. Outside of
the EU, IAG recognises trade unions in
many jurisdictions, has collective
agreements and meets/exceeds all
relevant labour standards.
IAG has a European Works Council (EWC)
which brings together employee
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INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021
Strategic Report representatives from the different
European Economic Area (EEA) Member
States 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 Member
States. During 2021, IAG hosted one full
meeting of the EWC and 11 Select
Committee meetings, which have all been
held virtually. In November 2021 we
commenced the nominations and elections
process for new representatives of the
EWC, a process which had been
postponed due to the pandemic.
Reflecting the changing geopolitical
landscape and the specific role of the EWC
to manage transnational issues for EEA
Member States, the UK will cease to have
representatives within the EWC, and we
will continue to engage with UK employee
representative groups on matters relevant
to them. The EWC election and
appointment process for the new Select
Committee and Chair will be completed in
February 2022.
Within the Group, individual operating
companies have responsibility for the
policies and procedures relating to their
employees, including reward frameworks
to ensure they can continue to attract and
retain the best talent for every role.
Due to the diverse nature of Group
businesses, both in terms of jurisdictions
and operations, all training policies and
programmes are implemented at operating
company level. Each is responsible for
determining the specific courses offered
within their organisation, the frequency
with which training courses must be
completed, and the employees required to
attend. However, across the Group, all
operating companies are required to run
the following mandatory corporate training
courses for their employees:
• Code of Conduct
• Compliance with Competition Laws
• Anti-bribery and Corruption Compliance
• Data Privacy, Security and Protection.
C.2. Health, safety and wellbeing
Reference to GRI, TCFD and SASB standards: Supports SDG 3
IAG is committed to safeguarding the
health and safety of our employees,
customers and all others affected by our
activities. This means operating in a
healthy, safe and secure way in compliance
with all applicable laws, regulations,
company policies and industry standards.
Health and safety are fundamental to our
business, whether in the air or on the
ground. It is our highest priority.
IAG has robust governance processes in
place led by the safety committees in each
operating company. The IAG Safety,
Environment and Corporate Responsibility
Committee monitors all matters related to
the operational safety and Corporate
Responsibility of IAG’s airlines as well as to
the systems and resources dedicated to
safety activities across the Group.
IAG’s customers travel on aircraft and
through buildings and environments that
are subject to regulations applicable to
health and safety in each country.
Procedures, systems and technology used
in our operations are designed to protect
employees and customers alike.
COVID-19 continues to be present in our
communities and impacts our people and
the Group continues to follow expert
guidance from bodies such as the IATA
Council Aviation Recovery Taskforce
(CART), the WHO, Public Health England
and Spanish and Irish authorities. New
safety and hygiene measures have been
introduced for all employees and
customers. All these measures have been
carefully thought through alongside the
need to reflect the latest advice from
public health authorities and aviation
regulators.
To support employee wellbeing across the
Group, each operating company has
continued to create new websites and has
deployed internal resources to support
mental health and COVID-19 safety. For
example, British Airways built on existing
resources put in place throughout 2020
and issued daily press updates which
continue to highlight wellbeing and the
support available such as information
about its Employee Assistance Programme
and the UNMIND mental health digital
application. The latter includes webinars,
interviews and other resources, and access
was extended to family members of
employees in the second half of 2020.
Iberia has also continued with its COVID-19
prevention training which is now
mandatory for all employees returning to
the office. In collaboration with local
authorities in Madrid, Iberia has also
assisted in the vaccination programme and
operated a vaccination centre on premises
between July 15 and September 30.
Additionally, Iberia has taken part in the
“Elige Cuidarte” (“Choose to take care of
yourself”) programme aimed at getting all
its employees vaccinated against both
COVID-19 and the flu.
INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021
93
SUSTAINABILITY
C. PEOPLE AND PROSPERITY
C.3. Diversity, inclusion and equality
Reference to GRI, TCFD and SASB standards: GRI 406-1
Supports SDG 5
IAG has a Group-wide Equal Opportunities
policy to address and eliminate
discrimination and promote equality of
opportunity regardless of age, gender,
disability, ethnicity, religion or sexual
orientation. At Group level, IAG also has a
Directors Selection and Diversity Policy
that sets out the principles that govern the
selection process and the approach to
diversity on the Board of Directors and the
IAG Management Committee. These
policies have been approved by the Board
of Directors.
Key 2021 progress on gender diversity
and equality:
• IAG has increased the number of women
in senior executive roles to 33 per cent, a
3 per cent increase on last year. In 2021,
working with senior leaders across the
Group, we have reviewed our targets
and plans and are delighted to announce
an increase in our external target to 40
per cent women in senior roles by 2025;
• Iberia and Vueling have revised their
equality plans covering all employees in
Spain reflecting new legislation;
• British Airways has made commitments
to equal opportunities within its
recruitment processes and has
announced a commitment to 100% open
recruitment, diverse shortlisting and
diverse interview panels;
• IAG launched the Elevate programme
– a peer networking programme for
senior women;
• Iberia has successfully launched its “Take
the Lead” programme aimed at cross-
mentoring for women within the
business;
• Iberia participated in the III Business
Summit #MujeresyLiderazgo (Women
and Leadership), organised by the
consulting firm 50 & 50 Gender
Leadership in collaboration with CEOE;
• Vueling and Iberia, alongside the Spanish
Aviation Safety and Security Agency
(AESA) and Airbus, produced an
awareness campaign video on
International Women’s Day to showcase
women in the aviation sector;
• IAG and IAG GBS, to mark and celebrate
International Women’s day, hosted a
“fireside chat” led by female members of
our Senior Executive community; and
• Aer Lingus achieved the “Investors in
Diversity” Bronze accreditation.
Key 2021 progress for other under-
represented groups
In 2021 we created a new Diversity Panel
to share best practice and to lead the
co-design of new diversity and inclusion
initiatives. We are reviewing key
employment policies, to ensure they are
inclusive and fair for all, and are looking
into how we manage declarations in our
core countries of operation reflecting the
cultural and regulatory environment, with
an aim to use data and insights to set
targets and develop action plans.
Key initiatives for under-represented
groups:
• Our procurement team is using the
EcoVadis tool to evaluate our top
suppliers including a review of diversity
and inclusion, enabling us to promote
and support inclusion throughout our
supply chain;
• British Airways launched its Reverse
Mentoring programme for ethnic
minority colleagues up to Management
Committee level and celebrated Black
History Month with several events
including: videos and interviews with the
Senior Leaders; an all-Black gate team;
and a webinar from Tessy Ojo OBE,
Chief Executive Diana Award UK;
• Aer Lingus launched visual guides on
aerlingus.com to support customers with
cognitive disabilities and has rolled out
disability awareness training for all front
line employees; and
• GBS ran Lunch and Learn session led by
an external expert to celebrate BHM and
encourage people to speak about racism
and allyship.
94
INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021
Strategic Report C.4. Human rights and modern slavery
Reference to GRI, TCFD and SASB standards: Supports SDGs 3, 4, 5
IAG had no known cases of human rights
violations across the Group during 2021.
IAG GBS screens suppliers to identify and
mitigate potential incidences of human
rights violations, and modern slavery
clauses feature in all new supplier
contracts as well as contract renewals.
IAG is taking steps to prevent incidences
of modern slavery within the Group and
across its supply chains. In terms of
policies associated with human rights, IAG
asks suppliers to adhere to the IAG Group
Slavery and Human Trafficking Statement,
which was last updated in 2021 and is
available on the IAG website. This
statement is made under section 54, part 5
of the 2015 UK Modern Slavery Act (MSA).
trafficking and reaffirming a commitment
to tackle this issue.
IAG is taking steps to prevent human
trafficking. Human trafficking is of
particular concern to IAG and to the wider
aviation industry, as the Group transports
millions of passengers every year and has
tens of thousands of suppliers across the
world. Operating airlines work closely
with governments and the airports in
which they operate to ensure that any
suspected trafficking on our flights is
identified, reported and dealt with
appropriately. IAG also supports the 2018
IATA resolution denouncing human
Operating airlines also train staff to
recognise and respond to the signs of
potential human trafficking situations and
provide procedures for reporting where
any cases are suspected. This training is
managed at airline level. In 2021, over
27,000 employees have completed over
38,000 hours of training covering Human
Rights topics.
In 2022, IAG plans to review the
assessment of human rights risks within
the business.
Human rights
Risk description
2021 Mitigating actions
Not preventing potential incidences of human trafficking via IAG
routes, damaging efforts to improve human rights and associated
legal and reputational impacts. Potential human rights or modern
slavery violations in the supply chain leading to fines, compliance
issues, business interruption or reputational damage.
• Updated Group Slavery and Human Trafficking Statement
• Training for staff to recognise signs of potential human
trafficking and guidance and processes in place to report this
• See A.6. Supply chain sustainability
C.5. Community engagement and charitable support
Reference to GRI, TCFD and SASB standards: GRI 102-13, 201-1. Supports SDG 11
IAG operating companies have long-
standing partnerships to support
community causes both locally and around
the world. Key partnerships include:
• British Airways has partnered with the
Disasters Emergency Committee for
eight years and helped raise over
£1.5 million supporting 17 humanitarian
appeals;
• Vueling has been working with Save the
Children for seven years and is the
second-largest sponsor of this NGO in
Spain;
• Iberia has been contributing to the
UNICEF children’s immunisation
programme for eight years. This
programme focuses on diseases like
polio and measles and has paid for the
vaccinations for more than a million
children in Chad, Angola and Cuba;
• Aer Lingus staff have had an annual
“Make a Difference” day for staff
volunteering for a decade. While this did
not go ahead in 2020 and 2021,
Aer Lingus was a significant contributor
to the COVID-19 global response via
flights of medical equipment between
Europe and China; and
• British Airways has been working with
the “Flying Start” global charity
programme, in partnership with Comic
Relief, for over a decade. This
programme has helped over 864,000
people in some of the world’s poorest
communities.
Key 2021 milestones:
• IAG Cargo transported over 19 million
COVID-19 vaccines, including a 4 million
dose shipment to Abuja, Nigeria in
collaboration with UNICEF and its
COVAX initiative and 300,000 doses to
Jamaica, donated by the UK
Government;
• IAG GBS employees supported the
“Business versus Smog” programme in
Poland, improving environmental
awareness among children;
• Iberia launched its corporate
volunteering programme “Cada acción
suma”, and via a collaboration with NGO
Mano a Mano and Iberia Express, sent
almost five tonnes of supplies to La
Palma residents affected by the volcanic
eruption; and
• Vueling supported multiple causes
including the Spanish Association
Against Cancer, Caritas, ASPANOB and
LOVAAS foundation which supports
children with different degrees of autism.
In 2021, €2.7 million was raised for charitable causes across the Group. Of this, 33 per cent came from customer contributions, 10 per
cent from company donations, 50 per cent from employee contributions, and 7 per cent from in-kind donations. The total remains
lower than 2019 due to reduced flying affecting customer contributions and reduced business activity limiting fundraising campaigns.
Metric
Total raised
Unit
€ million
vly
-42%
v2019
-53%
2021
2.7
2020
4.6
2019
5.7
2018
nr
2017
nr
INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021
95
SUSTAINABILITY
C. PEOPLE AND PROSPERITY
C.6. Workforce measures
Reference to GRI, TCFD and SASB standards: GRI 102-7, 102-8, 401-1, 405-1
Description and commentary for key workforce metrics
Metric
Description
Unit
Employment Average
• Manpower equivalent is the number of employees
manpower
equivalent
adjusted to include part-time workers, overtime and
contractors.
• The average is the mean of the manpower
Commentary
• The 17.1% decrease reflects the resizing of
the business in 2020. This is an average
figure and most of the resizing took place in
Q4 2020.
equivalent captured quarterly to reflect seasonality.
• This measure accounts for employees’
Headcount
Number of
people
• Headcount is the actual number of people employed
across the Group (employees) at December 31, 2021.
contractual schedule of work and therefore
does not account for the impact of
COVID-19 job retention scheme.
• Overall headcount decreased over the year
by 2.2%.
• Reflects the necessary workforce actions
taken in 2020 and in the beginning of 2021.
Composition %
• Composition is a breakdown of headcount as at
• Increase in temporary workers to 4%, driven
headcount
by
employment
type,
contract and
employee
categories
December 31, 2021.
• Full-time employees are defined as those working
full contractual hours as at December 31, 2021.
• A temporary employment contract has a defined
end date.
• The employee category breakdown portrays the
distribution of the major groups within IAG’s
workforce “in the air” – Pilots and Cabin Crew – and
“on the ground” – Airport, Corporate
and Maintenance & Logistics.
Employees
by country
Number of
people
• This metric depicts the distribution of the Group’s
employees according to the country in which they
are based.
by a stronger summer season in Spain,
particularly in Vueling, mostly in Airport
based roles.
• The modest increase in temporary
employees has also increased our ratio of
part time employees to 22%; these roles are
typically focused on covering specific peak
hours.
• A change in categorisation of employees in
our Cargo and Logistic units has seen
increases in maintenance and logistic roles
to 13% and related reductions in Airport and
Corporate. This aside, the Group has seen
modest recovery in Airport employees
linked to the broader recovery of travel.
• The increase in the proportion of Group
employees based in the Spain is due to the
increased summer flying schedules at Iberia
and Vueling. At the end of 2021 IAG had
employees based in 81 countries.
Gender
diversity
% women at
Board,
senior
executive,
and Group
level
• The share of women as a proportion of all staff at
• There were 194 senior executives as at
specific levels of seniority across the Group.
December 31, 2021.
• IAG increased the proportion of women in
senior executive roles to 33% by the end of
2021. IAG has maintained gender diversity
of the Board at 42%.
• A decrease in the proportion of women
across the whole Group is explained by the
impact of COVID-19 and restructuring in
2020 and the underlying gender mix of the
teams affected e.g. cabin crew
96
INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021
Strategic Report Metric
Age
diversity
Unit
Description
Commentary
% of staff in
each age
band
The ‘on the ground’ managerial population includes all
airport, corporate and maintenance roles equivalent to
a manager across the Group.
The ‘in the air’ managerial population includes all pilot
and cabin crew roles equivalent to Captains and Cabin
Service Managers.
The increase in the proportion of employees
over 50 years of age is explained by larger
voluntary turnover figures in younger cohorts.
The group lost 1,035 < 30 year olds (1.8%
turnover); 1,335 30-50 year olds (2.4%
turnover); and 565 > 50 year olds (1.0%
turnover).
The decrease in the proportion of employees
under 30 years of age is explained by the end
of temporary contracts and greater levels of
voluntary leavers.
The overall annual turnover in 2021 was 6% – a
total of 5,054 employees, of which 691 were
non-voluntary leavers. This compares to 21% in
2020, a total of 13,654 of which 3,456 were
non-voluntary leavers.
This significant decrease in turnover reflects
the Group resizing completed in 2020
Workforce
turnover
% voluntary
and
non-
voluntary
turnover
Measured as the number of leavers as a percentage of
the average number of Group employees in the
year. The number of leavers excludes temporary
contracts and death in service. Voluntary turnover
occurs when employees choose to leave (e.g.
resignation, retirement, voluntary redundancy) and
non-voluntary turnover occurs when employees leave
for reasons other than a personal decision (e.g.
compulsory redundancy, dismissal).
Table of key measures
Metric
Unit
Employment
Headcount
Composition
Composition
Composition
Average manpower
equivalent1
Number of people2
% headcount by
employment type
% headcount by
employment contract
% headcount by
employee categories
Employees by
country
% of people
Sub-category
vly
2021
2020
2019
2018
2017
-17.1%
50,222
60,612
66,034
64,734
63,422
Full-time:
Part-time:
Permanent:
Temporary:
Cabin Crew:
Pilots:
Airport:
Corporate:
Maintenance:
UK:
Spain:
Ireland:
India:
USA:
Other:
-2.2%
56,658
57,928
72,268
71,134
-1pt
1pt
-1pts
1pts
1pt
0pts
-2pts
-1pts
2pts
-1pts
2pts
-1pts
0pts
1pts
-1pt
78%
22%
96%
4%
32%
13%
23%
19%
13%
49%
36%
7%
2%
2%
4%
79%
21%
97%
3%
31%
13%
25%
20%
11%
50%
34%
8%
2%
1%
5%
74%
26%
94%
6%
35%
11%
26%
17%
11%
54%
31%
7%
2%
1%
5%
75%
25%
94%
6%
35%
11%
26%
18%
10%
nr
nr
nr
nr
nr
nr
nr
nr
nr
nr
nr
nr
nr
nr
nr
nr
nr
nr
nr
nr
nr
nr
Note: “nr” means “not reported previously”.
1 The mean of the manpower equivalent captured quarterly to reflect seasonality. This is not adjusted for time not worked whilst under COVID-19 job
retention schemes and it reflects normal contractual hours.
2 Actual number of people employed across the Group at December 31, 2021.
INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021
97
SUSTAINABILITY
C. PEOPLE AND PROSPERITY
Reference to GRI, TCFD and SASB standards: GRI 102-7, 102-8, 401-1, 405-1
Metric
Unit
Sub-category
Gender diversity
Gender diversity
% women at Board level1
% women at senior executive
level
Gender diversity
% women at Group level
Age diversity
% of managerial staff
in each age band
Age diversity
% of non-managerial staff
in each age band
<30
30-50
50+
<30
30-50
50+
Workforce turnover % voluntary and non-voluntary Voluntary
Workforce turnover Overall % by age group
Workforce turnover Overall % by gender
Non-voluntary
<30
30-50
50+
Women
Men
vly
0pts
3pts
-1pts
-1pts
-2pts
3pts
-2pts
-1pts
3pts
-11pts
-4pts
19pts
13pts
-32pts
-3pts
3pts
2021
42%
33%
42%
2%
55%
43%
16%
53%
31%
5%
1%
35%
46%
19%
49%
51%
2020
42%
30%
43%
3%
57%
40%
18%
54%
28%
16%
5%
16%
33%
51%
52%
48%
2019
33%
30%
44%
4%
55%
41%
21%
50%
29%
7%
2%
37%
36%
27%
47%
53%
2018
33%
27%
45%
7%
57%
36%
22%
50%
28%
8%
3%
35%
34%
31%
51%
49%
2017
25%
24%
44%
6%
65%
29%
17%
51%
32%
8%
2%
nr
nr
nr
nr
nr
Reference to GRI, TCFD and SASB standards: GRI 102-41, 403-9, 404-1. TR-AL-310a1.
Metric
Unit
vly
2021
2020
2019
2018
2017
Social dialogue and
trade unions
% covered by collective bargaining
agreements
0pts
89%
89%
87%
86%
88%
Average hours of
training
Average hours per employee per year
+47%
38.9
26.4
48.4
41.1
45.8
Lost Time Injury
(LTI) frequency rate LTI per 200,000 hours worked2
LTI severity rate
Average days lost per LTI2
Fatalities
Number of fatalities
Note: “nr” means “not reported previously”.
-9.1%
-10.1%
0pts
2.19
34.00
0
2.41
37.80
0
4.341
22.64
0
4.201
21.12
1
nr
nr
nr
1 In 2020 Female board composition metric normalised for consistency with 2021 at 42%.
2 The 2018 and 2019 LTI frequency rates have been restated due to change in standardising factor to better align to GRI standards.
98
INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021
Strategic Report
D. Alignment with external frameworks
Key: Green is GRI CORE
Sustainability section
Sustainability subsection
Partial/full alignment with GRI Standard
SASB
Governance
A.1. Defining sustainability and material issues
A.2. Sustainability governance
A.4. Sustainability risk management
A.5. Sustainability stakeholder engagement
A.6. Supply chain sustainability
A.7. Ethics and integrity
102-43, -44, -46, -47
102-46, -48
102-11, 102-15
102-13, 102-43, -44
308-2, 414-2
102-16, 102-17, 205-1, -2, -3
Planet
B.1. Climate change and TCFD disclosures
See next table TR-AL-110a1, -a2
B.2. Waste
B.3. Noise and air quality
People and Prosperity
C.1. Workforce overview
C.3. Diversity, inclusion and equality
C.5. Community engagement and charitable support
Other metrics
306-1, -2, -3 (2020)
305-7
403-4, 408-1, 409-1
406-1
102-13, 201-1
See next table
TR-AL-310a1
Key climate change metrics in Section B
Partial/full alignment with GRI standard
SASB
Scope 1
Scope 2
Scope 3
Emissions intensity
Electricity, energy
Jet fuel use
GHG reduction initiatives
Key people metrics in Section C
Employment
Headcount
Employment composition
Employees by country
Gender diversity
Age diversity
Workforce turnover
Social dialogue and trade unions
Hours of training
Lost Time Injury (LTI) frequency rate
Fatalities
TR-AL-110a1
305-1
305-2
305-3
305-4
302-1
301-1
305-5
Partial/full alignment with GRI standard
102-7
102-7
102-8
102-8
405-1
405-1
401-1
102-41
404-1
403-9
403-9
TR-AL-310a1
INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021
99
RISK MANAGEMENT AND PRINCIPAL RISK FACTORS
Agile risk management to
support the delivery of
sustainable long-term value
Enterprise risk
management (ERM)
approach
Agility in risk management
The risk management framework remains
responsive to the needs of the business
and our stakeholders by: continuing to
develop the Group’s assessment of the
interdependencies of risks; further building
on scenario planning to quantify risk
impact under different assumptions; and
considering the risks within the Group’s
risk environment that have increased either
as a result of the external factors or as a
result of decisions made by the business in
response to the pace of the transformation
agenda. This allows the Board and
management to assess and respond
quickly to changes across the Group’s
principal and other key risks.
In the year, improvements to further
develop the framework have been
considered and discussed with
management and the Board, including an
assessment of how the risk appetite
framework aligns to the business and risk
landscape following the COVID-19
pandemic impacts. New guidance from
regulators and investors is reviewed on an
ongoing basis and best practice sought
from other risk management sources.
Where appropriate, enhancements and
adaptions are then implemented across
the Group.
Emerging risks and longer-term threats
As part of the risk management
framework, potential emerging risks
and longer-term threats are considered
to identify new trends and risks that have
increased in speed of potential impact.
These include competitor actions,
regulations, governments’ interventions,
customer trends and sentiment to travel,
sustainability concerns and stakeholder
considerations or business disruptors that
could impact the Group’s business
strategy and plans.
IAG considers risks to the Strategic
Business Plan (“the plan”) over the short
term up to two years, medium term from
three to five years and in the longer term
beyond five years.
ERM policy and framework
The Group Enterprise Risk Framework is
set out in the Enterprise Risk Management
(ERM) policy, which has been approved by
the Board. The comprehensive risk
management process and methodology
ensures a robust identification and
assessment of the risks facing the Group,
including emerging risks. The risk
management framework is embedded
across the Group businesses. Enterprise
risks are defined as any risk that could
impact the plan (above a threshold). They
are assessed and plotted on an Enterprise
risk map, based on probability and impact.
Emerging risks are monitored within the
overall risk framework as ‘on watch’ until
they are re-assessed to be no longer a
potential threat to the business or where
an assessment of the risk impact over the
next two to three years can be made, and
appropriate mitigations can be put in place
or the risk becomes a principal risk. Other
high-impact, low-likelihood risks have been
discussed. This process is led by the
Management Committee supported by the
ERM function.
Risk outcomes are quantified as the
potential cash impact to the plan over two
years. Non-financial considerations include
the Group’s sustainability commitments,
potential for increased regulatory scrutiny,
as well as damage to customer and
employee trust impacting the Group’s
brand and share price.
Key controls and mitigations are
documented, including appropriate
response plans. Where risk treatments
require time to implement, short-term
mitigations are assessed and the timeline
to risk mitigation and consequent risk
acceptance discussed and agreed. Every
principal risk has clear Management
Committee oversight.
Risk maps for each operating company
and central function are reviewed by each
operating company’s management
committee and function leadership team,
which considers the accuracy and
completeness of the map, significant
movements in risk and any changes
required to the response plans addressing
those risks. Where the Group’s operating
companies have a reliance on other parts
of the Group for services delivery, risks are
reflected appropriately across risk maps to
ensure accountability is clear.
At the Group level, key risks from the
operating companies, together with
Group-wide risks, are maintained in a
Group risk map.
Risk appetite
IAG has a risk appetite framework which
includes statements informing the
business, either qualitatively or
quantitatively, of the Board’s appetite for
certain risks.
Each risk appetite statement applies either
on a Group-wide basis or for specific
programmes, initiatives or activity within
the Group. The framework has continued
to operate throughout the year, with the
Board assessing its appetite across all of
the framework statements at the half year
and year end against the Group’s
performance and its anticipated delivery of
the Board-approved strategic business
plan priorities and initiatives. The Board is
satisfied that the Group continued to
perform and deliver initiatives throughout
2021 as planned to mitigate risk as set out
in its framework statements or necessary
additional mitigations to risks have been
addressed as they occurred.
The appetite framework has been subject
to review in 2021. Adaptions to the
framework to set tolerances more
dynamically, assess interdependencies of
tolerances and link to the future strategic
goals and prioritisation of investment will
be implemented in 2022.
Risk assurance
The Group’s risk heatmap is used to inform
the annual Internal Audit plan. The ERM
function also works with other compliance
and Group functions, such as Government
Affairs, Investor Relations and
Sustainability, leveraging their frameworks
and assessments where appropriate.
Viability assessment
The Board’s assessment of the viability of
the Group, including the selection of
appropriate scenarios to determine the
assessment, are directly informed by the
outputs of the ERM framework. Full details
of our approach, scenarios modelled and
the viability assessment are shown at the
end of this report.
100 INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021
Strategic Report Risk management roles and responsibilities
Risk owners and
management
Operating
companies’
management
committees
IAG Management
Committee
IAG Board and
Audit & Compliance
Committee
Across the Group, risk
owners are responsible
for identifying potential
risks and appropriately
managing decisions
within their area of
responsibility that could
impact business
operations and delivery
of the plan.
As the Group undertakes
transformation activities
within its operating
companies, the pace and
agility of the changes
required creates risks
and opportunities. For
transformational risks,
business owners are
assigned, and the
business will agree
appropriate mitigations
and timelines for
implementation,
following discussions
with all relevant
stakeholders.
Emerging risks are
assessed and risk owners
consider and identify any
potential impact to plans.
Longer-term “on watch”
risks are subject to
review as part of the
framework.
Management is
responsible for the
effective operation of the
internal controls and
execution of the
agreed risk mitigation
plans.
Operating companies
review risk during the
year including risk map
reviews semi-annually, in
advance of the Group
risk heatmap reviews.
They escalate risks
that have a Group impact
or require Group
consideration in line with
the Group ERM
framework.
They confirm to their
operating company
board and audit
committees as to the
identification,
quantification and
management of
risks within their
operating company as
a whole at least annually.
Local heatmaps are in
place for subsidiary
businesses, together with
Group support platforms
including Group Business
Services and IAG Tech.
The IAG Management
Committee reviews risk
during the year, including
the Group risk map
semi-annually in advance
of reviews by the Audit
and Compliance
Committee, in
accordance with the
2018 UK Corporate
Governance Code and
the Spanish Good
Governance Code
for Listed Companies.
The IAG Management
Committee review the
performance of the
Group at half year and
full year against the risk
appetite framework and
reports any near
tolerance or out of
tolerance assessments to
the Audit and
Compliance Committee.
The Management
Committee recommends
scenarios for stressing
the strategic business
plan as part of the annual
Group viability
assessment.
The IAG Board has
overall responsibility for
ensuring that the Group
has an appropriate,
robust and effective risk
management framework,
including the
determination of the
nature and extent of risk
it is willing to take to
achieve its strategic
objectives.
The Audit and
Compliance Committee
discusses risk and
considers the risk
environment as part of
wider Board discussions
at every meeting in
addition to the bi-annual
risk map review, including
a review of the
assessment of Group’s
performance against its
risk appetite, scenarios
for assessment of
viability and the outputs
from the viability
modelling. The Audit and
Compliance Committee
has early sight of
management
consideration of
scenarios to enable it to
challenge subjectivities
and confirm rationale.
The Group risk map is
reviewed by the IAG
Board annually.
Enterprise Risk Management function
The Enterprise Risk Management function provides support across the Group to ensure risk management processes are appropriately
embedded and applied consistently, as well as working with management to identify risk, challenge assessments and strengthen the
risk culture across the Group. The function provides enterprise risk management guidance and shares best practice across the Group
and its operating companies, keeping them informed of any risk related regulatory developments. The function is responsible for
ensuring that the enterprise risk management framework remains agile and responsive to meet the needs of the business and its
stakeholders.
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RISK MANAGEMENT AND PRINCIPAL RISK FACTORS CONTINUED
Key
Interested stakeholders
Customers
Employees
Suppliers
Link to
principal risk
Strategic
priorities
Risk
trend
Considered in viability
assessment scenarios
1
2 3
Increase
V
1
2
3
4
Stable
Decrease
Governments
and regulators
Shareholders and
other financial
stakeholders
See Business model
section of this report
Principal
risk
Strategic
1
2
3
4
5
Brand and customer trust
Chief Strategy Officer
Competitive landscape
Chief Strategy Officer
Critical third parties in the supply chain
Chief Transformation Officer
Economic, political and regulatory environment
Chief Strategy Officer
Sustainable aviation
Chief People, Corporate Affairs & Sustainability Officer
Business and operational
6
7
8
9
Cyber attack and data security
Group CIO
Event causing significant network disruption
Chief Strategy Officer/Operating Company CEOs
IT systems and IT infrastructure
Group CIO/Chief Transformation Officer
People, culture and employee relations
Chief People, Corporate Affairs & Sustainability
Officer/Operating Company CEOs
10
Safety or security incident
Operating Company CEOs
11
Transformation and change
Chief Transformation Officer
Strategic
priorities
Interested
stakeholders
Risk trend
2020
2021
Viability
scenario
1
2 3
1
2 3
1
2 3
1
2 3
1
2 3
1
2 3
1
2 3
1
2 3
1
2 3
1
2 3
1
2 3
1
2 3 4
1
2 3 4
1 2 3 4
1
2 3 4
1
2 3 4
1 2 3 4
1
2 3 4
1
2 3 4
1
2 3 4
N/A
1
2 3 4
102
INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021
Strategic Report Principal
risk
Strategic
priorities
Interested
stakeholders
Risk trend
2021
2020
Viability
scenario
Financial risk including tax
12
Debt funding
Chief Financial Officer
13
Financial and treasury-related risk
Chief Financial Officer
14
Tax
Chief Financial Officer
Compliance and regulatory
15
Group governance structure
General Counsel
16
Non-compliance with key regulation and laws
General Counsel
1
2 3
1
2 3
1
2 3
1
2 3
1
2 3
1
2 3 4
1
2 3 4
1
2 3 4
1
2 3 4
1
2 3 4
Principal risks influence
The relative level of influence each principal risk has on the other
principal risks
Principal risk radar
The assessed likelihood of risk materialisation for each
principal risk
16
1
15
2
14
Compliance
and regulatory
risks
3
Strategic
risks
Financial
risks
Influence of risk
13
12
4
5
11
10
6
Business and
operational
risks
7
9
8
Strategic
Business and
operational
5
6
7
8
9
4
2
3
1
16
15
14
11
10
12
13
Compliance
and regulatory
Financial
Year in review
The highly regulated and commercially
competitive environment, together with
the businesses’ operational complexity,
exposes the Group to a number of risks.
The Group’s exposure to certain risks
outside of its direct control has continued
in 2021 as a result of the COVID-19
pandemic’s unprecedented impact
on the travel and aviation industry.
These risks include:
• changes in political and economic
environment
• government restrictions over travel and
movement of their citizens, governance
requirements and regulations
• external events causing operational
disruption including civil unrest, adverse
weather or pandemic
• volatility in the markets and availability
of funding and distortion caused by
differing government aviation-specific
support schemes
Management remains focused on
mitigating these risks at all levels in the
business and investing to increase
resilience whilst recognising that such risk
events may not be so easily planned for
and that mitigations are more responsive
in nature.
The principal risks have been assessed as
the Group moves back into recovery of its
operations and adapts its model
accordingly. One new principal risk of
‘Transformation and change’ has been
identified as part of this exercise. It reflects
the significance of the Group’s
transformation agenda and pace required
to deliver the plan.
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RISK MANAGEMENT AND PRINCIPAL RISK FACTORS CONTINUED
Principal risk register
Risks are grouped into four categories: strategic, business and operational, financial including tax and treasury, compliance and
regulatory risks.
Guidance is provided below on the key risks that may threaten the Group’s business model, future performance, solvency and liquidity.
Where there are particular circumstances that mean that the risk is more likely to materialise, those circumstances are described below.
Additional key business responses implemented by management are also set out.
The list is not intended to be exhaustive but does reflect those risks that the Board and Management Committee believe to be the most
likely to have a potential material impact on the Group.
Strategic
1 Brand and
customer trust
Chief Strategy Officer
Interested stakeholders
Strategic
priorities
1
2 3
Risk trend
2021
2020
Viability
scenario
V
Status The Group’s ability to attract and secure bookings, and generate revenue depends on customers’ perception and affinity with
the Group’s airlines’ brands and their associated reputation for customer service and value. The Group’s airlines’ brands are, and will
continue to be, vulnerable to adverse publicity regarding events impacting service and operations. Reliability, including on-time
performance, is a key element of the brands and of each customer’s experience. Where customers have been stranded as a result of
governments’ imposition of new restrictions, all airlines have worked directly with their customers to ensure their safe return. IAG
remains focused on strengthening its customer-centricity to ensure that its operating companies continue to adapt and focus their
business models to meet changing customer expectations and needs. Customer sentiment to travel and their expectations when they
travel are intrinsic to brand health. The Group’s airlines have implemented all required measures to ensure customer and employee
safety in line with governments’ regulations. The resilience and engagement of our people and leaders is critical to retaining brand
and customer trust.
Risk description
Strategic relevance
Mitigations
Erosion of the brands, through
either a single event or a series
of events, may adversely impact the
Group’s leadership position with
customers and ultimately affect
future revenue and profitability.
If the Group is unable to meet the
expectations of its customers and
does not engage effectively to
maintain their emotional
attachment, then the Group
may face brand erosion and loss of
market share.
Failure to meet customer
expectations on sustainability and
the Group’s impact on stakeholders
and society could impact the Group
and its brands.
• The Group’s brands are
• All IAG airlines are considered within the brand
positioned in their respective
markets to meet their
customer propositions and
deliver commercial value. Any
change in engagement or
travel preferences could
impact the financial
performance of the Group.
• IAG will continue to focus on
its customer propositions to
ensure competitiveness in its
chosen priority customer
demand spaces and to ensure
that it adapts to meet
changing customer
expectations.
• The Group is clear on the key
levers to improve brand
perception and satisfaction
for each of its operating
company brands.
portfolio review.
• Brand initiatives for each operating company have been
identified and are aligned to the plan.
• Product investment to enhance the customer experience
supports the brand propositions and is provided for in
the plan.
• All airlines track and report internally on their
Net Promoter Score (NPS) to measure
customer satisfaction.
• IAG Customer Steering Group meets monthly and
shares initiatives.
• Hygiene and travel protocols have been implemented
across the Group’s airlines to address regulatory
requirements resulting from the COVID-19 pandemic.
• Enhanced disruption management tools within airlines to
allow customers to manage their travel preferences.
• Enhanced flexibility in airline booking policies.
• Increased focus on the end-to-end customer journey
from flight search through to arrival and baggage
reclaim.
• The Group’s global loyalty strategy builds customer
loyalty within IAG airlines.
• The Group’s focus on sustainability and sustainable
aviation including the IAG Climate Change strategy to
meet the target of net zero carbon emissions by 2050.
• Robust portfolio process to determine the right
investments across the Group.
• The Group’s CIO and Chief Transformation Officer are
members of the IAG Management Committee.
104 INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021
Strategic Report Strategic
2 Competitive
landscape
Chief Strategy Officer
Interested stakeholders
Strategic
priorities
1
2 3
Risk trend
2021
2020
Viability
scenario
V
Status The scale of governmental support and aviation-specific state aid measures have varied by market and the potential
consequential impact to the competitive landscape is under continuous assessment. Governmental restrictions continue to impact
access to markets. The dynamic nature of the restrictions have required significant agility within our networks to manage the impact
on our customers and business. In 2019, the Group announced plans to acquire Air Europa, which is owned by Globalia, subject to
regulatory approvals. In December 2021, IAG and Globalia announced the termination of the agreement under which Iberia had
agreed to acquire Air Europa, but noted that the parties intended to evaluate alternative structures. Any future deal would be subject
to regulatory approval.
The Group continues to lobby over the negative impacts of government policies, such as increases in Air Passenger Duty (APD).
Risk description
Strategic relevance
Mitigations
Competitor capacity growth in
excess of demand growth could
materially impact margins.
Any failure of a joint business
or a joint business partner could
adversely impact the Group’s
airline business operations and
financial performance.
Some of the markets in which the
Group operates remain regulated by
governments, in some instances
controlling capacity and/or
restricting market entry. Changes in
such restrictions may have
a negative impact on margins.
Governments’ support schemes for
the aviation sector create
distortionary effects across the
markets in which IAG’s airlines
operate.
• The markets in which the
Group operates are highly
competitive. The Group faces
direct competition on its
routes, as well as from indirect
flights, charter services and
other modes of transport.
Some competitors have other
competitive advantages such
as government support
or benefits from insolvency
protection.
• Regulation of the airline
industry covers many of the
Group’s activities including
route flying rights, airport
landing rights, departure
taxes, security and
environmental controls. The
Group’s ability to comply with
and influence changes to
regulations is key to
maintaining operational and
financial performance.
• The IAG Management Committee meets weekly.
• The Board discusses strategy throughout the year and
dedicates two days per year to undertake a detailed
review of the Group’s strategic plans.
• Additional Management Committee and Board meetings
have been convened as required.
• The Group strategy function supports the Management
Committee by identifying where resources can be
devoted to exploit opportunities and accelerate change.
• The airlines’ revenue management departments and
systems optimise market share and yield through pricing
and inventory management activity. Additional processes
and reviews have allowed daily and weekly route analysis
as required to respond to the rapidly changing
environment resulting from government actions.
• The Group maintains rigorous cost control and targeted
investment to remain competitive. The Group
Procurement function has led an ongoing review of all
critical contracts.
• The Group has restructured its businesses with greater
flexibility and resilience built into the operations.
• The portfolio of brands provides flexibility as capacity
can be deployed at short notice as needed.
• The IAG Management Committee regularly reviews the
commercial performance of joint business agreements.
• The Group’s airlines review their relationships with
business partners supported where appropriate by the
Group strategy function.
• The Group’s Government Affairs function monitors
government initiatives, represents the Group’s interest
and forecasts likely changes to laws and regulations.
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RISK MANAGEMENT AND PRINCIPAL RISK FACTORS CONTINUED
Strategic
3 Critical third parties in
the supply chain
Chief Transformation Officer
Strategic
priorities
1
2 3
Interested stakeholders
Risk trend
2021
2020
Status Ongoing governments’ restrictions through 2021 have required the Group’s airlines to flex their operations and adjust capacity.
The operations of the Group’s suppliers, including aircraft manufacturers, has increased the risk of significant business interruption,
delays or disruptions, including a lack of availability of labour to support supplier operations and/or problems in maintaining supply.
This has led to increased costs to secure such services. Additional focus has been placed on key suppliers following the removal of
governments’ support schemes to ensure that the business and operations are not impacted.
The Group continues to lobby and raise awareness of the negative impacts of ATC airspace restrictions and performance issues on
the aviation sector and economies across Europe, particularly through the recovery period. The Group relies on the provision of
airport infrastructure and is dependent on the timely delivery of appropriate facilities. A third runway expansion proposal at London
Heathrow and additional facilities at Dublin and Madrid Airports are among examples where the Group supports solutions that are
efficient, cost effective and of value to our customers.
The Group continues to challenge unreasonable levels of increases in airport charges, especially at London Heathrow. A future
aviation package review by the UK Government is expected in 2022.
Risk description
Strategic relevance
Mitigations
IAG is dependent on the timely
entry of new aircraft and the engine
performance of aircraft to improve
operational efficiency and resilience
and meet the commitments of the
Group sustainability programme.
IAG is dependent on the timely,
on-budget delivery of infrastructure
changes, particularly at key airports.
• Any sub-optimal service
delivery or asset supplied by a
critical supplier can impact
on the Group airlines’
operational and financial
performance as well as
disrupting our customers and
impacting our brand and
reputation.
• The Group mitigates engine and fleet performance risks,
including unacceptable levels of carbon emissions, to
the extent possible by working closely with the engine
and fleet manufacturers, as well as retaining flexibility
with existing aircraft return requirements.
• The Group engages in regulatory reviews of supplier
pricing, such as the UK Civil Aviation Authority’s periodic
review of charges at London Heathrow and London
Gatwick airports.
• Infrastructure decisions or
• The Group is active at an EU policy level and in
consultations with airports covered by the EU Airport
Changes Directive.
• The Group pro-actively works with suppliers to ensure
operations are maintained and the impact to their
businesses understood, with mitigations implemented
where necessary.
• The Group procurement function has oversight of all
critical contracts across the Group’s businesses.
• Alternative suppliers are identified where feasible.
changes in policy by
governments, regulators or
other entities could impact
operations but are outside of
the Group’s control.
• London Heathrow has no
spare runway capacity.
• An uncontrolled increase in
the planned cost of expansion
could result in increased
landing charges.
• Airport charges represent a
significant operating cost to
the airlines and have an
impact on operations.
• Inflationary cost pressures
within the supply chain may
increase the cost of travel.
IAG is dependent on resilience
within the operations of
ATC services to ensure that its flight
operations are delivered
as scheduled.
IAG is dependent on the
performance and costs of critical
third-party suppliers that provide
services to our customers and the
Group such as airport operators,
border control and caterers.
Increases in costs or where
suppliers face ongoing financial
stress or restructuring where they
exit the market for supply of
services may impact the Group’s
operations.
IAG is dependent on the availability
and production of alternative fuels
to meet its carbon commitments.
This may require investments in
infrastructure in the markets in
which the Group operates.
106 INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021
Strategic Report
Strategic
4 Economic, political and
regulatory environment
Chief Strategy Officer
Strategic
priorities
1
2 3
Interested stakeholders
Risk trend
2021
2020
Viability
scenario
V
Status The COVID-19 pandemic has resulted in governments’ measures, which led to an unprecedented impact on air travel and has
also resulted in economic uncertainty and volatility across markets. These are being actively monitored and near-term capacity plans
are refreshed dynamically, according to the latest status as the Group’s airlines rebuild their operational capabilities and schedules.
There can also be no clear certainty as to the level of demand for the Group’s services as restrictions are lifted. The stress of the
COVID-19 pandemic could have further far-reaching impacts including currency devaluations, inflation, new tax regimes on corporates
and individuals as well as changes in control of governments and new government policies. The Group airlines have utilised the slot
alleviation waivers granted by regulatory bodies in 2021.
Wider macroeconomic trends are being monitored such as tone of dialogue between the US, Russia, China and the EU and UK which
can influence markets and result in imposition of misaligned policies or tariffs. The trend of increased nationalism and the potential
impact to the Group is also kept under review. Recent supply chain disruptions have occurred in many markets and the level of
disruption and potential impacts are considered across the Group.
Developments in relevant international relationships and air services agreements throughout the year, including the EU and the UK,
are being monitored. Any further macroeconomic trends or potential requirements arising from Brexit are monitored by government
affairs specialists across the Group businesses.
See the Regulatory environment section
Risk description
Strategic relevance
Mitigations
Economic deterioration in either a
domestic market or the global
economy may have a
material impact on the Group’s
financial position, while foreign
exchange, fuel price and interest
rate movements create volatility.
Uncertainty or failure to plan and
respond to economic change or
downturn impacts the operations of
the Group.
Political decisions to respond to the
COVID-19 pandemic impact
economies across all markets,
causing longer-term economic
stress.
• IAG remains sensitive
• The Board and the Management Committee review the
to political and economic
conditions in the
markets globally.
financial outlook and business performance of the Group
through the monthly trading results, financial planning
process and the reforecasting process.
• Reviews are used to drive the Group’s financial
performance through the management of capacity,
together with appropriate cost control measures
including the balance between fixed and variable costs,
management of capital expenditure, and actions to
improve liquidity.
• External economic outlook, fuel prices and exchange
rates are carefully considered when developing strategy
and plans and are regularly reviewed by the Board and
IAG Management Committee as part of business
performance monitoring.
• IAG Government Affairs function monitors governments’
initiatives, represents the Group’s interest and gives the
Group and its operating companies early sight of likely
changes to laws and regulations e.g. any review of slot
alleviation policy in the UK. It also continues to discuss
with governments and industry bodies, approaches for
the implementation of consistent, customer-centric
testing.
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RISK MANAGEMENT AND PRINCIPAL RISK FACTORS CONTINUED
Strategic
5 Sustainable aviation
Chief People, Corporate Affairs and
Sustainability Officer
Strategic
priorities
1
2 3
Interested stakeholders
Risk trend
2021
2020
Viability
scenario
V
Status IAG was the first airline group to commit to a target of net zero carbon emissions by 2050. In 2021, the Group committed to
extend net zero carbon emissions requirements to the Group’s supply chain, with the Global Business Services (GBS) procurement
function supporting the Scope 3 commitment. GBS will have a key role to play in ensuring its delivery for the Group with supplier
sustainability ratings a key consideration for future contract negotiations and renewals. IAG has also committed to 10% Sustainable
Aviation Fuel (SAF) usage on average across its fleet by 2030.
In July 2021, the EU announced its “Fit for 55” package of proposals. This requires an at least 55% emission reduction target set for
2030 and aims to bring the EU climate and energy legislation in line with the 2030 goal. The Group is currently modelling potential
impacts and costs based on the published proposals, which includes the removal of aviation jet fuel tax exemption from 2024.
Iberia has agreed deals in Spain for the production of SAF this year. Overall aviation industry requirements will require infrastructure
investments across markets to support the production of SAF to meet demand expectations. Availability of SAF may be restricted at
airports served by the Group in the medium to longer term, where markets may not have such strict eco targets or government set
policy.
The Group has completed the retirement of its aged fleet of Boeing 747s and Airbus A340s.
IAG was an early adopter of the Task Force on Climate-related Financial Disclosures (TCFD) guidelines for climate-related scenario
analysis and climate-specific risk assessments. The Group continues with its assessment of climate-related risks, by testing and
revising the assumptions on updated forecasts for future business growth and the regulatory context and future carbon price. The
Group has also embedded forecasting of its climate impacts into its strategic, business and financial planning processes.
See the Sustainability risk and opportunities section
Risk description
Strategic relevance
Mitigations
• IAG is committed to being
the leading airline group
in sustainability. This
means that environmental
considerations are integrated
into the business strategy at
every level and the Group
uses its influence to drive
progress across the industry.
• Our stakeholders and
potential investors seek
confirmation over our
sustainability agenda and may
link their purchasing,
investment or lending
decisions to our commitments
and progress against them.
Increasing global concern about
climate change and the impact of
carbon affects Group airlines’
performance as customers seek
alternative methods of transport or
reduce their levels of travel.
New taxes, the potential removal of
aviation jet fuel exemptions and
increasing price of carbon offsets
impact on demand for air travel.
Customers may choose to reduce
the amount they fly.
The airline industry sector is subject
to increased regulatory
requirements, driving costs and
operational complexity. Sustainable
fuels mandates are implemented
and demand exceeds supply or
infrastructure and production is not
available in the markets the Group’s
airlines serve.
• IAG climate change strategy to meet target of net zero
carbon emissions by 2050.
• British Airways offsets all UK domestic flight carbon
emissions.
• IAG investment in Sustainable Aviation Fuels (SAF),
including British Airways’ partnership with Velocys and
Iberia’s agreement with Repsol and Cepsa to produce
SAF.
• Aer Lingus internal SAF working group planning.
• BA customers may choose to offset their flights for
carbon emissions or pay for sustainable fuel for their
flight or both.
• Fleet replacement plan is introducing aircraft into the
fleet that are more carbon efficient.
• The appointment of EcoVadis to work with IAG GBS to
better track sustainability performance in the IAG supply
chain and mitigate supply chain-related sustainability
risks.
• Partnering with ZeroAvia to explore hydrogen-powered
aircraft technology.
• Participating in CORSIA, the ICAO global aviation carbon
offsetting scheme and the EU-ETS and UK-ETS emission
trading schemes.
• Horizon scanning of potential partners and technology.
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Strategic Report
Business and operational
6 Cyber attack and
data security
Group CIO
Interested stakeholders
Strategic
priorities
1
2 3
Risk trend
2021
2020
Viability
scenario
V
Status The risks from cyber threats continue as threat actors seek to exploit any weaknesses in defences particularly through social
engineering and human behaviours. The regulatory regimes associated with data and infrastructure security are also becoming more
complex with different regulators applying different framework approaches and guidance for reporting. The Group airlines are subject
to the requirements of privacy legislation such as GDPR and the National Information Security Directive (NISD).
Investment in cyber security systems and controls continue as planned, although addressing the risk is also dependent on business
capacity and the delivery of solutions to address technical obsolescence within IAG Tech. All planned investment is linked to a
Group-wide maturity assessment based on a leading industry standard benchmark. Data centre migration activity to the Cloud across
the Group’s airlines will further help to improve the security controls environment. As the Group improves its security posture and
maturity, it better understands the rapid nature of potential attack vectors and how to detect them.
Risk description
Strategic relevance
Mitigations
The Group could face financial loss,
disruption or damage to brand
reputation arising from an attack on
the Group’s systems by criminals,
foreign governments or hacktivists.
If the Group does not adequately
protect customer and employee
data, it could breach regulation and
face penalties and loss of
customer trust.
Changes in working practices and
environments for the Group’s
employees and third-party suppliers
could result in new weaknesses in
the cyber and data security control
environment.
• The cyber threat environment
remains challenging for all
organisations, including the
airline industry. Cyber threat
actors, criminals, foreign
governments and hacktivists
have the capacity and
motivation to attack the
airline industry for financial
gain and other political or
social reasons.
• The fast-moving nature
of this risk means that the
Group will always retain a
level of vulnerability.
• The Group has a Board-approved cyber strategy that
drives investment and operational planning.
• A cyber risk management framework ensures the risk is
reviewed across all operating companies.
• The Group Cyber Governance board assesses the
portfolio of cyber projects quarterly and each operating
company reviews their own cyber projects at least
quarterly.
• The IAG Chief Information Security Office provides
assurance and expertise around strategy, policy, training
and security operations for the Group.
• Detection tools and monitoring are in place. The Group-
wide security engineering and operations teams
proactively seek to identify and respond to threats and
vulnerabilities, including ongoing testing of the Group’s
defences.
• Threat intelligence is used to analyse cyber risks to
the Group.
• There is oversight of critical systems and suppliers to
ensure that the Group understands the data it holds, that
it is secure, and regulations are adhered to.
• Data Protection Officers are in place in all operating
companies, coordinated through a Group-wide Privacy
Steering Group.
• Working practices are reviewed to ensure the integrity of
the cyber and data security.
• All third-party suppliers have confirmed their adherence
to IAG security requirements within any revised security
protocols.
• Security architecture team embedded into Datacentre
migrations programmes.
• Desktop exercises to test business response plans have
been held across the Group’s airlines during the year.
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109
RISK MANAGEMENT AND PRINCIPAL RISK FACTORS CONTINUED
Business and operational
7 Event causing significant
network disruption
Chief Strategy Officer
Operating company CEOs
Strategic
priorities
1
2 3
Interested stakeholders
Risk trend
2021
2020
Viability
scenario
V
Status The outbreak of the COVID-19 pandemic in 2020 resulted in an unprecedented level of disruption to the aviation sector, as well
as global economic impacts and this remained the situation in 2021. Other potential high-impact, low-likelihood events have been
considered that could have the potential to disrupt IAG and/or the aviation sector. Many of these events remain outside of the
Group’s control such as adverse weather, another pandemic, civil unrest or a terrorist event seen in cities served by the Group’s
airlines.
Risk description
Strategic relevance
Mitigations
• Management has business continuity plans to mitigate
this risk to the extent feasible, with focus on operational
and financial resilience and customer and colleague
safety and recovery.
• Resilience to minimise the impact of ATC airspace
restrictions and strike action on the Group’s customers
and operations are in place.
An event causing significant
network disruption or the inability to
promptly recover from short-term
disruptions may result in lost
revenue, customer disruption and
additional costs to the Group.
The COVID-19 pandemic is likely to
continue to have an adverse effect
on the Group where governments
choose to reimpose restrictions to
manage public health concerns, as
would any future pandemic
outbreak or other material event
impacting operations or customers
ability to travel.
• The Group’s airlines may be
disrupted by a number of
different events.
• A single prolonged event, or
a series of events in close
succession, impact on the
Group’s airlines’ operational
capability, financial status
and brand strength.
• The Group needs to adhere to
local governments’
restrictions and regulations
especially related to safety
and public health and is
therefore sensitive to any
consequential impact on
demand.
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Strategic Report
Business and operational
8 IT systems and IT
infrastructure
Group CIO
Chief Transformation Officer
Interested stakeholders
Strategic
priorities
1
2 3
Risk trend
2021
2020
Viability
scenario
V
Status The Group recognises the importance of technology and all of its digital and IT resources are managed together in IAG Tech,
reporting to the Chief Information Officer (CIO), a member of the IAG Management Committee. All of the Group’s businesses have a
Chief Digital and Information Officer (CDIO) who represents their business within IAG Tech. This has strengthened IAG Tech’s focus
on understanding business requirements, helping to transform the Group’s businesses and deliver a digital customer experience. The
IAG Tech Management Committee governance structure is mirrored across into the Group’s businesses to ensure that IT investment
and operating company requirements are appropriately prioritised and delivered. There is an increased focus on service delivery and
services management as the Group addresses its legacy environment. Plans and investment to upgrade or transform away from
obsolete systems or architecture have been subject to ongoing review and plans accelerated where required to meet new regulations
around travel documentation.
Risk description
Strategic relevance
Mitigations
• IAG is dependent on IT
systems for most key
business processes.
Increasingly, the integration
within IAG’s supply chain
means that the Group is also
dependent on the
performance of suppliers’ IT
infrastructure e.g. airport
baggage operators.
• Competitors and new
entrants to the travel market
may use digital tools and
technology more effectively
and disrupt the Group’s
business model.
The dependency on IT systems for
key business and customer
processes is increasing and the
failure of a critical system may
cause significant disruption to the
operation and lost revenue.
The level of transformational change
at pace required by the Group’s
airlines may result in disruption to
operations as the legacy
environment is addressed.
Obsolescence within the IAG Tech
estate could result in service
outages and/or operational
disruption or delays in
implementation of the Group’s
transformation, particularly if the
Group needs to defer investment to
preserve cash.
Technology disruptors may
use tools to position themselves
between our brands and
our customers.
• IAG Tech works with the Group operating companies to
deliver digital and IT change initiatives to enhance
security and stability.
• Operating companies’ IT boards are in place to review
delivery timelines.
• IAG Tech leadership and professional development
framework.
• Reversion plans are developed for migrations on critical
IT infrastructure.
• System controls, disaster recovery and business
continuity arrangements exist to mitigate the risk of
a critical system failure.
• Robust portfolio process to determine the right
investments across the Group.
• IAG Tech CIO and MC have strategic relationships with all
critical IT suppliers and oversight of all critical IT
contracts across the Group’s businesses.
• The Group continues to develop platforms such
as the New Distribution Capability, changing distribution
arrangements and moving from indirect to direct
channels.
• IAG Tech continues to create early engagement and
leverages new opportunities with start-ups and
technology disruptors.
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111
RISK MANAGEMENT AND PRINCIPAL RISK FACTORS CONTINUED
Business and operational
9 People, culture and
employee relations
Chief People, Corporate Affairs and
Sustainability Officer
Operating company CEOs
Interested stakeholders
Strategic
priorities
1
2
3
Risk trend
2021
2020
Viability
scenario
V
Status The resilience and engagement of our people and leaders has been critical through the COVID-19 pandemic to ensure the
Group is best positioned to resume operations and adapt as needed to the uncertain external environment. The duration and scale of
the pandemic has required the Group to restructure and employee consultations across the Group’s businesses to support
restructuring proposals have been undertaken as required. Where possible, job retention and wage support schemes have been
utilised to reduce people impacts.
As the Group rapidly transforms all its operations to adjust for the new environment, the engagement and support of the Group’s
employees is going to be a critical enabler. The Group businesses are focused on building and maintaining employee relationships and
trust to deliver operational readiness and meet changing customer, employee and business demands.
In 2021, the Company implemented a new Remuneration Policy that is closely aligned to the Company’s strategy and supports the
aim of attracting and retaining exceptional talent across the Group. The Group is focused on staff wellbeing and people morale and
motivation, particularly as our people return to their offices and the Group businesses adapt and implement hybrid working models.
Welfare support schemes are in place to support the Group’s staff and initiatives to build trust and engagement continue across the
Group’s businesses. The Group has identified the skills and capabilities that are required to manage its transformation, which include
enhancing its leadership capability and delivering on the Group’s diversity and inclusion plans. All operating companies recognise the
critical role that their employees will play in the recovery and transformation of the Group and they are focusing on improving
organisational health and employee engagement.
Risk description
Strategic relevance
Mitigations
• The Group has a large
unionised workforce
represented by a number of
different trades unions. IAG
relies on the successful
agreement of collective
bargaining arrangements
across its operating
companies to operate its
airlines.
• The right skillsets and culture
are needed to transform our
businesses at the pace
required.
• Ongoing information sharing, consultation and collective
bargaining with unions across the Group takes place on a
regular basis led by operating companies’ human
resources specialists, who have a strong skillset
in industrial relations.
• Operating companies’ people strategies are in place in
our businesses.
• Succession planning within and across operating
companies has been reviewed by the IAG Management
Committee and Board and a consistent process is being
implemented across the Group.
• Focus on recruiting and developing skills to run and
transform our business.
• Operating companies’ engagement and organisational
health surveys have been conducted with subsequent
action plans developed.
• Access to support individuals’ wellbeing.
• IAG Code of Conduct is supported by an annual training
requirement for all of our staff.
Any breakdowns in the bargaining
process with the unionised
workforces may result in
subsequent strike action which may
disrupt operations and adversely
affect business performance and
customer perceptions of the airlines.
Our people are not engaged, or they
do not display the required
leadership behaviours.
The Group businesses fail to attract,
motivate, retain or develop our
people to deliver service and brand
excellence.
Critical skillsets are not in place to
execute on the required
transformation and drive the
business forward.
If the Group’s airlines cannot recruit
to respond to the demand
environment, given wider
recruitment challenges across
sectors of the economy, manpower
shortages may impact operational
capabilities.
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Strategic Report
Business and operational
10 Safety or
security incident
Operating company CEOs
Strategic
priorities
1
2 3
Interested stakeholders
Risk trend
2021
2020
Status The Group’s airlines were focused on a safe return to operations in the year, with additional refresher training as flight crews,
cabin crews and ground colleagues returned to service, building back their skills and knowledge.
The IAG Safety, Environment and Corporate Responsibility Committee (SECR) of the Board and the Board of each operating
company continued to monitor the safety performance of IAG’s airlines. Safety and security responsibility lies with each Group airline
in accordance with its applicable standards. Further detail is provided in the SECR Committee report.
Risk description
Strategic relevance
Mitigations
A failure to prevent or respond
effectively to a major safety or
security incident or intelligence may
adversely impact the
Group’s brands, operations and
financial performance.
• The safety and security of our
customers and employees are
fundamental values for the
Group.
• The corresponding safety committees of each of
the airlines of the Group satisfy themselves that they
have the appropriate resources and procedures
which include compliance with Air Operator Certificate
requirements.
• The Group’s airlines have comprehensive training and
maintenance programmes in place, supported by a just
culture environment.
• There is ongoing security engagement with airports,
regulators and public authorities across the airlines’
networks.
• Incident centres respond in a structured way in the event
of a safety or security incident or intelligence.
INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021
113
RISK MANAGEMENT AND PRINCIPAL RISK FACTORS CONTINUED
Business and operational
11 Transformation
and change
Chief Transformation Officer
Interested stakeholders
Strategic
priorities
1
2 3
Risk trend
2021
2020
Viability
scenario
N/A
V
Status The Group has established a Transformation Programme Management Office which has oversight of an agreed portfolio of
initiatives across the Group. Many of the programmes are multi-year and all are subject to the ongoing review and investment
approvals of the IAG Board.
Risk description
Strategic relevance
Mitigations
• The transformation agenda is
critical to the Group’s ability
to compete in the new
competitive marketplace,
where distortionary effects of
aviation support schemes
may have allowed
competitors to accelerate
their change agendas and
invest to improve capabilities
and customer propositions.
• The Chief Transformation Officer has clear oversight of
all programmes.
• Consistent core metrics and dashboard reporting is used
to assess performance against plan.
• The dashboard and progress against delivery is assessed
by a core group of the IAG Management Committee
weekly.
• The Group transformation agenda is subject to Board
approval and progress is regularly monitored by the
Board.
• There is operating company-led communications to our
employees on change initiatives and changes that may
affect them.
• Consideration is given to the Group’s sustainability
commitments and agenda for all programmes.
• Any potential changes that could impact the brand are
reviewed to mitigate against brand damage.
Failure to transform the business to
effectively maintain or grow share in
the new competitive environment,
fully implement all programmes
across the Group and realise the
benefits of the change initiatives to
deliver Group digital platforms and
customer propositions.
The pace of change may expose the
Group to execution risk as multiple
initiatives are delivered across
processes and systems that serve
our operations and customers.
The impact on our people of the
wide-ranging change agenda if
poorly managed or uncoordinated
could lead to logistical and
engagement challenges with the
potential to negatively impact NPS,
revenue and efficiency benefits.
Further standardisation,
simplification and efficiencies of the
Group platforms are not delivered.
Competitors, or new entrants, may
invest to deploy digital technologies,
sustainability initiatives and/or
platforms ahead of the Group.
The Group focus on cash
preservation, debt and debt
repayment could limit the
investment available to deliver
initiatives.
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INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021
Strategic Report Financial risk including tax
12 Debt
funding
Chief Financial Officer
Interested stakeholders
Strategic
priorities
1
2 3
Risk trend
2021
2020
Viability
scenario
V
Status Despite disruption in the financial markets since the spread of the COVID-19 pandemic, the Group has proactively focused on
protecting liquidity by raising new non-aircraft debt, agreeing new aircraft leases and entering into new multi-year credit facilities.
Aircraft were successfully financed on long-term arrangements during the year.
See Financial review section.
Risk description
Strategic relevance
Mitigations
Failure to finance ongoing
operations, committed
aircraft orders and future
fleet growth plans.
New financial arrangements, in
addition to the repayment of
existing arrangements, and
government support schemes (as
applicable) may impact plans to
transform the Group and will
influence the timing for IAG to
resume paying dividends to its
shareholders.
• The Group has substantial
debt that will need to be
repaid or refinanced. The
Group’s ability to finance
ongoing operations,
committed aircraft orders and
future fleet growth plans is
vulnerable to various factors
including financial market
conditions, financial
institutions’ appetite for
secured aircraft financing and
the financial market’s
perceptions of the future
resilience and cashflows of
the Group.
• The IAG Board and Management Committee have
reviewed the Group’s financial position and financing
strategy on a very frequent basis throughout the period
of the COVID-19 pandemic.
• The Group has maintained clear focus on protecting
liquidity.
• Additional funding arrangements entered into, including
raising additional equity in 2020.
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115
RISK MANAGEMENT AND PRINCIPAL RISK FACTORS CONTINUED
Financial risk including tax
13 Financial and
treasury-related risk
Chief Financial Officer
Strategic
priorities
1
2 3
Interested stakeholders
Risk trend
2021
2020
Viability
scenario
V
Status The financial markets were impacted by the uncertainty derived from the COVID-19 pandemic. The approach to fuel risk
management, financial risk management, interest rate risk management, proportions of fixed and floating debt management and
financial counterparty credit risk management and the Group’s exposure by geography have all been re-evaluated this year to ensure
the Group responds to the rapidly changing financial environment appropriately. Details are set out in the Group financial statements.
Risk description
Strategic relevance
Mitigations
Failure to manage the volatility in
the price of oil and petroleum
products.
Failure to manage currency risk on
revenue, purchases, cash and
borrowings in foreign currencies
other than the airlines’ local
currencies of euro and sterling.
Failure to manage the impact of
interest rate changes on floating
finance debt and floating operating
leases.
Failure to manage the financial
counterparties credit exposure
arising from cash investments and
derivatives trading.
• The volatility in the price of oil
and petroleum products can
have a material impact on the
Group’s operating results.
• The volatility in currencies
other than the airlines’ local
currencies can have a material
impact on the Group’s
operating results.
• The volatility in floating
interest rates can have a
material impact on the
Group’s operating results.
• The Group is exposed to
non-performance of financial
contracts that may result in
financial losses.
• Fuel price risk is partially hedged through the purchase
of oil derivatives in accordance with the Group risk
appetite.
• All airlines hedge in line with the Group hedging policy
under the Group Treasury oversight.
• The Group’s fuel hedging policy was revised in early 2021
(and approved by the IAG Audit and Compliance
Committee) to better reflect the circumstances caused
by the COVID-19 pandemic and future capacity
expectations.
• The IAG Audit and Compliance Committee and IAG
Management Committee regularly review the Group’s
fuel and currency positions.
• Currency risk is hedged through matching inflows and
outflows and managing the surplus or shortfall through
foreign exchange derivatives.
• All airlines review routes to countries with exchange
controls to monitor delays in the repatriation of cash
and/or with the risk of material local currency
devaluation.
• The impact of rising interest rates is mitigated through
structuring selected new debt and lease deals at fixed
rates throughout their term as well as through derivatives
instruments.
• The Group has a financial counterparty credit limit
allocation by airline and by type of exposure and
monitors the financial and counterparty risk on an
ongoing basis.
• The IAG Management Committee and the IAG Audit and
Compliance Committee regularly review the financial
risks and the hedged amounts. Any position outside of
policy limits has to be approved by the IAG Audit and
Compliance Committee.
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INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021
Strategic Report
Financial risk including tax
14 Tax
Chief Financial Officer
Strategic
priorities
1
2 3
Interested stakeholders
Risk trend
2021
2020
Status Tax is managed in accordance with the Tax Strategy, found in the Corporate Policies section of the IAG website. Further
information about taxes paid and collected by IAG is set out in note 10 of the Group financial statements.
Risk description
Strategic relevance
Mitigations
The Group is exposed to systemic
tax risks arising from either changes
to tax legislation and accounting
standards or challenges by tax
authorities on the interpretation or
application of tax legislation.
Businesses and consumers may be
subject to higher levels of taxation
as governments seek to increase
environmental taxes, redesign the
global tax framework and recover
the national debts arising from
COVID-19 pandemic support
measures.
The Group’s stakeholders’
expectations of the tax behaviours
of large corporates may lead to
reputational risk from the Group’s
management of tax.
• Payment of tax is a legal
obligation. Changes in the tax
regulatory environment,
including changes in tax rates,
may result in additional tax
costs for the Group and in
additional complexity in
complying with such changes.
The Group’s tax strategy aims
to balance the needs of our
key stakeholders, recognising
that tax is one of Group’s
positive contributions to the
economies and wider
societies of the countries in
which IAG operates.
• The Group adheres to the tax policy approved by the
IAG Board and is committed to complying with all tax
laws, to acting with integrity in all tax matters and to
working openly with tax authorities.
• Tax risk is managed by the operating companies in
conjunction with the IAG Tax function.
• Tax risk is overseen by the Board through the Audit and
Compliance Committee.
• The Group seeks to understand its stakeholders’
expectations on tax matters e.g. cooperative working
with tax authorities and its interaction with non-
governmental organisations.
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117
RISK MANAGEMENT AND PRINCIPAL RISK FACTORS CONTINUED
Compliance and regulatory
15 Group governance
structure
General Counsel
Strategic
priorities
1
2 3
Interested stakeholders
Risk trend
2021
2020
Status The aviation industry continues to operate under a range of nationality and other restrictions, some of which are relevant to
market access under applicable bi-lateral and multi-lateral air service agreements, while some are relevant to eligibility for applicable
operating licences. The Group will continue to encourage stakeholders to normalise ownership of airlines in line with other business
sectors.
See Corporate governance section.
Risk description
Strategic relevance
Mitigations
The governance structures the
Group has in place include
nationality structures to protect
Aer Lingus’, British Airways’ and
Iberia’s operating licences and/or
route rights.
IAG could face a challenge to its
ownership and control structure.
• Airlines are subject to a
significant degree of
regulatory control. In order for
air carriers to hold EU
operating licences, an EU
airline must be majority-
owned and effectively
controlled by EU nationals.
British Airways is a UK carrier
and not subject to the same
requirement.
• IAG will continue to monitor regulatory developments
affecting the ownership and control of airlines in the UK
and EU.
16 Non-compliance with key
regulation and laws
General Counsel
Strategic
priorities
1
2 3
Interested stakeholders
Risk trend
2021
2020
Status The Group has maintained its focus on compliance with key regulations and mandatory training programmes have continued
throughout the year.
Risk description
Strategic relevance
Mitigations
The Group is exposed to the risk of
individual employee’s or groups of
employees’ inappropriate and/or
unethical behaviour resulting in
reputational damage, fines or losses
to the Group.
• Carrying out business in a
compliant manner and with
integrity is fundamental to the
values of the Group, as well as
the expectation of the
Group’s customers
and stakeholders.
• The Group has clear frameworks in place including
comprehensive Group-wide policies designed to
ensure compliance monitored by the IAG Audit and
Compliance Committee.
• There are mandatory training programmes in place
to educate employees as required for their roles in these
matters.
• Compliance professionals specialising in competition
law and anti-bribery legislation support and advise the
Group’s businesses.
• IAG Code of Conduct framework and mandatory training
is in place for all Group businesses.
• Data Protection Officers are in place in all operating
companies.
118
INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021
Strategic Report Viability assessment
Risk assessment across the timeline of
the plan
The Directors have assessed key threats
and trends faced by the industry, emerging
risks and opportunities arising from the
COVID-19 pandemic as well as other
industry and Group specific risks that
could impact the Group’s business plan:
• These are considered in light of their
impact on our business model and
relevance, operations, customers,
financial status and include changes in
regulations, customer trends and
behaviours, macroeconomic predictions
on growth, regional market
opportunities, technology trends,
environmental implications and
infrastructure developments that could
impact our operations, as well as more
existential threats to aviation
• When developing the Group’s three-year
business plan, longer-term
considerations have been assessed by
the Management Committee and the
Board in conjunction with the priorities
faced by the business
• The Board has also conducted its annual
strategy session in addition to progress
reviews during the year. Following this
process, short-, medium- and longer-
term priorities, challenges and
opportunities have been identified and
actions agreed
Longer-term trends and risk
considerations
• The Directors have assessed industry,
Group specific and non sector-specific
longer-term trends over a timeframe
beyond the plan period, such as climate
change regulation, infrastructure
proposals at hubs, availability and timing
of technologies in fleet that will benefit
the environment, move to and
exploitation of the Cloud and disruptive
innovation. This may require the
business to consider strategic responses,
plans to adapt and require new skillsets
to implement ahead of any potential
impact to the Group plan
• Other considerations include:
• Economic trends and shifts in the
relative strengths of global economies
including market dynamics and
changes in customer behaviours or
sentiment to travel
• Supply chains and connectivity,
movement of physical goods,
inflationary and availability pressures
on key suppliers
• Costs of compliance to environmental
and climate change regulations and/or
lack of availability of infrastructure
within countries to meet commitments
or government mandates
• Areas of risk or opportunity for the
Group, such as ageing populations in
Europe, war for talent, diversity and
inclusion ambitions, hybrid ways of
working and different career
expectations from new joiners into
workforces and the aviation industry
• The ongoing challenges posed by the
COVID-19 pandemic, including
structural changes in how customers
travel, costs incurred by the Group in
safeguarding customers and
colleagues and the potential
macroeconomic consequences of
rising unemployment and inflation
• The potential longer-term economic
impact of Brexit
• The Group’s resilience to future events
impacting aviation or global markets
• Stakeholder expectations over
commitment to acting with integrity
to protect our planet, particularly
climate change and carbon impacts
Viability scenario development
• The Group has undertaken extensive
analysis, forecasting and scenario
modelling over the last year. It has
refined its forecasting models and
depth of analysis to ensure that
stresses considered reflect specifics to
markets and regions relevant to the
Group’s airlines as well as the analysis
completed at the Group level
• During 2021, the Board regularly
reviewed scenarios stressing the
financial plans. These exercises
leveraged the existing processes and
models used for viability assessment
within the Group
• When considering the viability of the
Group, for the purposes of this report,
the Directors have evaluated the risk
landscape facing the Group and
recommended plausible but severe
downside scenarios that could impact
the Group’s refreshed three-year plan
to determine the Group’s resilience to
such impacts. The results of these
scenarios on the plan have been
presented both pre and post an
assessment of the likely effectiveness
of the mitigations that management
reasonably believes would be available
over this period (and not already
reflected in the plan)
• The scenarios have been defined by
management and designed to consider
principal risks that could materialise
over the viability period and weaken
the Group’s liquidity position, and
therefore its sustainability. Each
scenario considered the impact on
liquidity, solvency and the ability to
raise financing in an uncertain and
volatile environment
• When considering the mitigations,
management has assessed mitigations
that are available to the business
beyond operating cost reductions
including further financing, capital
expenditure plans and potential
disposals. Options that may not have
been previously considered as
mitigations were presented with
recommendations for the Board to
consider. In assessing and approving
the scenarios, the Board considered,
amongst other matters, the availability
and sufficiency of potential mitigations,
the expected speed of implementation
in response to the uncertainty and the
future flexibility required for the Group
to adapt further as needed
• Sensitivities in the scenarios’
assumptions have been highlighted by
management and challenged by the
Board. In addition, the Board reviewed
the results of capacity and margin
reverse stress tests, which
demonstrated the level of sustained
capacity reductions, with losses capped
as experienced through the pandemic
and losses followed by margin decline
(before mitigations) that would result in
the Group using all available liquidity
(including cash and currently available
undrawn credit facilities) and compared
this to the outputs from the scenarios
• The Downside Lockdown scenario was
considered to be the most severly
impactful but plausible scenario that
could threaten the Group, and in excess
of any other plausible combination of
scenarios. Mitigating actions as
described in the Downside Cases were
also considered across all of the
scenarios modelled
• Management has assessed and the
Board considered the longer-term
sustainability and climate risks, applying
scenario analysis techniques as set out
by the TCFD process. Further details
can be found in the Sustainability
report
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119
RISK MANAGEMENT AND PRINCIPAL RISK FACTORS CONTINUED
Scenarios modelled
No.
Title
1
2
3
4
Downside cases and sensitivities further stressing the plan
Downside cases stressing the plan to model prolonged imposition of restrictions and a more gradual
recovery relative to the plan. This could be caused by factors such as new variants emerging and
differing governments’ appetite for pandemic measures, including vaccine and testing requirements
for entry, the availability of treatments in countries and border closures. Two scenarios were
modelled and assessed, referred to as the “Downside Case” and “Downside Lockdown Case”. Both
scenarios reflect a capacity restricted environment, with the second of these having a more
significant impact on the status of travel, with heightened restrictions being re-imposed worldwide
significantly lowering capacity. The Downside Lockdown case is representative of the environment
experienced in Q1 2021, with modelling the impact of national lockdowns and severe restrictions
impacting the Group airlines in all regions for a period of two months during 2022, with capacity
recovering to the Downside case levels in mid-2023. Both scenarios model a more acute impact on
the longhaul sector, with the domestic sector and European shorthaul sectors recovering faster than
longhaul, as experienced in 2021.
The Group does not need to draw down on its general credit facilities (being the multi operating
company Revolving Credit Facility (RCF) of $1.755m and the BA UKEF £1.0 billion credit facility, both
negotiated and executed in 2021) under the Downside scenario. In the Downside Lockdown
scenario, it is assumed that these facilities would be fully drawn down.
As part of the modelling, consideration was given to some of the key factors that could influence the
evolution of cash in the Downside and Downside Lockdown cases. Cost mitigations were considered
across all operating cost lines, including the impact of cost variability being lower than that assumed.
Fuel was modelled directly, based on fuel curves and hedging plans. Working capital and capital
expenditure adjustments were applied within the scenarios. The scenarios assume that the Group is
able to continue to secure financing for future aircraft deliveries, having successfully financed all
aircraft purchases during 2020 and 2021, and, in addition, has further potential mitigating actions,
including asset disposals, it would pursue in the event of adverse liquidity experience.
The period to June 2023 of this Downside Lockdown case scenario has also been applied as the
Downside case set out in the going concern analysis (see note 2 of the Group financial statements).
Business transformation delays and gaps in critical skillsets
Potential for lost revenue impact arising from delays in delivering and realising the benefits of
business transformation initiatives. Increased costs from critical skills not being in place to deliver the
transformation as a result of continuing uncertainty surrounding aviation industry, staff engagement
and pace of required change.
Ransomware attack
A stress to model the impact of a ransomware attack on an IAG airline. The scenario assumes a
disruption period of 1-2 weeks resulting from the attack before full connectivity is restored,
impacting customers and operations of the affected airline. It also assumes lost revenue due to
disruption of operations at the affected airline with knock-on impact to other IAG airlines due to
need to isolate and switch off connectivity of Group shared credentials platforms. There are also
further lost revenues due to reputational impact and increased EU 261 costs. Associated costs of
recovering from the incident include the disruption through the investigation period including
increased IT costs as well as brand impacts, and the potential for regulatory scrutiny and fines.
Increasing awareness of sustainability agenda impacting the Group
A revenue stress on shorthaul operations across the Group in years 2 and 3 to reflect changes in
customer behaviours towards shorthaul travel where other travel options exist, with the additional
imposition of costs from sustainable fuel usage (with no/limited ability to pass this on to the
customer). The scenario also includes an assumption where there is a slower than anticipated return
of corporate travel business (both long and shorthaul) versus plan expectations.
This scenario allows the Board to understand the potential impacts of the Sustainability agenda on
the Group’s future financial performance over the life of the plan to 2024. Longer-term
consideration of the impacts of climate change and carbon and regulatory initiatives to address this
within the aviation sector, such as the EU Fit for 55 proposals, the cost and availability of
sustainable aviation fuel are also subject to assessment and modelling by the Group.
120 INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021
Link to principal risks
2, 4, 7, 12, 13
1, 2, 9, 11
6, 7, 8
5
Strategic Report Viability statement
The Directors have assessed the viability
of the Group over three years to
December 2024 considering the ongoing
impact of the COVID-19 pandemic on the
external environment and aviation
industry, the assumptions of the plan, the
strategy of the Group and the Board’s risk
appetite. Although the prospects of the
Group are considered over a longer period,
the Directors have determined that a
three-year period is an appropriate time
frame for assessment as it is aligned with
the Group’s strategic planning period (as
reflected in the plan) and the external
uncertainties facing the aviation sector
more widely are significantly beyond any
experience to date and continue to drive
change in the external risk environment.
The Board recognises the pace of change
required within the Group to further adapt
and respond to this environment in
addition to the rapidly changing
competitive landscape and wider global
macroeconomic conditions.
The Group has modelled the impact of
mitigating actions to offset further
deterioration in demand and capacity,
including reductions in operating
expenditure and capital expenditure. The
Group expects to be able to continue to
secure financing for future aircraft
deliveries and in addition has further
potential mitigating actions it would
pursue in the event of adverse liquidity
experience.
Further details on debt financing can be
found in the Going Concern disclosures in
note 2 of the Group financial statements.
Based on this assessment, the Directors
have a reasonable expectation that the
Group will be able to continue in operation,
meet its liabilities as they fall due and raise
financing as required over the period to
December 2024. However, this is subject
to a number of significant factors that are
outside of the control of the Group. In
reaching this assessment the Directors
have made the following assumptions
when considering both the plan and the
Downside Lockdown scenario case (the
most severe and plausible of the downside
scenarios considered):
• the Group will continue to have access
to funding options and that the capital
markets retain a level of stability and
appetite for funding within the aviation
sector;
• the Group can implement any further
structural changes required in
agreement with any union consultation
processes and regulatory approvals;
• future COVID-19 pandemic impacts do
not result in further prolonged and
substantial capacity reductions and
groundings beyond 2022; and not to Q2
2020 levels, as governments do not
have the appetite for the economic
impact and stress that it would place on
their respective economies;
• and any new virus strain or threat to
public health that emerges during the
viability period can be managed within
existing health and testing regimes
without recourse to government
regulations that significantly affect
our airlines’ operations.
Due to the uncertainty created by the
COVID-19 pandemic, the potential for
future waves of the COVID-19 pandemic
and the consequential impact on travel
restrictions and/or demand, the Group is
not able to provide certainty that there
could not be more severe downside
scenarios than those it has considered,
including the stresses it has considered in
relation to factors such as the impact on
yield, capacity operated, cost mitigations
achieved and fuel price variations. In the
event that such a scenario were to occur,
the Group would need to implement
additional mitigation measures and would
likely need to secure additional funding
over and above that which is contractually
committed at February 24, 2022. The
Group has been successful in raising
financing since the outbreak of COVID-19,
however the Group cannot provide
certainty that it will be able to secure
additional funding, if required, in the event
that a more severe downside scenario than
those it has considered were to occur.
INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021
121
REGULATORY ENVIRONMENT
Making the case
for positive policies
companies, to manage the process of
implementing rule changes, thus
benefitting from the wide range of
experience and expertise across the
Group.
IAG’s engagement included highlighting
the benefits and value of aviation,
especially that of transatlantic traffic, at
the highest levels. The Group was well
prepared to meet the US authorities’
requirements for track and trace data
when the country opened to vaccinated
foreign visitors in November.
The US opening came as part of a gradual
removal of restrictions in IAG’s key home
markets and around the world along with
the welcome simplification of the UK’s
traffic light system and the removal of
hotel quarantine requirements in the UK
and Ireland.
The unpredictable nature of the pandemic
was emphasised when further restrictions
on travel to certain countries were
imposed by governments in response to
the spread of the Omicron variant. IAG
continues to argue for such policy action
to be proportionate so that future variants
of concern should not, for example, result
in blanket measures on all travellers, such
as the need for onerous and costly testing
regardless of origin.
Throughout the pandemic IAG has
advocated the establishment of a global
approach to imposing restrictions and to
rule-making through ICAO to reduce
confusion for customers and airlines alike.
The Group continues to urge governments
to come together to develop a joint
approach to crisis management that
applies a consistent set of requirements
whether for future pandemics (including
moving to a traveller-based approach to
risk rather than bans by country, allowing
fully vaccinated passengers to travel
without restriction, and setting standard
architectures for digital health certificates)
or for other upheavals that could impact
the operation of this global industry.
Sustainability – Brussels
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 has engaged with
representatives of the institutions of the
European Union over the European
Commission’s Fit for 55 package. This
commits the EU to reducing net
The political and regulatory environment in
2021 continued to provide IAG with
significant challenges as states around the
world maintained, and in many cases
tightened, restrictions on international
travel as part of their ongoing responses to
the COVID-19 pandemic. While always
seeking to maintain the safety of its
customers and colleagues, IAG worked to
influence common sense approaches to
rule-making and the safe lifting of
restrictions as vaccination programmes
expanded.
The effects of the pandemic had additional
knock-on impacts in a variety of areas as
policy makers and regulators reacted to
the reduction in traffic, leading to
temporary changes in policy. Specifically,
there were restrictions that impacted IAG
carriers via the limitation of frequencies
and allocation of capacity between
competitor airlines in several international
markets that the Group worked to reduce
or remove.
Alongside the pandemic, sustainability
continued to be the most important area
of regulatory policy development affecting
the industry. Interest around the world in
the management of carbon emissions
grew in the run-up to COP26 in November
with ongoing scrutiny of the contribution
of air transport to emissions. This is a
challenge to which IAG is leading the
aviation industry’s response.
COVID-19
Regulatory reaction to address the threat
of COVID-19 required IAG and its operating
companies to monitor and manage very
many developments in the regulatory field
throughout 2021.
In order to encourage the adoption of
practical and reasonable rules, as well as to
mitigate their impacts on the business, IAG
and its operating companies took every
opportunity to engage with the authorities
in the countries in which its airlines are
established and in other major markets
directly and through trade associations.
Understanding restrictions, implementing,
and complying with associated regulations,
as well as keeping customers informed of
requirements, was unfortunately made
ever more difficult by the very
considerable variations between
jurisdictions and further by constant
changes to regulations, often implemented
with little or no notice.
Swift development of digital applications
by the Group, such as British Airways’
in-house Right To Fly or Iberia’s and
Vueling’s AirCheck system, as well as
collaboration with independent apps such
as VeriFLY, were essential in helping verify
customers’ travel documents and
managing demand as passenger volumes
began to return in the second half of the
year.
As well as the unprecedented level of
engagement with governments over this
period, IAG established internal working
groups, both cross department within
operating companies and across Group
122
INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021
Strategic Report from that of the US and other key markets,
was disappointing. IAG continues to
support the use of the proven, effective
global rules of the IATA Worldwide Airport
Slots Guidelines.
Competition
Another feature of the impacts of the
pandemic in 2021 was that in some
markets, governments imposed
peremptory or arbitrary restrictions on
capacity to protect their home carriers on
the pretext of safeguarding public health.
IAG and its operating companies continue
to work through the governments of its
home countries and in the markets in
question to promote the benefit of
competition to consumers and the health
of the aviation industry and to encourage a
full return to normal operations in 2022.
Airport charges
Working with the trade association Airlines
for Europe (A4E), IAG continued to
promote the need for changes to airport
charges legislation in Europe to make the
industry fit for a more competitive future.
The Group continues to monitor
developments and engage with regulators
around the world as airports seek to
increase charges to pass on their losses
over the last two years to their airline
customers. A key focus during 2021 was on
Heathrow’s regulatory price review. The
airport sought to double charges when
other hubs (e.g. all airports in Spain) are
keeping rates flat or seeing only small
increases (e.g. Frankfurt). It was
disappointing to see the Civil Aviation
Authority (CAA) announce, in December,
that it would allow Heathrow to increase
charges by 50 per cent in 2022 (the
interim price cap). British Airways and IAG
are fully engaged in the CAA’s review
process that continues through the first
half of 2022. We seek to demonstrate that
charges should in fact more reasonably be
reduced at Heathrow over the remainder
of the regulatory period to 2026 in the
interests of preserving the competitiveness
of UK aviation and providing a better
outcome for both IAG’s airlines and for
consumers.
Market access
During the pandemic, regulatory approval
was secured for a range of flights for
Aer Lingus, British Airways and Iberia to
new destinations or for new purposes
including cargo and passenger charter
services. As restrictions began to be lifted
attention turned to strategic actions to
expand markets.
The start of Aer Lingus’s operations from
Manchester to the Caribbean
demonstrated the Group’s flexible business
model, including IAG’s central Government
Relations team helping to secure
regulatory permission from both UK and
US authorities for the new UK-based
operation. Further regulatory engagement
with several countries in the Caribbean,
Africa and Asia has also helped secure the
significant expansion of code share
networks, in particular with Kenya Airways
and Qatar Airways.
IAG monitored, as usual, developments in
relevant international relationships and air
services agreements throughout the year,
including the discussions in the Autumn
between the EU and the UK on the
Northern Ireland protocol (since the
UK-EU Trade and Cooperation Agreement
includes provisions on aviation). Any
potential changes to the status of the
protocol are not expected to have an
impact on the air services arrangements
between the EU and the UK.
In 2021 overall, the Group took every
opportunity to emphasise the economic
and social value of aviation in facilitating
trade, tourism and in reuniting families
separated by the pandemic, and also to
demonstrate that this is being done in a
responsible and environmentally
sustainable manner.
greenhouse gas emissions by at least 55%
by 2030 (compared with 1990) and to
reaching climate neutrality by 2050.
IAG welcomes Fit for 55, and its objectives
with which the Group is aligned, as a
powerful package for change. However,
IAG continues to argue that the design of
some elements may reduce the EU’s
capacity to invest in sustainability and
make it less competitive compared with
other non-EU aviation markets.
IAG does not support the imposition of the
jet fuel tax that Fit for 55 proposes. This is
not a solution for decarbonisation but will
reduce the sector’s ability to invest in more
effective measures. Instead, we are firmly
of the view that policy should focus on
increasing the use of Sustainable Aviation
Fuels (SAF) and market-based measures
such as the EU Emissions Trading System
(ETS) and ICAO’s Carbon Offsetting and
Reduction Scheme (CORSIA).
IAG contends that increasing the use of
SAF, which reduce lifecycle CO2 emissions
by up to 85 per cent, provides the primary
near-term opportunity to drive down
industry emissions. In April, IAG became
the first European airline group to commit
to powering 10 per cent of its flights with
SAF by 2030. We encourage the EU to
include a package of investment incentives
to enable scaled-up production of SAF
alongside the blending mandate
requirement that Fit for 55 introduces.
British Airways launched its BA Better
World sustainability strategy in September
and also procured the use of sufficient SAF
to power all flights between London and
Glasgow during COP26.
IAG has long been an advocate for and
contributor to the design of CORSIA. The
Group believes the Fit for 55 package
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.
Other policy issues
Slot allocation
A key impact of the pandemic, given the
dramatic reduction in demand, was the
need for a waiver from regulators to the
slot allocation rules that would otherwise
risk breaking up long-established airline
networks. IAG worked with its trade
association, the International Air Transport
Association (IATA) to advocate the
adoption of a system agreed with airports
and slot coordinators that would recognise
the value to consumers to allow temporary
alleviation from “the use it or lose it” rules
so as to maintain networks of airlines who
have built them up over the years. The UK
and others sensibly adopted full waivers of
the “use it or lose it" rules but the
patchwork of approaches adopted,
including the different position of the EU
INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021
123
CHAIRMAN'S INTRODUCTION TO CORPORATE GOVERNANCE
Committed to leading with
purpose and integrity
It is my pleasure to present this Corporate
Governance report which provides an
overview of the way in which our Group is
governed and the most relevant matters
we have encountered during 2021.
My first year as IAG Chairman has seen
unprecedented circumstances and
significant change at Board and
management level. I am pleased to be
supported by such an experienced and
committed team as we continue to
navigate the impacts of the pandemic.
Both our purpose and our vision are clearly
reflected in the Board and management’s
commitment to create and deliver
long-term sustainable value for our people,
customers, shareholders and our society.
Firstly, by weathering this crisis and
making the most of the recovery.
Secondly, by transforming our business
and preparing it for a post-COVID future.
In the last year, the Board met 19 times
including two dedicated sessions on our
strategy and long-term transformation
aspirations. The September meeting in
Madrid was particularly rewarding as we
met face-to-face for the first time since
February 2020. It was pleasing to
corroborate first-hand that, as productive
as online working proved to be, it cannot
replace the benefits of being together in
person, which is central to our purpose
and business.
Our unique model proved resilient and has
served us well during the pandemic. The
strength of our empowered operating
companies has enabled them to respond
effectively to a fast-changing environment
in the different markets in which they
operate. Being part of the Group also
enabled us to share strategies and best
practices to improve our response to the
crisis and coordinate actions accordingly.
Sustainability remains a key priority. As
announced last year, the Board is
supported in this work by the newly
established Safety, Environment and
Corporate Responsibility Committee. In
parallel, the Management Committee has
been bolstered with the appointment of a
Chief People, Corporate Affairs and
Sustainability Officer to ensure
sustainability remains at the core of our
strategy.
Javier Ferrán
Chairman
“Both our purpose and our vision are
clearly reflected in the Board and
management’s commitment to create
long-term sustainable value for our
people, customers, shareholders and
our society.”
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INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021
Corporate Governance Board evaluation
Reflecting our commitment to good
governance, the Nominations Committee
oversaw the evaluation of the Board and
all committees’ performance. The outcome
of this review and details of the process
are provided later in this report.
Our robust and efficient governance
processes underpin our ability to live our
values and deliver our strategy. The Board
is committed to ensuring that we continue
to adhere to high standards of corporate
governance so that we can create
long-term sustainable value for our
shareholders and perform in the interests
of all our stakeholders.
As I have said before, our people are at the
heart of our business and I would like to
express once again our deep appreciation
for the efforts and commitment shown
during this difficult year. I would also like to
thank my Board colleagues for their
continued support and dedication
throughout this period.
Javier Ferrán
Chairman
Board composition
As anticipated, Antonio Vázquez retired as
IAG Chairman on January 7, 2021.
Moreover, we started the year with three
new non-executive directors, Peggy
Bruzelius, Eva Castillo and Heather Ann
McSharry, who joined the Board on
December 31, 2020. In addition, Maurice
Lam joined our Board as a non-executive
director, at our Shareholders Meeting in
June 2021. All of these new appointees
have completed their induction
programmes during the year as further
detailed in the Nominations Committee
Report.
Our people
I would like to highlight our renewed focus
on our people who are at the centre of
everything we do and achieve. The Board
has direct oversight over culture, and
together with management is redoubling
efforts to nurture our talent and align our
culture, purpose and strategy. In addition
to Nicola Shaw and Alberto Terol, the
Board has appointed Eva Castillo as a
designated director supporting the
workforce engagement initiatives detailed
later in this report.
The Board is also prioritising diversity and
inclusion. I am pleased that we are leading
by example with a significant 42 per cent
female representation on the Board, which
is 62 per cent of our independent
directors, and with women chairing two of
the Board committees. We also comply
with the Parker Review target for ethnic
diversity on FTSE 100 boards. Despite this
progress, there is still more to be done
across the business and IAG management
is committed to do so. To this end, a
cross-Group Diversity Panel was created
to share best practice and to lead the
co-design of new diversity and inclusion
initiatives. Additionally, we have set a new
target of having at least 40 per cent of
senior roles held by women and we will
continue to review our policies to ensure
we are a diverse and inclusive organisation.
Management changes
I was pleased to welcome two new
members of the Management Committee
during the year. Firstly, as reported last
year, David Podolsky, who was previously
at Bain & Co, joined the Group in January
2021 as Chief Strategy Officer, he also
became Chief Executive Officer of IAG
Cargo from April 2021 . Secondly, we
appointed Carolina Martinoli as Chief
People, Corporate Affairs and
Sustainability Officer from April 2021.
Carolina has extensive experience in the
Group having worked at both British
Airways and Iberia for more than 10 years
including leadership roles in brand and
customer experience, as well as successful
business transformation.
Within the Management Committee, Lynne
Embleton was appointed Chairman and
Chief Executive Officer of Aer Lingus from
April 2021. From 2017, she led IAG Cargo
and was responsible for setting the
business on a digital transformation
journey. Prior to this, Lynne held a number
of leadership roles at British Airways.
As announced in October 2021, Steve
Gunning has decided to stand down as
Chief Financial Officer and leave the Group
following the release of our full year 2021
results. After a rigorous search process, I
am pleased to welcome Nicholas Cadbury
who will join us in March 2022. He is a
well-respected and experienced CFO with
an excellent track record at Whitbread,
Premier Farnell and Dixons Carphone,
including valuable board experience as
non-executive director and Chair of the
Audit Committee for Land Securities.
On behalf of the Board, I would like to
thank Steve for his significant contribution
in helping us build resilience and a solid
financial position from which the Group
will be able to continue to navigate the
challenges ahead.
INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021
125
BOARD LEADERSHIP
Our board of directors
Javier Ferrán N
Key areas of experience:
Consumer, finance, sales/marketing, governance
Current external appointments:
Chairman, Diageo Plc. Senior advisor to
BlackRock Long Term Private Capital and
director of investee company.
Previous relevant experience:
Non-executive director, Coca Cola European
Partners Plc 2016-2020. Chairman of Supervisory
Board, Picard Surgelés 2010-2020. Member,
International Advisory Board ESADE 2005–2019.
Non-executive director, Associated British Foods
plc 2005–2018. Non-executive director, Desigual
SA. 2014-2017. Non-executive director, SABMiller
plc 2015–2016. Vice Chairman, William Grants &
Sons Limited 2005–2014. Non-executive director,
Louis Dreyfus Holdings BV 2013–2014. Non-
executive director, Abbott Group 2005–2008.
Non-executive director, Chupa Chups SA
2000-2003. Partner, Lion Capital LLC 2005–
2018. President EMEA, President and CEO,
Bacardi Group 1992-2004.
Luis Gallego
Key areas of experience:
Airline industry, general management
Current external appointments:
Member of the Board of Governors and Member
of the Chair Committee, IATA.
Previous relevant experience:
Chairman and CEO, Iberia 2013-2020. CEO, Iberia
Express 2012-2013. Chief Operating Officer,
Vueling 2009-2012. Founder of Clickair
2006-2009.
Peggy Bruzelius A
Key areas of experience:
Financial services, corporate finance
Current external appointments:
Chair, Lancelot Holding AB. Non-executive
director and Chair of the Audit Committee,
Lundin Energy AB. Non-executive director and
Chair of the Investment Committee, Skandia
Mutual Life Insurance. Member, the Royal
Academy of Engineering Sciences.
Previous relevant experience:
Chair, Swedish National Agency for Higher
Education 2008-2011. Member Board of Trustees,
Stockholm School of Economics 2000-2011.
Various Corporate Boards, Trygg Hansa Liv AB,
Celsius AB, AB Ratos, Scania AB, The Body Shop
Plc, Axel Johnson AB, Axfood AB Husqvarna AB
1992-2019. Senior Independent Director, AB
Electrolux 1996-2012. Non-executive director,
Syngenta AG 2001-2014. Non-executive director,
Diageo plc 2009-2018. Non-executive director,
Akzo Nobel nv 2007-2019. Executive Vice
President, Head of Asset Management
Skandinaviska Enskilda Banken 1997-1998. CEO,
ABB Financial Services AB 1991-1997.
Alberto Terol R N
Key areas of experience:
Finance, professional services, information
technology, hospitality industry
Current external appointments:
Vice Chairman, Lead Independent Director and
Chair of the Nominations, Remuneration and
Corporate Governance Committee, Indra
Sistemas. Non-executive Director, Chairman of
the Audit Committee, GMP Property SOCIMI, S.A.
Non-executive Director, Broseta Abogados.
Non-executive director, Schindler España.
Independent Director Varma, S.A. Vice Chairman
and non-executive Director of Ontime Corporate
Union. Patron of Fundación Telefónica. Vice
Chairman Circulo de Empresarios. Executive
Chairman of various family owned companies.
Previous relevant experience:
International Senior Advisor, Centerbridge
2014-2021. Chairman of the Supervisory Board,
Senvion GmbH 2017–2019. Non-executive
director, OHL 2010–2016. Non-executive director,
Aktua 2013–2016. Non-executive director, N+1
2014–2015. International Senior Advisor, BNP
Paribas 2011–2014. Member, Global Executive
Committee Deloitte 2007–2009 previously from
2003, Member Global Management Committee.
Managing Partner, EMEA Deloitte and Global Tax
& Legal 2007–2009. Managing Partner, Latin
America Deloitte 2003–2007, Integration
Andersen Deloitte 2002–2003, Managing Partner
EMEA, Arthur Andersen 2001–2002, Managing
Partner Global Tax & Legal, Arthur Andersen
1997–2001, Managing Partner, Garrigues-
Andersen 1997–2000.
Giles Agutter N S
Key areas of experience:
Airline industry
Current external appointments:
CEO, Southern Sky Ltd. Director, JSX Airlines.
Previous relevant experience:
Non-executive director, LATAM Airlines Group
2017-2020. Non-executive director, Air Italy
2017-2020.
Eva Castillo A R
Key areas of experience:
Financial sector, telecoms sector
Current external appointments:
Non-executive director, Caixabank. Non-
executive director, Zardoya Otis. Trustee of the
Council for Economy of the Holy See (Vatican),
Trustee of the Board of the Comillas ICAI
Foundation. Member of Entreculturas
Foundation. Member of Advantere School of
Management.
Previous relevant experience:
Non-executive director, Bankia 2012-2021. Chair
Telefónica Deutschland AG. 2012-2018. Non-
executive director, Telefónica, S.A. 2008-2018.
Non-executive director VISA Europe Plc
2014-2017. President and CEO, Telefónica Europe
2012-2014. Non-executive director, Old Mutual
Plc 2011-2013. President and CEO Merrill Lynch
Capital Markets, Spain 1999-2006. President and
CEO, Merrill Lynch, Wealth Management EMEA
2006-2009.
.
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INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021
Corporate Governance Key
Committee Chair
A
Audit and Compliance Committee
N
S
Nominations Committee
R
Remuneration Committee
Safety, Environment and Corporate
Responsibility Committee
Margaret Ewing A N
Key areas of experience:
Professional services, financial accounting,
corporate finance, strategic and capital planning,
corporate governance, risk management
Current external appointments:
Senior Independent Director and Chair of the
Audit and Risk Committee, ConvaTec Group Plc.
Non-executive director and Chair of the Audit
and Risk Committee, ITV Plc.
Previous relevant experience:
Trustee and Chairman of the Finance and Audit
Committee, Great Ormond Street Hospital
Children’s Charity 2015-2020. Non-executive
director, Standard Chartered Plc 2012–2014.
Independent external member of the Audit and
Risk Committee, John Lewis Partnership Plc
2012–2014. Non-executive director, Whitbread
Plc 2005–2007. Vice Chairman, Managing
Partner, Public Policy, Quality and Risk and
London Practice Senior Partner, Deloitte LLP
2007–2012. Director, Finance, BAA Ltd 2006 and
Chief Financial Officer, BAA PLC 2002–2006.
Group Finance Director, Trinity Mirror PLC
2000–2002. Partner, Corporate Finance, Deloitte
& Touche LLP 1987–1999.
Maurice Lam A S
Key areas of experience:
Professional services, financial accounting, audit
and compliance in the banking industry
Emilio Saracho R S
Key areas of experience:
Banking, corporate finance, investment
management
Current external appointments:
Independent Director, Chairman of the Audit
Committee and Member of the Board Risk
Committee, Bank of China (Europe) S.A.
Independent director and Chairman of the Audit
& Compliance Committee of Banque
Internationale à Luxembourg S.A.
Previous relevant experience:
Independent Director, Chairman of the Audit
Committee and Member of the Board Risk
Committee of Quintet Private Bank (Europe) S.A.
2015-2020. Member of the Board of Directors of
LuxConnect S.A., a Luxembourg State owned
Company, acting as a business enabler in the ICT
market 2013-2016. Independent Director, Generali
Fund Management S.A. 2013. Deloitte
Luxembourg, Managing Partner and CEO,
2000-2010, Head of Audit 1993-2000, Audit
Partner, Financial services 1988-1993 ; Deloitte &
Touche UK 1979-1985.
Current external appointments:
Senior Advisor, Altamar Capital Partners.
Non-executive director, Inditex.
Previous relevant experience:
Chairman, Banco Popular Español 2017. Vice
Chairman and Member Investment Banking
Management Committee, JP Morgan 2015–2016.
Deputy CEO EMEA 2012–2015, Co-CEO
Investment Banking for EMEA 2009-2014, JP
Morgan. CEO, JP Morgan Private Banking for
EMEA 2006–2008. Director, Cintra 2008.
Director, ONO 2008. Chairman, JP Morgan Spain
& Portugal 1998–2006. Global Investment
Banking Head, Santander Investment (UK)
1995–1998. Head Corporate Finance Iberia,
Goldman Sachs International 1990–1995.
Nicola Shaw R S
Key areas of experience:
Transport sector, public policy and regulatory
affairs, consumer, safety and environment
operational management
Previous relevant experience:
Executive Director, National Grid plc 2016-2021.
Non-Executive Director Ellevio AB 2015–2017.
CEO, HS1 Ltd 2011–2016. Non-Executive Director,
Aer Lingus Plc 2010–2015. Director and
previously other senior positions FirstGroup plc
2005–2010. Director of Operations and other
management positions at the Strategic Rail
Authority 2002–2005. Deputy Director and
Deputy Chief Economist, Office of the Rail
Regulator (ORR) 1999–2002.
Robin Phillips S
Key areas of experience:
Finance, airline industry and transportation
Current external appointments:
Chairman, Development Funding Board,
Pancreatic Cancer UK. Senior Advisor,
Circadence Corporation (US). Board member,
IR - Scientific (Canada).
Previous relevant experience:
Global Head/Co-Head of Corporate and
Investment Banking, Head of Global Banking
and Markets (Hong Kong), Group Head
Climate committee, Head of Global Industries
Group, Head of Transport, Services and
Infrastructure, HSBC 2003-2019. Global
Co-Head of Transport & Infrastructure Group,
Citigroup 1999-2003. Executive Director,
Transportation and Aviation Investment
Banking, UBS Warburg 1992-1999. Assistant
Director, Capital Markets, Kleinwort Benson
1985-1991.
Heather Ann McSharry N R
Key areas of experience:
General management, pharmaceuticals/health
care, financial services, consumer products, food
and construction industry sectors, governance
Current external appointments:
Non-executive director, Chair of Nominations
and Governance Committee, Jazz
Pharmaceuticals Plc.
Previous relevant experience:
Non-executive director, CRH plc 2012-2021.
Non-executive director, Greencore plc 2013-2021.
Non-executive director, Uniphar Plc 2019-2020.
Non-executive director, Bank of Ireland Plc
2007-2011. Chairman, Bank of Ireland Pension
Fund Trustee Board 2011-2017. Managing
Director, Reckitt Benckiser Ireland 2004-2009
Managing Director, Boots Healthcare Ireland
1998-2004.
INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021
127
CORPORATE GOVERNANCE
Statement of compliance
with applicable corporate
governance codes
As a company incorporated and listed in
Spain, IAG is subject to applicable Spanish
legislation and associated corporate
governance framework. In accordance
with this, this Corporate Governance
Report details its compliance with the
Spanish Good Governance Code of Listed
Companies, last updated and published by
the Spanish Comisión Nacional del
Mercado de Valores (“CNMV”) in June
2020, and available on its website (www.
cnmv.es).
At the same time, as IAG has a listing on
the London Stock Exchange, it is also
subject to the UK Listing Rules, including
the requirement to explain whether it
complies with the UK Corporate
Governance Code published by the UK
Financial Reporting Council (“FRC”) as
amended from time to time. A copy of the
current version of the UK Corporate
Governance Code applicable to this
reporting period (updated and published
in July 2018) is available at the website of
the FRC (www.frc.org.uk).
IAG has prepared a consolidated
Corporate Governance Report responding
to both Spanish and UK reporting
requirements, which is available on the
Company’s website (www.iairgroup.com),
as well as on the CNMV website (www.
cnmv.es). Pursuant to the CNMV
regulations, this report has been filed with
the CNMV accompanied by a statistical
annex covering some legally required data.
This Corporate Governance Report is part
of the IAG Management Report for the
year 2021.
In addition, and as required by the LSE
Listing Rules, this Report includes an
explanation regarding the Company’s
application of the principles of the UK
Corporate Governance Code and how it
has complied with its supporting
provisions during the year. Details of
where key information can be found is
provided below.
During 2021, IAG fully complied with most
of the applicable recommendations of the
Spanish Corporate Governance Code.
Notwithstanding this, the Company
acknowledges that due to applicable legal
and regulatory requirements of the
aviation sector, the Company’s bylaws
contain certain share ownership
restrictions which are contrary to the
provisions of the first recommendation of
the Spanish Code. In addition to this,
during 2021 the Company partially
complied with recommendation number 4
of the Spanish Code, as revised in 2020,
because, throughout the year, its policy
regarding communication and contact
with shareholders, institutional investors
and proxy advisors required updating to
better address the requirements of the
revised recommendation. The policy was
revised and approved by the Board on
February 24, 2022.
As far as the 2018 UK Corporate
Governance Code is concerned, the
Company confirms that it applied the
principles and complied with all the
provisions of the Code in the reporting
period.
Applying the principles of the UK Governance Code
Board leadership and company purpose
Chair’s introductory statement
Composition, succession and evaluation
Board biographies
124-125
Company purpose and values
Corporate culture
Board activities
Investment in the workforce
How the Board considers stakeholders interests
Board composition
Nominations Committee report
Board succession
Board evaluation
133
133
139
133
134
Board decisions, corporate interest and stakeholders
135-137
Workforce engagement
Whistleblowing
Conflicts of interests
Division of responsibilities
Governance framework and division of responsibilities
Board of Directors: division of responsibilities
Board and committee meetings
Directors’ independence
Board and committee attendance during 2021
137
151
141
129
130
138
131 and 146
Audit, risk and internal controls
Audit and Compliance Committee report
Fair, balance and understandable confirmation
Confirmation that the Board carried out a robust
assessment of emerging and principal risks
139
Risk management and internal control
Principal risks and uncertainties
Remuneration
Remuneration Committee Chair Statement
Directors’ Remuneration Report
Alignment with Provision 40
126-127
131-132
144-147
146
140-141
152-161
154-155
100-101
100-121
100-121
162-164
166-189
165
128
INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021
Corporate Governance IAG governance framework
and division of responsibilities
IAG Board of Directors
The Board has ultimate responsibility
for the long-term success of the
Group and for delivering sustainable
shareholder value as well as
contributing to wider society
Key positions:
Chairman
Javier Ferrán
Senior Independent Director
Alberto Terol
Board Advisory Committees
n
o
i
t
a
g
e
e
D
l
Audit and
Compliance
Nominations
Remuneration
Safety,
Environment
and Corporate
Responsibility
IAG Management Committee
Led by the Chief Executive, is responsible
for the day-to-day management of the
Company. It is responsible for the
performance of the Group and the
implementation of
the strategy approved by the Board
Key position:
Group CEO
Luis Gallego
Updated to the corporate governance framework
approved by the Board on February 25, 2021
Key matters reserved to the Board are:
• submission of proposals to the
shareholders’ meetings
• approval of the Group’s strategy, business
and financial plans
• approval of the Group’s general policies
• appointment and removal of senior
executives
• determination of the policy on shareholders’
remuneration
• approval of significant investment
or divestment decisions
• approval of the risk management
and control policy
• ensures effectiveness of the corporate
governance system
y
t
i
l
i
b
a
t
n
u
o
c
c
A
The Chairman:
• chairs shareholders’ meetings
• leads the Board’s work
• sets the Board’s agenda and directs
its discussions and deliberations
• acts as main link with the Group CEO
and management
• seeks regular engagement with major
shareholders
• promotes and ensures highest standards
of corporate governance
The Senior Independent Director:
• acts as a sounding board
for the Chairman and
appraises his performance
• serves as intermediary for
other directors when necessary
• is available to shareholders,
if concerns not resolved through
normal channels
The Group CEO:
• is responsible and accountable
to the Board for the management
and operation of the Company
• leads the Company’s
management team
• oversees the preparation of
operational and commercial plans
• develops an effective management strategy
• puts in place effective controls
• coordinates Group activities
INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021
129
CORPORATE GOVERNANCE CONTINUED
There is a clear separation of the roles of
the Chairman and the Group Chief
Executive and their main responsibilities
are established in articles 5 and 6 of the
Board Regulations. The Chairman is
responsible for the operation of the Board
and for its overall effectiveness in directing
the Company. The Group Chief Executive
and the management team are responsible
for the day-to-day management and
performance of the Group and for the
implementation of the strategy approved
by the Board. All the powers of the Board
have been permanently delegated to the
Group Chief Executive save for those
which cannot be delegated pursuant to
applicable legislation, the Company Bylaws
or the Board Regulations.
Consistent with its governance role, the
Board of Directors retains a schedule of
matters reserved for its decision, as
detailed in article 3.4 of the Board
Regulations. This schedule of reserved
matters was reviewed at the Board
meeting held on February 25, 2021 and is
available on the Company’s corporate
website (www.iairgroup.com).
The Board has four advisory committees
that provide dedicated focus on a number
of areas. Each Board committee comprises
non-executive directors only and has an
experienced non-executive independent
chair. Copies of the minutes of all
committees’ meetings as well as the
documents distributed ahead of each
committee meeting are made available to
all Board members.
The different Board positions and their
respective responsibilities are detailed in
the Board Regulations as amended on
February 25, 2021 (available on the
corporate website). The Board also
approved new and separate regulations for
each one of the Board committees as part
of the governance review completed in
February 2021. These regulations are
available on the corporate website. The
roles, memberships and activities of these
committees during 2021 are described in
their individual reports within this
Corporate Governance Report.
Group structure
IAG, as the Group’s parent company,
is responsible for defining the Group’s
long-term strategy, as well as setting
performance targets, monitoring their
progress and allocating capital within the
Group. With a light structure, IAG
oversees intra-Group coordination and
manages central functions, including
the development of its common
integrated platform.
Each operating company has an individual
brand and cultural identity and is
responsible for executing its strategy and
accountable for its results. Each company
has its own board of directors and its own
management committee, led by the top
executive of each company.
Further details on the Group structure can
be found on the Business Model section
within the Strategic Report.
Board of Directors: division of
responsibilities
The IAG Board is collectively responsible
for establishing the Company’s purpose,
values and strategy, promoting its culture,
overseeing the business and its
performance, as well as for the Group’s
long-term sustainable success. As stated in
its Regulations, the Board endeavours to
reconcile the corporate interest with the
legitimate interests, as applicable, of the
employees, suppliers, customers and other
stakeholders that might be affected, also
taking into consideration the impact of its
activities on the community as a whole and
on the environment. Examples of this
long-term focus and consideration of
stakeholders’ interest are discussed further
on in this report and in the stakeholder
section.
130 INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021
Corporate Governance Board composition
The IAG Board comprises nine independent non-executive directors, one of which is the Chairman, two proprietary non-executive
directors and one executive director, IAG’s Chief Executive. The biographies of each member of the Board are set out in the Board of
Directors section.
Following the significant number of changes in 2020, only one new non-executive director was appointed in 2021, filling the vacancy
that arose following the retirement of the former Chairman, Antonio Vázquez, which took place on January 7, 2021. Accordingly,
Maurice Lam was appointed a non-executive director at the Shareholders’ Meeting held on June 17, 2021. Details of his recruitment
process can be found in the Nominations Committee report.
As set out in the Company’s Bylaws, the Board shall comprise a minimum of nine and a maximum of fourteen members. As of
December 31, 2021, the Board composition was:
Name of Board Member
Javier Ferran1
Luis Gallego
Alberto Terol
Giles Agutter2
Peggy Bruzelius
Eva Castillo
Margaret Ewing
Maurice Lam
Heather Ann McSharry
Robin Phillips2
Emilio Saracho
Nicola Shaw3
Position/Category
Chairman
Chief Executive
Senior Independent Director
Director (Proprietary)
Director (independent)
Director (independent)
Director (independent)
Director (independent)
Director (independent)
Director (Proprietary)
Director (independent)
Director (independent)
First appointed
June 20, 2019
September 8, 2020
June 20, 2013
September 8, 2020
December 31, 2020
December 31, 2020
June 20, 2019
June 17, 2021
December 31, 2020
September 8, 2020
June 16, 2016
January 1, 2018
1. Became Chairman on January 7, 2021 following the retirement of Antonio Vázquez.
2. Appointed on proposal from Qatar Airways (Q.C.S.C), a significant shareholder of IAG.
3. The appointment of Nicola Shaw as a non-executive director was approved by the Shareholders’ Meeting on June 15, 2017 but did not become effective
until January 1, 2018.
The Board Secretary is Álvaro López-Jorrín, partner of the Spanish law firm J&A Garrigues, S.L.P, and the Deputy Secretary is Lucila
Rodríguez. The Group Chief Financial Officer, Steve Gunning, and the Group General Counsel, Chris Haynes, attend all Board meetings.
Directors’ independence
The Board, as reported by the Nominations
Committee, reviewed directors'
independence at its meeting held on
January 20, 2022. It is satisfied that those
directors classified as independent are free
from any business or other relationship
that could materially interfere with
exercising an independent judgement,
both as a question of character and
judgement. Further details are provided on
conflicts of interests and independence of
directors later in this report and the
Nomination Committee Report.
The Chairman was considered to be
independent on appointment and neither
he nor any of the non-executive directors
has exceeded the maximum nine-year
recommended term of service set out in
the UK Corporate Governance Code, with
our longest serving director, Alberto Terol,
having served on the Board since 2013.
Appointment, re-election, resignation
and removal of directors
The selection and appointment process is
described in detail in the Nominations
Committee report.
IAG directors are appointed for a period of
one year, as set out in the Company's
Bylaws. At the end of their mandate,
directors may be re-elected one or more
times for periods of equal duration to that
established in the Bylaws. In this way, the
Company complies with the UK Code
recommendation that directors should be
subject to annual re-election.
Re-election proposals are subject to a
formal process, based on the Nominations
Committee proposal in the case of
independent directors, or its
recommendation report for all other
categories of directors. This proposal or
report is prepared having due regard to
the performance, commitment, capacity,
ability and availability of the director to
continue to contribute to the Board with
the knowledge, skills and experience
required.
Directors cease to hold office when the
term of office for which they were
appointed expires.
Notwithstanding the above, a director
must resign in the cases established in
article 17.2 of the Board Regulations,
among other things when the director
ceases to have the good standing,
suitability, reliability, competence,
availability or commitment to office
necessary to be a director of the Company
or when his or her remaining on the Board
might affect the Company’s credibility or
reputation or otherwise jeopardises its
interests.
According to article 24.2 of the Board
Regulations, directors have a number of
disclosure obligations, including the duty
to inform the Company of any situation in
which they are involved and that may
seriously affect the reputation of the
Company, in particular if they are involved
in any investigation in a criminal
proceeding. In such circumstances, the
Board would consider the case as soon as
practicable and adopt the decisions it
deems fit, taking into account the
corporate interest, following a report by
the Nominations Committee.
INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021
131
CORPORATE GOVERNANCE CONTINUED
incorporated in the Board Regulations
approved in February 2021, which are
available on the Company’s website (www.
iairgroup.com), and on the website of the
Spanish CNMV (wwww.cnmv.es).
The Board may only propose the removal
of a non-executive director before the end
of the mandate when it considers there is
just cause, following a report by the
Nominations Committee. For these
purposes, just cause is deemed to exist
when the director takes up new positions
or enters into new obligations that prevent
them from dedicating the necessary time
to the performance of his or her duties as
a director, otherwise breaches his or her
duties as a director or unexpectedly
becomes subject to any of the
circumstances provided for in article 17.2
of the Board Regulations.
A director who stands down before the
end of their term of office must adequately
explain the reasons for this decision, or in
the case of a non-executive director, their
opinion on the reasons for the
Shareholders’ Meeting resolution, in a letter
to be sent to all the directors. In addition,
these explanations need to be included in
the Company’s Annual Corporate
Governance Report and if relevant for
shareholders, the Company should publish
an announcement of the departure as soon
as possible, with sufficient reference to the
reasons or circumstances provided by the
director.
The removal may also be proposed as a
result of takeover bids, mergers or other
similar corporate transactions that
determine a material change of control.
The rules above have been updated in
accordance with the Spanish Corporate
Governance Code Recommendations
approved in June 2020 and are
Nationality
Gender
Tenure1
5
Spain
4
UK
1
1
Ireland
1
Luxembourg
42%
58%
Sweden
11%
22%
67%
Male
Female
0-3
4-6
7-9
Board experience2
Related industry
General management
Consumer Brands B2C
Corporate transactions
ESG/Sustainability
CEO/Chair experience in a listed company
Accounting, financial and related
Technology
International
132
INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021
36%
64%
27%
73%
18%
18%
82%
18%
73%
1. the tenure chart comprises solely the
independent non-executive directors,
including the Chairman (9 directors). For the
sake of completeness, the three remaining
directors' tenure is less than three years.
2. non-executive directors only
Corporate Governance Board leadership
and company purpose
2021 continued to be a difficult year for the
airline industry. A year in which IAG’s
management team had to focus on the
immediate challenges, while also laying the
foundations for the transformation of the
Group so that it can emerge more
competitive in the future. This includes
ensuring our corporate culture is aligned
with the Group strategy and reflects the
values across the Group.
IAG’s purpose - ‘To connect people,
businesses and countries’- underpins the
Group’s vision to be the world’s leading
airline group, maximising sustainable value
creation for its stakeholders. IAG will
continue to use its unique business model
to pursue this purpose and vision and
always aims to deliver sustainable value for
its customers, its people, its shareholders
and the communities it serves.
By connecting people, businesses and
countries, the Group is able to provide the
jobs, prosperity and cultural benefits that
travel has always created. While a number
of important new initiatives and projects
have been launched during the year, there
is more to be done to achieve the
aspirations the Group has set for itself.
The Board believes that IAG can achieve
its purpose and vision by promoting the
Group’s key values, which are ambition,
teamwork, innovation, pragmatism,
efficiency and responsibility. In 2022, the
Board will review how these values are
further embedded in the organisation and
how this links to the work on corporate
culture and on people that started in the
last quarter of 2020, ensuring that the
complete exercise takes root with the
strategy and the transformation of the
Group.
Further detail on IAG’s purpose and values
can be found throughout this annual
report, and in particular on the first pages
of the Strategic Report and the
introductory letters of the Chairman and
the Group Chief Executive.
Corporate culture
IAG’s Code of Conduct, approved by the
Board in 2019, remains our guide to the
core behaviours that we seek to encourage
and instil throughout the Group. This Code
applies to all directors and employees and
establishes our principles of integrity, as
well as outlining where compliance is
required.
To help strengthen the work on culture, in
April 2021, Carolina Martinoli joined IAG’s
Management Committee as Chief People,
Corporate Affairs and Sustainability
Officer, with the remit to place a special
focus on people, culture and sustainability.
At the annual strategy meeting held in
September 2021, the Board devoted a
special session on our people and how
best to develop the Group’s corporate
culture. Consistent with IAG’s model, the
individual operating companies remain
responsible for the design and
implementation of their respective plans
under the Group common framework. IAG
plays an important role to set minimum
principles and standards, to enable the
sharing of best practices and the design of
Group-wide projects where appropriate.
As reported last year, in the last quarter of
2020, a Group-wide Organisation Health
Index (OHI) exercise facilitated by an
external firm was completed. The objective
is to have a unified Group metric which
brings together organisational health and
culture under a common framework.
The results and initial conclusions from the
first survey were shared with the Board
during the two-day strategy meeting held
in December 2020 in a session devoted to
culture and talent. Following this meeting,
organisation-wide priorities and action
plans were defined and launched in the
first half of 2021. With that backdrop,
going forward a full OHI survey will be
undertaken once a year, with a follow-up
pulse survey after six months. All this
information will be regularly reported and
discussed with the Board.
The Audit and Compliance Committee has
also reviewed and reported to the Board
the effectiveness and functioning of the
Speak Up channels available throughout
the Group provided by independent
third-party providers, whereby employees
are able to raise concerns on a confidential
basis. The Committee discussed this
report, including the number and nature of
issues reported to the Speak Up channels
during 2021. Further details can be found
in the ‘Ethics and integrity’ section of the
sustainability report.
Investment in the workforce
In general terms, all Group companies
invest in their employees through training
and development programmes, as well as
through healthcare and wellbeing
programmes. Terms and conditions are set
and managed within each operating
company, enabling them to put in place
appropriate rewards to reflect their
specific operating model and local market
conditions. Across the Group we look to
ensure that all rewards and benefits are
simple, clear, competitive, and fair. Across
the UK, Spain and Ireland approximately
90% of IAG’s workforce are part of
collective bargaining agreements with
varying levels in other countries the Group
operates in. We work closely with
employee representatives to consult on
reward matters. For those outside of
collective agreements, we benchmark roles
and rewards against local markets to
ensure they remain attractive and
competitive.
INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021
133
CORPORATE GOVERNANCE CONTINUED
Information on the Board’s engagement
with the workforce is provided in the
Workforce engagement section of this
Governance report. As far as shareholders
are concerned, and as already described in
the Stakeholder section, the Chairman has
maintained regular engagement with major
shareholders in order to understand their
views on governance and performance of
the Group against the strategy. In addition
to this, the Senior Independent Director
and Chairman of the Remuneration
Committee had significant contact with
key shareholders and proxy advisors in
relation to IAG’s directors’ remuneration
policy.
The Board has been regularly informed
about shareholders’ considerations and
concerns. The Head of Investor Relations
reports regularly to the IAG Board and one
of the Company brokers was invited to the
annual strategy meeting to discuss
investor insights.
How the Board considers stakeholders
interests
Day-to-day stewardship of all stakeholder
relationships is delegated to management,
with the Board having a supervisory role
based on the information provided and
discussions held with management teams.
In addition to this, the Board has direct
engagement with the Company’s
shareholders and with the workforce as
recommended by the UK Corporate
Governance Code.
The Company’s governance framework
was reviewed in February 2021 and, in
accordance with the recommendation of
the Spanish Governance Code, one of the
Board advisory committees, the Safety,
Environment and Corporate Responsibility
Committee, was assigned the responsibility
to oversee and evaluate the Company’s
interaction with its stakeholder groups,
including the workforce.
Considering the exceptional circumstances
in which the Group is currently operating
due to the COVID-19 pandemic, the
identification of the Group’s key
stakeholders has been reviewed and
updated.
More information on our stakeholders, how
they fit in our strategy and business model,
their main interests, and our engagement
with them can be found in the stakeholder
section of this annual report.
Section 172 Statement (and
compliance with article 3.6 of IAG’s
Board of Directors Regulations)
In their discussions and decisions
during the reporting period, the
directors of IAG have acted in good
faith, with unity of purpose and
independent judgement, guided by
the corporate interest to promote
the success of the company as a
profitable and sustainable business in
the long term and giving the same
treatment to all shareholders in the
same position. In doing so the Board
had regard and tried to reconcile the
corporate interest with the legitimate
interests of employees, suppliers,
customers and other stakeholders,
also taking into consideration the
impact of its activities on the
community as a whole and on the
environment.
Information on how the directors
discharged their duties under these
principles during the year, including
how they had regard to the matters
set out above in their discussions
and decision making, is included in
this section. Further details can also
be found throughout the Strategic
and Governance reports. Feedback
from stakeholders is received at a
number of different levels and helps
inform numerous decisions directly
or indirectly overseen by the Board.
In many circumstances, the views of
stakeholders are considered and
embedded in the proposals shared
with the Board or submitted for its
decision.
134 INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021
Corporate Governance Board decisions, corporate interest and
stakeholders
As explained before, the IAG Board has
delegated the day-to-day management of
the Company to the Group Chief Executive
and the Group’s management team but it
has reserved for itself the authority on a
number of matters including three main
areas:
• Approval of the Group strategy and the
supervision of its implementation, which
entails the approval of the business plan,
management objectives and annual
financial plan, monitoring of the internal
information and control systems, and of
risk management framework and
processes.
• Approval and compliance oversight of
the Group general policies including: the
investment and financing policy; the
enterprise risk management policy; the
corporate responsibility or sustainability
policy.
• According to certain quantitative
thresholds, the approval of contractual
commitments, asset acquisition or
disposals, capital expenditures,
borrowings or equity investments.
embedded throughout the Group’s
decision-making processes.
This has been a second unprecedented
year for IAG, as such the Board has
continued to adjust its ways of working to
the business pace. Until August, the Board
had biweekly meetings to adequately
monitor the business developments,
support management during this difficult
period and continue to make critical
decisions in response to the COVID-19
pandemic.
The Group’s decision-making process is
regulated by an internal instruction
covering the IAG Board, the IAG
Management Committee as well as the
Boards of the main subsidiaries. In
addition, another instruction regulates the
Group investment process. This
framework and the dedication and expert
support provided by the different Board
advisory committees ensures the existence
of an adequate governance system.
The impact on our different stakeholders
as well as the consequences of any
decision in the long term are usually
considered and discussed by the Board. It
is not always possible to provide positive
outcomes for all stakeholders and on
occasions the Board has to make decisions
based on the competing priorities of
stakeholders. The principles set out in
article 3.6 of our Board Regulations, which
coincide with those reflected in section 172
of the UK Companies Act, are not
exclusively a matter for the Board, they are
Adjusting, adapting and restarting operations according to the situation created by the COVID-19 pandemic
The Board oversaw the Company’s management of the crisis and the coordination of the Group’s response, in particular the
actions adopted to secure the business in the short-term -reducing costs, strengthening liquidity and preserving cash-. At the
same time, the Board maintained focus on the design and actions for the transformation of the Group to ensure it comes out
from the crisis competitive and sustainable. Although decisions in relation to employees and customers are taken by the
operating companies, the IAG Board exercises oversight and coordination at a Group level.
Decision
During this crisis, decisions on costs, regarding employee restructuring or salary reductions and
even capital allocation have been difficult and challenging. They illustrate how decisions are taken
for the long-term interest of the business, considering our shareholders, but also bearing in mind
and trying to reconcile the interests of our employees and customers as far as possible. Significant
short-term measures were needed to reinforce the Company’s resilience in the face of a very
difficult environment so that the delivery of our long-term strategy and the ongoing creation of
value for our shareholders could be ensured.
The effort and focus devoted by management and the Board to work on the restructure and rebuild
of the business to ensure operational readiness to be prepared to return to operations at short
notice once restrictions were eased is another example of decisions taken considering our
employees, considering our customers and with an enormous effort deployed to engaging with
Governments and regulators.
The Board was kept informed by the different airline companies on the impact that the pandemic
was having on their customers and employees, and about the measures they had to put in place to
support them, including the deployment of COVID-19 health and safety procedures,
S.172 considerations
Corporate interest
LT
Employees
Shareholders
Other stakeholders
Sustainability
INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021
135
CORPORATE GOVERNANCE CONTINUED
COVID-19 Corporate Financing initiatives
During this difficult period, the Group has raised substantial funds from the debt capital markets. The Board received regular
funding and liquidity updates, as well as updates on the Group trading performance. In the first half of 2021, IAG issued a €1.2bn
senior unsecured bond and a €825m convertible bond. As far as our airlines are concerned, the Board approved the agreement
with the UK Export Finance (UKEF) and a syndicate of banks for a 5-year £1.0 billion UKEF guaranteed facility of £1.0 billion for
British Airways, which remains undrawn, in addition to a £2.0 billion UKEF guaranteed facility that was announced in December
2020 and fully drawn in early 2021. In March 2021, British Airways, Iberia and Aer Lingus secured $1,755m of committed funding
in the form of a Secured Revolving Credit Facility provided by the Groups relationship banks.
Decision
The Board when considering these transactions had to bear in mind a detailed assessment of
funding requirements, forecast and modelling scenarios, as well as the relevant transaction terms
and conditions, all in order to adopt the decision in the best corporate interest. In addition, the
Board had to consider the requirements for security over certain assets and other requirements,
including restrictions imposed regarding dividends or executives’ remuneration. The Board had to
balance the short and long-term interests of the Group to enter into these transactions, the loss of
flexibility for the Group on certain matters, as well as the restrictions imposed on other
stakeholders, particularly on shareholders.
S.172 considerations
Corporate interest
LT
Employees
Shareholders
Other stakeholders
Remuneration Policy
In 2021, the Company implemented a new remuneration framework for executive directors and senior management. This new
remuneration framework is designed to closely align incentives to the Company’s strategy and to support the aim of attracting
and retaining talent across the Group.
Decision
Extensive internal and external engagement had taken place to support the design and
implementation of this new remuneration policy. The feedback received internally, from colleagues,
and externally, from shareholders and proxy advisors, directly informed its design.
The new Restricted Share Plan (RSP) approved by the Board and by shareholders will improve the
Group’s ability to attract, motivate and retain key management in what is an increasingly
competitive global market for leadership talent. Following shareholder feedback, the Board decided
to provide greater detail around the RSP performance underpin and to give greater reassurance
that any RSP value delivered will be fair and appropriate in the context of sustainable business
performance and the experience of stakeholders. The Board’s main objective in the implementation
of this new remuneration framework is to drive the behaviours that support the delivery of the
Group’s strategy and business objectives. The new policy also contains the necessary flexibility and
discretion to adapt to commercial and market circumstances, as well as to recoup incentives where
any performance is subsequently understood to be unfounded.
Understanding and balancing the interests of all stakeholders in executive pay decisions ensures
outcomes are objective, fair and proportionate. The simplification of our remuneration framework
and the focus on long-term performance, supports the Group’s management to continue to deliver
our strategy and sustainable shareholder returns.
S.172 considerations
Corporate interest
LT
Shareholders
Employees
Sustainability
Values and
corporate
reputation
136
INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021
Corporate Governance Purpose, values and sustainability matters
Our role in the world is to connect people, businesses and countries. We do this and create value through a unique model that
enables Group airlines to perform in the long-term interests of customers, people, shareholders and society. We hold ambition,
teamwork, innovation, pragmatism, efficiency and responsibility as key values that enable us to fulfil our purpose.
Decision
The Board believes that our purpose should drive our strategy, guide our culture and provide a
framework for consistent decision making which benefits all stakeholders. During 2021, the Board,
through its Safety, Environment and Corporate Responsibility Committee, reviewed the materiality
assessment completed by an independent third party to assess which business activities have a
material impact on the environment and people and what is most important to key stakeholders.
IAG’s sustainability strategy, initiatives and reporting are based on the feedback received. IAG has a
vision to be the world’s leading airline group on sustainability, which entails not only transforming
its own business, but working to create a truly sustainable aviation industry. IAG is committed to
delivering best practices in sustainability programmes, processes and impacts. The IAG Board is
convinced that sustainability is fundamental to long-term growth. In line with this, at the annual
strategy meeting, the Board considered the People and ESG strategic principles for the Group. In
January 2022, the Board considered in detail the Company’s approach and ambition regarding
diversity and inclusion.
S.172 considerations
Corporate interest
LT
Shareholders
Employees
Customers
Sustainability
Values and
corporate
reputation
The Board considers all these matters as they are key for the long-term sustainability of our
business, because ESG factors have become increasingly more material for shareholders, investors
and debt providers, and also because they are more and more relevant for our own employees and
customers.
Workforce engagement
The COVID-19 pandemic significantly
curtailed the Board's usual programme of
site visits and face-to-face engagement
with management and employees which
could only be resumed during the last
quarter of 2021. The Board has been
regularly informed about initiatives at
each operating company with respect to
their workforce during the pandemic. A
session at the annual strategy meeting
was devoted to the analysis and
discussion of the results and initial
conclusions from the employee survey
completed in the Group, as well as to
discuss the Group's approach and
ambition on employee matters.
Eva Castillo, Nicola Shaw and Alberto
Terol have been designated as the
directors responsible for workforce
engagement. Recent Board engagement
sessions have been held with British
Airways, Iberia, IAG Loyalty, IAG Cargo,
IAG Tech, Vueling and Aer Lingus. The
sessions have been very constructive with
an opportunity to hear from different
employee groups and see latest
innovations. Key themes have been the
impact of changes to terms and
conditions, the company's plans
regarding resourcing as we emerge from
the pandemic, the effectiveness of
communications channels, the approach
to flexibility as more teams return to
offices, and the Group's focus on
development and careers. Each visit
included a debrief for senior teams on
emerging issues to ensure appropriate
actions are taken forward.
INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021
137
CORPORATE GOVERNANCE CONTINUED
Board and committee meetings
The Board was scheduled to meet eight
times during the year, including its annual
two-day strategy meeting scheduled for
September 2021.
Since the start of the year, the Board
moved from weekly to holding bi-weekly
meetings to continue monitoring the
impact of the pandemic and the Group’s
response. Since the end of July 2021, the
Board returned to its normal meeting
schedule as travel restrictions started to be
lifted and the Group’s business started to
approach its recovery path. The total
number of Board meetings held during the
reporting period was 19, Details of
attendance at Board and committee
meetings are shown further on in this
report.
In addition, there were two board meetings
held by written procedure without a
meeting, with all board members agreeing
to adopt certain resolutions by such
procedure.
The Board Secretariat together with the
General Counsel maintains an annual
agenda schedule for Board meetings that
sets out strategic, standard and
operational matters to be considered. The
Chairman sets a carefully structured
agenda for each meeting in consultation
with the Chief Executive Officer, with the
support from the General Counsel and the
Board Secretariat. During 2021, as was the
case in 2020, the Board’s main focus was
conditioned by the COVID pandemic,
supporting management and exercising
oversight over the Group’s businesses and
stakeholders’ interests and the Group’s
continued response to the pandemic. The
key activities of the Board in 2021 are
detailed in the Board activities table
further on in this report.
After the review and approval of the
minutes of the prior Board meeting, each
Board meeting continues with a report
from each of the committees’ chairs. The
reports focus on the key discussions and
decisions considered by the respective
committees, providing an opportunity for
directors to comment or ask questions on
the matters dealt with by each committee.
This is followed by a general update from
the Group Chief Executive and
subsequently, from the Chief Financial
Officer.
All scheduled Board meetings include a
private session for non-executive directors
to meet with the Chairman to discuss any
matters arising. In addition to this, at least
once a year there is a private meeting with
the Chairman that includes independent
non-executive directors only. The Senior
Independent Director also met with the
non-executive directors, without the
Chairman, as part of the chair annual
evaluation process.
As stated in the Board Regulations,
directors shall make their best efforts to
attend Board meetings. If this is not
possible, they may grant a proxy to
another director, although non-executive
directors may only grant their proxy to
another non-executive director. These
proxies need to be in writing and
specifically granted for each meeting. No
director may hold more than three proxies,
except for the Chairman, although he
cannot represent more than half of the
Board members. As far as possible, proxies
should be granted including voting
instructions.
Due to the extensive number of additional
Board meetings held during the year due
to the COVID pandemic, and sometimes
called at short notice, some directors were
not able to attend all meetings.
Board and committee attendance during 2021
Board member1
Javier Ferrán2
Luis Gallego
Giles Agutter
Peggy Bruzelius
Eva Castillo
Margaret Ewing3
Maurice Lam4
Heather Ann McSharry
Robin Phillips
Emilio Saracho
Nicola Shaw
Alberto Terol5
Audit and
Compliance
Committee
Nominations
Committee
Remuneration
Committee
Safety,
Environment
and Corporate
Responsibility
Committee
7/7
6/7
6/6
7/7
10/10
8/10
10/10
4/4
6/6
7/7
8/10
10/10
9/10
8/10
10/10
1/1
3/3
2/2
3/3
3/3
3/3
Board
19/19
19/19
18/19
18/19
17/19
19/19
8/8
19/19
19/19
19/19
19/19
18/19
1. Antonio Vázquez Romero did not attend any Board or committee meetings during 2021 as he retired from the Board on January 7, 2021.
2. Appointed Chairman of the Board on January 7, 2021. Stepped down from the Safety, Environment and Corporate Responsibility Committee on June 17,
2021.
3. Appointed member of the Nominations Committee on January 28, 2021.
4. Joined the Board and respective Board committees on June 17, 2021.
5. Stepped down from the Audit and Compliance Committee on June 17, 2021.
138
INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021
Corporate Governance Board activities
2021 continued to be an unprecedent year
for the Group, as it continued to face the
biggest challenge the airline industry has
ever encountered. The Board activity
clearly reflects these circumstances. The
key areas of Board activity during 2021 are
outlined herein:
Strategy and planning
Joint Board/Management Committee
two-day strategy session, including:
• Strategic Context
• Role of the Centre
• IAG Loyalty full potential
• Cargo Update
• Technology Excellence
• IAG fleet transformation and strategy
• London Gatwick/Paris Orly updates
• People and ESG update
• Partnerships and M&A Scan
• Transformation plans and indicative
Financials
• Strategy follow-up items
Performance and monitoring
• Operating companies regular reporting
• Quarterly and full year financial reporting
• Monthly financial report (reviewed at the
relevant meeting or distributed to all
Board members)
• Group capital allocation principles
review
Risk management and internal controls
• Review risk map and risk appetite
performance and statements
• Assessment of viability and going
concern
• Effectiveness review of the internal
control and risk management systems
• External auditor yearly report to the
• Review of different joint business
Board
arrangements
• Update on the UK Information
Commissioner’s Office proceedings
against British Airways and related
litigation
COVID-19 crisis
• Updates on liquidity status and
forecasting, and passenger revenue
information
• Follow up on travel restrictions and
updates on capacity
Significant transactions, investments and
expenditures
• Air Europa acquisition follow up
• Financing arrangements
• Fleet updates
• Technology investments
• Financing arrangement for the
acquisition or lease of aircrafts
• Disposals/write-off of aircraft and
deferral agreements
Shareholders, stakeholders and
governance
• Transactions with related parties
• Sustainability update
• Modern Slavery statement review
• Review feedback from institutional
shareholders, roadshows as well as
analyst reports
• Board and management succession
• Remuneration matters, including new
directors’ remuneration policy
• Shareholders’ meeting call notice and
proposed resolutions
• Review of the Board committee’s
composition
• Board and committees evaluation and
improvement priorities
• Update on the D&O insurance
programme
• Corporate governance updates
INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021
139
CORPORATE GOVERNANCE CONTINUED
Board information and training
In general all Board and committee
meeting documents are available to all
directors, including the minutes of each
meeting, through an online platform which
facilitates an efficient and secure access to
all materials. All directors have access to
the advice of the Board Secretary and the
Group General Counsel. Directors may take
independent legal, accounting, technical,
financial, commercial or other expert
advice at the Company’s expense when it
is judged necessary in order to discharge
their responsibilities effectively. No such
independent advice was sought in the 2021
financial year.
In 2021 the Board received specific
briefings on corporate governance and key
legal and regulatory developments. In
addition to this, most directors attended
two deep-dive briefings organised by the
Audit and Compliance Committee
regarding the BEIS open consultation in
relation to the UK Government’s white
paper “Restoring trust in audit and
corporate governance: proposals on
reforms”, and in relation to the BA defined
benefit pension obligations. Furthermore,
two sessions of two hours each were held,
with the support from an external firm and
co-chaired by the Audit and Compliance
Committee and the Safety, Environment
and Corporate Responsibility Committee
chairs, regarding governance of climate-
related risks and opportunities and
non-financial reporting requirements.
Directors are offered the possibility to
update and refresh their knowledge of the
business and any technical related matter
on an ongoing basis to enable them to
continue fulfilling their responsibilities
effectively. Directors are consulted about
their training and development needs and
given the opportunity to discuss training
and development matters as part of the
Board annual performance evaluation.
Induction of directors
According to the induction guidelines,
approved by the Nominations Committee,
on joining the Board every newly
appointed director has a thorough and
appropriate induction. Each programme is
based on the individual director’s needs
and includes meetings with other directors,
senior management and key external
advisers as appropriate. The induction is
designed to provide a wide overview of
the industry and the sector, including
particulars of each of the markets in which
the Group operates, as well as an
understanding of the Group business
model and its different businesses. The
programme is also a useful tool to
introduce the new director to the IAG
Management Committee as well as to the
different operating companies’ teams.
In January 2021, an induction programme
for the three newly appointed directors
was initiated following the IAG induction
guidelines. On this occasion, meetings with
management were arranged to prioritise a
rapid introduction to the Group and
briefings on main current matters, with a
second phase of customary meetings with
all Management Committee members and
other key positions within IAG.
Additionally, an induction programme was
launched for Maurice Lam following his
appointment in June 2021. Further detail
are provided in the Nominations
Committee report
Due to COVID-19 related constraints,
practically all meetings were held virtually,
and directors’ visits to the Group’s key
sites and meetings with each operating
company's leadership team had to be
delayed. As will be mentioned later in the
context of the Board evaluation, these site
visits will be resumed in 2022 as far as
possible.
As explained next as part of the Board
evaluation section, the feedback received
from new directors on the IAG induction
programme is very positive. Directors
consider that the programme of meetings
is very thorough, providing very complete
information on the Group and the industry.
In the present circumstances, an important
effort was made to share insights into
issues currently impacting the Group,
particularly given the extremely difficult
and uncertain conditions arising from the
pandemic.
Board and committee
evaluation
The effectiveness of the Board and its
committees is reviewed annually, with an
independent, externally facilitated review
being conducted every three years. The
last external review was conducted in
2019, therefore an internal evaluation was
completed for 2021.
The internal evaluation was led by the
Chairman and conducted by the Board
Secretariat using a self-assessment
questionnaire, complemented by a general
discussion of the full Board on the
outcome from the survey and proposed
actions at the Board meeting held on
December 16, 2021.
The overall conclusions of the review were
positive, confirming that the Board and the
committees continue to adequately fulfil
their responsibilities. Directors considered
that there has been an outstanding
commitment and engagement from all
Board members during the year while the
business continues to face the challenges
of the COVID-19 crisis. The continued
management of the Board’s agenda and
the frequency of meetings have ensured
that the Board remained briefed and able
to support management throughout the
year as circumstances changed. In relation
to the areas for focus agreed for 2021, the
Board considered that good progress had
been made in all of them considering the
complexity of the situation. In particular,
induction programmes were reinforced to
facilitate the rapid introduction and
adaptation of the new directors and the
new Safety, Environment and Corporate
Responsibility Committee was established
and meetings commenced in May as per
its agreed plan of activities.
Actions agreed for 2022 include:
• to consider how best to reinforce the
Board’s competencies on IT and digital
matters
• as long as travel restrictions allow, to
organise Board meetings in Barcelona
and Dublin, including meetings with
Vueling and Aer Lingus management
teams
• review of the annual calendar to ensure
adequate coverage of key areas agreed
• improvements to the follow up of
matters arising and reporting back to
the Board
140 INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021
Corporate Governance • continue to increase the level of
engagement between the Board and
senior executives, facilitating managers
below Management Committee to
present at Board meetings
• monitoring and building on the work
done following the setting up of the
Safety, Environment and Corporate
Responsibility Committee
Other Statutory
Information
Directors’ disclosure duties, conflicts of
interests, and related party transactions
Directors must inform the Company of any
participation or interest they may hold or
acquire in any company that is a
competitor of the Group, or any activities
that could place them in conflict with the
corporate interest.
According to article 21 of the Board
Regulations, directors have an obligation
to adopt the measures necessary to avoid
conflict of interest situations. These include
any situation where the interest of the
director, either directly or through third
parties, may conflict with the corporate
interest or with their duties to the
Company. In the event of conflict, the
affected director must inform the
Company and abstain from participating in
the discussion of the transaction referred
to by the conflict. For the purposes of
calculating the quorum and voting
majorities, the affected director would be
excluded from the number of members in
attendance.
The shareholders’ meeting held on June 17,
2021, approved the re-election of Giles
Agutter and Robin Phillips as non-
executive proprietary directors as
proposed by IAG’s significant shareholder
Qatar Airways Group (Q.C.S.C.) (‘Qatar
Airways’). Qatar Airways, a Middle East air
carrier headquartered in Doha, has been
the single largest shareholder of IAG since
2016, owning, as of the date of this report,
25.143% of the share capital of the
Company. Throughout this period there
has been a long-standing business and
commercial relationship between Qatar
Airways and the airlines of the IAG Group.
This close relationship of commercial
cooperation, which has always been
undertaken on an arms’-length basis and
on market terms, which significantly
reduces the potential existence of
permanent conflicts of interest between
Qatar Airways and the Group’s airlines.
As far as the relationship of the proprietary
directors with the significant shareholder
who proposed their appointments is
concerned, it should be noted that Giles
Agutter is the owner and Chief Executive
of the consultancy services firm Southern
Sky Limited, one of whose material clients
is Qatar Airways, and that Robin Phillips
has no relevant connection with Qatar
Airways
Any potential conflict of interest that
might affect such proprietary directors is
managed by applying the duty of
abstention in accordance with the
procedure for managing conflicts of
interest described below. In addition, the
Spanish and the United Kingdom regimes
on related parties’ transactions are also
applicable as detailed below.
In accordance with article 3.4 of the Board
Regulations, the Board of Directors has the
exclusive authority to approve transactions
with directors or shareholders that have a
significant holding or that are represented
on the Board or with any persons related
to them, on the terms established in the
law and the Board Regulations and this will
require a prior report from the Audit and
Compliance Committee.
The execution of these type of
transactions needs to be reported to the
Audit and Compliance Committee to
ensure that they are carried out at arm’s
length and with due observance of the
principle of equal treatment of
shareholders. This year IAG’s internal
regulations on related party transactions
were revised to bring them into line with
the changes introduced in the Spanish
Companies Act regarding the regime for
related party transactions in listed
companies. According to this new
requirement, the Audit and Compliance
Committee needs to issue a report to the
Board assessing whether the transaction is
fair and reasonable from the standpoint of
the Company and, where applicable, of the
shareholders other than the related party,
and report on this assessment, including
the assumptions and methods used. The
directors related to the transaction shall
not participate in the preparation of such
report.
Depending on the amount or value of the
proposed related party transaction,
different corporate governance and
disclosure requirements may apply under
both the Spanish and UK legal frameworks.
In accordance with IAG procedures on
related party transactions, prior to the
Audit and Compliance Committee
consideration, shareholder related party
transactions are also reviewed by the IAG
Management Committee and are reported
to the IAG Head of Group Audit.
Share issues, buy-backs and treasury
shares
The Annual General Meeting held on June
17, 2021 authorised the Board, with the
express power of substitution, for a term
ending at the 2022 Annual General
Meeting (or, if earlier, 15 months from June
17, 2021), to:
• increase the share capital pursuant to
the provisions of Article 297.1.b) of the
Spanish Companies Law, by up to fifty
per cent of the aggregate nominal
amount of the Company’s issued share
capital as at the date of passing such
resolution (such amount to be reduced
by the maximum amount that the share
capital may need to be increased by on
the conversion or exchange of any
securities issued by the Board under the
relevant authorisation), through the
issuance and placement into circulation
of new shares (with or without a
premium) the consideration for which
shall be cash contributions;
• issue securities (including warrants)
convertible into and/or exchangeable
for shares of the Company, up to a
maximum limit of 1,500,000,000 euros
or the equivalent thereof in another
currency, provided that the aggregate
share capital that may need to be
increased on the conversion or
exchange of all such securities may not
be higher than fifty per cent of the
aggregate nominal amount of the
Company’s issued share capital as at the
date of passing such resolution (such
amount to be reduced by the amount
that the share capital has been increased
by the Board under the relevant
authorisation);
• exclude pre-emptive rights in connection
with the capital increases and the
issuance of convertible or exchangeable
securities that the Board may approve
under the previous authorities for the
purposes of allotting shares or
convertible or exchangeable securities in
connection with a rights issue or in any
other circumstances subject to an
aggregate maximum nominal amount of
the shares so allotted or that may be
INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021
141
CORPORATE GOVERNANCE CONTINUED
Each share in the Company confers on its
legitimate holder the status of shareholder
and the rights recognised by applicable
law and the Company’s Bylaws which can
be accessed on the Company’s website.
The Company has a Sponsored Level 1
American Depositary Receipt (ADR)
facility that trades on the over-the-counter
market in the US. Each ADR is equivalent
to two ordinary shares and each ADR
holder is entitled to the financial rights
attaching to such shares, although the
ADR depositary, Deutsche Bank, is the
registered holder. As at December 31, 2021
the equivalent of 55,871,936 shares was
held in ADR form (2020: 40 million
shares).
allotted on conversion or exchange of
such securities of five per cent of the
aggregate nominal amount of the
Company’s issued share capital as at
June 17, 2021;
• carry out the acquisition of its own
shares directly by the Company or
indirectly through its subsidiaries,
subject to the following conditions:
• the maximum aggregate number of
shares which is authorised to be
purchased shall be the lower of the
maximum amount permitted by the
law and such number as represents 10
per cent of the aggregate nominal
amount of the Company’s issued share
capital on June 17, 2021, the date of
passing the resolution;
• the minimum price which may be paid
for an ordinary share is zero;
• the maximum price which may be paid
for an ordinary share is the highest of:
• an amount equal to five per cent
above the average of the middle
market quotations for the shares as
taken from the relevant stock
exchange for the five business days
immediately preceding the day on
which the transaction is performed;
and
• the higher of the price of the last
independent trade and the highest
current independent bid on the
trading venues where the transaction
is carried out at the relevant time; in
each case, exclusive of expenses.
The shares acquired pursuant to this
authorisation may be delivered directly to
the employees or directors of the
Company or its subsidiaries or as a result
of the exercise of option rights held
thereby. For further details see note 29 to
the Group financial statements.
The IAG Securities Code of Conduct
regulates the Company’s dealings in its
treasury shares. This can be accessed on
the Company’s website.
Capital structure and shareholder rights
As of December 31, 2021, the share capital
of the Company amounted to 497,147,601
euros (2020: 497,147,601 euros), divided
into 4,971,476,010 shares
(2020: 4,971,476,010 shares) of the same
class and series and with a nominal value
of €0.10 each (2020: €0.10 each), fully
subscribed and paid.
As of December 31, 2021, the Company
owned 10,153,335 shares as treasury
shares.
Company’s share capital
During the year there were no changes to the share capital.
The significant shareholders of the Company at December 31, 2021, calculated according to the Company’s share capital as at the date
of this report and excluding positions in financial instruments, were:
Name of shareholder
Qatar Airways (Q.C.S.C)
Lansdowne Partners
International Limited
Number of direct
shares
1,249,999,997
Number of indirect
shares Name of direct holder
Total shares Percentage of capital
1,249,999,997
80,876,691
25.14%
1.627%
–
–
80,876,691
Funds and
accounts
managed by
Lansdowne
Partners (UK) LLP
142
INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021
Corporate Governance the Company; and (b) the middle market
quotation for an ordinary share of the
Company as derived from the London
Stock Exchange’s Daily Official List for the
business day on which they were acquired
by the relevant non-qualifying person.
Impact of change of control
The following significant agreements
contain provisions entitling the
counterparties to exercise termination in
the event of a change of control of the
Company:
• Certain significant IAG financing
arrangements allow for prepayment,
redemption or early termination in
certain circumstances if there is a
change of control of the Company.
In addition, the Company’s share plans
contain provisions as a result of which
options and awards may vest and become
exercisable on a change of control of the
Company in accordance with the rules of
the plans.
Directors’ and Officers’ liability insurance
The Company has purchased insurance
against Directors’ and Officers’ liability for
the benefit of the directors and officers of
the Company and its subsidiaries.
Shareholders’ meeting
The quorum required for the constitution
of the shareholder’s meeting, the system of
adopting corporate resolutions, the
procedure for amending the Bylaws and
the applicable rules for protecting
shareholders’ rights when changing the
Bylaws are governed by the provisions
established in the Spanish Companies Law.
Considering the COVID pandemic
circumstances as well as the
recommendation of the Spanish Corporate
Governance Code, the Company facilitated
virtual attendance and participation to the
2021 Annual Shareholders’ Meeting using
an online platform. Further detail on the
2021 Annual Shareholders’ Meeting is
provided in the Stakeholder engagement
section.
The Shareholder’s Meeting Regulations,
which establishes the operating rules of
the shareholder meeting, are available in
the Corporate Governance section of the
Company’s website.
Disclosure obligations
The Company’s Bylaws establish a series
of special obligations concerning
disclosure of share ownership as well as
certain limits on shareholdings, taking into
account the ownership and control
restrictions provided for in applicable
legislation and bilateral air transport
treaties signed by Spain and the UK.
In accordance with article 7.2 b) of the
Bylaws, shareholders must notify the
Company of any acquisition or disposal of
shares or of any interest in the shares of
the Company that directly or indirectly
entails the acquisition or disposal of a
stake of over 0.25 per cent of the
Company’s share capital, or of the voting
rights corresponding thereto, expressly
indicating the nationality of the transferor
and/or the transferee obliged to notify, as
well as the creation of any charges on
shares (or interests in shares) or other
encumbrances whatsoever, for the
purposes of the exercise of the rights
conferred by them.
In addition, pursuant to article 10 of the
Bylaws, the Company may require any
shareholder or any other person with a
confirmed or apparent interest in shares of
the Company to disclose to the Company
in writing such information as the
Company shall require relating to the
beneficial ownership of or any interest in
the shares in question, as lies within the
knowledge of such shareholder or other
person, including any information that the
Company deems necessary or desirable in
order to determine the nationality of the
holders of said shares or other person with
an interest in the Company’s shares or
whether it is necessary to take steps in
order to protect the operating rights of the
Company or its subsidiaries.
In the event of a breach of these
obligations by a shareholder or any other
person with a confirmed or apparent
interest in the Company’s shares, the
Board may suspend the voting or other
political rights of the relevant person. If the
shares with respect to which the
aforementioned obligations have been
breached represent at least 0.25 per cent
of the Company’s share capital in nominal
value, the Board may also direct that no
transfer of any such shares shall be
registered.
Limitations on ownership of shares
In the event that the Board deems it
necessary or appropriate to adopt
measures to protect an operating right of
the Company or of its subsidiaries, in light
of the nationality of its shareholders or any
persons with an interest in the Company’s
shares, it may adopt any of the measures
provided for such purpose in article 11 of
the Bylaws, including the determination of
a maximum number of shares that may be
held by non-qualifying shareholders
provided that such maximum may not be
lower than 40 per cent of the Company’s
share capital. If such a determination is
made and notified to the stock market, no
further acquisitions of shares by non-
qualifying persons can be made.
In such circumstances, if non-qualifying
persons acquire shares in breach of such
restriction, the Board may also (i) agree on
the suspension of voting and other political
rights of the holder of the relevant shares,
and (ii) request that the holders dispose of
the corresponding shares so that no
non-qualifying person may directly or
indirectly own such shares or have an
interest in the same. If such transfer is not
performed on the terms provided for in the
Bylaws, the Company may acquire the
corresponding shares (for their subsequent
redemption) pursuant to applicable
legislation. This acquisition must be
performed at the lower of the following
prices: (a) the book value of the
corresponding shares according to the
latest published audited balance sheet of
INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021
143
REPORT OF THE NOMINATIONS COMMITTEE
Report of the Nominations Committee
In June 2021, we welcomed a new non-
executive director, Maurice Lam, whose
appointment process was managed by the
Committee during the first half of the year.
Following the recent non-executive
directors appointments, the Committee
oversaw their extensive induction
programmes. Due to existing COVID-
related restrictions, the induction meetings
were held virtually. Despite the existing
challenges, thanks to IAG’s management
commitment support, the feedback
received from directors has been very
positive. We hope to complete the
induction with site visits to the Group’s
operations during 2022.
We close the year satisfied that we have a
Board with the right skills and experience
to continue providing the highest
standards of leadership and oversight in
the years ahead. We are also satisfied that
the Board composition meets the target
for the proportion of women on boards set
out in the Hampton-Alexander Review as
well as the recommendation on ethnic
diversity on boards in the Parker Review.
We hope to further consolidate and
improve this progress, and trust that the
Board's leadership will serve as an anchor
for the management team's own plans on
diversity and inclusion.
Javier Ferrán
Nominations Committee Chair
Javier Ferrán
Nominations Committee Chair
Committee members
Javier Ferrán (Chair)
Giles Agutter
Margaret Ewing
Heather Ann McSharry
Alberto Terol
Date appointed
September 8, 2020
September 24, 2020
January 28, 2021
December 31, 2020
June 20, 2019
Dear Shareholder
On behalf of the Nominations Committee,
I am pleased to introduce my first full year
report as its Chair.
Beyond the regular issues, the Committee's
work in 2021 has focused on reviewing the
appointments to, and changes within the
IAG Management Committee as the Group
Chief Executive has continued to
strengthen his senior team. During the
year, the Committee considered changes
to three Management Committee
positions, the appointment of a new
Director of Strategy, that of the new Chief
People, Corporate Affairs and
Sustainability Officer, and the move of
Lynne Embleton as new Chief Executive of
Aer Lingus.
In addition, the Committee oversaw the
process for the appointment of Nicholas
Cadbury as our new Chief Financial Officer,
who will be joining the Group on March 21,
2022 following the departure of Steve
Gunning.
Further details of these management
changes is provided in this report.
Another important area of focus for the
Committee has been management
succession planning and talent
development, including diversity
requirements. In fact, in September, the
Committee undertook a detailed review of
the new plans and initiatives in line with
the Group’s people strategy. In 2022, we
will continue to focus on this important
area, overseeing the development of the
plans that have been presented.
144 INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021
Corporate Governance The Nominations Committee
The composition, competencies and
operating rules of the Nominations
Committee are regulated by article 31 of
the Board Regulations and by the
Nominations Committee Regulations as
approved by the Board on February 25,
2021. A copy of the Board and the
Nominations Committee Regulations can
be found on the Company’s website.
The Nominations Committee has overall
responsibility for leading the process for
appointments to the Board and to ensure
that these appointments bring the
necessary skills, experience and
competencies to the Board, aligning its
composition to the business strategy and
needs. The Committee also reports to the
Board on the proposed appointment of
senior executives of the Company. It
oversees Board and senior management
succession planning and in general the
development of a diverse pipeline for
succession.
The Nominations Committee shall be made
up of no less than three non-executive
directors appointed by the Board, with the
dedication, capacity and experience
necessary to carry out its function. A
majority of the members must be
independent directors that are EU
nationals.
As mentioned in the 2020 Nominations
Committee report, the only new
appointment to the Committee was that of
Margaret Ewing on January 28, 2021.
The Committee’s responsibilities
The Nominations Committee’s
responsibilities can be summarised as:
• evaluating the mix of competencies,
knowledge and experience necessary in
the Board‘s membership and reviewing
the criteria for the Board composition
and the selection of candidates
• submitting the recommendation for
appointment of directors to the Board
for approval, and reporting on the
proposed designations of the members
of the Board committees and their chairs
• succession planning for Board members
making proposals to the Board so that
such succession occurs in a planned and
orderly manner
• reporting to the Board on the
appointment and removal of senior
executives (which includes all IAG
Management Committee members)
New Board appointment
Maurice Lam
Non-executive director
Soon after joining the Board in June
2021, I attended IAG’s induction
programme which introduced me to the
Group, its management and business.
Given the pandemic situation and the
fact that I was the only newly appointed
member at that time, this induction
consisted in a number of one to one
virtual meetings with key members of
management.
I have a financial services background
and am relatively new to the airline
industry. The quality of the thorough
and open exchange together with the
level and completeness of the
information provided, helped me
significantly to better understand the
industry dynamics and its business logic.
We had the opportunity to share
insights into issues impacting the Group,
particularly in the context of the
uncertain conditions prevailing from
COVID-19 and its unpredictable
developments. We also had interesting
discussions on challenging subjects like
climate change, cybersecurity and other
emerging risks and their potential
impacts.
Although the induction meetings were
held virtually, the time commitment and
the quality of the interactions provided
me with a good start to building a
relationship with key people in the
Group; indeed this proved to be very
useful when we finally met physically last
September for the ’Strategic meetings’. I
felt encouraged to exchange at any
time, an extremely important enabler to
successfully fulfil my independent
director role.
Currently, planned site visits to the
different locations of IAG entities are still
outstanding and I am looking forward to
participating in these as soon as
conditions allow.
As a new member of the Board, its Audit
and Compliance Committee and its
Safety, Environment and Corporate
Responsibility Committee, I feel well
integrated so far, and from the start felt
motivated to be actively engaged in all
issues affecting the Group.
The complexity and diversity of the
Group implies quite a lot of information
to read and digest ahead of meetings. I
feel the diversity and experience of the
different board and committee
members, under strong leadership and
guidance, facilitate probing questions
and challenging discussions; this is
particular important in an environment
where forecasting in current volatile and
uncertain times, leading to the need to
consider a variety of options, has to be
continuously performed by management
and overseen by the Board.
I am proud to be a Board Member of
IAG and look forward to contributing in
this recent role.
INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021
145
REPORT OF THE NOMINATIONS COMMITTEE CONTINUED
• ensuring that non-executive directors
receive appropriate induction
programmes
• setting diversity targets (gender,
ethnicity and other criteria) both within
the senior management and the
succession pipeline
• ensuring that plans are in place for
orderly succession of senior
management positions whilst
safeguarding the achievement of agreed
diversity targets
• establishing a target for female and
ethnicity representation on the Board
which should adhere to the Company’s
Directors Selection and Diversity Policy
• coordinating the annual evaluation of
the performance of the Board and its
committees
The Committee’s activities in 2021
The Committee met seven times during
2021, including four scheduled and three
ad hoc meetings. Directors’ attendance at
these meetings can be found in the
Corporate Governance section. The Group
Chief Executive is invited to attend the
Committee’s meetings as and when
necessary.
The Committee focused on the following
activities during the year:
• review of the composition of the Board
and search process for a new non-
executive independent director
• review of the Board committees’
membership, including that of the new
Safety, Environment and Corporate
Responsibility Committee
• Board succession planning
• review of the directors’ independence
• review of compliance with the Directors’
Selection and Diversity Policy
• management succession plans
• launching of the Board annual evaluation
process, as well as that of the
Nominations Committee
• changes to Group company boards
• review of investor feedback from the
2021 Annual General Meeting
• update on regulatory developments on
diversity matters.
Throughout the year, Spencer Stuart
provided recruitment consultancy services
to the Committee. Spencer Stuart does not
have any other connection with the
Company or individual directors and is a
signatory to the UK Voluntary Code of
Conduct for Executive Search Firms.
Non-executive directors appointment
process
As already anticipated, the Nominations
Committee and the Board were keen to
improve ethnic diversity, and this was
taken into consideration when a new
search was started following the
retirement of Antonio Vázquez in January
2021. Spencer Stuart was appointed to
conduct this search on January 7, 2021. In
May 2021, the Committee was pleased to
recommend the appointment of Maurice
Lam, who joined the Board at IAG’s Annual
Shareholders’ Meeting on June 17, 2021.
Maurice brings extensive financial audit,
and risk-related experience to further
reinforce the composition of the Audit and
Compliance Committee.
This search process was completed
pursuant to the IAG Directors Selection
and Diversity Policy as confirmed by the
Nominations Committee in the review
completed in January 2022. The process
was carried out in accordance with the
following principles:
• an executive search firm was engaged to
conduct this search, which is a signatory
to the UK Voluntary Code of Conduct
for Executive Search Firms.
• the search criteria were formulated
following the evaluation of the balance
of skills, experience, independence,
diversity and knowledge on the Board,
alongside the then existing succession
plans for directors, and taking into
consideration the conclusions from the
annual review of the Board performance.
• based on these considerations, the role
and capabilities required for this
particular appointment were established.
As the Committee is keen to ensure a
broad diversity in the Board, it was also
agreed to put a special focus on
diversity, in particular on minority ethnic
diversity. These specifications were
included in the search firm’s
engagement letter.
• a long-list of candidates were reviewed
during February and March 2021 and,
following a detailed analysis of the
profiles of the candidates included, a
shortlist of potential candidates was
agreed.
• the final shortlist was reviewed and
discussed by the Chair of the
Nominations Committee and Chairman
of the Board with the Committee
members, and according to the
conclusions reached and after hearing
the feedback from a compliance
perspective from the Group General
Counsel, it was reported to the
Nominations Committee.
• following the interview process of the
shortlisted candidates, a final candidate
was then agreed, and submitted for final
approval at the Nominations Committee
held on May 5, 2021. A final report was
presented to the Board endorsing the
nomination.
Board succession
The Committee regularly reviews the
formal succession plan for the Board,
including analysis of non-executive
directors’ length of tenure, skills and
experience, and planning for succession of
any areas that could require strengthening
from a skills and succession perspective.
The conclusions of this exercise helped to
inform new directors’ searches and the
profile and skills required.
In September 2021, the Committee
reviewed in detail the Board succession
planning, including the Board refreshment
timeline, the Board skills matrix, as well as
the identification of potential successors
for the different positions.
Board positions and committee
memberships
On February 24, 2021 the Nominations
Committee considered the composition of
the new Safety, Environment and
Corporate Responsibility Committee which
was subsequently approved by the Board.
This committee is chaired by an
independent non-executive director, Nicola
Shaw, and is composed of non-executive
directors with a majority of independent
directors.
Following the Annual Shareholders’
Meeting in June, the Committee reviewed
the Committees’ composition, and
proposed the appointment of Maurice Lam
as a member of the Audit and Compliance
Committee and of the Safety, Environment
and Corporate Responsibility Committee,
replacing Alberto Terol on the former, and
Javier Ferrán on the latter.
Directors’ independence, performance
and re-election
The Nominations Committee, having
considered the matter carefully, is of the
opinion that all of the current non-
executive directors, with the exception of
the two proprietary directors, are
independent, both in line with the
definition set out by the Spanish
Companies Act and with that of the UK
Corporate Governance Code, and are free
from any relationship or circumstances
that could affect, or appear to affect, their
independent judgement.
All proposals for the appointment or
re-election of directors presented to the
2021 Shareholders’ Meeting were
accompanied by an explanatory report
issued by the Board of Directors with the
support of the Nominations Committee
assessing the competence, experience and
merits of each candidate. The Committee
also reviews the time commitment and
availability of each non-executive director,
which during 2021 was again remarkable.
Following this review, the Committee was
of the opinion that each non-executive
director submitting themselves for
re-election continued to demonstrate
commitment to the role as a member of
the Board and its committees, discharged
146 INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021
Corporate Governance This selection process is described in detail
in the preceding section on ‘Non-executive
directors’ appointment process’.
Female directors currently represent 42%
of the Board of Directors and 62% of the
independent non-executive directors. In
addition to this, two of the four Board
advisory committees are chaired by
women. From an ethic diversity
perspective, the IAG Board has met the UK
Parker Review objective, having appointed
in 2021 one director from a minority ethnic
group.
The Board and the Nominations
Committee are committed to improving
diversity, and gender diversity across the
Group, and encourages and supports
management actions in this regard. As
explained below, the Committee has
agreed to maintain its focus on diversity
and inclusion as a priority for 2022.
Given its relevance, the Board reviewed
the Group's diversity and inclusion strategy
during its annual strategy session in
September 2021. In addition, in January
this year, the Group's gender diversity
initiatives and ambitions within this new
diversity framework were shared again
with the full Board.
Further explanations of the steps that IAG
is taking to promote diversity and inclusion
across the Group is set out in the ‘Diversity,
inclusion and equality’ section of the
sustainability report.
The Committee annual evaluation
The annual performance evaluation of the
Board and its committees was internally
facilitated, having been carried out by an
independent external facilitator in 2019.
The evaluation concluded that the
Committee operated effectively during the
year. Although significant progress has
been made, the Committee will continue
prioritising its focus on the two areas
identified in the prior evaluation, that is
management succession planning,
including talent retention and talent
development, and diversity and inclusion
initiatives at management level.
their duties effectively and that each was
making a valuable contribution to the
leadership of the Company for the benefit
of all shareholders.
Each director is required to advise the
Committee and seek its authorisation
before accepting any external directorship
or other significant appointment that
might affect the time they are able to
devote to the role as a director Company.
Management appointments and
succession planning
As mentioned in the Committee report for
2020, in January 2021, the Committee
endorsed the appointment of David
Podolsky as new Director of Strategy.
In February 2021, the Committee
considered and reported to the Board on
the appointment of Lynne Embleton as the
new Chair and Chief Executive of
Aer Lingus with effect from April 6, 2021.
At the same meeting, the Committee also
considered and endorsed the appointment
of Carolina Martinoli in a new role as Group
Head of Culture, Talent and Sustainability
Officer with her becoming Chief People,
Corporate Affairs and Sustainability Officer
in May 2021.
Although this was not a position on the
IAG Management Committee, the
Committee also reviewed the appointment
of David Shepherd, Chief Commercial
Officer of Aer Lingus, as managing director
and member of the board of IAG Cargo,
reporting to David Podolsky who leads IAG
Cargo as a Management Committee
member and chairs the IAG Cargo board
of directors.
Finally, the Committee reviewed the search
and selection process for the position of
Chief Financial Officer of the Company.
The search was conducted with the
assistance of Egon Zehnder. This process
culminated in October 2021 with the
announcement of the appointment of
Nicholas Cadbury, Chief Financial Officer
of Whitbread, to replace Steve Gunning,
who will be leaving in March 2022.
In the September meeting, the main
principles and objectives of the Group
management succession planning process
were presented to the Committee. The
process is currently being reviewed to
better align it to IAG’s broader people
strategy. Several matters were discussed
at this meeting, including: how to keep the
right balance between succession and
external recruitment and the different
implications this could have from a cultural
perspective; the relevance of structured
processes and methodology for talent
development and promotion; the focus on
diversity standards; the role of the Group
and that of the different operating
companies. The Committee was also
updated on the Group key roles, including
an analysis of leadership changes since
2019, highlighting the high churn suffered
in the leadership teams and across the
Group critical roles in the same period.
It was agreed that the Committee will be
kept updated on the initiatives and
developments of this plan, as this is an
area on which it was agreed to put a
special focus following the Committee's
performance evaluation last year.
Diversity
The Nominations Committee remit was
reviewed in 2021 and its responsibility for
diversity was confirmed from three
different perspectives as far the Board and
senior management are concerned. The
Committee is responsible for developing
measurable objectives, for monitoring
progress towards their achievement and
compliance with IAG’s diversity policies,
and to oversee the development of a
diverse pipeline for Board and senior
management succession.
The IAG Directors Selection and Diversity
Policy, which is available on IAG’s website,
sets out the principles that govern the
directors selection process and the
approach to diversity on the Board of
Directors and on the Management
Committee. This policy reflects IAG’s
commitment to promote equality and
diversity.
The IAG Board recognises the value of
having a variety of opinions, perspectives,
skills, experiences, backgrounds and
orientations to enrich discussions and to
have better decision-making processes.
Considering the ongoing work on people
and culture in the Group, it has been
deemed appropriate to delay the review of
the Group's diversity and inclusion policies
to this year, in order to ensure adequate
consistency in these initiatives.
The procedure for the appointment of
directors follows the principles established
in the Directors Selection and Diversity
Policy. As recommended by the Spanish
Good Governance Code, the Nominations
Committee reviews compliance with this
policy on an annual basis. This review was
completed in January 2022.
When considering director appointments,
the Committee follows a formal, rigorous
and transparent procedure, designed to
preserve this diversity value in its broader
sense, while ensuring that any
appointment is made on merit, and taking
into account the specific skills and
experience needed at any point in time to
ensure continuing Board balance and
relevant knowledge. Gender diversity
principles are followed throughout the
process, while preserving the general
diversity and merit-based appointment
principles established in the policy. The
Board’s policy is to consider candidates
from a wide variety of backgrounds,
without discrimination based on gender,
race, colour, age, social class, beliefs,
religion, sexual orientation, disability or
other factors.
INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021
147
REPORT OF THE SAFETY, ENVIRONMENT AND CORPORATE RESPONSIBILITY COMMITTEE
Report of the Safety, Environment
and Corporate Responsibility Committee
each business, the Committee carries out a
high-level overview of safety activities and
informs the Board as appropriate. More
importantly, we aim at promoting the
discussion of common issues and sharing
best practice. This has proved to be a very
valuable tool in facing the unprecedented
impact of the COVID pandemic.
Sustainability takes many forms. From
stewardship of the environment to social
matters. We seek to actively manage our
impact on the world by setting ambitious
targets, measuring our progress, and
transparently reporting on the steps we
are taking. In 2021, the Committee oversaw
and discussed the Group’s initiatives in this
area, from how we approach carbon
emissions, to the new diversity targets we
have established, the improvement in our
reporting and the partnerships that we
have joined to drive positive change.
On the environmental front, tackling
climate change remains the most material
issue, as validated by the stakeholder
materiality exercise completed this year. In
2021, we became the first airline group in
Europe to commit to deploying 10 per cent
sustainable aviation fuel (SAF) by 2030,
equating to 1 million tons of SAF per year.
We have also continued to embed our net
zero transition pathway within our
business and remain focused on the
delivery of our ambitious targets.
Listening to our stakeholders is crucial to
inform our priorities and plans to deliver a
fully sustainable business. In line with the
feedback received, and going beyond
environmental issues, the Committee will,
along with our climate change
commitments, continue to focus on social
and corporate responsibility matters in the
coming year.
It is fundamental to our ambition that we
do business in the right way which is why
sustainability is at the heart of our strategy.
We are committed to building a truly
sustainable, responsible and inclusive
business to deliver long term value for our
people, customers, shareholders and the
communities we serve. Together we can
make a lasting difference to the world.
Nicola Shaw
Safety, Environment and Corporate
Responsibility Committee Chair
Nicola Shaw
Safety, Environment and Corporate
Responsibility Committee Chair
Committee members
Nicola Shaw (Chair)
Giles Agutter
Emilio Saracho
Robin Phillips
Maurice Lam
Date appointed
February 25, 2021
February 25, 2021
February 25, 2021
February 25, 2021
June 17, 2021
Dear Shareholder
I am pleased to share with you my first
report as Chair of the IAG Safety,
Environment and Corporate Responsibility
Committee (SECR Committee), which
details the work of this Committee and our
ambitions and achievements during 2021.
At IAG, we believe in the huge social and
economic benefits our business creates by
bringing people together. In line with our
Group’s purpose, we’re committed to
ensuring aviation remains a force for good
in the world. That means ensuring every
business decision is rooted in the values
that we hold and the desire to do the right
thing for all our stakeholders. Only then
can we create a resilient business that will
grow sustainably for the long-term. This
inspires the work of this new Committee
which has a key role in supporting the
Board by providing guidance and direction
on IAG’s sustainability and corporate
responsibility ambitions.
The Committee was incorporated in
February 2021 with new membership,
expanding the remit of the former Safety
Committee, to oversee environmental
matters and corporate responsibility and
met for the first time in May. In June 2021,
Maurice Lam joined us following his
appointment as non-executive director at
the Annual Shareholders’ Meeting,
replacing Javier Ferrán.
The SECR Committee has oversight over
safety matters. Although this responsibility
lies with each airline in accordance with its
applicable standards, its own culture and
the circumstances and particularities of
148
INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021
Corporate Governance According to its regulations, the SECR
Committee’s remit includes:
• to receive significant safety information
about IAG’s subsidiaries, franchise,
codeshare or wet-lease providers used
by any member of the Group
• to exercise a high-level overview of
safety activities and resources
• to review the Group’s strategy and
policies on social and environmental
sustainability
• to evaluate that the Company’s
environment and social practices are in
accordance with the established
strategy and policies
• to evaluate the effectiveness of the
Company’s environment and social
policies, to confirm that they are fulfilling
its mission to promote the corporate
interest and catering for, as appropriate,
the legitimate interests of its
stakeholders
• to review the Group’s global
environment and climate risk mitigation
strategy, the implementation of
sustainability programmes and any
climate related financial disclosure
• to review the content of the non-
financial information statement or
sustainability report
• to monitor and evaluate the Company’s
interaction with its stakeholder groups,
including the workforce
The Committee’s activities during
the year
During 2021, the Committee held three
meetings. Directors’ attendance at
these meetings is detailed in the Corporate
Governance report. At its first meeting, the
Committee agreed on it plan of activities
for 2021 as well as its standard annual plan
for the following years.
During 2021, the Committee focused on
the following activities during the year:
• safety readiness programmes of the
Group airlines
• overview of an airline company safety
framework
• safety review report of the Group airlines
• Conclusions from the IAG Investors ESG
survey
• key upcoming EU and national ESG
consultations
• 2021 stakeholder materiality assessment
process and conclusions
• update on sustainable aviation projects
and other low carbon initiatives
• review of the 2020 IAG Modern Slavery
Statement
• update on emerging trends and
benchmark analysis on ESG
• review of ESG ratings and relevant
sustainability indexes
• Group sustainability strategy and
policies review
• to review the principal environmental,
• 2021 Non-Financial Information
social and reputational risks
• to review the general diversity and
inclusion policies
Statement and other sustainability
reporting, including review of
compliance and key metrics.
• diversity and Inclusion review
The Safety, Environment, and Corporate
Responsibility Committee
The Committee composition,
competencies and operating rules are
regulated by article 33 of the Board
Regulations as well as the Regulations of
the SECR Committee, as approved by the
Board on February 25, 2021. A copy of the
Board and the SECR Committee
Regulations can be found on the
Company’s website.
The Committee is made up of no fewer
than three directors appointed by the
Board, with the necessary dedication,
capacity and experience. All the members
of the Committee shall be non-executive
directors and a majority of them shall be
independent directors.
In addition to the Secretary and Deputy
Secretary, regular attendees at Committee
meetings included the Chairman, the
Group Chief Executive and the Chief
People, Corporate Affairs and
Sustainability Officer. Senior managers
with responsibility for safety matters and
others in charge of different sustainability
areas were invited to attend specific
agenda items as required and when
relevant.
The Committee’s role and responsibilities
The Committee’s role is to support and
advise the Board in matters relating to
safety, environment and corporate
responsibility. Responsibility for safety
matters belongs to the Group’s airlines.
IAG, through this Committee, has an
overall view of each airline’s safety
performance and of any important issues
that may affect the industry. The
Committee also has visibility of the Group
airlines’ resources and procedures.
Responsibility for performing detailed and
technical assessments remains with each
airline, overseen by their respective safety
committees. In the areas of environment
and corporate responsibility, the SECR
Committee provides a governance forum
for non-executive directors to exercise
specific oversight, challenge and support
to senior management in shaping the
Group’s sustainability strategy, policies and
targets, buttressing IAG’s vision to be the
world’s leading airline group on
sustainability.
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REPORT OF THE SAFETY, ENVIRONMENT AND CORPORATE RESPONSIBILITY COMMITTEE CONTINUED
In addition to this, two externally provided
training sessions were organised together
with the IAG Audit and Compliance
Committee, focusing on the Board’s ESG
compliance and reporting responsibilities,
with a particular attention to climate
change. A follow up discussion was
also held at the SECR Committee
December meeting.
Safety
In May 2021, the SECR Committee
reviewed the four Group airlines’ plans to
restart and readiness to fly in the ramp up
of the operations for the summer period.
The Committee was briefed on the
challenge the airlines faced under a
dynamic and uncertain cancellation phase,
the large-scale parking and storage plan
which continued to vary, the extensive
staff furlough programme to match a
much reduced flying programme, a restart
phase with significant uncertainty and
including a new operational and customer
environment. The different teams
presented their respective plans to ensure
a safe return into operations but also
building on the opportunities that the
situation also brings and on the possibility
of sharing best practices across the Group
benefiting from the safety and security
network already established between the
Group airlines and the support provided
from the centre.
The Committee reviewed the relevant
areas of each operating company’s
performance across the Safety Risk
Management activities. In line with the
above, in addition to each airline's standard
reporting, the Committee devoted special
attention to the different challenges posed
by the COVID pandemic on the safety
management systems and environment.
ESG investors survey and materiality
assessment
Two key exercises on ESG were completed
in 2021. The first one was the survey that
the IAG Investor Relations team conducted
to get input from IAG institutional
shareholders and investors on ESG
matters. The top 100 shareholders plus ten
additional investors were contacted to
participate. They were consulted on their
approach to ESG when analysing
investments, how they saw that evolving,
what IAG is lacking, what should be the
Group’s focus in terms of reporting and
the gap between their expectations and
what IAG is currently doing. The
Committee discussed with the Investor
Relations and Sustainability teams the
feedback received, including both
qualitative and quantitative findings, as
well as the conclusions and
recommendations to be drawn from this
important engagement.
The second exercise was the materiality
assessment completed between April and
June 2021 to seek the Group stakeholders’
perspective regarding sustainability
priorities. This was facilitated by a leading
sustainability consultancy Simply
Sustainable as an independent third party
and it included both a medium (two years)
and a long-term (ten years) approach. The
Committee considered the design,
methodology and content of the process,
and was also briefed on the main
conclusions drawn and actions to be taken
to ensure this properly informs IAG’s
strategy and reporting going forward. A
complete description of the materiality
assessment can be found in the
Sustainability Report.
Market trends and EU and national ESG
consultations.
The Committee has been regularly
updated on any upcoming ESG policy
consultations at international, EU or
national level, including the Group’s
positioning and actions intended in each of
them. This year this included, among
others, the UK BEIS consultation on
Mandatory Climate Change Reporting, the
EU ‘Fit for 55’ and the UK ‘Jet Zero’
consultations.
As part of the materiality assessment
process, a benchmarking analysis was
completed to position IAG versus best
practice in the different areas considered.
Sustainable aviation strategy, projects
and other low carbon initiatives
At the December SECR meeting the
Committee reviewed and approved the
updated IAG sustainability strategy with an
increased focus on delivery of carbon
mitigation initiatives particularly the
commitment to 10% sustainable aviation
fuels by 2030.
The Committee also closely follows the
Group's various projects on sustainable
aviation fuels and hydrogen projects,
namely Lanzajet, Velocys/Altalto and
ZeroAvia, discussing the relevant pathway,
status and next steps. In this respect, the
Committee also considered the Group's
positioning and the various initiatives
management undertakes to ensure
appropriate policies support the
development of these projects.
150 INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021
Corporate Governance Review of ESG ratings and relevant
sustainability indexes and Group
reporting
At its July meeting, the Committee was
updated on the different IAG ESG ratings.
The Committee considered the situation of
each one of them and the actions
proposed to be addressed by
management, with particular attention to
the Carbon Disclosure Project (CDP), on
which relevant disclosures were filed at the
end of July.
The Committee annual evaluation and
priorities for 2022
As the Committee started to be operative
in May 2021, its annual performance
evaluation was completed by the
Committee Chair based on the
conversations held with Committee
members and management. The
Committee was said to be operating
effectively during 2021. Nonetheless,
considering the early life of this Committee
and the important expectations and
business focus in this area, it was
considered appropriate to add two
additional meetings to the 2022 schedule,
and to restructure the Committee plan of
activities accordingly.
Human rights and modern slavery
In July, the Committee was briefed on the
steps IAG is taking to ensure that slavery
and human trafficking are not taking place
in the Group’s businesses or in its supply
chain, providing an update on the Group’s
key initiatives. In particular, the Committee
reviewed IAG’s Modern Slavery Statement
and submitted it for approval to the Board
of Directors.
IAG’s Code of Conduct, which is also
applicable to IAG directors, establishes the
Group’s commitment to respect human
rights in the business, underpins IAG’s
framework in this area, which also includes
anti-bribery and anti-fraud policies and
control, whistleblowing channels and
reporting, and the Group’s slavery and
human trafficking statement. As far as
suppliers are concerned, IAG screens
suppliers to identify and mitigate potential
incidences of human rights violations, and
modern slavery clauses feature in all new
supplier contracts as well as contract
renewals. In addition to IAG’s own Modern
Slavery statement, IAG asks suppliers to
adhere to the third IAG Group Slavery and
Human Trafficking Statement.
In 2022, the Committee will focus on the
assessment of human rights risks within
the business and its supply chain, including
environment, labour and human rights,
and ethics.
Diversity and Inclusion initiatives
At the December meeting, the Committee
assessed and refreshed the Group’s
diversity and inclusion commitments and
oversaw the programme of activities
envisaged under the Group’s diversity and
inclusion plans.
The Committee noted the progress made
in the year, including the establishment of
the new IAG Diversity Panel and refreshed
plans for each operating company to
underpin the Group’s new targets and
ambition, but also noted the adverse
impact on workforce composition and
gender pay due to the pandemic and
restructuring activities over the last year.
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151
REPORT OF THE AUDIT AND COMPLIANCE COMMITTEE
Report of the Audit
and Compliance Committee
important than ever as they continue to
work with determination as the business
hopefully moves into a recovery phase and
a progressive return to normal operations,
which will bring further challenges for the
finance and auditing teams. I would also
like to thank Steve Gunning, our Group
CFO, who steps down in March this year.
Steve has been instrumental in leading the
Group through the most challenging of
times and has ensured that he is leaving
the Group in a strong liquidity position. I
welcome Nicholas Cadbury, our new CFO,
and look forward to working with him in
future.
Alberto Terol stood down from the
Committee in June 2021, and I would like
to thank him for his significant
contribution, playing a key role in
advocating strong internal control, risk
management and compliance practices
across the Group. I welcome Maurice Lam,
who joined the Board and the Committee
in June. Maurice is an experienced audit
committee member with a breadth of
finance, audit and accounting knowledge.
Upon Maurice’s appointment, I met with
him to brief him on the key issues and
priorities for the Committee this year as
well as providing insights into certain
industry-specific accounting and risk
issues.
Throughout 2021, I have maintained a
dialogue with other members of the
Committee, management and the internal
auditor, including meeting with ‘agenda
topic owners’ prior to Committee
meetings, ensuring the Committee would
be provided with the necessary
information to enable it to guide, challenge
and advise and, when required, make
informed decisions. I also met regularly
with the lead partners of our new external
auditor, KPMG, as part of my ongoing
review of their effectiveness, particularly in
this year of their transition. In addition,
other Committee members met with
finance team representatives, management
and internal and external auditors, as part
of their induction.
The Committee held ten formal meetings
during 2021 (compared to twelve in 2020)
and several ad hoc meetings on topics
such as fuel hedging strategy and policy.
The key items discussed by the Committee
in discharging its oversight responsibilities
and its areas of focus are set out in further
detail in this report. The Committee has
had clear oversight over the continuing
impact of COVID-19 on the business,
Margaret Ewing
Audit and Compliance Committee Chair
Committee members
Margaret Ewing (Chair)
Peggy Bruzelius
Eva Castillo
Maurice Lam
Date appointed
June 20, 2019
December 31, 2020
December 31, 2020
June 17, 2021
Dear Shareholder
On behalf of the Board, I am pleased to
present the Report of the Audit and
Compliance Committee, which provides an
overview of the role of the Committee and
the key matters considered in 2021,
including insight into how the Committee
has discharged its responsibilities and
provided assurance on the integrity of the
2021 Annual Report and Accounts (2021
ARA). It is our responsibility to ensure that
financial information published by the
Group properly presents its activities to all
stakeholders in a way that is transparent,
useful and understandable and is aligned
with the latest guidance and requirements
of regulators. In addition, the Committee’s
fundamental priorities include ensuring the
quality and effectiveness of the external
and internal audit processes and
monitoring the management of the
principal risks of the business.
The continuation of the COVID-19
pandemic and its impact on governments’
policies regarding flying restrictions, the
aviation industry and our business has
meant that throughout 2021 the Group has
continued to face unprecedented and
significant challenges. The Committee
continued to apply an increased level of
focus on the effect of this situation on our
people and financial integrity, for example,
management’s ability to forecast the
recovery adds additional complexity to
those significant accounting judgements
based on future expectations. I would like
to take this opportunity, on behalf of the
Committee, to acknowledge and express
our significant gratitude to management
and teams who have continued to adapt
so well to the pandemic. We recognise
that retaining our best people is more
152
INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021
Corporate Governance particularly in respect of the significant
operational, compliance and financial risks
that could materially impact the Group’s
financial position and ability to execute
and deliver its strategy. A critical area of
focus for the Committee has been the
smooth transition to KPMG as our external
auditor. KPMG presented an update of
their transition at each Committee
meeting, providing the Committee with
their observations and plans. This included
presenting their 2021 audit plan and risk
assessment in November and plan for their
review of the financial statements for the
first six months of the year (in May), both
of which the Committee discussed in detail
and approved.
This report describes how the Committee
has monitored and assessed the
effectiveness of the external auditor during
2021. KPMG’s fresh perspective, challenge
and rigour have drawn the Committee’s
and management’s attention to a
requirement for renewed consideration of
the application of certain accounting
policies and judgements. Management
have responded positively to KPMG’s
findings. The Committee has spent
considerable time reviewing and
scrutinising the Group’s financial results,
including the areas of challenge by the
external auditor, and details of the
significant issues we considered can be
found in this report.
During the year, several risk deep dives
and educational sessions were held for the
Committee (particularly given the recent
appointment of three of the members) to
ensure collective robust knowledge of
issues unique to this industry and our
businesses, key financial risks and more
complex accounting judgements, as well
as the impact of emerging regulatory and
non-financial information requirements.
These sessions covered topics such as fuel
hedging, British Airways pensions, loyalty
programmes and the associated
accounting, ESG and sustainability. In
addition, briefing sessions by management
and the external auditor have ensured that
all Committee members are aware of the
rapid evolution of corporate governance
proposals and regulatory guidelines in the
UK and EU, including the Department for
Business, Energy and Industrial Strategy
(BEIS) consultations on UK Corporate
Governance and Audit Reform, the
European Commission’s consultation
“Corporate reporting – improving its
quality and enforcement” and FRC and
CNMV thematic reviews.
I believe that, throughout 2021, we have
ensured: the key challenges and risks faced
by the Group were reflected in the external
and internal audit plans; effective controls
remained in place; rapidly changing
principal and emerging risks were
identified and effectively managed;
compliance with all regulatory and legal
obligations; and sound financial
I hope that you find this report informative
and can continue to take assurance from
the work undertaken by the Committee
during 2021 and planned for 2022. The
Committee seeks to respond to
shareholders’ and other stakeholders’
expectations in our reporting. I welcome
feedback on this Committee report or
other related issues and an opportunity to
meet with investors during 2022.
Margaret Ewing
Audit and Compliance Committee Chair
judgements and estimates continued to be
made. The internally facilitated evaluation
of the Committee’s effectiveness during
2021 supported this conclusion. The
evaluation findings, which were shared
with the Board, indicated that the
Committee continued to perform
effectively and had addressed its key
priorities and action plan for 2021.
As we look forward to this current year,
2022, further relaxation in travel
restrictions and the anticipated increase in
business and operations levels of activity
and revenues, the Committee will continue
to provide robust challenge of
management and our external and internal
auditors. We will target known and
emerging risk areas for deep dives and
ensure that the transformation occurring
across the Group, as well as challenges
posed by the implementation of changes
in corporate governance and regulatory
requirements, are appropriately reflected
in the Group’s accounting, internal control,
risk and compliance procedures.
The Audit and Compliance Committee
The composition, competencies and
operating remit of the Audit and
Compliance Committee are regulated
by article 29 of the Board Regulations
as well as the Regulations of the Audit
and Compliance Committee. The
Committee and Board approved
revisions to the Regulations in February
2021 to reflect the latest guidance and
regulatory requirements in Spain and
the UK. A copy of these Regulations
can be found on IAG’s website.
In addition to the Secretary and Deputy
Secretary, regular attendees at
Committee meetings included the
Chairman, the Head of Group Audit
(who reports functionally to the Chair of
the Committee) and representatives
from the external auditor. Members of
the management team, including the
Chief Executive Officer, the Chief
Financial Officer and the Group
Financial Controller, were invited to
attend specific agenda items as
required and when relevant.
The Committee’s composition,
competencies and attendance
Detailed biographies of all current
Committee members are included in
this Annual Report. The Board is
satisfied that the Committee has
retained competence relevant to its
overall responsibilities and a wide range
of financial, audit, risk management and
relevant sector and business experience
amongst its members, providing the
right mix of skills and experience to
provide constructive challenge and
support to management. The Board has
determined that Margaret Ewing and
Maurice Lam have recent and relevant
financial experience. The Board, through
the Nominations Committee, will
continue to review the Committee’s
membership to ensure the skills and
experience of its members align with
the business as it develops.
A private session of the Committee
members was held at the end of each
Committee meeting and during the year
the Committee met privately with each
of the external and internal auditor.
The Committee’s responsibilities
and activities
The Committee’s principal responsibility
is to oversee and provide assurance to
the Board on the integrity and quality of
financial reporting, effectiveness of
audit arrangements and robustness and
effective operation of internal controls,
compliance and risk management
processes. The Committee meeting
agendas are tailored to ensure
emerging topics are included and to
allow for ad hoc discussion and reviews.
A summary of the Committee’s
activities during 2021 and until the date
of this report is detailed below.
INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021
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REPORT OF THE AUDIT AND COMPLIANCE COMMITTEE CONTINUED
Area of Committee focus
Financial reporting
External auditor
Activities
• reviewing the financial statements and announcements of the Group to ensure integrity;
• consideration of the process for confirming and recommending to the Board that the
2021 Annual Report and Accounts is fair, balanced and understandable;
• reviewing and challenging significant accounting estimates, judgements and accounting
policies applied in the financial statements of the Group and related reporting and
disclosures; and
• reviewing and challenging management’s assessment of the going concern and viability
of the Group.
• oversight of the external auditor focusing on audit quality, effectiveness, independence
and objectivity to ensure the rigour and challenge of the audit process is maintained.
Specific activities undertaken by the Committee to oversee the relationship with KPMG
and the audit process are included in this report.
Internal auditor
• oversight of the internal auditor focusing on the appropriateness of the internal audit
skills and resourcing, approving the audit plan, reviewing audit results and ensuring the
independence of the internal audit team. Specific activities undertaken by the Committee
with regard to internal audit are included in this report.
Internal Control over Financial Reporting
(ICFR)
• consideration and challenge of management’s analysis of risks in financial reporting,
identification of key financial controls and documentation of accounting processes;
Enterprise risk management
Legal and compliance
• monitoring the internal controls procedures adopted by the Company, to verify
compliance with them; and
• reviewing the results of the internal audits of ICFR, consideration of the external auditor’s
findings and conclusions on this matter and tracking the progress of implementation of
internal and external ICFR audit recommendations.
• reviewing the principal and emerging risks facing the Group, including gaining assurance
as to the effectiveness of the internal control system, mitigations, and risk management
process;
• reviewing the performance of the Group against its existing risk appetite and confirming
management’s assessment that the Group has applied appropriate mitigations or other
effective controls to ensure that an appropriate risk appetite has operated throughout
the period;
• reviewing the approach adopted by the Board in defining the Group’s risk appetite in
light of the changing environment in which the Group will operate as it emerges from the
destructive effects of the pandemic and executes on its transformation strategy;
• reviewing the Group’s fraud risk assessment and design of the internal control
framework to prevent and detect fraud, including consideration of the key controls and
assurance activities provided across the Group in relation to financial and non-financial
fraud risk;
• overseeing treasury risk management, including reviewing the Group’s fuel and foreign
exchange hedging policies, positions and financial counterparty exposure, compliance
with the Group’s treasury and financial risk management policies and consideration of
the implications of the approved fuel hedging profile given the unprecedented decline in
demand and its continued appropriateness in managing these risks; and
• overseeing tax risk management and considering the tax strategy before recommending
to the Board for approval and publishing on the IAG website.
• reviewing the Group’s anti-bribery, sanctions, competition, privacy and Spanish Criminal
Code compliance programmes including the latest related risk heat maps, regulatory
developments, the key programme activities during 2021 and priorities for 2022;
• reviewing, on behalf of the Board, the Group’s independent third party-facilitated
whistleblowing procedures and the annual report from the Group’s General Counsel on:
incidents reported via the whistleblowing channels, by category and nature; any
emerging themes or trends; timeliness and responsibility for follow-up; and investigations
and actions taken to address substantiated reports; and
• consideration of litigation status reports from the General Counsel including the status of
remaining and potential civil litigation actions. (See note 33 to the financial statements.)
154 INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021
Corporate Governance Area of Committee focus
IT, cybercrime and GDPR
Activities
• reviewing and monitoring key cyber security and data privacy management
improvement projects including visibility of trend analysis and benchmarking external
data to better understand the Group’s progress.
Non-Financial Information
• reviewing the processes and integrity of information provided in the Group’s
Consolidated Statement of Non-Financial Information in compliance with Law 11/2018,
including information on environmental, social, employee, and human rights-related
matters and receiving the external auditor’s assurance report and conclusions; and
• reviewing the integrity of the reporting and data in respect of the Group’s longer-term
sustainability and climate-related risks and opportunities, including the Group’s
alignment with the provisions of the TCFD process, and the appropriate reflection of the
implications of climate change in the financial statements and financial and cashflow
forecasts.
• reviewing the Group’s insurance position, including general insurance arrangements and
directors’ and officers’ liability insurance, and reporting to the Board on the adequacy
and appropriateness of the cover with regards to the Group’s relevant principal and
emerging risks (recognising that not all risks are of an insurable nature).
• reviewing management’s summary and analysis of the Group’s investor/analyst views
regarding accounting policies, risks and disclosures to ensure that investor views are
taken into account where required.
Insurance
Investor relations
Governance and other matters
• reviewing and recommending to the Board the adoption of amendments to relevant
policies. In 2021 this included updating the related party transactions policy
(incorporating changes to Spanish Law 5/2021 April 12 implementing the European
Shareholder Rights Directive II) and revising the internal procedures to ensure
compliance with the new requirements; and
• considering the implications of both the European Commission’s consultation
“Corporate reporting – improving its quality and enforcement” as well as the UK
Government’s proposals regarding audit and corporate governance reforms, agreeing
with management’s initial plans for potential implementation of relevant aspects of the
proposals and reviewing and submitting our detailed response to the BEIS consultation.
Significant financial
reporting matters
considered by the Audit
and Compliance Committee
The Committee takes account of
significant issues and risks, including
strategic, business and operating, financial,
compliance and regulatory, that may
materially impact the integrity and
accuracy of the quarterly financial results
announcements or the 2021 Annual Report
and Accounts.
The Committee has also sought to ensure
that the Group’s reporting is aligned with
the latest guidance and requirements from
regulators, that it is fair, balanced and
understandable and that all matters
disclosed and reported upon, including the
Company’s response to the pandemic and
its implications for the future strategy of
the Group, meet the rapidly evolving needs
of the Group’s stakeholders.
The significant accounting judgements,
estimates, accounting policies and issues
considered by the Committee in relation to
the Annual Report and Accounts for the
year to December 31, 2021 (including those
considered as significant audit issues by
the external auditor and described in the
Independent Auditor’s Report) are set out
in the table below. After robust challenge
and debate, there are no topics where the
conclusion resulted in significant
disagreement between management, the
external auditor and the Committee, or
unresolved issues that needed to be
referred to the Board.
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REPORT OF THE AUDIT AND COMPLIANCE COMMITTEE CONTINUED
Matter
Viability and going concern assessments Throughout the year and in finalising the 2021 financial statements and Annual Report,
Action taken by the Committee and outcome/future actions
given the ever evolving relaxation and subsequent tightening of government restrictions in
relation to travel and the continuation of economic uncertainty arising from the global
COVID-19 pandemic, the Committee has considered and robustly challenged
management’s going concern review and viability assessment, including the supporting
analysis.
The Committee considered the enhanced level of assessment and rigour applied by
management reflecting the volatility in the external environment that directly impacted
management’s ability to forecast the recovery. This included review of critical estimation
assumptions and judgements applied in relation to cash flow forecasts over the short,
medium and long term, many of which are based on events outside of the Group’s control
such as the predictability of the pattern of government restrictions.
Management sense-checked the assumptions underlying the Base Case projections and
Downside scenarios by comparison to forecasts available from informed external
commentators including IATA, analysts and other industry-wide researchers.
The Committee provided robust challenge of the assumptions applied in management’s
Base Case projections (reflecting the continuing impact of the pandemic, progressive
relaxation of Government travel restrictions and related recovery forecasting), the
selection of the four sensitivity scenarios to be modelled to stress the business plan, the
assessment of the severity and plausibility of these events occurring during the viability
period and underlying assumptions and reverse stress test scenarios. The Committee also
reviewed the external auditor’s findings and conclusions on this matter. The Viability
statement section of this Annual Report provides details of the Base Case and Downside
scenarios applied in assessing the appropriateness of the Board’s viability statement and
application of the going concern basis of accounting.
Following this thorough challenge, the Committee recommended the viability and going
concern statements and related disclosures to the Board for inclusion in the 2021 half-year
interim results announcement and the 2021 Annual Report and Accounts, including a
related ‘material uncertainty’ statement in respect of going concern and viability and
significantly expanded disclosures.
The Committee reviewed management’s assessment of potential impairment of cash
generating units (which hold the goodwill, intangible and tangible assets of the Group’s
businesses). The Committee considered the methodology applied, the critical assumptions
adopted (including, for each CGU, discount rates, long-term growth rates, weighted
average cost of capital and cash flow forecasts as reflected in the operating companies’
forecasts consolidated in the Group’s three-year Financial Plan). The impairment review,
although required to be undertaken only annually unless there is a trigger of impairment,
was undertaken at both the half year and year end.
The Committee challenged both management and the auditor as to the level of prudence /
optimism included in the underlying cash flow forecasts and impairment modelling
assumptions. The Committee further challenged both management and the auditor as to
whether the cash flow models used in the impairment modelling were consistent with
those used for other critical estimates and in particular the going concern modelling. The
Committee noted the impairment review was undertaken on a multi-scenario basis and
that no impairment was required in either the base case scenario or when applying a
weighted combination of the base case and downside scenarios. The Committee agreed
that management’s assessment of no impairment of CGUs was appropriate, as was the
disclosure within the Financial Statements as to the assumptions and sensitivities applied in
the assessment of the carrying value of the CGUs.
The Committee also discussed management’s assessment of the carrying value of specific
assets including in 2021 the reversal of impairment recognised originally in 2020 as a result
of aircraft being stood down and subsequently brought back into service. The Committee
agreed that the reversal was appropriate resulting from the standing up of four leased
Airbus A320s.
Impairment of non-financial assets
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INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021
Corporate Governance Matter
Hedge accounting
Exceptional items and alternative
performance measures
Loyalty revenue recognition
Defined benefit pension obligations
Action taken by the Committee and outcome/future actions
The Committee considered management’s discontinuation of hedge accounting for those
transactions not expected to occur over the remaining course of 2021 and the associated
gains/losses in the cash flow hedge reserve reclassified to the Income statement. These
amounts, which are significantly less than in 2020, have arisen from the substantial
deterioration in demand for air travel caused by COVID-19, which resulted in a significant
level of hedged fuel purchases in US dollars and hedged passenger revenue transactions in
a variety of foreign currencies to no longer be expected to occur, based on the Group’s
operating forecasts prevailing at the balance sheet date. The Committee agreed with
management’s approach to continue to derecognise hedge accounting for these
transactions.
In response to the FRC’s thematic review and letter to the Chairman on alternative
performance measures and exceptional items, and challenge from the Committee and
external auditor, management tabled a proposed revision to the exceptional items and
APM accounting policy. Management also performed analysis to facilitate the response to
the FRC’s letter from the Committee. Following review of the draft policy revisions, the
Committee requested management to reconsider the definition of what should be
classified as exceptional, considering the position of industry peers. The outcome of this
assessment was subsequently reflected in the revised policy approved by the Committee.
The Committee also requested a detailed analysis of items proposed by management for
treatment as an exceptional item. The Committee considered all items proposed to be
classified as exceptional items in the financial statements with reference to the revised
policy and took into account the history of exceptional items and the views of the external
auditor.
The Committee is satisfied that the judgements and estimates relating to loyalty revenue
recognition are appropriately supported by reasonable management assumptions and
those of an independent expert third party. The Committee also considered the
conclusions of the external auditor, who had identified loyalty revenue recognition as a Key
Audit Matter. The Committee’s scrutiny included training and deep-dive risk sessions on
loyalty accounting.
The Committee is satisfied that the judgements and estimates relating to defined benefit
pension obligations reflect assumptions supported by independent experts including
actuarial specialists engaged by the Group. In reaching its conclusion, the Committee also
considered KPMG’s audit of the defined benefit pension obligations, which they had
identified as a Key Audit Matter. The Committee’s scrutiny included training and deep-
dive risk sessions covering British Airways’ defined benefit pension obligations.
The Committee observed KPMG’s challenge of the Group’s accounting policy for
administration costs associated with the Group’s defined benefit pension schemes. Whilst
the Committee supported management’s rationale for the original policy (as had the
previous external auditor), the Committee observed good debate of the arguments put
forward by both management and KPMG in Committee meetings, including discussion of
the treatment of similar costs in other organisations.
The debate ultimately resulted in management’s proposal to change the accounting
policy, including an associated prior year adjustment, which was supported by KPMG. The
Committee challenged management as to whether such a change in accounting policy
provided more relevant and useful information to users of the financial statements and
ultimately agreed with management that the revised policy better reflects the underlying
management and operation of the Group’s defined benefit schemes, while remaining in
compliance with IAS 19.
INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021
157
REPORT OF THE AUDIT AND COMPLIANCE COMMITTEE CONTINUED
Other significant matters considered
Highlights of other key matters that the Committee considered are explained below.
Matter
Fraud
procedures
Interest rate
and foreign
exchange
hedging
policy
Fleet
maintenance
and aircraft
refit
Corporate
governance
and audit
reform
Non-financial
information
and
environment
Action taken by the Committee and outcome/future actions
The fraud risk profile of the Group continued to develop in 2021 as working practices continued to evolve and teams
adapted to the changing outlook and level of business operations.
The Committee reviewed management’s annual fraud risk assessment and noted alignment between the assessment,
the assurance map, including lines of defence, and the approved internal audit plan covering key financial reporting
anti-fraud controls as well as audits targeted at specific fraud risk across the Group during this period.
In addition, the Committee reviewed the design of the internal control framework to prevent and detect fraud. This
included consideration of the key controls and assurance activities taking place across the Group in relation to financial
and non-financial fraud, whether from internal or external sources.
On behalf of the Board, the Committee will continue to monitor fraud and internal controls carefully, including
consideration of the views of the external auditor, the results of the annual ICFR audits and the results of a series of
focused anti-fraud control internal audits.
The Committee reviewed management’s proposals for a revised fuel hedging strategy and policy. The Group’s previous
risk management strategy was to build up fuel hedges gradually over a three-year period when the level of forecast fuel
consumption and passenger revenues were more certain. Due to the current COVID-19 related market volatility and
unpredictable nature of government restrictions, management proposed a revision to the fuel hedging strategy and
supporting policy. The Committee recommended several enhancements to management’s proposals, which were
accepted by management and resulted in the Committee approving the current fuel price hedging strategy and policy.
The revised strategy includes a reduction in the minimum percentage of hedging coverage as well as the use of
alternative financial instruments to increase flexibility.
The Committee also considered the Group’s review of both the Foreign Exchange Risk and Interest Rate Risk policies.
The Committee agreed with management’s conclusion that no significant changes are required to either policy.
Management’s conclusions were supported and informed by both external advice and competitor analysis, including
retrospective and forward-looking analysis, peer benchmarking and outside-in analysis by key financial institutions. In
agreeing with management’s conclusion, the Committee requested management closely monitor the ongoing
applicability of the policies.
The Committee considered management’s assessment and application of existing accounting policies. In doing so,
KPMG and the Committee challenged management on the appropriateness of the accounting treatment of fleet assets,
and in particular accounting for heavy maintenance events and the componentisation of such assets on acquisition.
Management presented the existing accounting policies, supplemented with alternative treatments, including the
retrospective impact of any change in accounting policy. The Committee further challenged KPMG on the existing
accounting policies and the alternatives presented by management.
Following discussion with management and the external auditor, the Committee agreed with management that no
change in accounting policy was merited.
The Committee considered the European Commission’s consultation “Corporate reporting – improving its quality and
enforcement” as well as the Group’s formal response to the BEIS open consultation in relation to the UK Government’s
white paper “Restoring trust in audit and corporate governance: proposals on reforms”. The Committee and
management are broadly supportive of the key objectives and ambition of the proposed reform package.
The Committee approved the Group’s formal written response to BEIS and awaits the publication of the outcome of the
consultation to identify a plan to achieve compliance by the date of required implementation. The response was an
opportunity to not only demonstrate support for certain proposals but also to highlight where a few aspects would
create challenges, given the unique position of IAG as a Spanish holding company of a Spanish and UK listed
multinational group, with a UK subsidiary that is a Public Interest Entity.
In conjunction with the Safety, Environment and Corporate Responsibility Committee, the Committee plays a key role in
the governance of regulatory reporting requirements in respect of non-financial information, particularly those related
to workforce data and climate-related risks and opportunities. The Committee focusses on the integrity of the data,
effectiveness of relevant controls, and balance of the narrative supporting each data point disclosed. During 2021,
management has worked towards improving the process and controls to obtain reliable workforce data and the
Committee has requested an Internal Audit to be undertaken in 2022.
In ensuring climate change and other matters related to ESG had been considered and disclosed, with supporting
evidence and balance, by the Group, the Committee continued to receive regular updates in relation to the statements
on non-financial information and diversity (prepared in compliance with the requirements of Law 11/2018) as well as
management’s demonstration of close alignment with key sustainability frameworks, including TCFD.
The Committee considered the financial modelling regarding the Group’s various climate change commitments and the
resultant incorporation of the modelling assumptions into the financial reporting, and its underlying assumptions and
judgements. Such consideration included review and challenge of management regarding the enhanced disclosure note
regarding the impact of climate change on financial reporting. The Committee also reviewed the limited assurance
report from KPMG on the Group’s non-financial information, including TCFD compliance.
158
INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021
Corporate Governance The Committee will continue to receive
regular updates on all of the above matters
in 2022.
Internal Control over Financial Reporting
The Board of Directors is ultimately
responsible for the supervision of the
existence and effectiveness of Internal
Control over Financial Reporting (“ICFR”).
The Board has delegated the responsibility
for the development of effective controls
to the Chief Executive Officer and the
supervision of the effectiveness of these
controls to the Audit and Compliance
Committee.
The Group’s ICFR monitoring and auditing
covers processes applied by the Company,
Aer Lingus, British Airways, IAG GBS, IAG
Loyalty, Iberia, and Vueling and covers
processes performed by IAG GBS and IAG
Cargo on behalf of the operating
companies. The Committee reviews and
validates the Group’s approach to
complying with the CNMV’s ICFR
recommendations.
In 2021, the Committee reviewed the
results of the internal audits of ICFR (which
included IT general controls) as well as the
results of the external audit. Despite the
operating conditions of 2021 and the
continuation of remote working and ERTE
or furlough being applied for much of the
year, no material or significant weaknesses
that would impact the integrity of the
financial statements were identified, and
management continued to improve the
control environment across the Group. The
Committee also tracked the progress of
internal audit recommendations to address
any weaknesses identified.
Internal audit
The Committee’s activities during 2021 in
relation to the Internal Audit function
included:
• reviewing and agreeing the internal audit
2021 plan and 2022 first six months plan
(including resourcing and budget to
appoint appropriate external specialist
resource and recruit additional
permanent resource when required to
ensure the function is appropriately
resourced to provide the required level
of assurance over the principal risks,
processes and controls throughout the
Group) and amendments to the 2021
plan (as the internal auditor responded
to the pandemic’s impact on the Group).
This included ensuring the 2021 plan
continued to focus on fraud risk while
also ensuring coverage of specific risks,
including cyber security, and satisfying
ICFR and Spanish Criminal Code
requirements;
• review of KPMG’s transition and first
year audit arrangements and plan and
overseeing implementation progress
throughout 2021;
• reviewing key audit conclusions,
discussing the quality and timeliness of
management’s responses, monitoring
the resolution of issues raised and
requesting additional audit review of
certain weaknesses or concerns
identified by internal audit, post
management action to remediate;
• holding regular meetings during the year
between the Committee, the Head of
Group Audit and the external audit
partner as well as ensuring the Head of
Group Audit feels able to raise any
concerns informally and directly with the
Chair of the Committee; and
• monitoring and protecting internal
audit’s independence and standing
within the Group, ensuring its ability to
influence and engage at the most senior
levels across IAG and all operating
companies and functions and is closely
involved in the Group’s discussions on
risk.
During 2021, the Committee requested an
independent effectiveness review of the
Internal Audit function. This review was
undertaken by Deloitte UK and concluded
that Internal Audit remains a high
performing function.
The Committee is satisfied that delivery of
the approved internal audit strategy and
plan is providing timely and appropriate
assurance on the effectiveness of controls
in place to successfully and effectively
manage the Group’s relevant principal risks
(ie those that are capable of being
subjected to an audit review).
External audit
The Committee engaged throughout the
year with KPMG, with the engagement
partners attending all Committee meetings
as well as a series of ad hoc meetings. The
Committee Chair met frequently with the
Group and lead audit partners throughout
the year to review Group developments,
audit progress and their planned reporting.
The Committee’s key activities in relation
to its interaction with KPMG included:
• approval of the 2021 external audit plan
and strategy including consideration of
scope, approach and methodology
(including comparison to prior external
auditor approach and reasons for
differences), emerging industry and
Group-specific audit risks and
materiality. Monitoring the audit plan’s
implementation, including receiving
regular reports from KPMG on key
judgements, audit matters and any
significant weaknesses detected in the
internal control environment;
• discussion, prior to recommendation of
the financial statements to the Board for
approval, of the audit findings, including
audit differences, and observations on
internal controls, operations and
resources. This included challenging the
auditors on their conclusions regarding
fleet maintenance and aircraft refit
discussed above.
• performing an assessment of the
effectiveness and independence of
KPMG, including the quality of the 2021
audit, and reviewing and approving the
fees and terms of reference; and
• reviewing and approving 2021 non-audit
services expenditure against policy and
previously determined limit guidance.
Reviewing and approving non-audit
services limit guidance and expectations
for 2022.
External audit scope, materiality and
execution
The Committee discussed and agreed the
scope of the audit with KPMG in
November, prior to the commencement of
the year end audit, ensuring that the audit
strategy was robust and informed by the
auditor’s review of the financial statements
for the six months to June 30, 2021 and
assessment of the Group’s key risks,
particularly those that are significant to the
audit. KPMG explained to the Committee
the key tests that they intended
performing on the identified higher-risk
audit areas that could lead to material
misstatement of the financial statements
and significantly influenced the audit plan.
In addition, KPMG presented a dynamic
risk assessment providing the Committee
with an enhanced four-dimensional view of
risk by evaluating each risk’s
interconnectivity and how rapidly they can
materialise. The auditor and the Committee
INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021
159
REPORT OF THE AUDIT AND COMPLIANCE COMMITTEE CONTINUED
procedures in relation to the ongoing
impact of the COVID-19 pandemic, as
well as the impact of UK audit reform.
• reports from the external auditor were
reviewed during all scheduled
Committee meetings in 2021 and again
in January and February 2022
Committee meetings, covering: the
conclusions of the review of the Group’s
results for the half year, audit planning
and transition updates, interim audit
findings (including those of the review of
the relevant key IT general controls),
progress update for year end matters,
and final report for year end matters.
• KPMG attended all Committee meetings
during the year, including ad hoc
meetings, to answer any questions the
Committee had outside of these formal
updates.
• Taking all aspects of the assessment
throughout the year into consideration,
the Committee concluded that it is
satisfied that, despite it being the first
year, the KPMG audit was probing,
challenging and robust and the
approach provided a reliable audit
opinion with a reasonable expectation of
detecting material errors, irregularities
and material fraud. The Committee
considered the external audit to have
been effective and of a high quality.
External audit tender and transition
To comply with the Spanish Act 22/2015,
the Committee conducted an audit tender
process that concluded in January 2020.
Since KPMG’s appointment as the auditor
of the Company for the years 2021, 2022
and 2023, the Committee has reviewed
and monitored the implementation of
KPMG’s transition and audit plans as well
as the execution of these plans throughout
2021. The Committee will be required to
consider and approve the reappointment
of KPMG annually from 2024.
confirmed a shared understanding of these
risks and key audit matters, including
going concern and viability, the carrying
value of tangible and intangible assets and
how these were to be considered in the
audit approach.
The auditor confirmed that 96 per cent
(2020: 97 per cent) of the Group’s revenue
and 90 per cent (2020: 91 per cent) of the
Group’s total assets would be subject to a
full scope audit and that specific scope
procedures would be performed on IAG
Loyalty. The Committee agreed that the
approach was appropriate and should
provide the Board with a high level of
assurance regarding the integrity of the
financial statements and subsequently
approved the audit plan, recognising that
the plan would evolve as the year
concluded to reflect any changes in
circumstances or outlook.
The Committee agreed with KPMG, in
considering the accuracy of financial
reporting, the scale of accounting errors of
lesser significance that were to be brought
to the Committee’s attention and the
amounts that would need to be adjusted
so that the financial statements give a true
and fair view. The Committee
acknowledged KPMG’s challenge in setting
materiality given the economic and
financial consequences of COVID-19 on the
Group’s revenues and profitability. The
Committee challenged the auditor on the
appropriateness of applying one measure
of materiality only to the Group’s income
statement and balance sheet, given the
carrying values of categories of assets and
liabilities and the anticipated loss before
tax for the year. The auditor explained the
requirements of the relevant auditing
standard and explained that, due to the
current volatility, the default benchmark
for a group like IAG does not currently
provide an appropriate basis for setting
materiality. Consequently, the Committee
was satisfied with the method used by the
auditor to determine materiality and the
consequential level of materiality applied
during the audit.
External auditor quality and effectiveness
The Committee is very focused on audit
quality and effectiveness, which is
reviewed on an ongoing basis to ensure
the rigour and challenge of the external
audit process is maintained. As 2021 is
KPMG’s first year as IAG’s external auditor,
the Committee received an update from
KPMG at all Committee meetings, enabling
the Committee to assess and measure the
quality of the audit through regularly
monitoring the auditor’s communications
with management and the Committee,
compliance with relevant regulatory,
ethical and professional guidance and
assess, on an ongoing basis, the audit
team’s qualifications, expertise, resources,
partner performance and the effectiveness
of the audit process. The Committee’s
assessment included, in addition to its own
independent assessment, a survey as well
as detailed discussion with key executives
and finance staff, which demonstrated
that, while the 2021 external audit was
deemed to be effective and of good
quality, there were some areas identified
for improvement and this has been
reported to the Lead Engagement Partner.
The Committee’s independent assessment
considered the overall quality of the audit,
including the independence of KPMG and
whether the auditor exhibited an
appropriate level of challenge and
scepticism in their work and dealings with
management. However, the Committee
also acknowledged management’s
identified areas for improvement, which
KPMG has agreed to action during 2022.
In particular, the Committee assessed the
depth of review and level of challenge
provided by the external auditor over the
significant accounting policies, judgements
and estimates made by management. An
example of where the Committee
observed the external auditor demonstrate
both professional scepticism and a
challenge of management was in relation
to the treatment of administration costs
associated with the Group’s defined
benefit pension schemes. The observations
and conclusion of the Committee in
respect of this matter are noted in this
report above.
In addition to the annual evaluation and
regular review of reports to the Committee
and the working practices of the KPMG
audit team, the Committee undertook an
ongoing assessment of external audit
quality and effectiveness including, but not
limited to, the following:
• the Committee oversaw formal terms of
engagement with the auditor and
agreed the audit fee. KPMG assured the
Committee that despite a significant
increase compared to the 2020 fee, the
approved 2021 fee was at a level that
was appropriate for the scope of the
audit, to enable a quality audit to be
undertaken and to allow for additional
160 INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021
Corporate Governance External auditor non-audit services and
independence
Non-audit services provided by the
external auditor are subject to a Board-
approved policy that prohibits certain
categories of work and controls the overall
level of expenditure. The Company
complies voluntarily with the revised UK
standards in relation to non-audit services
and the Committee concluded that KPMG
is independent.
The Committee reviews the nature and
volume of projects undertaken by the
external auditor on a quarterly basis and all
projects are either pre-approved in line
with the list of permitted services in the
FRC’s Revised Ethical Standard 2019 or
approved by the Committee Chair for
projects over €100,000 or of an unusual
nature and then retrospectively approved
by the Committee. The overall volume of
work is addressed by a target annual
maximum of €1.7 million with an additional
allowance of up to €1.3 million for large
projects where the external auditor is
uniquely placed to carry out the work.
Spend in 2021 is within the total target
maximum and was €423,000 with an
additional €776,000 relating to
preparatory work performed on an
aborted corporate finance transaction that
would have been required under the
regulations and most effectively
performed by the statutory auditor. Details
of the fees paid to the external auditor
during the year can be found in note 7 to
the Group financial statements.
INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021
161
REPORT OF THE REMUNERATION COMMITTEE
Report of the Remuneration Committee
sustainable value for our shareholders. In
particular, the Group was effective in
raising and maintaining cash liquidity
through banks and public markets and
positive levered free cash flows were
achieved in 2021 as a result of improved
operating cash flows and successful debt
capital raising.
The establishment of the new Manchester
base for Aer Lingus, Paris-Orly expansion
for Vueling, strengthening of IAG Loyalty
and relaunch of the BA Gatwick shorthaul
network from summer 2022 (with flight
sales having begun in December 2021) all
showed significant progress against our
long-term strategic initiatives, despite the
challenges presented by the pandemic.
Similarly, the Group’s climate change
commitments continued to lead the global
aviation sector towards net zero emissions
by 2050, evidenced by IAG being the first
European airline to commit to 10%
sustainable aviation fuel by 2030,
alongside multiple other environmental
projects and innovations.
2021 shareholder consultation and
support for new policy
In my report last year, I described how we
held a number of highly productive
meetings with major shareholders to
better understand their expectations on
evolving Remuneration Policy design and
implementation.
This feedback directly informed the design
of our new Policy for 2021 and I was
pleased that this collaboration was evident
in the strong levels of support received for
the new policy at the Annual Shareholders’
Meeting in June 2021. I was also pleased to
see a strong level of support for the 2020
Annual Report on Directors’ Remuneration.
Against the backdrop of the biggest crisis
the aviation industry has ever faced, the
new Policy proposed a change in
remuneration components from the 2018
policy’s Performance Share Plan (PSP) to
Restricted Shares (RSP) awarded under
the Executive Share Plan (ESP) approved
in June 2021. The strong level of support
received from shareholders for this change
enables us to improve simplicity and
transparency, as well as strengthen the
alignment of interests between our senior
leaders and our shareholders. The RSP
improves our ability to attract, motivate
and retain our Management Committee
and other key roles in what is an
increasingly competitive market for talent.
Alberto Terol
Remuneration Committee Chair
Committee members
Alberto Terol (Chair)
Nicola Shaw
Emilio Saracho
Heather Ann McSharry
Eva Castillo
Date appointed
December 31, 2020
January 1, 2018
June 20, 2019
December 31, 2020
December 31, 2020
Dear Shareholder
On behalf of the Board, I am pleased to
present our 2021 Directors’ Remuneration
Report, my second as chair of the
Committee. This report includes both our
current Directors’ Remuneration Policy, as
approved by Shareholders at the 2021
Annual Shareholders’ Meeting, and our
2021 Annual Report on Remuneration,
detailing how our policy was implemented
during 2021. I will also present our
proposed policy amendment to the
Restricted Share Plan (RSP) for the IAG
CEO, which is detailed later in the report.
As set out in more detail elsewhere in this
report, COVID-19’s continued impact in
2021 has been both more severe and more
prolonged in our sector than others.
However, the strength, stability and
resilience of the IAG platform and focus of
our reorganised Management Committee
have enabled us to face into this
protracted headwind, make improvements
to the business and prepare for growth.
This work has positioned the Group to take
full advantage of the recovery that we are
now beginning to experience in early 2022.
We believe that our new Directors’
Remuneration Policy, strengthened by the
proposed amendment to the IAG CEO RSP
opportunity, will support the strategic
priorities of the Company as we respond
to the unique challenges faced by the
airline industry. It will provide the
Committee with the necessary flexibility to
motivate and retain our key talent at a
time when other markets are further
progressed in their recoveries. I would like
to thank shareholders on behalf of the
Committee for supporting us in the
transition to this framework.
Performance delivered in 2021
The proficient stewardship of the Group in
2021 both optimised preparations and
opportunities for our recovery and ensured
progress continued to be made against
our strategy and the creation of long-term,
162
INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021
Corporate Governance Principal changes from the previous policy:
Change to policy
Summary of the change
Long-term incentive
Pension contributions
Post-cessation shareholding
requirements
Malus and clawback
Discretion
Addressing significant falls in share price
under long-term incentives
Replacement of the existing Performance Share Plan (PSP) with a Restricted Share Plan
(RSP).
Upon appointment, the pension contribution for the new CEO of IAG was revised down to
12.5% of salary, comparable to the rate applicable to the majority of the UK workforce. In
the Remuneration Policy, the Company has formalised the arrangement that pension
contributions for executive directors will be aligned with the wider workforce.
Introduction of a post-cessation shareholding requirement for executive directors, in line
with best practice.
Extended the malus and clawback trigger events to include payments based on erroneous
or misleading data, serious reputational damage and corporate failure to align with
guidance.
Additional wording to align to the UK Corporate Governance Code and allow discretion to
adjust formulaic outcomes to reflect corporate performance.
Additional wording to address windfall gains that may occur for long-term incentives.
Following shareholder feedback, we have
given greater reassurance that any RSP
value delivered will be fair and appropriate
in the context of sustainable business
performance and the experience of our
stakeholders.
It is the Committee’s view that these
changes have both strengthened the link
between remuneration outcomes and
delivery of our strategy, and also aligned
our remuneration framework with best
practice and the 2018 UK Corporate
Governance Code. I would like to take this
opportunity to thank shareholders for their
contribution towards, and support for,
these changes in 2021.
Response to COVID-19 during 2021 and
remuneration impacts
At the end of 2020, the decision was taken
to continue temporary salary and fee
reductions into 2021 at a rate of 10 per
cent for the IAG CEO and non-executive
directors. Prior to this, the IAG CEO and
non-executive directors had taken 20 per
cent salary and fee reductions from the
beginning of April 2020. The ongoing
reduction in fixed pay maintained
alignment of interests with the Group’s
stakeholders.
These lowered salary and fee levels were
maintained for executives for the full year,
extending beyond the UK Government’s
Coronavirus Job Retention Scheme, which
ceased at September 2021.
Awards made in 2021
Following the Board’s approval of the
decision to cancel the 2020 annual
incentive plan, no cash or share-based
annual incentive plan awards were made
to directors or managers in 2021.
Following shareholder approval of the
Executive Share Plan in June 2021, a
number of deferred, conditional long-term
share awards were made to selected
members of the Group’s senior
management, whose skills and contribution
are critical to the delivery of IAG’s long-
term strategy.
As part of these awards, the IAG CEO
received an RSP grant under the Executive
Share Plan, consistent with the terms of
the new Directors’ Remuneration Policy.
This award will vest in 2024, contingent on
the satisfaction of the performance
underpin, following which a two-year
holding period will apply.
Summary of 2021 outcomes and senior
leadership performance
The choice of performance measures for
the 2021 annual incentive plan reflected
the priorities for the Group during the
uncertain and changing pandemic
environment, namely, the need to protect
capital, continue to provide an exceptional
customer experience and ensure the
Group’s management delivered their
functional objectives.
The significant volatility and overall
reduction in flying schedules, as well as the
unpredictability of passenger load factors
experienced in 2021, made the
implementation of a planned carbon
efficiency measure impractical. Senior
managers continued to focus on the
delivery of the Group’s low-carbon
transition pathway as part of individual
and functional objectives.
The uncertain and changing outlook for
2021, also made it appropriate to set and
review targets at six-monthly intervals.
This ensured the Group’s senior leadership
remained focused on the right priorities in
light of changing government policies and
commercial conditions.
Throughout the ongoing challenges of
2021, the Group’s senior leadership
demonstrated their ability to respond to
changing priorities and deliver strong
underlying improvements in the areas
where outcomes remained within senior
leaders’ ability to influence.
This effective management of significant
short-term challenges alongside the
preparation of the business for the return
to flying, has set the foundations for
success in 2022 and the longer term.
Variable pay outturns for the IAG
CEO in 2021
Prior to Committee’s review of the 2021
Annual Incentive Plan performance
measures, the IAG CEO confirmed to the
Board that he did not wish to be
considered for a 2021 annual incentive
award. In explaining his reasons for this,
the IAG CEO has reflected on the
experience of all the Group’s stakeholders
during 2021 due to the protracted nature
of the pandemic and has sought to ensure
his experience is aligned with theirs in a
genuinely meaningful way. His decision
demonstrates both personal integrity and
a long-term commitment to the Group and
its stakeholders. This request has been
accepted by the Board, mindful of
considerations in relation to our key
stakeholders, who express their thanks to
the IAG CEO for his enormous personal
INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021
163
this overarching principle, we embed our
pay for performance approach, ensuring
both our short- and long-term incentive
plans only pay out if sustainable progress
and value is delivered to our shareholders.
With the proposed amendment, our policy
will continue to contain the necessary
flexibility and discretion to adapt to
commercial and market circumstances, as
well as recoup incentives where any
performance is subsequently understood
to be unfounded. In this way we drive the
right culture and maintain alignment of
interests between our senior management
and our shareholders, which is also
reinforced by our minimum shareholding
requirements that continue to apply for
two years post-employment for executive
directors.
Understanding and balancing the interests
of all stakeholders in executive pay
decisions ensures outcomes are objective,
fair and proportionate. The simplification
of our remuneration framework and the
focus on long-term performance, supports
the Group’s management to continue to
deliver our strategy and sustainable
shareholder returns.
Looking ahead
The Committee believes that the 2021
Policy, supported by the amendment to
the current IAG CEO RSP opportunity, will
better underpin delivery against multi-year
objectives and will further the alignment
between our strategy and executive pay
decisions.
On behalf of the Committee, I would like to
thank shareholders for their engagement
and support over the past year and
request that this continues into 2022 as we
seek to make an important change to the
Policy this year.
I hope that our Remuneration Report is
clear in explaining how the new Policy has
been implemented in 2021 and that it
receives your support at our 2022
Shareholders’ Meeting.
Approved by the Board and signed on its
behalf by
Alberto Terol
Remuneration Committee Chairman
REPORT OF THE REMUNERATION COMMITTEE CONTINUED
contribution and critical stewardship of the
Group in 2021.
This will therefore be the second year in
succession that the IAG CEO will not
receive an annual incentive award.
Additionally, the 2019 PSP award reached
the end of its three-year performance
period in December 2021. As a result of the
pandemic, all three measures (relative TSR,
EPS, and RoIC) fell short of the threshold
level at which shares are paid out, resulting
in a zero vesting outturn for the IAG CEO.
Neither short- or long-term awards were
therefore realised by the IAG CEO in
respect of 2021.
Implementation of the Policy in 2022
With positive signs of recovery now visible
in the external market and reductions to all
directors’ salaries, pension contributions
and fees having been in place continuously
for 20 months, it was agreed to reinstate
full director fixed pay from January 1, 2022.
It should be noted that this is the first point
at which the full contractual CEO salary of
£820,000 per annum, approved for
implementation at September 2020, has
been paid to the IAG CEO. For non-
executive directors, full fees were restored
from January 1, 2022.
With the return of more normalised flying
schedules and passenger volumes
expected in 2022, it was agreed to
reintroduce a carbon efficiency annual
incentive measure for 2022. The metric
used to assess this measure will be
grammes of CO2 per passenger kilometre,
an unchanged basis from 2020.
Our objective of continuing to build
aligned interests between IAG senior
leaders and the Group’s shareholders will
be supported in 2022 by the second year
of RSP grants. However, to ensure the
Group is able to offer the IAG CEO a fair
and proportionate long-term incentive
opportunity, reflective of the complexity of
the Group, its strategy, and one that
adequately recognises ongoing external
challenges, a proposal to amend the IAG
CEO’s maximum annual RSP opportunity
will be presented at the 2022 Annual
Shareholder’s meeting. I have already
engaged with a number of our largest
shareholders regarding this change and
the reasons for it. This resolution will
propose an increase in RSP opportunity
from 100 per cent of salary to 150 per cent
of salary.
The Committee believes a change to a
more commensurate IAG CEO RSP
opportunity is essential in light of the
growing opportunities for talent in the
external market. In the Committee’s view,
the CEO’s existing arrangements are
becoming increasingly uncompetitive
compared to companies both inside and
outside of the aviation industry. The Group
competes for talent in a global market and
recent evidence suggests that the rate of
executive pay growth in mainland Europe
and US has been faster than the UK with
the opportunity gap to US packages being
a particular retention concern.
Since the start of the pandemic the Group
has lost a number of critical senior
individuals to competitors in other sectors.
Also, over the past year, the Group’s own
executive recruitment experience has
confirmed the rising market for executive
pay, reducing the relative positioning of
the IAG CEO’s total compensation
compared to that of his executive team
and increasing the compression in pay
levels within the executive team. These
factors highlight the challenges we face in
retaining our top talent essential to the
Group’s transformation, as well as the
important role that fair and competitive
remuneration play in this.
We do not feel that it would be in IAG or
our shareholders’ best interests to
compromise our ability to retain the
current IAG CEO. The current environment
amplifies the need for the IAG CEO’s skills,
capabilities and deep aviation experience.
We therefore have the strong view that it
is in IAG and our shareholders’ best
interests to change the RSP opportunity
and place more emphasis in the CEO's
remuneration package on sustained
long-term performance.
As part of its overall review of the IAG
CEO's package, the Committee has
decided to defer the annual review of the
IAG CEO's salary to the second half of
2022 to better understand the Group's
recovery from the pandemic. Whilst the
proposed increase to the IAG CEO's RSP
opportunity will increase competitiveness
of the overall remuneration package and is
therefore a step in the right direction, the
Committee is acutely aware of the
importance of ensuring that the salary
level is also competitive in the context of a
dynamic talent market in the geographies
in which the Group operates and competes
for talent.
Strategy and link to remuneration
IAG was formed to create a new,
disruptive industry model based around
consolidation, strategic flexibility and
financial performance. Our role in the
world is to connect people, businesses and
countries. We do this and create value
through a unique model that enables our
airlines to perform in the long-term
interests of our customers, people,
shareholders and society, knowing that
success in each reinforces the others. We
hold ambition, teamwork, innovation,
pragmatism, efficiency and responsibility
as key values that enable us to fulfil our
purpose. The flexibility in our framework
allows us to be agile and respond quickly
to changing operating environments.
The Committee’s main objective in the
implementation of the Directors’
Remuneration Policy is to drive the
behaviours that support the delivery of our
strategy and business objectives. Through
164 INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021
Corporate Governance Alignment of IAG remuneration practices to
Provision 40 of the UK Corporate Governance Code
UK Corporate Governance Code –
Provision 40
How we have achieved alignment
Clarity
Simplicity
Risk
Predictability
Proportionality
Changes to the Policy in 2021 were designed to improve both simplicity and
transparency. Revisions in the areas of pensions, minimum shareholding and
long-term incentive either simplified existing structures, such as the replacement of
PSP with RSP, or introduced straightforward rules for new items, such as the
post-employment shareholding requirement. This has improved the ability of
participants, employees and shareholders to understand executive pay
arrangements. Additionally, the Company continues to make more remuneration
analysis and information available to both employees and shareholders, via both UK
and Spanish disclosures.
Our corporate governance structure provides for a cross-over in board committee
membership between the Remuneration Committee and the Audit and Compliance
Committee. This ensures a joined-up view between emerging or crystalised risks and
remuneration outcomes. The design of our policy also ensures independent control
over remuneration outcomes, with all executive variable pay being awarded on a
discretionary basis and subject to malus and clawback provisions.
Our Policy identifies the maximum opportunity for each component of executive
remuneration and also illustrates potential total remuneration outcomes in various
performance scenarios. These disclosures provide transparency around overall
opportunities.
Our executive remuneration performance measures, targets, underpins are
transparently disclosed where awards are made, detailing the relationship between
the performance achieved and the delivery of our long-term strategy and the
creation of sustainable shareholder value. The transparency of this approach,
alongside the independent nature of executive remuneration decisions, supports
proportionate remuneration outcomes relative to company and individual
performance measures, as well as the wider performance environment.
Alignment to culture
The selection and balance of financial and non-financial measures for both short- and
long-term incentives is designed to reinforce the values and behaviours that support
the delivery of long-term sustainable returns to shareholders. In particular, the new
RSP, and high overall proportion of deferred executive pay, enable a focus on
transformation and long-term success.
INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021
165
REPORT OF THE REMUNERATION COMMITTEE CONTINUED
Directors’ Remuneration
Policy
Key elements of pay
Executive directors
The Company’s remuneration approach is
to provide total remuneration outcomes
that reflect the delivery of the business
strategy, are competitive, and take into
account each individual’s performance of
their role in the Company’s work.
The Committee receives regular updates
on pay and conditions of the Group’s
employees and takes this into account
when considering executive directors’
remuneration.
The current Directors’ Remuneration
Policy
The current Directors’ Remuneration Policy
was approved at the Shareholders’
Meeting on June 17, 2021 and reflects
recent regulatory and corporate
governance framework changes. We are
proposing to make an amendment to the
current Directors' Remuneration Policy in
respect of the restricted share award
opportunity for the IAG CEO, which will be
put forward for shareholder approval at
the 2022 Annual Shareholders’ Meeting.
The policy (including the amendment) can
be found later in this report.
The Committee maintains an ongoing
evaluation of the policy to ensure its
components, opportunities and
implementation outcomes continue to
achieve the Policy’s objectives.
Introduction
The Remuneration Committee takes
responsibility for the preparation of the
Report of the Remuneration Committee,
which is approved by the Board.
The Company’s current policy on directors’
remuneration was approved by
shareholders at the Shareholders’ Meeting
on June 17, 2021 following close
consultation with major shareholders.
As a Spanish incorporated company, IAG
is subject to Spanish corporate law. The
Spanish legal regime regarding directors’
remuneration is substantially parallel to
that of the UK as far as directors´
remuneration disclosure and approval
requirements are concerned.
The Company welcomes the opportunity
provided by the Spanish CNMV allowing
companies to prepare free-format reports.
Therefore, for the fourth consecutive year,
IAG is presenting a consolidated report
responding to Spanish and UK disclosure
requirements. This report will be
accompanied by a duly completed form
which is required by the CNMV covering
some relevant data. This is prepared in
accordance with Spanish legislation and is
available on the Company’s and the
CNMV’s respective websites.
It is the Company’s intention once again to
comply voluntarily with all reporting
aspects of the UK legislation of 2018, The
Companies (Miscellaneous Reporting)
Regulations (SI 2018/860) and The
Companies (Directors’ Remuneration
Policy and Directors’ Remuneration
Report) Regulations 2019, and to follow
best practice UK standards.
In addition to the Remuneration
Committee Chairman’s statement, this
Directors’ Remuneration Report contains
the Annual Report on Remuneration, which
covers the information on directors’
remuneration paid in the reported year.
166
INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021
Corporate Governance Service contracts and exit payments policy
Executive directors
The following is a description of the key terms of the service contracts of executive directors.
The contracts of executive directors are for an indefinite period.
There are no express provisions in executives’ service contracts with the Company for compensation payable upon termination of
those contracts, other than for payments in lieu of notice.
Executive director
Luis Gallego
Date of contract
September 8, 2020
Notice period
6 months - from/12 months - given
The period of notice required from the executive is six months; the period of notice required from the Company is 12 months. Where
the Company makes a payment in lieu of notice, a lump sum in lieu of the first six months’ base salary is payable within 28 days of the
date of termination of employment. A payment in respect of base salary for the second six-month period only becomes payable if, in
the Company’s opinion, the executive has taken reasonable steps to find alternative paid work and then only in six one-monthly
instalments. The Company may reduce the sum payable in respect of any month by any amount earned by the executive (including
salary and benefits) referable to work done in that month.
In the event of an executive’s redundancy, compensation, whether in respect of a statutory redundancy payment or a payment in lieu
of notice or damages for loss of office is capped at an amount equal to 12 months’ base salary. The Company will honour the
contractual entitlements of a terminated director; however, the Company may terminate an executive’s service contract with
immediate effect and without compensation on a number of grounds including where the executive is incapacitated for 130 days in any
12-month period, becomes bankrupt, fails to perform his or her duties to a reasonable standard, acts dishonestly, is guilty of misconduct
or persistent breach of his or her duties, brings the Company into disrepute, is convicted of a criminal offence, is disqualified as a
director, refuses to agree to the transfer of his or her service contract where there is a transfer of the business in which he or she is
working or ceases to be eligible to work in Spain or the UK (as applicable).
Under any of the Company’s share plans, save in respect of deferred annual incentive awards (which will normally vest in full following
cessation for any reason), if a director leaves, the Board, after considering the recommendation of the Remuneration Committee, may
exercise its discretion (within the rules of the schemes) to grant Good Leaver status. This can be granted in certain circumstances
including for example (list not exhaustive) the director leaving for reasons of ill health, injury or disability, redundancy, retirement or
death. Executive directors leaving with good leaver status will receive a pro rata amount of their PSP shares subject to the company
performance conditions being met, and a pro rata amount of their RSP shares, subject to the underpin being met, in accordance with
the plan rules. The proration is normally calculated according to what proportion of the performance period the executive director
spent in company service. Normal vesting dates, holding periods, and post-cessation shareholding guidelines will normally continue to
apply, other than in a limited number of exceptional circumstances in accordance with plan rules and/or at the discretion of the Board.
If good leaver status is not granted to an executive director, all outstanding awards made to them will lapse.
Executive directors leaving with good leaver status are eligible to receive a pro rata annual incentive payment for the period of the year
actually worked, subject to the regular performance assessment and paid in the normal manner following year end.
In the event of an executive director’s termination from the Company, they must not be employed by, or provide services to, a
restricted business (i.e. an airline or travel business that competes with the Company) for a period of 12 months.
Non-executive directors
Non-executive directors (including the Chairman) do not have service contracts. Their appointment is subject to the Board regulations
and the Company’s Bylaws. They do not have the right to any compensation in the event of termination as directors. Board members
shall hold office for a period of one year. The dates of the current Chairman’s and non-executive directors’ appointments are as follows:
Non-executive director
Date of the first appointment
Date of last re-election
Javier Ferrán
Alberto Terol
Giles Agutter
Peggy Bruzelius1
Eva Castillo1
Margaret Ewing
Heather Ann McSharry1
Maurice Lam
Robin Phillips
Emilio Saracho
Nicola Shaw
June 20, 2019
June 20, 2013
September 8, 2020
December 31, 2020
December 31, 2020
June 20, 2019
December 31, 2020
June 17, 2021
September 8, 2020
June 16, 2016
January 1, 2018
1 Ratification of the appointment by co-option and re-election at June 17, 2021.
June 17, 2021
June 17, 2021
June 17, 2021
June 17, 2021
June 17, 2021
June 17, 2021
June 17, 2021
-
June 17, 2021
June 17, 2021
June 17, 2021
INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021
167
REPORT OF THE REMUNERATION COMMITTEE CONTINUED
Annual Remuneration Report
The Annual Remuneration Report sets out how the Directors’ Remuneration Policy (as approved by shareholders at the Shareholders’
Meeting on June 17, 2021) was and will be implemented in 2021 and 2022, respectively.
The Committee’s activities during the year
In 2021, the Committee met ten times and discussed, amongst others, the following matters:
Meeting
January
Agenda items discussed
2020 Directors’ Remuneration Report and Non-Financial Information Statements
Share ownership update: Review of executive holdings, share awards authority and dilution limits
Management Committee pay benchmarking review
Approval of remuneration for a new Management Committee member
February
Approval of 2020 Directors’ Remuneration Report
Update on the Remuneration Policy proposal
2021 Directors’ Remuneration Policy development update
Vesting outcome of the Performance Share Plan (PSP) 2018 award
Capital increase impact on in-flight long-term incentives
Approval of remuneration for new Management Committee members
March
May
Approval of the 2021 Annual Incentive Plan
2021 Directors’ Remuneration Policy – final proposal
June
July
September
October
November
2021 Annual Incentive Plan update
Executive Share Plan (ESP) proposal and associated rules
Authorisation for the allotment of shares for IAG share plans
Approval of grants under ESP following shareholder approval
Review of non-executive director fee taxation
2021 Annual Incentive Plan measures and performance update
Approval of remuneration for a new Management Committee member
2021 Annual Incentive Plan measures and performance update
Market update presented by external provider
2019 and 2020 PSP outturn forecast
December
IAG executive directors’ Remuneration Policy consultation
Approval of buy-out share awards to be granted under the ESP rules and delegation of authority
168
INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021
Corporate Governance Subject to audit
Single total figure of remuneration for the Executive Director
The table below sets out the single total figure of remuneration breakdown for the IAG CEO, who was the only executive director
during 2021. An explanation of how the figures are calculated follows the table.
Salary
Benefits
Pension
Total Fixed
Annual
incentive
Long-term
incentive
Total Variable
Total
Director (’000)
Luis Gallego (GBP)1,2,3,4
Luis Gallego (€)2,3,4
2021 2020 2021 2020 2021 2020
26
738 206 280
1,110
29 1,286
855 232
324
2021
107
69
92
78
2020
2021
2020
2021
2020
2021
2020
2021
2020
301
339
0
0
–
–
0
0
–
–
0
0
–
1,110
– 1,286
301
339
1 Remuneration is paid to the Executive Director in sterling and expressed in euro for information purposes only.
2 2020 values only reflect Luis Gallego’s period of service as an executive director from September 8, 2020 to December 31, 2020. The full IAG CEO single
figure history is shown later in this report.
3 2020 and 2021 benefits totals include a fixed series of relocation payments to support Luis Gallego’s move to the UK in summer 2020. The majority of
payments were made in 2020, with payments ceasing at February 2021.
4 Personal tax return benefit is included as a new taxable benefit in 2021. Also from 2021, the Executive Director is eligible for a transitionary allowance of
£250,000 p.a. (gross), in view of the additional costs associated with living in the UK whilst personally maintaining a base in Madrid, given the
Company’s significant presence in Spain. This is included in the 2021 benefits value and accounts for £250,000 of the overall value (further details in
Taxable benefits section below).
Additional explanations in respect of the single total figure table for 2021
Only the current IAG CEO, Luis Gallego, served as an executive director in 2021. As the sole executive director, the IAG CEO has
confirmed in writing that he has not received any other items in the nature of remuneration other than those already disclosed in the
table above.
Base salary
The values shown represent the actual salary paid to the IAG CEO as an executive director for each performance year. For 2020, the
significantly reduced values reflect two considerations. Firstly, salary is only reported from appointment as an executive director on
September 8, 2020. Secondly, the salary value reflects that a COVID-related reduction of 20 per cent of base salary operated for all
directors during 2020. In contrast, for 2021, the IAG CEO served the full performance year as an executive director and the level of
COVID-related salary reduction was decreased from 20 per cent to 10 per cent. The IAG CEO’s contractual salary was £820,000 on
appointment.
Taxable benefits
Taxable benefits include the provision of a company car, a fuel allowance and private health insurances.
The Executive Director received payments relating to his relocation from Spain in 2020. These relocation payments terminated in
February 2021.
From January 2021 the Executive Director became eligible for a transitionary allowance to reflect that as a result of his role as IAG CEO
he and his family now live in the UK. This allowance provides a two-year fixed period of transitionary support and considers that the
IAG CEO continues to personally maintain a base in Madrid given the Company’s significant operations and business in Spain. The value
of the transitionary allowance is not included in the calculation of any pension, incentive or other benefit values. Payment of the
transitionary allowance will terminate in December 2022.
Pension-related benefits
Employer’s contribution to pension scheme and/or cash in lieu of pension contribution.
Annual incentive plan
The IAG CEO confirmed to the Board that he did not wish to be considered for a 2021 annual incentive award, waiving any 2021
incentive opportunity. The single total figure of remuneration therefore shows that no annual incentives have been awarded to the IAG
CEO either for 2020 or 2021.
Long-term incentive vesting
This relates to the IAG PSP 2019 award based on performance measured to December 31, 2021. The outcomes of the performance
conditions resulted in zero vesting for the IAG CEO and are described in detail later in this report.
Share price appreciation and depreciation
The amount of remuneration attributable to share price appreciation is zero, as there was zero vesting of the IAG PSP 2019 award.
The Committee has not exercised any discretion as a result of share price appreciation or depreciation for any of the remuneration in
the above table.
Life insurance
The Company provides life insurance and accidental death cover for all executive directors. For the year ended December 31, 2021 the
Company paid life insurance premium contributions of €13,464 (2020: €15,366).
Exchange rate for 2021
For the year to December 31, 2021, €:£ exchange rate applied is 1.1587 (2020: 1.1273).
INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021
169
REPORT OF THE REMUNERATION COMMITTEE CONTINUED
Variable pay outcomes
2021 Annual Incentive Plan
The IAG Annual Incentive Plan supports the business strategy through incentivising the delivery of identified priorities within the
reporting period. The composition of measures selected reflect the most important priorities for Group for the year to deliver long-term
sustainable returns. For 2021, in view of the ongoing restrictions to flying, the identified priorities were to focus on protecting capital,
improving operating efficiencies, reducing costs, continuing to offer our customers an outstanding experience, whilst exploring and
taking advantage of the new opportunities that would present themselves with the return to flying. The planned reintroduction of a
carbon efficiency measure in 2021 was deferred until 2022, owing to the significantly reduced flying schedule and passenger volumes
expected during the reporting period.
The 2021 performance year was split into two halves, reflecting the highly uncertain and changing external environment and enabling
appropriate measures to be adopted for the anticipated change in commercial conditions expected with recovery.
The 2021 Annual incentive plan structure for the IAG CEO was as follows:
• Financial measures - (60%)
• Customer – Net Promoter Score (20%)
• Strategic and personal (20%)
Strategic and personal objectives focussed on:
Effectively navigating the pandemic: Responding to changing external factors and ensuring IAG is operational ready to
take advantage of opportunities as market restrictions ease.
Lead sustainable aviation: Driving IAG’s sustainability strategy and progressing towards ambitious carbon targets and
building industry momentum towards a net zero world.
Set strategy and plans to maximise long term value for IAG: Oversee business transformations at the operating
companies to ensure IAG emerges more efficiently from the crisis, and further develop the capability, culture, diversity and
talent to underpin Group strategy and transformation plans.
Under the policy, the IAG CEO has a maximum annual incentive opportunity of 200 per cent of contractual salary.
Decision by IAG CEO not to be considered for 2021 annual incentive
Prior to the Committee’s review of the full year 2021 Annual Incentive Plan measures, the IAG CEO advised the Board that he did not
wish to be considered for a 2021 Annual Incentive Plan award. This request reflected a desire to maintain a personal alignment of
interests with all the Group’s stakeholders, many of whom continued to be negatively impacted by the ongoing pandemic in 2021.
The Board has accepted the IAG’s CEO’s request and expresses its gratitude to him for his long-term commitment to the Group. The
Board also recognises that this is the second year for which no annual incentive or long-term incentive has been realised by the IAG
CEO. These being in addition to reductions to his fixed pay over the same performance period.
Irrespective of any decision regarding a financial outcome to the IAG CEO, the Board have evaluated the IAG CEO’s performance in
2021 as being ‘Exceptional’ in managing the pandemic, driving the transformation of the Group and in leading sustainable aviation. This
performance assessment is set against the context of an extremely uncertain and challenging external environment.
170 INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021
Corporate Governance IAG PSP award 2019
The IAG PSP award granted on March 8, 2019 was tested at the end of the performance period which began on January 1, 2019 and
ended on December 31, 2021. The award for the current IAG CEO, who was not an executive director of the Group at the time of grant,
was equivalent to 150 per cent of salary at the time of the award.
One third of the award was subject to a TSR performance condition measured against the TSR performance of the MSCI European
Transportation (large and mid-cap) index, one third subject to achievement of the Company’s adjusted EPS targets (diluted EPS,
adjusted for exceptional items), and one third subject to RoIC. The definition of RoIC used remains consistent with the methodology
described in the Company’s 2017 Annual Report and Accounts. The vesting of any award was subject to the Board being satisfied that
the Group’s underlying financial performance was satisfactory in the circumstances prevailing over the three-year performance period.
The outcomes of the performance conditions were as follows:
Measure
Threshold
Target
Maximum
Outcome
TSR performance compared to the TSR
performance of the MSCI European
Transportation Index (large and mid-cap)
over the full three-year performance
period (one-third weighting)
IAG’s TSR
performance
equal to the
index (25 per
cent vests)
Adjusted EPS. Measure is adjusted EPS in
final year of the performance period, i.e.
2021 EPS (one-third weighting)
2021 EPS of 150
€cents (10 per
cent vests)
RoIC. Measure is RoIC in final year of the
performance period, i.e. 2021 RoIC
(one-third weighting)
2021 RoIC of 14
per cent (10 per
cent vests)
IAG’s TSR
performance
between index
return and
8 per cent p.a.
outperformance
(straight line
vesting between
threshold
and maximum)
2021 EPS
between 150
€cents and
190 €cents
(straight line
vesting between
threshold
and maximum)
2021 RoIC
between 14 per
cent and 16 per
cent (straight
line
vesting between
threshold
and maximum
Vesting (as per
cent award
granted in 2019)
0 per cent
IAG’s TSR
performance
exceeds index
by 8 per cent p.a.
(100 per cent
vests)
TSR achieved:
-56.75 per cent
Underperformed
the index by per
cent 131.44 per
cent
2021 EPS of 190
€cents (100 per
cent vests)
-59.1 €cents
per share
0 per cent
2021 RoIC of 16
per cent (100 per
cent vests)
-16.4 per cent
0 per cent
Details of any discretion exercised
No discretion exercised by the Remuneration Committee/Board
Overall outcome for executive director
(IAG CEO)
0 per cent
No value was realised by the IAG CEO following the nil vesting of the 2019 PSP award.
INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021
171
REPORT OF THE REMUNERATION COMMITTEE CONTINUED
IAG PSP award 2018 (vested at December 31, 2020)
The outcome of the previous year’s PSP vesting outcome (2018 PSP) is included for reference. This award was granted on May 10, 2018
and was tested at the end of the performance period which began on January 1, 2018 and ended on December 31, 2020. The plan
participants who were serving executive directors during the year of vesting (2020), were Willie Walsh, who was Chief Executive
Officer of IAG at the time of award and received a grant equivalent to 200 per cent of salary and Enrique Dupuy de Lôme, who was
Chief Financial Officer of IAG at the time of the award and received a grant equivalent to 150 per cent of salary. Luis Gallego and
Steve Gunning, who were not executive directors at the time of the award in 2018, received awards of 150 per cent and 120 per cent of
salary respectively.
One third of the award was subject to a TSR performance condition measured against the TSR performance of the MSCI European
Transportation (large and mid-cap) index, one third subject to achievement of the Company’s adjusted EPS targets (diluted EPS,
adjusted for exceptional items), and one third subject to RoIC. The definition of RoIC used was the methodology as described in the
Company’s 2017 Annual Report and Accounts. The vesting of any award was subject to the Board being satisfied that the Group’s
underlying financial performance was satisfactory in the circumstances prevailing over the three-year period.
The outcomes of the performance conditions were as follows:
Measure
Threshold
Target
Maximum
Outcome
TSR performance compared to the TSR
performance of the MSCI European
Transportation Index (large and mid-cap)
over the full three-year performance
period (one-third weighting)
IAG’s TSR
performance
equal to the index
(25 per cent
vests)
IAG’s TSR
performance
between index
return and
8 per cent p.a.
outperformance
(straight-line
vesting between
threshold
and maximum)
Underperformed
the index by 20.7
per cent
IAG’s TSR
performance
exceeds index by
8 per cent p.a.
(100 per cent
vests)
Vesting (as per
cent award
granted in 2018)
0 per cent
Adjusted earnings per share (EPS)
measured in final year of the performance
period (one-third weighting)
2020 EPS of 130
€cents (10 per
cent vests)
Return on Invested Capital (RoIC)
measured in final year of the performance
period (one-third weighting)
2020 RoIC of 13
per cent (10 per
cent vests)
2020 EPS of 170
€cents (100 per
cent vests)
-122.6 €cents
0 per cent
2020 RoIC of 16
per cent (100 per
cent vests)
-22.4 per cent
0 per cent
2020 EPS
between 130
€cents and
170 €cents
(straight-line
vesting between
threshold
and maximum)
2020 RoIC
between 12 per
cent and 16 per
cent (straight-line
vesting between
threshold
and maximum)
Details of any discretion exercised
No discretion exercised by the Remuneration Committee/Board
Overall outcome for executive directors
0 per cent
No value was realised by any executive director following the nil vesting of the 2018 PSP award.
Subject to audit
Scheme interests awarded during the financial year
2021 Restricted Share Plan (RSP)
During 2021, the Group revised its approach to long-term incentives, replacing the existing Performance Share Plan (PSP) with a
Restricted Share Plan under the new Executive Share Plan, approved by shareholders in June 2021.
The RSP was introduced to increase the alignment of both interests and outcomes between the Group’s senior management and
shareholders through the build-up and maintenance of senior management shareholdings and an increased focus on the long-term,
sustainable performance of the Company. The simplified structure and transparency of the RSP in comparison to the Performance
Share Plan, also provided a better basis to attract and retain senior management talent.
A three-year vesting period and further two-year holding period applies to RSP awards for executive directors, with vesting being
dependent upon a satisfactory review of the discretionary underpin by the Remuneration Committee. This assessment focuses on the
Company’s overall performance during the vesting period, including financial and non-financial performance measures, as well as any
material risk or regulatory failures identified and ensures any value delivered to executive directors is fair and appropriate in the context
of business performance and shareholder experience. Malus and clawback provisions apply to RSP awards enabling the reduction of
awards so far as nil value to further ensure that corporate or individual failure is not rewarded under the plan.
For 2021, the face value of the IAG CEO’s award was reduced from 200 per cent of salary to 100 per cent of salary in association with
the change from a PSP to an RSP opportunity.
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INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021
Corporate Governance Details of 2021 RSP executive director award
Type of award
Company shares
Basis of determination of the size of award Awards only made to consistently high-performing executives within key roles who have
the potential to take on greater organisational responsibility and whom the Company
wishes to retain for the long term.
Executive director award face value
IAG CEO (Luis Gallego) – 100 per cent
(per cent of base salary)
Date of Grant
Grant price
Vesting period
Holding period
Discretionary underpin description
June 23, 2021
£1.97
Three years: June 23, 2021 to June 22, 2024
Two years: June 23, 2024 to June 22, 2026
No performance measures are associated with the awards. Vesting will be contingent on
the satisfaction of a discretionary underpin, assessed three years after grant. In assessing
the underpin, the Committee will consider the Company’s overall performance, including
financial and non-financial performance measures over the course of the vesting period, as
well as any material risk or regulatory failures identified. Financial performance may
include elements such as revenue, profitability, cash generation, return on capital and
benchmarked with comparable airlines. Non-financial performance may include a range of
operational and strategic measures critical to the Company’s long-term sustainable
success. This assessment will ensure any value delivered to executive directors is fair and
appropriate in the context of the performance of the business and experience of our
stakeholders and that corporate or individual failure is not rewarded. In the case of
significant failure on the part of the Company or the individual, vesting may be reduced,
including to nil. Full disclosure of the Remuneration Committee’s considerations in
assessing the underpin will be disclosed in the relevant Directors’ Remuneration Report at
the point of vesting.
Total pension entitlements
Luis Gallego is not a member of the Company’s pension scheme and the Company, therefore, did not pay any contributions in his time
as an executive director during the reporting period (January 1, 2021 to December 31, 2021). He received cash in lieu of contributions of
£92,251. This value is equivalent to 12.5% of base salary paid during the performance period and is comparable to the rate for the
majority of the UK workforce.
Payments for loss of office
Antonio Vázquez, who stood down from the Board on January 7, 2021, has received the following payments during 2021: a Chairman’s
fee for the part month only of €11,288, taxable benefits of €6,848, and a lump sum retirement benefit relating to his historical Iberia
service contract, valued at €2,800,000 plus accrued interest, administered via an external insurance provider, The information
regarding his retirement benefit was fully disclosed in the 2020 Annual Report and Accounts.
No other loss of office payments were made to current or past directors during 2021.
Payments to past directors
Patrick Cescau received travel benefits worth €10,249 during 2021.
Maria Fernanda Mejia received travel benefits worth €13,451 during 2021.
Deborah Kerr received travel benefits worth €2,392 during 2021.
Baroness Kingsmill received travel benefits worth €6,113 during 2021.
James Lawrence received travel benefits worth €2,337 during 2021.
Keiran Poynter received travel benefits worth €604 during 2021.
Dame Marjorie Scardino received travel benefits worth €7,436 during 2021.
Willie Walsh received travel benefits worth £159 during 2021.
INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021
173
REPORT OF THE REMUNERATION COMMITTEE CONTINUED
Subject to audit
Statement of directors’ shareholding and share interests
In order that their interests are aligned with those of shareholders, executive directors are required to build up and maintain a minimum
personal shareholding in the Company.
Under the Group’s shareholding guidelines, the IAG CEO is required to build up and maintain a shareholding of 350 per cent of salary
and other executive directors are required to build up and maintain a shareholding of 200 per cent of basic salary.
In addition, executive directors are required to retain all shares received via incentive plans until 100 per cent of their shareholding
requirement is attained.
The Committee has reviewed the IAG CEO’s progress against the requirement and notes that he is compliant with the policy
requirement.
Shares which qualify towards the policy include shares already held by the executive, vested and exercised shares, vested and
unexercised shares including those in the performance share plan holding period, vested shares in the restricted share plan holding
period and unvested deferred annual incentive shares.
The table below summarises current executive directors’ interests as of December 31, 2021:
Executive
director
Luis Gallego
Shareholding
requirement
350 per cent
of salary
Shares already
vested, or in the
holding period,
from performance
share plans
Shares
owned
Shares already
vested from
deferred annual
incentive plans
Vested shares
from
restricted
share plan
Unvested shares
from deferred
annual incentive
plans
403,834
513,747
169,545
0
82,731
Total
qualifying
shares held1
1,169,856
(491 per cent
of salary)
1 In accordance with the Policy, the share price used to calculate the percentage of salary guideline is either the share price on the date of award or on
the date of vesting/exercise.
On departure, executive directors will be required to hold the number of shares in line with their in-employment shareholding
requirement (or the number of shares that they own at departure if lower) for two years from their date of termination from the Group.
Shares will normally be retained in the nominee account administered by the Company to ensure this.
External non-executive directorship
The Company’s consent is required before an executive director can accept an external non-executive appointment and permission is
only given in appropriate circumstances. The current executive director has no external non-executive appointments.
Non-executive directors
Non-executive directors are paid a flat fee each year, as per the following table. The fees in the table are the contractual rates and do
not reflect the pandemic-related reductions that were applied to non-executive director fees in 2020 and 2021.
Role
Non-executive Chairman
Non-executive directors
Additional fee for holding a Committee chairmanship
Additional fee for Senior Independent Director
Fee
€645,000
€120,000
€20,000
€30,000
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INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021
Corporate Governance Single total figure of remuneration for each non-executive director
The fees shown in the following table reflect that all non-executive directors agreed to a reduction in all types of fees received in order to
preserve cash and maintain the Group’s competitive positioning during the pandemic. Between April 1, 2020 to December 31, 2020, a 20
per cent reduction applied to all fee types. Thereafter in 2021, the reduction was decreased to 10 per cent and applied for the full year.
Director (€'000)
Antonio Vázquez1,2
Javier Ferrán3
Alberto Terol
Giles Agutter
Marc Bolland6
Peggy Bruzelius4
Eva Castillo4
Margaret Ewing
Deborah Kerr6
Maurice Lam5
Heather Ann McSharry4
Maria Fernanda Mejía6
Robin Phillips
Kieran Poynter6
Emilio Saracho
Nicola Shaw
Total (€’000)
2021 fees
2021 taxable
benefits
Total for year
to December
31, 2021
2020 fees
2020 taxable
benefits
Total for year
to December
31, 2020
11
573
153
108
-
108
108
126
-
58
108
-
108
-
108
123
7
4
9
4
-
0
0
0
-
2
0
-
0
-
7
0
18
577
162
112
-
108
108
126
-
60
108
-
108
-
115
123
548
107
128
30
84
-
-
107
107
-
-
102
30
84
102
102
0
4
10
0
3
-
-
4
-
-
-
15
0
2
6
1
548
111
138
30
87
-
-
111
107
-
-
117
30
86
108
103
1,692
34
1,725
1,531
45
1,576
1 Antonio Vázquez retired from the Board on January 7, 2021, receiving a Chairman’s fee for that part month only.
2 Antonio Vázquez’s lump sum retirement benefit relating to his historical Iberia service contract, valued at €2,800,000 and accrued interest, and
administered via an external insurance provider, was delivered to him at point of retirement, as fully disclosed in the 2020 Annual Report and Accounts.
3 Javier Ferrán was appointed Chairman on Antonio Vázquez’s retirement on January 7, 2021 and his January 2021 fees reflect a blend of non-executive
director and chair fees.
4 Peggy Bruzelius, Eva Castillo Sanz and Heather Ann McSharry joined the Board on December 31, 2020, but received no remuneration for 2020.
5 Maurice Lam joined the Board on June 17, 2021 and his fees and taxable benefits reflect a part year of service.
6 Marc Bolland, Deborah Kerr, Maria Fernanda Mejía and Kieran Poynter all stepped down from the Board during 2020 and received no fees in 2021.
Additional explanations in respect of the single total figure table for each non-executive director
Each non-executive director has confirmed in writing that they have not received any other items in the nature of remuneration other
than those already disclosed in the table above.
Taxable benefits
Taxable benefits for non-executive directors relate to personal travel benefits.
Exchange rates
For the year to December 31, 2021, €:£ exchange rate applied is 1.1587 (2020: 1.1273).
Directors’ interests in shares
Javier Ferrán
Luis Gallego
Alberto Terol
Giles Agutter
Peggy Bruzelius
Eva Castillo
Margaret Ewing
Maurice Lam
Heather Ann McSharry
Robin Phillips
Emilio Saracho
Nicola Shaw
Total
Total shares
and voting rights
Percentage of
capital
774,750
829,544
102,341
625
0
0
18,750
0
55,000
0
0
4,285
1,785,295
0.016
0.017
0.002
0.000
0.000
0.000
0.000
0.000
0.001
0.000
0.000
0.000
0.036
There have been no changes to the shareholdings set out above between December 31, 2021 and the date of this report.
Share scheme dilution limits
The Investment Association sets guidelines that restrict the issue of new shares under all the Company’s share schemes in any ten-year
period to 10 per cent of the issued ordinary share capital and restrict the issues under the Company’s discretionary schemes to 5 per
cent in any ten-year period. At the Annual Shareholders’ Meeting on June 17, 2021 the Company was given authority to allocate up to
100,000,000 shares (2.01 per cent of the share capital at that time) under the Executive Share Plan in 2021, 2022, 2023 and 2024
financial years. Of this a maximum of 5,000,000 shares could be allocated to executive directors under the Executive Share Plan for
awards made during 2021, 2022, 2023 and 2024 financial years. Should some or all of these above-mentioned shares not be allocated
to the executive directors, they may be allocated to the remaining participants in the Executive Share Plan.
INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021
175
REPORT OF THE REMUNERATION COMMITTEE CONTINUED
IAG’s total shareholder return (TSR) performance compared to the FTSE 100
The chart shows the value by December 31, 2021 of a hypothetical £100 invested in IAG shares on listing compared with the value of
£100 invested in the FTSE 100 index over the same period. The other points plotted are the values at intervening financial year-ends. A
spot share price has been taken on the date of listing, and a three-month average has been taken prior to the year ends.
The FTSE 100 was selected because it is a broad equity index of which the Company is a constituent, and the index is widely
recognised.
600
500
400
300
200
100
0
Jan 2012
Dec 2012
Dec 2013
Dec 2014
Dec 2015
Dec 2016
Dec 2017
Dec 2018
Dec 2019
Dec 2020
Dec 2021
IAG
FTSE 100
IAG CEO remuneration history
The table below shows the IAG CEO single total figure of remuneration for the latest ten-year rolling period:
IAG CEO – total single figure of
remuneration
Annual incentive payment as a
percentage of the maximum
Long-term incentive vesting as a percentage of
the maximum
2012
2013
2014
2015
2016
2017
2018
2019
2020 Willie Walsh
Luis Gallego
2021
£1,083,000
£4,971,000
£6,390,000
£6,455,000
£2,462,000
£3,954,000
£3,030,000
£3,198,000
£662,000
£301,000
£1,110,000
No annual incentive payment
Zero vesting of long–term incentives
78.75 per cent of maximum
97.78 per cent of maximum
80 per cent of maximum
33.33 per cent of maximum
92.92 per cent of maximum
61.85 per cent of maximum
51.97 per cent of maximum
100 per cent of maximum
85 per cent of maximum
100 per cent of maximum
50 per cent of maximum
66.67 per cent of maximum
46.19 per cent of maximum
72.11 per cent of maximum
No annual incentive payment
Zero vesting of long–term incentives
No annual incentive payment
Zero vesting of long–term incentives
No annual incentive payment
Zero vesting of long–term incentives
Single total figure of remuneration includes basic salary, taxable benefits, pension-related benefits, annual incentive award and long-
term incentive vesting, and in 2020 and 2021 reflects agreed reductions to salary and pension benefits in light of the pandemic.
Percentage change in remuneration of the IAG CEO compared to employees
The table below compares the remuneration outcomes of the IAG CEO against the UK workforce in 2021. The ‘all UK employees’
comparator group remains unchanged from that used for 2020 on the continued rationale that using the largest comparator group
provides the most representative and meaningful comparison for the UK workforce.
Over 90 per cent of UK employees reported are employed by British Airways, with the majority of the remainder employed by either
employees of other airlines currently working in the UK, IAG Head Office, the Group’s specialist procurement function GBS, IAG Tech,
IAG Loyalty or IAG Cargo. The comparison therefore provides a full cross-section of roles, job functions and seniority levels in the UK.
The use of the UK population also keeps a broad alignment with the population captured for the IAG CEO pay ratio, providing a more
consistent population basis for all senior executive and workforce pay comparisons.
For specific comparisons, such as the award of salary increases, a ‘same store’ employee population is used focusing only on
employees who were present in both 2020 and 2021, to give a more representative comparison against the salary increase eligible
population.
2021 basic
salary increases
IAG CEO
Reductions to the IAG CEO’s salary and pension
benefits operated from his appointment in
September 2020, through to December 2021.
The IAG CEO was not awarded a salary increase
in 2021.
UK employees
In 2021, due to the focus on preserving cash, salary increases were
only approved on an exceptional basis, such as in promotion
situations. Of the circa 24,000 employees present in both 2020
and 2021, less than 5 per cent (circa 1,200 employees) received
contractual salary increases in 2021. For employees receiving
increases, the median salary increase awarded was 6.15 per cent
of contractual basic salary. The value of salary and fixed pay
actually received by UK employees was primarily driven by the
COVID response measures and resource requirements for the role
the employee performed.
176
INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021
Corporate Governance 2021 annual
Incentive
awards
IAG CEO
The cancellation of 2020 Annual Incentive plan
by the Committee and the IAG CEO’s request
not to be considered for an award under the
2021 Annual Incentive Plan means he received no
annual incentive award for 2020 or 2021.
UK employees
The impact of the pandemic in 2020 and need to preserve cash
had the impact of either cancelling the operation of incentive
plans (such as the IAG Annual Incentive Plan, for which most UK
managers are eligible) or significantly reducing the value of any
incentives distributed.
For 2021, incentive plans were in place against objectives
designed to focus on protecting cash, supporting customers and
ensuring IAG navigates the pandemic and is positioned to take
advantage of opportunities as market restrictions ease. Outturns
and payments against these plans were managed at a local level.
The value and level of taxable benefit offered to employees
remained unchanged in 2021.
Taxable
benefits
Following his international relocation in 2020,
from 2021 the IAG CEO began to receive a tax
advisory support benefit, the value for which is
expected to be £7,000 for 2021. He also
received £8,000 in relocation benefits in 2021 in
relation to his relocation to the UK in H2 2020.
In 2021, the IAG CEO became eligible for a
two-year, fixed-term £250,000 per annum
transitionary allowance, enabling him to
personally maintain a base in Madrid given the
Company’s significant operations and business
in Spain.
Change in directors’ remuneration compared to employees
The table below shows a comparison of the change in year-on-year remuneration for directors of the Group, against the equivalent
change for UK employees from 2019 to 2021.
Director (€'000)
Luis Gallego1
Antonio Vázquez2
Javier Ferrán3
Alberto Terol
Giles Agutter1
Peggy Bruzelius4
Eva Castillo4
Margaret Ewing
Maurice Lam
Heather Ann McSharry4
Robin Phillips1
Emilio Saracho
Nicola Shaw
All UK employees6,7
Salary or fees
value change
from 2020 to
20215
269%
2020 to 2021
Taxable benefits
value change
from 2020 to
2021
315%
Annual incentive
value change
from 2020 to
2021
0%
(98%)
436%
20%
260%
–
–
18%
–
–
260%
6%
21%
39%
100%
0%
(10%)
100%
–
–
(100%)
–
–
0%
17%
(100%)
0%
131%
2019 to 2020
Salary or fees
value change from
2019 to 2020
Taxable benefits
value change from
2019 to 2020
Annual incentive
value change from
2019 to 2020
–
(15%)
67%
(6%)
–
–
–
–
(100%)
100%
(62%)
–
–
–
67%
300%
–
–
–
(15%)
(15%)
(11%)
–
–
–
(67%)
(94%)
–
–
–
1 The comparison of 2020 vs 2021 remuneration for Luis Gallego, Giles Agutter and Robin Phillips reflects a part year of director service and remuneration
in 2020 versus a full year of director service and remuneration in 2021.
2 Antonio Vázquez retired from the Board at January 7, 202I and his remuneration comparison compares a full year of chairman service in 2020, versus a
part month in 2021.
3 The uplift in fees for Javier Ferrán between 2020 and 2021 reflects his role as a non-executive director in 2020 and his assumption of the Chairman role
at January 7, 2021, for the rest of the reporting period.
4 Eva Castillo, Heather Ann McSharry, and Peggy Bruzelius were appointed as directors on December 31, 2020, but received no remuneration for 2020.
5 The comparison of fees for all directors in respect of 2020 and 2021, reflects a 20 per cent COVID-related reduction operated between April 1, 2020 and
December 1, 2020 and a 10 per cent reduction operated for the full year in 2021.
6 The All UK Employee 2020 and 2021 salary medians underlying the 39% uplift in median salary are taken from UK employee earnings published in the
2021 CEO pay ratio section and reflect the inclusion of company top-up and statutory furlough payments as part of reported employee salaries in 2021,
that were not included in 2020.
7 The reported change in the median value of All UK employee annual incentives from 2020 to 2021 (131%) reflects the distribution of considerably
reduced award values in both years.
INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021
177
REPORT OF THE REMUNERATION COMMITTEE CONTINUED
Relative importance of spend on pay
The table below shows, for 2021 and 2020, total remuneration costs, adjusted operating profit/(loss) and dividends for the Company.
Total employee costs, IAG1
Total remuneration, directors (including
non-executive directors)
IAG operating profit/(loss), excluding
exceptional items
Dividend declared
Dividend proposed
2021
€ 3,031,000,000
€3,011,000
2020
€ 3,247,000,000
€ 3,339,000
€ (2,970,000,000)
€ (4,365,000,000)
–
–
–
–
1 Total employee costs are before exceptional items and include furlough grants received.
CEO Pay Ratio
The following table sets out IAG’s CEO pay ratio figures in respect of 2021, 2020 and 2019.
Year
2021
2020
2019
CEO single figure
(£‘000)
1,110
963
3,198
Method
Option A
Option A
Option A
25th percentile pay
ratio
Median pay ratio
75th percentile pay
ratio
29:1
34:1
109:1
21:1
23:1
72:1
14:1
15:1
49:1
The pay ratio figures in the above table are calculated using the following UK employee remuneration information:
Year
2021
2020
2019
UK employee pay
Basic salary (£‘000)
Total remuneration (£‘000)
Basic salary (£‘000)
Total remuneration (£‘000)
Basic salary (£‘000)
Total remuneration (£‘000)
25th percentile pay
ratio
Median pay ratio
75th percentile pay
ratio
26.9
38.6
17.2
28.4
20.1
29.4
39.7
53.4
28.6
42.8
32.3
44.2
60.6
80.7
45.2
63.9
46.5
64.7
The ratio continues to be calculated on the most statistically accurate basis, Option A. UK employee pay is based on the payroll records
of 29,774 employees who were in the Group for the whole of or some of 2021. To provide a fair and representative view to all
remuneration received by UK employees, the 2021 basic salary and total remuneration figures include statutory and company top-up
furlough payments. The 2020 UK employee remuneration figures excluded all types of furlough payment and were representative of
earnings for time worked, but were not representative of the full level of pay received by employees and their actual remuneration
experience. With the UK furlough scheme having ended in September 2021, this consideration should not be relevant for future years
reporting.
To ensure the accuracy of these calculations, earnings data was collected directly from the UK payroll on a month-by-month basis. Any
variable incentive elements in respect of 2021, payable to employees later in 2022, are modelled on an employee-by-employee basis
against agreed frameworks. This approach enables fair and accurate comparison to the IAG CEO 2021 single total figure of
remuneration.
The continued low ratio for 2021 shows the impact of the ongoing pandemic to the IAG CEO’s pay. The increases in remuneration for
both the IAG CEO and UK employees in 2021, maintain the ratio in a broad equilibrium, with the ratio reducing slightly by two points
from 2020.
The increase in the UK employee remuneration in 2021 reflects:
• The rise in employee pay resulting from the reporting of all amounts paid to employees in 2021 (in 2020, UK Government furlough
and company top-up amounts were not reported as part of employee earnings)
• Any payments made to managers under the 2021 annual incentive plan
• Changes to the size and composition of the UK workforce between years, with pay for 37,081 employees being reported for 2020
and 29,744 for 2021
The change in IAG CEO remuneration between 2020 and 2021, is due to balance of changing factors as follows:
• The higher proportion of contractual salary and pension contributions received by the IAG CEO in 2021 vs 2020.
• The increase in the value of the IAG CEO’s taxable benefits resulting from his eligibility to a transitionary allowance in 2021.
• No short- or long-term incentives being received by the IAG CEO in 2021.
The ratio reported for the second year of the pandemic is the lowest the Group has reported since disclosure of this metric
commenced. The reduction in the ratio from 2019 demonstrates the continuing impact of the pandemic and is an accurate reflection of
the contraction in IAG CEO pay, with current IAG CEO remuneration being around 35 per cent of 2019 levels. The fall in the ratio at all
quartiles from 2019 and 2020 demonstrates that the implementation of the Policy in 2021 has not favoured the IAG CEO at the expense
of the wider workforce.
The Committee is aware that the current ratio, whilst temporary, is an outlier amongst similar profile organisations. As the Group
continues its recovery from the pandemic and IAG CEO variable incentives again begin to be payable against the generation of
sustainable shareholder value, it is expected that the Group’s CEO pay ratio will increase to a more representative, pre-pandemic range.
178
INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021
Corporate Governance Implementation of Remuneration Policy for 2022
At the outset of 2022, the Directors’ Remuneration Policy continues to apply only to the IAG CEO, who is currently the only IAG
executive director.
With the Group emerging from the pandemic at end of 2021, and the CEO having voluntarily given up over £150,000 in salary and
pension allowances since assuming the IAG CEO role at September 2020, it was agreed to cease the IAG CEO salary reduction from
January 1, 2022. This restoration increased the IAG CEO salary to its full contractual rate of £820,000 per annum and also implemented
the full value of salary-linked pension benefits. This marked the first point at which the IAG CEO received full contractual pay since
appointment, demonstrating the significant length of time pay reductions had been in place.
The review of executive director base salaries normally occurs in January each year. For 2022, the Committee has decided to defer the
review of the IAG CEO’s salary until the second half of the year. This postponement will enable the Committee to better understand the
Group’s recovery from the pandemic and make an informed decision in relation to the IAG CEO’s base salary level.
Executive director
IAG CEO
Basic salary review
£820,000 (€950,134) (no increase from 2021)
2022 annual incentive plan
For 2022, with the anticipated return of more normalised flight and passenger volumes, we will reinstate an IAG-specific carbon
efficiency measure, to further drive progress towards our Flightpath Net Zero 2050 commitment. This will measure the fuel efficiency of
our flight operations, taking account of our network, aircraft mix and passenger load factors. The specific metric will be grammes of CO2
per passenger kilometre and will have a weighting of 10 per cent of overall incentive.
In addition to the carbon-efficiency measure, the existing 2021 measure types; financial, customer and strategic and personal will be
carried forward into 2022 and weighted in alignment with the Policy with financial measures accounting for no less than 60 per cent of
overall incentive opportunity.
2022 long-term incentive plan
Following the approval of the Executive Share Plan in June 2021, the Group ceased making awards under the Performance Share Plan
(PSP) and granted the first schedule of Restricted Share Plan (RSP) to eligible senior leaders. In replacing the PSP with an RSP, a
maximum RSP opportunity of 100 per cent of salary was determined for the IAG CEO and was approved in the Policy.
Since the implementation of the Policy in 2021, the Committee has reflected at length on the appropriateness of the IAG CEO RSP
opportunity and the extent to which the current opportunity level will be effective in supporting the delivery of the business strategy.
The current opportunity level was set at a modest level relative to the size and complexity of the Group's operations. Since approval, the
Committee has undertaken a review of the CEO's remuneration arrangements, in light of the concerns around the competitiveness of
the CEO's package, the wish to place more emphasis on sustained long-term alignment, and the need to retain a CEO of outstanding
quality at this critical time.
A number of shareholders have been consulted for their views and a resolution will be submitted to the 2022 Annual Shareholders’
Meeting to amend the current Policy. This change will reflect an increase in the IAG CEO’s maximum RSP opportunity from 100 per cent
of salary to 150 per cent of salary.
The proposed RSP opportunity reflects the Committee’s careful consideration, taking into account:
• Long-term award opportunities both externally at other relevant businesses and internally within our senior management team
• The cumulative impact that this higher opportunity could have on the CEO’s long-term interest in IAG and the associated benefits of
that, and
• The wish to place more emphasis in the CEO’s remuneration package on sustained long-term alignment at a challenging time for the
business when the CEO provides critical stability
Amending the Policy in this area builds long-term alignment of interests with shareholders and affords the Committee greater flexibility
in determining the value of any RSP awards, relative to all factors, in 2022 and the future.
2022 long-term incentives and wider senior leadership
The eligibility criteria for 2022 RSP awards remained unchanged from 2021, with grants for senior leaders continuing to be made only to
consistently high-performing individuals, whose skills are critical to the delivery of the business strategy and whom the Company has
identified as a long-term retention priority. With the exception of the IAG CEO, the maximum value of individual awards scheduled to be
made in 2022 will remain consistent with last year and the overall face value of grants will be similar to that distributed in 2021.
Although no value can be realised by plan participants from 2022 awards until 2025, their simplicity and transparency create immediate
engagement, attraction and retention benefits amongst the Group’s key leaders. This continues to enable the Group to maximise the
contribution of its senior leadership throughout the 2022 recovery and remain focused on the delivery of long-term sustainable value to
shareholders.
INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021
179
REPORT OF THE REMUNERATION COMMITTEE CONTINUED
Taxable benefits and pension-related benefits
Taxable benefits and pension benefits remain unchanged for 2022. The IAG CEO’s eligibility to the transitionary allowance will cease at
the end of 2022.
Non-executive director fees
Non-executive director fees were last reviewed in 2017 and remain unchanged for 2022. The fees have remained unchanged since 2011.
In 2021, all non-executive directors including the Chairman, agreed to a 10 per cent reduction in fees for the full year, in view of the need
to preserve cash within the business. Recognising the Group’s emergence into recovery, and in alignment with the decision taken for
the IAG CEO salary reinstatement, it was agreed that all non-executive directors should return to receiving full fees from January 1,
2022.
The Remuneration Committee
The Remuneration Committee is regulated by article 32 of the IAG Board Regulations and by its own Regulations approved on
February 25, 2021. A copy of these Regulations is available on the company website.
Beyond executive directors, the Committee oversees the general application of the Remuneration Policy for the members of the IAG
Management Committee (and also occasionally considering remuneration matters related to managers generally across the Group).
Article 32 of the Board Regulations ensures that the Remuneration Committee shall be made up of no fewer than three independent
non-executive directors, with the dedication, capacity and experience necessary to carry out their function. Alberto Terol chairs the
Committee and holds Senior Independent Director responsibility. None of the Committee members has any personal financial interest,
other than as a shareholder, in the matters to be decided.
In accordance with the 2018 UK Code, the Remuneration Committee also has responsibility to review workforce remuneration and
related policies and the alignment of incentives and rewards with culture.
Advisers to the Committee
The Committee appointed Deloitte as its external adviser in September 2016. Deloitte reports directly to the Committee. The fees
paid to Deloitte for advice provided to the Remuneration Committee during 2021 were £56,073 (€64,971), charged on a time and
materials basis. Deloitte is a member of the Remuneration Consultants Group and a signatory to the voluntary UK Code of Conduct. As
well as advising the Remuneration Committee, other Deloitte teams provided advice in relation to remuneration, pensions, taxation and
immigration compliance requirements for IAG’s mobile workforce, data governance, business process improvement, financial/fiscal
advisory work and tax to the Group in 2021. The Committee has reviewed the remuneration advice provided by Deloitte during the year
and is comfortable that it has been objective and independent.
In addition to Deloitte providing the Remuneration Committee with market updates on pay themes, the Group also received market
data and insights from other specialist consultants such as Aon, PwC and Willis Towers Watson in 2021.
Statement of voting
The table below shows the consultative vote on the 2020 annual Directors’ Remuneration Report and the binding vote on the
Directors’ Remuneration Policy at the 2021 Shareholders’ Meeting:
2020 Annual Directors’
Remuneration Report
Number of votes cast
For
Against
Abstentions/Blank
2,573,169,545
2,383,678,763
189,490,782
1,525,952
(99.94 per cent)
(92.58 per cent)
(7.36 per cent)
(0.06 per cent)
2,574,695,497
2,407,953,176
149,433,203
17,309,118
Directors’ Remuneration Policy
(99.33 per cent)
(93.53 per cent)
(5.80 per cent)
(0.67 per cent)
180 INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021
Corporate Governance Supplementary information — Directors’ share options and shares
The following table details the nil-cost options over ordinary shares of the Company granted to the current IAG CEO under the IAG
PSP as at December 31, 2021:
Director
Luis Gallego
Total nil cost options
over ordinary shares
Date of grant
May 28, 2015
March 7, 2016
March 6, 2017
May 10, 2018
March 8, 2019
March 6, 2020
Number of
options at
January 1,
2021
Exercise
price
Options
exercised
during
the year
Options
lapsed
during the
year
Options
granted
during the
year
131,242
98,001
174,504
194,269
245,114
538,805
1,381,935
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
-
194,269
–
–
194,269
–
–
–
–
–
–
–
Exercisable
from
Expiry date
1/1/2020 31/12/2024
1/1/2021 31/12/2025
1/1/2022 31/12/2026
Lapsed
1/1/2024 31/12/2028
1/1/2025
1/1/2029
Number of
options at
December 31,
2021
131,242
98,001
174,504
0
245,114
538,805
1,187,666
The award granted on May 10, 2018 was tested at the end of the performance period. Threshold performance was not achieved for any
measure and therefore the award lapsed in full.
The performance conditions for each of the unvested PSP awards listed above will be tested to determine the level of vesting. For each
of these awards, one third of the award is subject to TSR performance measured against a comparator index, one third is subject to
adjusted EPS performance, and one third is subject to RoIC performance. The performance conditions will be measured over a single
three-year performance period. Any vested awards are subject to an additional two-year holding period.
The value attributed to the Company’s ordinary shares in accordance with the plan rules on the date of the 2020 PSP award was 459
pence (2019: 567 pence; 2018: 691 pence; 2017: 546 pence; 2016: 541 pence; and 2015: 550 pence).
The following table details the conditional share awards over ordinary shares granted under the Executive Share Plan (RSP) to
Executive Directors:
Director
Date of grant
Number of
conditional
shares granted
Vesting date
Shares lapsed
at vesting due
to underpin
Holding period
expiry date
Number of
unvested
conditional
shares at
December 31,
2021
Number of
vested
conditional
shares at
December 31,
2021
Luis Gallego
June 23, 2021
414,954 June 23, 2024
– June 23, 2026
414,954
Total conditional share
awards (RSP)
414,954
–
414,954
–
–
RSP awards are subject to a discretionary underpin prior to vesting. This review, performed by the Remuneration Committee, considers
the Company’s overall performance, including financial and non-financial performance measures, over the course of the vesting period,
as well as any material risk or regulatory failures identified. In the event of a significant failure on the part of the Company or the
executive director, malus and clawback provisions are available to the Remuneration Committee to reduce the vesting value, including
to nil.
The value attributed to the Company’s ordinary shares in accordance with the plan rules on the date of the 2021 RSP award was
197 pence.
INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021
181
REPORT OF THE REMUNERATION COMMITTEE CONTINUED
Incentive Award Deferral Plan (IADP)
Under the current policy, 50 per cent of any annual incentive award for executive directors is made in deferred shares under the
Incentive Award Deferral Plan. Under this plan, incentive award shares are deferred for three years from date of grant. The following
table details the current Executive Director’s holdings of conditional awards over ordinary shares of the Company granted under the
IAG IADP. Awards are shown for the performance periods ended December 31, 2017, December 31, 2018 and December 31, 2019.
No award was made in respect of 2020 following the decision to cancel the 2020 IAG Annual Incentive Plan. Additionally, no award will
be made to the IAG CEO for 2021. The impact of not making IADP grants to the IAG CEO for two years in succession will be a
considerable reduction in unvested IADP shareholdings and the effectiveness of unvested IADP shares as a retention tool.
Executive Director
relates to1 Date of award
Performance
year award
Luis Gallego
2017
2018
2019
May 10,
2018
March 8,
2019
March 6,
2020
Number of
Shares at
January 1,
2021
awards
released
during the
year
90,253
90,253
74,576
81,520
–
–
Date of
vesting
March 8,
2021
March 8,
2022
March 6,
2023
Total
246,349
90,253
1 No IADP award was made in March 2021, following the cancellation of the 2020 Annual Incentive Plan.
Awards
lapsing during
the year
Awards made
during the
year
Number of
unvested
shares at
December 31,
2021
–
74,576
81,520
–
–
–
–
156,096
–
–
–
–
IADP awards already reflect performance delivered against a completed performance period, therefore awards are not subject to
further performance conditions for vesting to occur. The terms and conditions of award for IADP grants do however require executive
directors to be in employment with the Company at the time of vesting, or have left as a Good Leaver, to be eligible to receive the
award. IADP awards are also subject to the policy’s malus and clawback provisions.
The values attributed to the Company’s ordinary shares in accordance with the plan rules for IADP awards (relating to the previous
year’s performance) were 2020 award: 459 pence; 2019 award: 567 pence and 2018 award: 691 pence.
The value attributed to the Company’s ordinary shares in accordance with the plan rules on the date of the 2018 IADP award (relating
to the 2017 performance year) was 691 pence. The share price on the date of the vesting of this award (March 8, 2021) was 210 pence.
The monetary value of the shares received was the share price on the date of the vesting multiplied by the number of shares in respect
of the award vested, as shown in the table above.
182
INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021
Corporate Governance
Approval of 2021 Directors’ Remuneration Policy
The new Directors’ Remuneration Policy, approved by shareholders on June 17, 2021, brought the policy into line with changing UK and
Spanish governance best practice and improved alignment to the Group’s strategy through changes in long-term incentive plan design,
alignment of executive director pension benefits, introduction of post-employment shareholding requirements, extension of malus and
clawback capabilities and extension of discretion afforded to the Remuneration Committee and Board.
The updated policy is published on the IAG external website and presented in detail below.
(https://www.iairgroup.com/~/media/Files/I/IAG/AGM%202021/English/6%20May%20upload/directors_remuneration_policy_2021.
pdf)
2021 Directors’ Remuneration Policy:
Governance
This Directors' Remuneration Policy is adapted to the new wording of article 529 novodecies of the Capital Companies Act, as
amended by Law 5/2021 of 12 April, and shall apply, in accordance with the provisions of section 1 of said article 529 novodecies, from
the date of its approval by the 2021 Shareholders' Meeting and during the following three financial years (i.e. during financial years
2022, 2023 and 2024). Any amendment or replacement thereof during such period shall require the prior approval of the Shareholders’
Meeting in accordance with the procedure established for its approval.
As a Spanish-incorporated company, IAG is not subject to the remuneration reporting regulations that apply to UK-incorporated
companies. Nevertheless, the Committee recognises the importance of effective corporate governance and is firmly committed to UK
best practice, such that we continue to operate in line with the regulations.
IAG Remuneration Principles
Alignment
Simplicity and clarity
Competitiveness
Pay for performance
Judgement
Sustainability
Our remuneration policies promote long-term value creation, through transparent
alignment with our corporate strategy.
We will keep our remuneration structures as simple and clear as possible to ensure they
are understandable and meaningful to employees and shareholders.
Total remuneration will be competitive for the role, taking into account scale, sector,
complexity of responsibility and geography. When setting senior executive pay, we will
consider experience, external pay relativity, and the ability of IAG to compete for global
talent.
We promote a culture where all employees are accountable for delivering performance.
We will ensure there is alignment between performance and pay outcomes, with fair
outcomes supported by corporate and individual performance and wider stakeholder
experience. Depending on the level of the individual in the organisation, we use long-term
equity to incentivise performance, shareholder value creation, and retention. Performance
measures and targets will seek to balance collective success with a clear line of sight for
participants. Remuneration outcomes aim to reflect the sustained long-term underlying
performance of IAG.
We will use discretion and judgement to review formulaic performance outcomes to arrive
at fair and balanced remuneration outcomes for both IAG and employees.
Our remuneration policies incentivise individual and corporate performance, support
talent attraction and retention and promote sound risk management to enhance the
sustainable long-term financial health of the Group. Individual contribution and values and
behaviours will be reflected in remuneration outcomes.
INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021
183
REPORT OF THE REMUNERATION COMMITTEE CONTINUED
Consideration of shareholder views
The Company consults regularly with its major investors on all matters relating to executive remuneration. The Company will engage in
an extensive investor consultation exercise whenever there are any significant changes to remuneration policy.
Early in 2021, the Board Chair, Remuneration Committee Chair and executives from the Company held meetings with our major
investors on our proposed new Remuneration Policy. These discussions were very useful; the Company carefully considered the views
stated and modified the policy as appropriate.
The Committee discusses each year the issues and outcomes from the Annual Shareholders’ Meeting usually held in June, and
determines any appropriate action required as a result.
The policy as shown on the following pages is intended to apply for three years, until 2024, taking effect from the date of approval.
The principal changes from the previous Remuneration Policy (which was approved at the Annual Shareholders’ Meeting in 2018) are
shown on the following table.
Area of change to policy
Long-term incentive
Pension contributions
Post-cessation shareholding
requirements
Malus and clawback
Discretion
Addressing significant falls in share
price under long-term incentives
Summary of approved change from 2018 to 2021
Replacement of the existing Performance Share Plan (PSP) with a Restricted Share Plan
(RSP).
Upon appointment, the pension contributions for the new CEO and CFO of IAG were revised
down to 12.5% of salary, comparable to the rate applicable to the majority of the UK
workforce. In this Remuneration Policy, the Company will formalise the arrangement that
pension contributions for executive directors will be aligned with the wider workforce.
Introduction of a post-cessation shareholding requirement for executive directors, in line with
best practice.
Extend the malus and clawback trigger events to include payments based on erroneous or
misleading data, serious reputational damage and corporate failure to align with guidance.
Additional wording to align to the Corporate Governance Code and allow discretion to adjust
formulaic outcomes to reflect corporate performance.
Additional wording to address windfall gains that may occur for long-term incentives.
These changes:
• Ensure a focus on the long-term performance of the Company, with a primary focus on delivering sustainable shareholder returns.
• Ensure that executives are not discouraged from making timely and difficult strategic decisions that may have short-term impacts,
but are in the best interests of the long-term health of the business.
• Support the build-up and maintenance of a long-term shareholding which ensures executives and senior managers focus on
recovering and enhancing shareholder value.
• Ensure management have the same ownership experience as shareholders.
• Simplify remuneration for executive directors and senior managers
184 INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021
Corporate Governance Key elements of pay
Executive directors
The table below summarises the main elements of remuneration packages for the executive directors:
Purpose and
link to strategy
Base salary
To attract
and retain talent
to help achieve
our strategic
objectives.
Annual
incentive
award
Incentivises
annual
corporate
financial and
non-financial
performance
and the
delivery of
role-specific
objectives.
The deferred
shares element
aligns the
interest of
executives and
shareholders
and provides a
retention tool.
Operation of element of policy
Maximum opportunity
Performance metrics
Individual and business performance
are considered in reviewing and
setting base salary.
At least 60 per cent and no more than
80 per cent of the annual incentive is
subject to financial measures. The
weighting on role-specific objectives
will not exceed 25 per cent, and any
remaining portion will be subject to
measurable non-financial metrics.
For the bonus deferral award, no
other performance conditions apply
because it is based on performance
already delivered.
There is no formal
maximum. Basic salaries
are reviewed annually by
the Remuneration
Committee by taking into
account factors such as:
company affordability, the
value and worth of the
executive, retention risks,
and the size of pay
increases generally across
the whole group of
companies.
The maximum
opportunity in the
incentive plan is 200 per
cent of salary. Each
performance metric in the
incentive plan is
independent. For each
performance metric in the
incentive plan, there will
be no payment at all until
performance for that
particular metric has
reached the threshold
level of the target range.
50 per cent of the
maximum will be awarded
for on-target
performance, and the
maximum for each
element will only be
awarded once a stretch
target has been reached.
Takes account of factors such as role, skills and
contribution.
The positioning of base salaries is set with
reference to factors such as the external market,
as well as the individual’s skills and contribution.
Basic salaries are reviewed annually, and
normally take effect on January 1 each year.
The Board, on a recommendation from the
Remuneration Committee, sets the financial
and non-financial targets that apply to the
annual incentive award. These are set by
reference to a number of factors, including the
Business Plan (as approved by the Board), and
the Group’s strategic focus. For the portion
based on personal objectives, the Committee
will consider the performance of each
executive against their role-specific objectives.
All performance evaluations for executive
directors will be submitted to the Board for
final approval.
The Board, after considering the
recommendation of the Committee, retains the
discretion to adjust the formulaic outcome of
awards in order to, in its opinion, properly
reflect overall corporate performance – see
below.
50 per cent of the annual incentive award is
deferred into shares. This is designed to align
the interests of executives with shareholders by
providing a proportion of the annual incentive
in shares in the form of a bonus deferral award.
On vesting, executives will receive the benefit
of any dividends paid over the deferred period
in the form of dividend equivalent payments.
Malus and clawback provisions apply – see
below.
INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021
185
REPORT OF THE REMUNERATION COMMITTEE CONTINUED
Operation of element of policy
Maximum opportunity
Performance metrics
Purpose and
link to strategy
Restricted Share
Plan (RSP)
Incentivises
long-term shareholder
value creation, and
retention.
The RSP is a discretionary plan
targeted at key senior executives and
managers of the Group who directly
influence shareholder value. The RSP
consists of an award of the
Company’s shares which vests as long
as the executive remains employed by
the Company at the time of vesting
and subject to the assessment of the
underpin. On vesting, in line with the
rules of the RSP and IAG’s philosophy
to encourage and facilitate employee
shareholding, participants may elect
to self-fund any tax due rather than
sell a portion of their share award to
meet tax liabilities.
Malus and clawback provisions apply
– see below.
Following the assessment of the
underpin, there is normally an
additional holding period of at least
two years.
No performance measures are
associated with the awards.
Vesting will be contingent on the
satisfaction of a discretionary
underpin, assessed three years after
grant. In assessing the underpin, the
Committee will consider the
Company’s overall performance,
including financial and non-financial
performance measures over the
course of the vesting period, as well as
any material risk or regulatory failures
identified. Financial performance may
include elements such as revenue,
profitability, cash generation, return on
capital and benchmarked with
comparable airlines. Non-financial
performance may include a range of
operational and strategic measures
critical to the Company’s long-term
sustainable success. Whilst the RSP
provides a greater certainty of reward
by its very nature, the Committee will
ensure any value delivered to
executive directors is fair and
appropriate in the context of the
performance of the business and
experience of our stakeholders and
that corporate or individual failure is
not rewarded. In the case of significant
failure on the part of the Company or
the individual, vesting may be reduced,
including to nil. Full disclosure of the
Committee’s considerations in
assessing the underpin will be
disclosed in the relevant Directors’
Remuneration Report at the point of
vesting.
2021 Policy - The face
value of an award will
not exceed 100 per
cent of salary at the
time of the award. An
executive will have a
maximum of one award
in respect of any
financial year of the
Company.
Proposed 2022
Policy amendment
to replace
2021 maximum
opportunity:
The face value of
an award will not
exceed 150 per
cent of salary at
the time of the
award. An
executive will
have a maximum
of one award in
respect of any
financial year of
the Company.
There is no formal
maximum. In general,
the Company expects
to maintain benefits at
the current level.
The level of employer
contribution for
executive directors,
expressed as a
percentage of basic
salary, will be in line
with the rate applicable
to the majority of the
workforce in the
country in which the
executive director is
based. For the UK
workforce, this is
currently 12.5 per cent
of basic salary.
Benefits
Ensures total package
is competitive.
Pension
Provides
post-retirement
remuneration
and ensures
total package
is competitive.
Benefits include, but are not limited
to, life insurance, personal travel and,
where applicable, a company car, fuel,
and private health insurance. Where
appropriate, benefits may include
relocation and international
assignment costs. Executives will also
be reimbursed for all reasonable
expenses.
The Company operates a defined
contribution scheme as a percentage
of salary, and all executive directors
are eligible for membership.
Executives can opt instead to receive
a salary supplement in lieu of a
pension.
Performance
Share Plan
There will be no further awards made
under this plan. Legacy awards will
continue to vest.
186
INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021
Corporate Governance Information supporting the policy tables
Shareholding requirements
In order to increase alignment with shareholders, executive directors are required to build up a minimum personal shareholding equal
to a set percentage of base salary. The share price used to calculate the guideline is either the share price on the date of award or on
the date of vesting/exercise. Executive directors will be required to retain the entire 100 per cent of shares (net of tax) which vest from
share plans until their respective shareholding requirement is attained. The CEO of IAG is required to build up and maintain a
shareholding of 350 per cent of basic salary, and other executive directors are required to build up and maintain a shareholding of 200
per cent of basic salary.
On departure, executive directors will be required to hold the number of shares in line with their in-employment shareholding
requirement (or the number of shares that they own at departure if lower) for two years from their date of termination from the Group.
Shares will normally be retained in the nominee account administered by the Company to ensure this.
Malus and clawback provisions
The Board, following the advice of the Committee, has authority to reduce or cancel awards before they are satisfied (and/or impose
additional conditions on awards), and to recover payments, if special circumstances exist. These special circumstances include (but are
not limited to) fraud; material breach of any law, regulation or code of practice; an error or a material misstatement of results leading to
overpayment or over-allocation; misconduct; failure of risk management; the occurrence of an exceptional event affecting the
Company’s value or reputation; payments based on results that are subsequently found to be materially financially inaccurate or
misleading; serious reputational damage as a result of a participant’s behaviour; corporate failure; or any other circumstances in which
the Board considers it to be in the interests of shareholders for the award to lapse or be adjusted. This is aligned with the latest version
of the UK Corporate Governance Code provisions.
For RSP and PSP awards, clawback provisions apply for two years post vesting (which will usually align with the additional holding
period). For the bonus deferral awards, there will be three years from the date of award in which shares can be withheld, i.e. the entire
period from the date of the award until vesting. For the cash element of the annual incentive plan, clawback provisions apply for three
years from the date of payment. The proportion of an award to be withheld or recovered will be at the discretion of the Board, upon
consideration of the Committee, taking into account all relevant matters.
Discretion to adjust formulaic outcomes
The Board, after considering the recommendation of the Remuneration Committee, retains the discretion to adjust (including
preventing them in their entirety and making no payment) the formulaic outcome of incentive award payments in order to, in its
opinion, properly reflect overall corporate performance. This includes where the business has had an exceptional event, in particular
events that significantly impact stakeholders. This will include analysing the performance of the participant and the underlying financial
performance of the Group to check whether they have been satisfactory in the circumstances and whether vesting levels reflect overall
corporate performance. The Remuneration Committee can also take other factors as it considers relevant into account. Underlying
financial performance is defined as the overall performance of the Company, which may be considered with reference to a range of
measures as the Remuneration Committee considers most appropriate at the time. Stakeholders would include shareholders,
customers, and the Company’s workforce. The Board also has authority to reduce the award levels and/or the vesting outcomes for the
former PSP and the RSP where the Company has experienced a significant fall in share price, as a result of which it considers that
participants have unduly benefitted from windfall gains.
Benefits, expenses and taxation
The Board may arrange to settle any taxes and associated expenses payable if it deems such settlement appropriate, including, but
not limited to tax on benefits or where, without such settlement, the executive will be subject to double taxation on the same
remuneration amount.
INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021
187
REPORT OF THE REMUNERATION COMMITTEE CONTINUED
Non-executive directors
The table below summarises the main elements of remuneration for non-executive directors:
Purpose and link to strategy
Operation of element of policy
Maximum opportunity
Basic fees
Fees take into account the level of
responsibility, experience, abilities and
dedication required.
The maximum annual aggregate gross
remuneration (including annual basic fees
and benefits, including travel benefits)
payable to directors shall not exceed
€3,500,000 as approved by the
Shareholders’ Meeting on October 19, 2010,
in accordance with article 37.3 of the
Company’s Bylaws.
Fees are set with reference to market
positioning.
To acknowledge the key role of the Chair
of the Board of Directors, fees are set
separately for this role. There is also an
additional fee for undertaking the role of
Senior Independent Director, and also for
holding a Committee chair position. There is
no additional fee for Committee
membership.
Non-executive director fees will take into
account external market conditions to
ensure it is possible to attract and retain the
necessary talent. There is no specific review
date set, but it is the Company’s intention
to review fees from time to time.
Benefits
Non-executive directors (including the
Board Chair) are entitled to use air tickets
of the airlines of the Company or related to
the Company in accordance with the terms
and conditions established in the Company
travel scheme.
The maximum total annual gross amount
of the personal travel benefit is €500,000
for all non-executive directors taken
together (including any former non-
executive director who may enjoy this
benefit at any given time).
As provided for under article 37.8 of the
Company’s Bylaws this benefit may also be
provided to non-executive directors after
they have vacated office in accordance
with the terms and conditions established
in the Company travel scheme.
Remuneration scenarios
A significant portion of the Company’s total remuneration package is variable, with emphasis placed on longer-term reward to align
closely executive directors’ interests with shareholder interests. The proposed amendment to the policy for 2022 seeks to increase the
opportunity level for long-term incentive component, therefore rebalancing the Executive Director’s overall package more towards
share-based, deferred remuneration and thereby increasing the proportion of overall remuneration opportunity directly aligned to
shareholder’s interests.
The chart on the following page shows the 2021 remuneration outturn for the Executive Director set against various remuneration
outturn scenarios under the proposed 2022 policy opportunity structure. The scenarios illustrated include the minimum remuneration
receivable, the remuneration receivable if the director performs in line with the Company’s expectations, the maximum remuneration
receivable, and the maximum remuneration receivable with 50 per cent share price growth. With the exception of the illustration
showing 50 per cent share price growth, no share price variation is taken into consideration in these scenarios.
IAG CEO - 2022 remuneration scenario assumptions
Fixed remuneration is basic salary as at January 1, 2022 ((£820,000 (€950,134), plus taxable benefits (est. £275,000 (€318,642), plus
pension-related benefits (2022 level of £102,500 (€118,766). The value of 2021 taxable benefits includes a fixed-term transitionary
allowance of £250,000 p.a. (payable only until December 2022), as described on page 169.
The annual incentive amount is zero at the minimum remuneration level, £820,000 (€950,134) at the on-target level (equivalent to 100
per cent of salary), and £1,640,000 (€1,900,268) at maximum (equivalent to 200 per cent of salary).
The long-term incentive (RSP) opportunity is presented on the basis of the proposed 2022 policy amendment which increases the
Executive Director’s opportunity from 100 per cent of salary to 150 per cent of salary. RSP outturns are shown as zero at the minimum
remuneration level, £1,230,000 (€1,425,201) at the on-target level (equivalent to 150 per cent of salary) and £1,845,000 (€2,137,802) at
the maximum level, which includes a 50 per cent share price appreciation, solely for the purpose of illustrating a wider range of
potential remuneration outcomes.
In contrast to the reporting of executive director remuneration in the 2021 single total figure of remuneration table where RSP value is
shown at vesting rather than grant, for illustrative purposes for the scenario modelling opposite, RSP values for 2021 and 2022 are
shown at time of grant rather than time of vesting.
Euro amounts are shown at the 2021 exchange rate GBP 1: EUR 1.1587.
188
INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021
Corporate Governance Remuneration scenarios: IAG CEO 2021 remuneration outturn vs proposed 2022 remuneration opportunity
2021 IAG
CEO actual
remuneration
£1,110,000 (€1,286,157)
£820,000
(€950,134)
£1,930,000 (€2,236,291)
2022
Minimum
(fixed only)1
2022
On-target1
2022
Maximum1
2022 Maximum,
plus share
price growth1
£1,197,500 (€1,387,543)
£1,197,500 (€1,387,543)
£1,197,500 (€1,387,543)
£820,000
(€950,134)
£1,230,000
(€1,425,201)
£3,247,500 (€3,762,878)
£1,197,500 (€1,387,543)
£1,640,000 (€1,900,268)
£1,230,000 (€1,425,201)
£4,067,500 (€4,713,012)
£1,197,500 (€1,387,543)
£1,640,000 (€1,900,268)
£1,845,000 (€2,137,802)
£4,682,500
(€5,425,613)
0
1,000,000
2,000,000
3,000,000
4,000,000
5,000,000
Fixed Remuneration
Annual Incentive
Long-term incentive (RSP)
1 Fixed remuneration includes a transitionary allowance of £250,000 p.a. (payable until the end of 2022 only), as described on page 169.
Remuneration policy below director level
Managers at the operating companies in the Group participate in their own company annual incentive plans. These all have
performance measures specific to their operating company, and are typically financial, operational, and customer service measures.
Selected senior managers participate in RSP under Executive Share Plan rules. Employees below senior manager level do not
participate in RSP.
Notes to the policy tables
The Board may make any remuneration payments and payments for loss of office (and exercise any discretions available to it in
connection with such payments) which are not in line with this Remuneration Policy, where the terms of the payment were agreed (i)
before this policy came into effect (provided that they were in line with any applicable directors’ Remuneration Policy in force at the
time they were agreed) or (ii) at a time when the relevant individual was not a director of the Company and such payment was not, in
the Board’s opinion, in consideration of the individual becoming a director. For these purposes ‘payments’ include the Board satisfying
awards of variable remuneration and, in respect a share award, the terms of the payment are agreed at the time the award is granted.
This will also include the vesting of any awards granted under the IAG PSP. The Board may also make remuneration payments and
payments for loss of office outside of the policy set out above if such payments are required by law in a relevant country.
External non-executive directorship
The Company’s consent is required before an executive can accept an external non-executive appointment and permission is only
given in appropriate circumstances. The Company allows the executive to retain any fee from such appointments.
Approach to recruitment remuneration
The remuneration for new executive directors will be in line with the policy for current executive directors as far as possible, as
expressed in the policy table earlier in this report.
On appointment, new executive directors will have their basic salary set by taking into account the external market, their peers, and
their level of experience. New executive directors will participate in the annual and long-term incentives on the same basis as existing
directors.
To facilitate recruitment, the Board, after considering the recommendation of the Committee, may make one-off awards to buy out
variable pay or contractual rights forfeited on leaving a previous employer. Generally, such buy-out awards will be made on a
comparable basis to those forfeited giving due regard to all relevant factors (including value, performance targets, the likelihood of
those targets being met and vesting periods). In such circumstances, shareholders will be provided with full details and rationale in the
next published Remuneration Report.
Excluding the value of any potential buy-out, the maximum value of variable remuneration offered at recruitment will be no more than
that awarded to current directors.
In the case of an internal promotion to executive director, the Company will continue to honour any commitments made before
promotion. Other than that, the remuneration arrangements on recruitment will be as above.
Non-executive directors will be recruited in line with the Company’s Remuneration Policy principles outlined before.
Consideration of employment conditions elsewhere in the Group
The Committee is updated on pay and conditions of the employees within the Group and takes this into account when considering
executive directors’ remuneration.
The pay of employees across all companies in the Group is taken into account when determining the level of any increase in the annual
salary review of directors. This takes place each year at the January Committee meeting.
When determining the RSP awards for executive directors, the Committee takes note of the eligibility criteria and the potential size of
awards for executives below director level in all companies within the Group.
At the operating company level, the company consults with employee representative bodies, including trade unions and works
councils. This will include consultation on company strategy, the competitive environment, and employee terms and conditions. In
addition, some of the operating companies run employee opinion surveys in order to take into consideration employee views on a
variety of subjects, including leadership, management, and the wider employee experience.
INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021
189
CONSOLIDATED INCOME STATEMENT
€ million
Passenger revenue
Cargo revenue
Other revenue
Total revenue
Employee costs
Fuel, oil costs and emissions charges
Handling, catering and other operating costs
Landing fees and en-route charges
Engineering and other aircraft costs
Property, IT and other costs
Selling costs
Depreciation, amortisation and impairment
Currency differences
Total expenditure on operations
Operating loss
Finance costs
Finance income
Net change in fair value of convertible bond
Net financing (charge)/credit relating to pensions
Net currency retranslation (charges)/credits
Other non-operating credits/(charges)
Total net non-operating costs
Loss before tax
Tax
Loss after tax for the year
Attributable to:
Equity holders of the parent
Non-controlling interest
Basic loss per share (€ cents)
Diluted loss per share (€ cents)
Note
5
8
6
9
9
9
9
10
Year to December 31
2021
5,835
1,673
947
8,455
3,013
1,781
1,308
923
1,085
758
434
1,932
(14)
11,220
(2,765)
20201
5,512
1,306
988
7,806
3,585
3,735
1,340
918
1,456
782
405
2,955
81
15,257
(7,451)
(830)
(670)
13
89
(2)
(82)
70
(742)
(3,507)
574
(2,933)
41
–
12
245
(4)
(376)
(7,827)
892
(6,935)
(2,933)
(6,935)
–
–
(2,933)
(6,935)
11
11
(59.1)
(59.1)
(196.6)
(196.6)
1 The 2020 results have been restated for the treatment of administration costs associated with the Group’s defined benefit pension schemes. Further
information is given in note 2.
190
190 INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021
Financial Statements
CONSOLIDATED INCOME STATEMENT
CONSOLIDATED STATEMENT OF OTHER COMPREHENSIVE INCOME
€ million
Passenger revenue
Cargo revenue
Other revenue
Total revenue
Employee costs
Fuel, oil costs and emissions charges
Handling, catering and other operating costs
Landing fees and en-route charges
Engineering and other aircraft costs
Property, IT and other costs
Selling costs
Depreciation, amortisation and impairment
Currency differences
Total expenditure on operations
Operating loss
Finance costs
Finance income
Net change in fair value of convertible bond
Net financing (charge)/credit relating to pensions
Net currency retranslation (charges)/credits
Other non-operating credits/(charges)
Total net non-operating costs
Loss before tax
Tax
Loss after tax for the year
Attributable to:
Equity holders of the parent
Non-controlling interest
Basic loss per share (€ cents)
Diluted loss per share (€ cents)
information is given in note 2.
Year to December 31
Note
2021
5,835
1,673
947
8,455
3,013
1,781
1,308
923
1,085
758
434
1,932
(14)
11,220
(2,765)
13
89
(2)
(82)
70
(742)
(3,507)
574
(2,933)
20201
5,512
1,306
988
7,806
3,585
3,735
1,340
918
1,456
782
405
2,955
81
15,257
(7,451)
41
–
12
245
(4)
(376)
(7,827)
892
(6,935)
(830)
(670)
5
8
6
9
9
9
9
10
(2,933)
(6,935)
–
–
(2,933)
(6,935)
11
11
(59.1)
(59.1)
(196.6)
(196.6)
1 The 2020 results have been restated for the treatment of administration costs associated with the Group’s defined benefit pension schemes. Further
€ million
Items that may be reclassified subsequently to net profit
Cash flow hedges:
Fair value movements in equity
Reclassified and reported in net profit
Fair value movements on cost of hedging
Cost of hedging reclassified and reported in net profit
Currency translation differences
Items that will not be reclassified to net profit
Fair value movements on other equity investments
Fair value movements on cash flow hedges
Fair value movements on cost of hedging
Fair value movements on liabilities attributable to credit risk changes
Remeasurements of post-employment benefit obligations
Remeasurements of long-term employee-related provisions
Total other comprehensive loss for the year, net of tax
Loss after tax for the year
Note
Year to December 31
2021
20201
31
794
(81)
10
(12)
(12)
–
54
–
(15)
1,400
25
2,163
(2,933)
(2,171)
1,871
(16)
(19)
(213)
(53)
(45)
26
–
(587)
(9)
(1,216)
(6,935)
Total comprehensive loss for the year
(770)
(8,151)
Total comprehensive loss is attributable to:
Equity holders of the parent
Non-controlling interest
31
(770)
–
(770)
(8,151)
–
(8,151)
1 The 2020 results have been restated for the treatment of administration costs associated with the Group’s defined benefit pension schemes. Further
information is given in note 2.
Items in the consolidated Statement of other comprehensive income above are disclosed net of tax.
190
191
INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021
191
CONSOLIDATED BALANCE SHEET
€ million
Non-current assets
Property, plant and equipment
Intangible assets
Investments accounted for using the equity method
Other equity investments
Employee benefit assets
Derivative financial instruments
Deferred tax assets
Other non-current assets
Current assets
Non-current assets held for sale
Inventories
Trade receivables
Other current assets
Current tax receivable
Derivative financial instruments
Current interest-bearing deposits
Cash and cash equivalents
Total assets
Shareholders’ equity
Issued share capital
Share premium
Treasury shares
Other reserves
Total shareholders’ equity
Non-controlling interest
Total equity
Non-current liabilities
Borrowings
Employee benefit obligations
Deferred tax liability
Provisions
Deferred revenue on ticket sales
Derivative financial instruments
Other long-term liabilities
Current liabilities
Borrowings
Trade and other payables
Deferred revenue on ticket sales
Derivative financial instruments
Current tax payable
Provisions
Total liabilities
Total equity and liabilities
Note
December 31,
2021
December 31,
20201
December 31,
20191
13
17
18
19
32
28
10
20
16
20
20
10
28
21
21
29
29
31
25
32
10
26
23
28
24
25
22
23
28
10
26
17,161
3,239
40
31
1,775
77
1,282
250
17,531
3,208
29
29
334
42
1,075
228
19,168
3,442
31
82
531
268
546
273
23,855
22,476
24,341
20
334
735
960
16
543
51
–
351
557
792
101
122
143
7,892
10,551
34,406
5,774
7,840
30,316
497
7,770
(24)
(7,403)
840
6
846
497
7,770
(40)
(6,623)
1,604
6
1,610
17,084
13,464
285
–
2,267
391
47
208
477
40
2,286
473
310
140
–
565
2,255
1,314
186
324
2,621
4,062
11,327
35,668
996
5,327
(60)
851
7,114
6
7,120
12,411
326
290
2,416
–
286
71
20,282
17,190
15,800
2,526
3,712
6,161
126
21
732
13,278
33,560
34,406
2,215
2,810
4,657
1,160
48
626
11,516
28,706
30,316
1,843
4,344
5,486
252
192
631
12,748
28,548
35,668
1 The 2020 and 2019 results have been restated for the treatment of administration costs associated with the Group’s defined benefit pension schemes. Further
information is given in note 2.
192
192
INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021
Financial Statements
CONSOLIDATED BALANCE SHEET
CONSOLIDATED CASH FLOW STATEMENT
Investments accounted for using the equity method
€ million
Non-current assets
Property, plant and equipment
Intangible assets
Other equity investments
Employee benefit assets
Derivative financial instruments
Deferred tax assets
Other non-current assets
Current assets
Non-current assets held for sale
Inventories
Trade receivables
Other current assets
Current tax receivable
Derivative financial instruments
Current interest-bearing deposits
Cash and cash equivalents
Total assets
Shareholders’ equity
Issued share capital
Share premium
Treasury shares
Other reserves
Total shareholders’ equity
Non-controlling interest
Total equity
Non-current liabilities
Borrowings
Employee benefit obligations
Deferred tax liability
Provisions
Deferred revenue on ticket sales
Derivative financial instruments
Other long-term liabilities
Current liabilities
Borrowings
Trade and other payables
Deferred revenue on ticket sales
Derivative financial instruments
Current tax payable
Provisions
Total liabilities
Total equity and liabilities
information is given in note 2.
December 31,
December 31,
December 31,
Note
2021
20201
20191
23,855
22,476
24,341
13
17
18
19
32
28
10
20
16
20
20
10
28
21
21
29
29
31
25
32
10
26
23
28
24
25
22
23
28
10
26
7,892
10,551
34,406
5,774
7,840
30,316
17,084
13,464
17,161
3,239
40
31
1,775
77
1,282
250
20
334
735
960
16
543
51
497
7,770
(24)
(7,403)
840
6
846
285
–
2,267
391
47
208
2,526
3,712
6,161
126
21
732
13,278
33,560
34,406
17,531
3,208
29
29
334
42
1,075
228
–
351
557
792
101
122
143
497
7,770
(40)
(6,623)
1,604
6
1,610
477
40
2,286
473
310
140
2,215
2,810
4,657
1,160
48
626
11,516
28,706
30,316
19,168
3,442
31
82
531
268
546
273
–
565
2,255
1,314
186
324
2,621
4,062
11,327
35,668
996
5,327
(60)
851
7,114
6
7,120
12,411
326
290
2,416
–
286
71
1,843
4,344
5,486
252
192
631
12,748
28,548
35,668
20,282
17,190
15,800
€ million
Cash flows from operating activities
Operating loss
Depreciation, amortisation and impairment
Movement in working capital
(Increase)/decrease in trade receivables, inventories and other current assets
Increase/(decrease) in trade and other payables and deferred revenue on ticket sales
Payments related to restructuring
Employer contributions to pension schemes
Pension scheme service costs
Provision and other non-cash movements
Settlement of derivatives where hedge accounting has been discontinued
Interest paid
Interest received
Tax received
Net cash flows from operating activities
Cash flows from investing activities
Acquisition of property, plant and equipment and intangible assets
Sale of property, plant and equipment and intangible assets and investments
Decrease in other current interest-bearing deposits
Other investing movements3
Net cash flows from investing activities
Cash flows from financing activities
Proceeds from borrowings
Repayment of borrowings
Repayment of lease liabilities
Dividend paid
Acquisition of treasury shares
Settlement of derivative financial instruments
Proceeds from rights issue
Other financing movements
Net cash flows from financing activities
Net increase in cash and cash equivalents
Net foreign exchange differences
Cash and cash equivalents at 1 January
Cash and cash equivalents at year end
Interest-bearing deposits maturing after more than three months
Cash, cash equivalents and interest-bearing deposits
Year to December 31
Note
2021
20201, 2
6
26
32
12
21
21
21
(2,765)
1,932
1,634
(351)
1,985
(161)
(41)
26
305
(497)
(640)
3
63
(141)
(744)
544
91
(72)
(181)
4,817
(784)
(1,481)
–
(24)
(268)
–
(25)
2,235
1,913
205
5,774
7,892
(7,451)
2,955
1,161
2,281
(1,120)
(383)
(318)
30
486
569
(548)
22
45
(3,432)
(1,939)
1,133
2,366
2
1,562
3,567
(978)
(1,536)
(53)
–
136
2,674
–
3,810
1,940
(228)
4,062
5,774
51
143
7,943
5,917
1 The 2020 results have been restated for the treatment of administration costs associated with the Group’s defined benefit pension schemes. Further
information is given in note 2.
2 The 2020 results include a reclassification to conform with the current year presentation regarding settlement of derivative financial instruments. Further
information is given in note 2.
3 Other investing movements include the Air Europa settlement payment. Refer to note 3i for further information.
For details on restricted cash balances refer to note 21 Cash, cash equivalents and current interest-bearing deposits.
1 The 2020 and 2019 results have been restated for the treatment of administration costs associated with the Group’s defined benefit pension schemes. Further
192
193
INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021
193
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the year to December 31, 2021
€ million
January 1, 2021 (restated)1
Issued
share
capital
(note 29)
497
Share
premium
(note 29)
7,770
Treasury
shares
(note 29)
(40)
Other
reserves
(note 31)
(2,420)
Retained
earnings
(4,203)
Total
shareholders’
equity
1,604
Non-
controlling
interest
(note 31) Total equity
1,610
6
Loss for the year
–
–
–
–
(2,933)
(2,933)
–
(2,933)
Other comprehensive loss for the year
Cash flow hedges reclassified and
reported in net profit:
Passenger revenue
Fuel and oil costs
Currency differences
Finance costs
Discontinuance of hedge accounting
Net change in fair value of cash flow
hedges
Net change in fair value of cost of
hedging
Cost of hedging reclassified and
reported in net profit
Fair value movements on liabilities
attributable to credit risk changes
Currency translation differences
Remeasurements of post-employment
benefit obligations
Remeasurements of long-term
employee-related provisions
Total comprehensive loss for the year
Hedges reclassified and reported in
property, plant and equipment
Cost of share-based payments
Vesting of share-based payment
schemes
Acquisition of treasury shares
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
December 31, 2021
497
7,770
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
40
(24)
(24)
–
–
–
–
–
–
–
–
–
–
18
(45)
(15)
23
(62)
848
10
(12)
(15)
(12)
1,400
1,400
18
(45)
(15)
23
(62)
848
10
(12)
(15)
(12)
–
–
25
738
(1,508)
9
–
–
–
–
23
(42)
–
(1,673)
(5,730)
25
(770)
9
23
(2)
(24)
840
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
6
18
(45)
(15)
23
(62)
848
10
(12)
(15)
(12)
1,400
25
(770)
9
23
(2)
(24)
846
1 The 2020 results have been restated for the treatment of administration costs associated with the Group’s defined benefit pension schemes. Further
information is given in note 2.
194
194 INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021
Financial Statements
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the year to December 31, 2021
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the year to December 31, 2020
€ million
January 1, 2021 (restated)1
497
7,770
(40)
(2,420)
(4,203)
Issued
share
capital
(note 29)
Share
premium
(note 29)
Treasury
shares
(note 29)
Other
reserves
(note 31)
Retained
earnings
Total
controlling
shareholders’
interest
Non-
equity
1,604
(note 31) Total equity
€ million
January 1, 2020 (reported)1
Issued
share
capital
(note 29)
996
Share
premium
(note 29)
5,327
Treasury
shares
(note 29)
(60)
Other
reserves
(note 31)
(2,579)
Retained
earnings
3,139
Total
shareholders’
equity
6,823
Non-
controlling
interest
(note 31)
6
Change in accounting policy1
January 1, 2020 (restated)
–
996
–
5,327
–
–
291
(60)
(2,579)
3,430
291
7,114
Loss for the year
–
–
–
–
(6,935)
(6,935)
Other comprehensive income for the
year
Cash flow hedges reclassified and
reported in net profit:
Passenger revenue
Fuel and oil costs
Currency differences
Finance costs
Discontinuance of hedge accounting
Net change in fair value of cash flow
hedges
Net change in fair value of equity
investments
Net change in fair value of cost of
hedging
Cost of hedging reclassified and
reported in net profit
Currency translation differences1
Remeasurements of post-employment
benefit obligations1
Remeasurements of long-term
employee-related provisions
Total comprehensive income for the
year
Capex hedging reclassified and
reported in property, plant and
equipment
Cost of share-based payments
Vesting of share-based payment
schemes
Share capital reduction
Rights issue
December 31, 2020 restated1
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(797)
298
497
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
2,443
7,770
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
20
–
–
50
356
18
12
1,435
(2,216)
(53)
10
(19)
(213)
–
–
–
–
–
–
–
–
–
–
–
–
50
356
18
12
1,435
(2,216)
(53)
10
(19)
(213)
(587)
(587)
(9)
(9)
(620)
(7,531)
(8,151)
(18)
–
–
797
–
–
(10)
(22)
–
(70)
(18)
(10)
(2)
–
2,671
1,604
(40)
(2,420)
(4,203)
Total
equity
6,829
291
7,120
(6,935)
50
356
18
12
1,435
(2,216)
(53)
10
(19)
(213)
(587)
(9)
(8,151)
(18)
(10)
(2)
–
2,671
1,610
–
6
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
6
Loss for the year
–
–
–
–
(2,933)
(2,933)
Other comprehensive loss for the year
Cash flow hedges reclassified and
reported in net profit:
Passenger revenue
Fuel and oil costs
Currency differences
Finance costs
Discontinuance of hedge accounting
Net change in fair value of cash flow
hedges
hedging
Net change in fair value of cost of
Cost of hedging reclassified and
reported in net profit
Fair value movements on liabilities
attributable to credit risk changes
Currency translation differences
Remeasurements of post-employment
benefit obligations
Remeasurements of long-term
employee-related provisions
Total comprehensive loss for the year
Hedges reclassified and reported in
property, plant and equipment
Cost of share-based payments
Vesting of share-based payment
schemes
Acquisition of treasury shares
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
40
(24)
(24)
18
(45)
(15)
23
(62)
848
10
(12)
(15)
(12)
–
–
9
–
–
–
–
–
–
–
–
–
–
–
–
–
25
–
23
(42)
–
18
(45)
(15)
23
(62)
848
10
(12)
(15)
(12)
25
(770)
9
23
(2)
(24)
840
1,400
1,400
738
(1,508)
December 31, 2021
497
7,770
(1,673)
(5,730)
1 The 2020 results have been restated for the treatment of administration costs associated with the Group’s defined benefit pension schemes. Further
information is given in note 2.
6
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
6
1,610
(2,933)
18
(45)
(15)
23
(62)
848
10
(12)
(15)
(12)
1,400
25
(770)
9
23
(2)
(24)
846
1 The 2020 results have been restated for the treatment of administration costs associated with the Group’s defined benefit pension schemes. Further
information is given in note 2.
194
195
INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021
195
NOTES TO THE ACCOUNTS
For the year to December 31, 2021
1 Background and general information
International Consolidated Airlines Group S.A. (hereinafter ‘International Airlines Group’, ‘IAG’ or the ‘Group’) is a leading European airline
group, formed to hold the interests of airline and ancillary operations. IAG is a Spanish company registered in Madrid and was incorporated
on December 17, 2009. On January 21, 2011 British Airways Plc and Iberia Líneas Aéreas de España S.A. Operadora (hereinafter ‘British
Airways’ and ‘Iberia’ respectively) completed a merger transaction becoming the first two airlines of the Group. Vueling Airlines S.A.
(‘Vueling’) was acquired on April 26, 2013, and Aer Lingus Group Plc (‘Aer Lingus’) on August 18, 2015. A list of the subsidiaries of the Group
is included in the Group investments section.
IAG shares are traded on the London Stock Exchange’s main market for listed securities and also on the stock exchanges of Madrid,
Barcelona, Bilbao and Valencia (the ‘Spanish Stock Exchanges’), through the Spanish Stock Exchanges Interconnection System (Mercado
Continuo Español).
2
Significant accounting policies
Basis of preparation
The consolidated financial statements of the Group have been prepared in accordance with the International Financial Reporting Standards
as endorsed by the European Union (IFRSs as endorsed by the EU). The consolidated financial statements are rounded to the nearest
million unless otherwise stated. These financial statements have been prepared on a historical cost convention except for certain financial
assets and liabilities, including derivative financial instruments and other equity investments that are measured at fair value. The carrying
value of recognised assets and liabilities that are subject to fair value hedges are adjusted to record changes in the fair values attributable to
the risks that are being hedged. The financial statements for the prior year include reclassifications that were made to conform to the
current year presentation.
The Group’s financial statements for the year to December 31, 2021 were authorised for issue, and approved by the Board of Directors on
February 24, 2022.
Presentation of results
The prior period Cash flow statement includes a reclassification to conform with the current period of presentation regarding the
settlement of foreign currency derivative financial instruments not designated in a hedge relationship, but entered into to mitigate foreign
exchange movements on long-term financial liabilities in currencies other than the functional currencies of the operating companies holding
the liabilities. Accordingly, the Group has reclassified the results for the year ended December 31, 2020 to recognise €136 million of
derivative settlement cash inflows as Settlement of derivative financial instruments within cash flows from financing activities with a
corresponding increase in cash outflows within cash flows from operating activities.
Change in accounting policy
During 2021, the Group has changed its accounting policy with regard to the treatment of administration costs associated with British
Airways’ Airways Pension Scheme (APS) and the New Airways Pension Scheme (NAPS) defined benefit schemes, while remaining in
compliance with IAS 19. The change in policy has been adopted to better reflect the underlying management and operation of these
schemes. This change in accounting policy has been applied retrospectively to the consolidated financial statements.
Previously a discounted estimate of future administration costs was included as part of the APS and NAPS defined benefit obligations.
These administration costs were recognised as a service cost in the year in which such costs arose and recorded within Other
comprehensive income. Under the updated accounting policy, administration costs are now recognised as incurred and included within
Employee costs in the Income statement. This change has had the effect of reducing the defined benefit obligation and increasing retained
earnings at both December 31, 2020 and January 1, 2020. It has in addition increased the charge to Employee costs and the Financing
credit relating to pensions in the Income statement, as well as increased the Remeasurements of post-employment benefit obligations and
Currency translation differences in the Statement of other comprehensive income for the year ended December 31, 2020.
Further details of the accounting policy change are given in note 36.
Going concern
The economic uncertainty of the COVID-19 pandemic and the fragmented and varied responses from governments have had a significant
impact on the Group’s results and cash flows. At December 31, 2021, the Group had total liquidity of €11,986 million (December 31, 2020:
total liquidity of €8,054 million), comprising cash and interest-bearing deposits of €7,943 million, €2,917 million of committed and undrawn
general facilities and a further €1,126 million of committed and undrawn aircraft specific facilities.
The increase in liquidity during the year to December 31, 2021 was attributable to, amongst other actions, accessing €2.3 billion (£2.0 billion)
of the UK Export Finance (UKEF) Credit Facility, the issuance of fixed rate bonds of €1.2 billion, the issuance of a convertible bond of €0.8
billion, securing a multi-entity three-year Revolving Credit Facility (RCF) of €1.5 billion ($1.8 billion), securing a €0.7 billion aircraft specific
facility achieved as part of an Enhanced Equipment Trust Certificate (EETC) financing structure and securing an additional UKEF Credit
Facility of €1.2 billion (£1.0 billion). These actions raised an additional €7.6 billion of liquidity. Of facilities in place at December 31, 2021, €0.7
billion matures by the end of the going concern period. A loan from the Ireland Strategic Investment Fund (ISIF) of €150 million has limited
financial covenants, but otherwise the Group’s facilities do not have financial covenants. There are a number of non-financial covenants to
protect the position of the lenders, including restrictions on the upstreaming of cash to the Company or lending to other Group companies.
Despite the uncertainty of the COVID-19 pandemic, the Group has continued to successfully secure financing arrangements for all aircraft
delivered in 2021.
In its assessment of going concern over the period to June 30, 2023 (the ‘going concern period’), the Group has modelled three scenarios
referred to below as the Base Case, the Downside Case and the Downside Lockdown Case. The Group’s three-year business plan, prepared
and approved by the Board in December 2021, was subsequently refreshed with the latest available internal and external information in
February 2022. This refreshed business plan supports the Base Case, which takes into account the Board’s and management’s views on the
anticipated impact of and recovery from the COVID-19 pandemic on the Group’s businesses across the going concern period. The key
inputs and assumptions underlying the Base Case include:
196
196
INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021
Financial Statements NOTES TO THE ACCOUNTS
For the year to December 31, 2021
1 Background and general information
International Consolidated Airlines Group S.A. (hereinafter ‘International Airlines Group’, ‘IAG’ or the ‘Group’) is a leading European airline
group, formed to hold the interests of airline and ancillary operations. IAG is a Spanish company registered in Madrid and was incorporated
on December 17, 2009. On January 21, 2011 British Airways Plc and Iberia Líneas Aéreas de España S.A. Operadora (hereinafter ‘British
Airways’ and ‘Iberia’ respectively) completed a merger transaction becoming the first two airlines of the Group. Vueling Airlines S.A.
(‘Vueling’) was acquired on April 26, 2013, and Aer Lingus Group Plc (‘Aer Lingus’) on August 18, 2015. A list of the subsidiaries of the Group
is included in the Group investments section.
IAG shares are traded on the London Stock Exchange’s main market for listed securities and also on the stock exchanges of Madrid,
Barcelona, Bilbao and Valencia (the ‘Spanish Stock Exchanges’), through the Spanish Stock Exchanges Interconnection System (Mercado
Continuo Español).
2
Significant accounting policies
Basis of preparation
The consolidated financial statements of the Group have been prepared in accordance with the International Financial Reporting Standards
as endorsed by the European Union (IFRSs as endorsed by the EU). The consolidated financial statements are rounded to the nearest
million unless otherwise stated. These financial statements have been prepared on a historical cost convention except for certain financial
assets and liabilities, including derivative financial instruments and other equity investments that are measured at fair value. The carrying
value of recognised assets and liabilities that are subject to fair value hedges are adjusted to record changes in the fair values attributable to
the risks that are being hedged. The financial statements for the prior year include reclassifications that were made to conform to the
The Group’s financial statements for the year to December 31, 2021 were authorised for issue, and approved by the Board of Directors on
current year presentation.
February 24, 2022.
Presentation of results
The prior period Cash flow statement includes a reclassification to conform with the current period of presentation regarding the
settlement of foreign currency derivative financial instruments not designated in a hedge relationship, but entered into to mitigate foreign
exchange movements on long-term financial liabilities in currencies other than the functional currencies of the operating companies holding
the liabilities. Accordingly, the Group has reclassified the results for the year ended December 31, 2020 to recognise €136 million of
derivative settlement cash inflows as Settlement of derivative financial instruments within cash flows from financing activities with a
corresponding increase in cash outflows within cash flows from operating activities.
Change in accounting policy
During 2021, the Group has changed its accounting policy with regard to the treatment of administration costs associated with British
Airways’ Airways Pension Scheme (APS) and the New Airways Pension Scheme (NAPS) defined benefit schemes, while remaining in
compliance with IAS 19. The change in policy has been adopted to better reflect the underlying management and operation of these
schemes. This change in accounting policy has been applied retrospectively to the consolidated financial statements.
Previously a discounted estimate of future administration costs was included as part of the APS and NAPS defined benefit obligations.
These administration costs were recognised as a service cost in the year in which such costs arose and recorded within Other
comprehensive income. Under the updated accounting policy, administration costs are now recognised as incurred and included within
Employee costs in the Income statement. This change has had the effect of reducing the defined benefit obligation and increasing retained
earnings at both December 31, 2020 and January 1, 2020. It has in addition increased the charge to Employee costs and the Financing
credit relating to pensions in the Income statement, as well as increased the Remeasurements of post-employment benefit obligations and
Currency translation differences in the Statement of other comprehensive income for the year ended December 31, 2020.
Further details of the accounting policy change are given in note 36.
Going concern
The economic uncertainty of the COVID-19 pandemic and the fragmented and varied responses from governments have had a significant
impact on the Group’s results and cash flows. At December 31, 2021, the Group had total liquidity of €11,986 million (December 31, 2020:
total liquidity of €8,054 million), comprising cash and interest-bearing deposits of €7,943 million, €2,917 million of committed and undrawn
general facilities and a further €1,126 million of committed and undrawn aircraft specific facilities.
The increase in liquidity during the year to December 31, 2021 was attributable to, amongst other actions, accessing €2.3 billion (£2.0 billion)
of the UK Export Finance (UKEF) Credit Facility, the issuance of fixed rate bonds of €1.2 billion, the issuance of a convertible bond of €0.8
billion, securing a multi-entity three-year Revolving Credit Facility (RCF) of €1.5 billion ($1.8 billion), securing a €0.7 billion aircraft specific
facility achieved as part of an Enhanced Equipment Trust Certificate (EETC) financing structure and securing an additional UKEF Credit
Facility of €1.2 billion (£1.0 billion). These actions raised an additional €7.6 billion of liquidity. Of facilities in place at December 31, 2021, €0.7
billion matures by the end of the going concern period. A loan from the Ireland Strategic Investment Fund (ISIF) of €150 million has limited
financial covenants, but otherwise the Group’s facilities do not have financial covenants. There are a number of non-financial covenants to
protect the position of the lenders, including restrictions on the upstreaming of cash to the Company or lending to other Group companies.
Despite the uncertainty of the COVID-19 pandemic, the Group has continued to successfully secure financing arrangements for all aircraft
delivered in 2021.
In its assessment of going concern over the period to June 30, 2023 (the ‘going concern period’), the Group has modelled three scenarios
referred to below as the Base Case, the Downside Case and the Downside Lockdown Case. The Group’s three-year business plan, prepared
and approved by the Board in December 2021, was subsequently refreshed with the latest available internal and external information in
February 2022. This refreshed business plan supports the Base Case, which takes into account the Board’s and management’s views on the
anticipated impact of and recovery from the COVID-19 pandemic on the Group’s businesses across the going concern period. The key
inputs and assumptions underlying the Base Case include:
• As part of the recovery, the Group has assumed a gradual easing of travel restrictions, by geographical region, based on deployment of
vaccines during the year. Travel restrictions, including testing and quarantine requirements, between countries are assumed to continue
to be scaled back and removed;
• Capacity recovery modelled by geographical region (and in certain regions, by key destinations) with capacity gradually increasing from
a reduction of 34 per cent in quarter 1 2022 (compared to the equivalent period in 2019) to pre-pandemic levels by the end of the going
concern period with the average over the going concern period being 11 per cent down versus 2019;
• Passenger unit revenue per ASK, although forecast to continue to recover, is assumed to still remain below levels of 2019 by the end of
the going concern period, which is based on, amongst other assumptions, a greater weighting of shorthaul versus longhaul, leisure versus
business and economy versus premium compared to 2019. Specifically, the Group’s assumption is that traffic related to domestic and
leisure will recover faster than longhaul and business;
• The Group has assumed that the committed and undrawn general facilities of €2.9 billion will not be drawn over the going concern
period. The availability of certain of these facilities reduces over time, with €2.7 billion being available to the Group at the end of the going
concern period;
• The Group has assumed that of the committed and undrawn aircraft specific facilities of €1.1 billion, €0.9 billion would be available to be
drawn over the going concern period if required, but is not expected to be drawn;
• Of the capital commitments detailed in note 15, €4.3 billion is due to be paid over the going concern period of which the Group has
committed aircraft financing of €0.6 billion, under the EETC financing structure, and the Group has further forecast securing 80 per cent,
or €2.7 billion, of the aircraft financing required that is currently uncommitted, to align with the timing and payments for these aircraft
deliveries. This loan to value assumption is below the level of financing the Group has been able to achieve recently, including over the
course of the COVID-19 pandemic to date;
• The Group has assumed that the €0.5 billion convertible bond that matures in November 2022 will be refinanced.
The Downside Case applies stress to the Base Case to model a more prolonged downturn, with a more gradual recovery relative to the
Base Case. The Downside Case is representative of existing travel restrictions remaining in place and the gradual recovery of capacity being
delayed longer than in the Base Case. The Downside Case also models a more acute impact on the longhaul sector, with the domestic
sector and European shorthaul sectors recovering faster than longhaul. The result of which is that the levels of capacity assumed under the
Base Case are delayed by a quarter under the Downside Case and would reach those of the Base Case at the end of the Going Concern
period. In the Downside Case, over the going concern period capacity would be 17 per cent down on 2019. The Downside Case assumes
that there would be no drawing on either of the RCF and the UKEF credit facility. The Directors consider the Downside Case to be a severe
but plausible scenario.
In addition, the Group has sensitised the Downside Case to incorporate the occurrence of a two-month lockdown, and associated travel
restrictions, during the second quarter of 2022, a scenario referred to as the Downside Lockdown Case. The Downside Lockdown Case is
representative of the emergence of more virulent strains of COVID-19 and/or strains for which the efficacy of existing vaccines is reduced.
The Downside Lockdown Case assumes that there would be full drawing on both the RCF and the UKEF credit facility. Subsequent to this
lockdown, capacity is assumed to recover gradually over the going concern period and to only recover to the Base Case by the end of
2023. In this scenario, over the going concern period capacity would be 35 per cent down on 2019. Consistent with the Downside Case, the
Directors consider the Downside Lockdown Case to be an alternative severe but plausible scenario.
Under all three scenarios modelled, the Group’s limited financial covenants are forecast to be met.
The Group has modelled the impact of further deteriorations in capacity operated and yield, but also considered further mitigating actions,
such as reducing operating and capital expenditure. The Group expects to be able to continue to secure financing for future aircraft
deliveries and in addition has further potential mitigating actions, including asset disposals, it would pursue in the event of adverse liquidity
experience.
Having reviewed the Base Case, Downside Case, Downside Lockdown Case and additional 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 for the year to December 31, 2021.
However, due to the uncertainty created by COVID-19, there are a number of significant factors that are outside of the control of the Group,
including: the status and impact of the pandemic worldwide; the emergence of new variants of the virus and potential resurgence of
existing strains of the virus; the speed at which vaccines are deployed worldwide; the efficacy of those vaccines; the availability of
medicines to combat the impact of the virus and the restrictions imposed by national governments in respect of the freedom of movement
and travel. The Directors, therefore, are not able to provide certainty that there could not be a more severe downside scenario than those
they have considered, including the sensitivities in relation to the timing of recovery from the COVID-19 pandemic, capacity operated,
impact on yield, cost mitigations achieved and the availability of aircraft financing to offset capital expenditure. In the event that a more
severe scenario were to occur, the Group may need to secure sufficient additional funding. Sources of additional funding are expected to
include securing additional long-term financial facilities. However, the Group’s ability to obtain this additional funding in the event of a more
severe downside scenario represents a material uncertainty at February 24, 2022 that could cast significant doubt upon the Group’s ability
to continue as a going concern and therefore, to continue to realise its assets and discharge its liabilities in the normal course of business.
The consolidated financial statements for the year to December 31, 2021 do not include the adjustments that would result if the Group was
unable to continue as a going concern.
196
197
INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021
197
NOTES TO THE ACCOUNTS CONTINUED
For the year to December 31, 2021
2
Significant accounting policies continued
Consolidation
The Group financial statements include the financial statements of the Company and its subsidiaries, each made up to December 31,
together with the attributable share of results and reserves of associates and joint ventures, adjusted where appropriate to conform to the
Group’s accounting policies.
Subsidiaries are consolidated from the date of their acquisition, which is the date on which the Group obtains control and continue to be
consolidated until the date that such control ceases. Control exists when the Group is exposed to, or has rights to, variable returns from its
involvement with the entity and has the ability to affect those returns through its power over the entity.
The Group applies the acquisition method to account for business combinations. The consideration paid is the fair value of the assets
transferred, the liabilities incurred and the equity interests issued by the Group. Identifiable assets acquired and liabilities assumed in a
business combination are measured initially at their fair values at the acquisition date. Non-controlling interests represent the portion of
profit or loss and net assets in subsidiaries that are not held by the Group and are presented separately within equity in the Consolidated
balance sheet. Acquisition-related costs are expensed as incurred.
If the business combination is achieved in stages, the acquisition date fair value of the acquirer’s previously held equity interest in the
acquiree is remeasured to fair value at the acquisition date through the Income statement.
Goodwill is initially measured as the excess of the aggregate of the consideration transferred and the fair value of non-controlling interest
over the net identifiable assets acquired and liabilities assumed.
All intragroup account balances, including intragroup profits, are eliminated in preparing the consolidated financial statements.
Unconsolidated structured entities
The Group regularly uses sale and leaseback transactions to finance the acquisition of aircraft. In certain instances the Group will undertake
several such sale and leaseback transactions at once through Enhanced Equipment Trust Certificates (EETCs). Under each of these
financing structures, a company or companies (the EETC Issuer) are established to facilitate such financing on behalf of a number of
unrelated investors. In certain of these financing structures, additional special purpose vehicles (the Lessor SPV) are established to provide
additional financing from a number of further unrelated investors to the EETC Issuer. The proceeds from the issuance of the EETCs by the
EETC Issuer, and where relevant the proceeds obtained from the Lessor SPV, are then used to purchase aircraft solely from the Group. The
Group will then enter into lease arrangements (which meet the recognition criteria of Asset financed liabilities) with the EETC Issuer, or
where relevant the Lessor SPV, with payments made by the Group to the EETC Issuer, or the Lessor SPV, distributed, through a trust, to the
aforementioned unrelated investors. The main purpose of the trust structure is to enhance the credit-worthiness of the Group’s debt
obligations through certain bankruptcy protection provisions and liquidity facilities, and also to lower the Group’s total borrowing cost.
The EETC Issuer and the Lessor SPV are established solely with the purpose of providing the asset-backed financing and upon maturity of
such financing are expected to have no further activity. The relevant activities of the EETC Issuer and the Lessor SPV are restricted to pre-
established financing agreements and the retention of the title of the associated financed aircraft. Accordingly, the Group has determined
that each EETC Issuer and the Lessor SPVs are structured entities. Under the contractual terms of the financing structures, the Group has
no exposure to losses in these entities, does not own any of the share capital of the EETC Issuer or the Lessor SPV, does not have any
representation on the respective boards and has no ability to influence decision-making.
In considering the aforementioned facts, management has concluded that the Group does not have access to variable returns from the
EETC Issuers and Lessor SPVs because its involvement is limited to the payment of principal and interest under the arrangement and,
therefore, it does not control the EETC Issuers or the Lessor SPVs and as such does not consolidate them.
Segmental reporting
Operating segments are reported in a manner consistent with how resource allocation decisions are made by the chief operating decision-
maker. The chief operating decision-maker, who is responsible for resource allocation and assessing performance of the operating
segments, has been identified as the IAG Management Committee.
Foreign currency translation
a Functional and presentation currency
Items included in the financial statements of each of the Group’s entities are measured using the functional currency, being the currency of
the primary economic environment in which the entity operates. In particular, British Airways and Avios have a functional currency of
pound sterling. The Group’s consolidated financial statements are presented in euros, which is the Group’s presentation currency.
b Transactions and balances
Transactions in foreign currencies are initially recorded in the functional currency using the rate of exchange prevailing on the date of the
transaction. Monetary foreign currency balances are translated into the functional currency at the rates ruling at the balance sheet date.
Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at balance sheet exchange
rates of monetary assets and liabilities denominated in foreign currencies are recognised in the Income statement, except where hedge
accounting is applied. Foreign exchange gains and losses arising on the retranslation of monetary assets and liabilities classified as non-
current on the Balance sheet are recognised within Net currency retranslation (charges)/credits in the Income statement. All other gains
and losses arising on the retranslation of monetary assets and liabilities are recognised in operating profit.
c Group companies
The net assets of foreign operations are translated into euros at the rate of exchange ruling at the balance sheet date. Profits and losses of
such operations are translated into euros at average rates of exchange during the year. The resulting exchange differences are taken
directly to a separate component of equity (Currency translation reserve) until all or part of the interest is sold, when the relevant portion of
the cumulative exchange difference is recognised in the Income statement.
198
198
INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021
Financial Statements NOTES TO THE ACCOUNTS CONTINUED
For the year to December 31, 2021
2
Significant accounting policies continued
Consolidation
The Group financial statements include the financial statements of the Company and its subsidiaries, each made up to December 31,
together with the attributable share of results and reserves of associates and joint ventures, adjusted where appropriate to conform to the
Group’s accounting policies.
Subsidiaries are consolidated from the date of their acquisition, which is the date on which the Group obtains control and continue to be
consolidated until the date that such control ceases. Control exists when the Group is exposed to, or has rights to, variable returns from its
involvement with the entity and has the ability to affect those returns through its power over the entity.
The Group applies the acquisition method to account for business combinations. The consideration paid is the fair value of the assets
transferred, the liabilities incurred and the equity interests issued by the Group. Identifiable assets acquired and liabilities assumed in a
business combination are measured initially at their fair values at the acquisition date. Non-controlling interests represent the portion of
profit or loss and net assets in subsidiaries that are not held by the Group and are presented separately within equity in the Consolidated
balance sheet. Acquisition-related costs are expensed as incurred.
If the business combination is achieved in stages, the acquisition date fair value of the acquirer’s previously held equity interest in the
acquiree is remeasured to fair value at the acquisition date through the Income statement.
Goodwill is initially measured as the excess of the aggregate of the consideration transferred and the fair value of non-controlling interest
over the net identifiable assets acquired and liabilities assumed.
All intragroup account balances, including intragroup profits, are eliminated in preparing the consolidated financial statements.
Unconsolidated structured entities
The Group regularly uses sale and leaseback transactions to finance the acquisition of aircraft. In certain instances the Group will undertake
several such sale and leaseback transactions at once through Enhanced Equipment Trust Certificates (EETCs). Under each of these
financing structures, a company or companies (the EETC Issuer) are established to facilitate such financing on behalf of a number of
unrelated investors. In certain of these financing structures, additional special purpose vehicles (the Lessor SPV) are established to provide
additional financing from a number of further unrelated investors to the EETC Issuer. The proceeds from the issuance of the EETCs by the
EETC Issuer, and where relevant the proceeds obtained from the Lessor SPV, are then used to purchase aircraft solely from the Group. The
Group will then enter into lease arrangements (which meet the recognition criteria of Asset financed liabilities) with the EETC Issuer, or
where relevant the Lessor SPV, with payments made by the Group to the EETC Issuer, or the Lessor SPV, distributed, through a trust, to the
aforementioned unrelated investors. The main purpose of the trust structure is to enhance the credit-worthiness of the Group’s debt
obligations through certain bankruptcy protection provisions and liquidity facilities, and also to lower the Group’s total borrowing cost.
The EETC Issuer and the Lessor SPV are established solely with the purpose of providing the asset-backed financing and upon maturity of
such financing are expected to have no further activity. The relevant activities of the EETC Issuer and the Lessor SPV are restricted to pre-
established financing agreements and the retention of the title of the associated financed aircraft. Accordingly, the Group has determined
that each EETC Issuer and the Lessor SPVs are structured entities. Under the contractual terms of the financing structures, the Group has
no exposure to losses in these entities, does not own any of the share capital of the EETC Issuer or the Lessor SPV, does not have any
representation on the respective boards and has no ability to influence decision-making.
In considering the aforementioned facts, management has concluded that the Group does not have access to variable returns from the
EETC Issuers and Lessor SPVs because its involvement is limited to the payment of principal and interest under the arrangement and,
therefore, it does not control the EETC Issuers or the Lessor SPVs and as such does not consolidate them.
Segmental reporting
Operating segments are reported in a manner consistent with how resource allocation decisions are made by the chief operating decision-
maker. The chief operating decision-maker, who is responsible for resource allocation and assessing performance of the operating
segments, has been identified as the IAG Management Committee.
Foreign currency translation
a Functional and presentation currency
Items included in the financial statements of each of the Group’s entities are measured using the functional currency, being the currency of
the primary economic environment in which the entity operates. In particular, British Airways and Avios have a functional currency of
pound sterling. The Group’s consolidated financial statements are presented in euros, which is the Group’s presentation currency.
b Transactions and balances
Transactions in foreign currencies are initially recorded in the functional currency using the rate of exchange prevailing on the date of the
transaction. Monetary foreign currency balances are translated into the functional currency at the rates ruling at the balance sheet date.
Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at balance sheet exchange
rates of monetary assets and liabilities denominated in foreign currencies are recognised in the Income statement, except where hedge
accounting is applied. Foreign exchange gains and losses arising on the retranslation of monetary assets and liabilities classified as non-
current on the Balance sheet are recognised within Net currency retranslation (charges)/credits in the Income statement. All other gains
and losses arising on the retranslation of monetary assets and liabilities are recognised in operating profit.
c Group companies
The net assets of foreign operations are translated into euros at the rate of exchange ruling at the balance sheet date. Profits and losses of
such operations are translated into euros at average rates of exchange during the year. The resulting exchange differences are taken
directly to a separate component of equity (Currency translation reserve) until all or part of the interest is sold, when the relevant portion of
the cumulative exchange difference is recognised in the Income statement.
Property, plant and equipment
Property, plant and equipment is held at cost. The Group has a policy of not revaluing property, plant and equipment. Depreciation is
calculated to write off the cost less the estimated residual value on a straight-line basis, over the economic life of the asset. Residual values,
where applicable, are reviewed annually against prevailing market values for equivalently aged assets and depreciation rates adjusted
accordingly on a prospective basis.
a Capitalisation of interest on progress payments
Interest attributed to progress payments made on account of aircraft and other qualifying assets under construction are capitalised and
added to the cost of the asset concerned. All other borrowing costs are recognised in the Income statement in the year in which they are
incurred.
b Fleet
All aircraft are stated at the fair value of the consideration given after taking account of manufacturers’ credits. Fleet assets owned or right
of use (‘ROU’) assets are disaggregated into separate components and depreciated at rates calculated to write down the cost of each
component to the estimated residual value at the end of their planned operational lives (which is the shorter of their useful life or lease
term) on a straight-line basis. Depreciation rates are specific to aircraft type, based on the Group’s fleet plans, within overall parameters of
23 years and up to 5 per cent residual value for shorthaul aircraft and between 23 and 29 years (depending on aircraft) and up to 5 per cent
residual value for longhaul aircraft. Right of use assets are depreciated over the shorter of the lease term and the aforementioned
depreciation rates.
Cabin interior modifications, including those required for brand changes and relaunches, are depreciated over the lower of five years and
the remaining economic life of the aircraft.
Aircraft and engine spares acquired on the introduction or expansion of a fleet, as well as rotable spares purchased separately, are carried
as property, plant and equipment and generally depreciated in line with the fleet to which they relate.
Certain major overhaul expenditure, including replacement spares and labour costs, is capitalised and amortised over the average expected
life between major overhauls. All other replacement spares and other costs relating to maintenance of fleet assets (including maintenance
provided under ‘pay-as-you-go’ contracts) are charged to the Income statement on consumption or as incurred respectively.
c Other property, plant and equipment
Provision is made for the depreciation of all property, plant and equipment. Property, with the exception of freehold land, is depreciated
over its expected useful life over periods not exceeding 50 years, or in the case of leasehold properties, over the duration of the lease if
shorter, on a straight-line basis. Equipment is depreciated over periods ranging from 4 to 20 years.
d Leases
The Group leases various aircraft, properties, equipment and other assets. The lease terms of these assets are consistent with the
determined useful economic life of similar assets within property, plant and equipment.
At inception of a contract, the Group assesses whether a contract is, or contains, a lease. A contract is, or contains, a lease if the contract
conveys the right to control the use of an identified tangible asset for a period of time in exchange for consideration. The Group has elected
not to apply such consideration where the contract relates to an intangible asset, in which case payments associated with the contract are
expensed as incurred.
Leases are recognised as a ROU asset and a corresponding lease liability at the date at which the leased asset is available for use by the
Group.
Right of use assets
At the lease commencement date a ROU asset is measured at cost comprising the following: the amount of the initial measurement of the
lease liability; any lease payments made at or before the commencement date less any lease incentives received; and any initial direct costs.
In addition, at the lease commencement date a ROU asset will incorporate unavoidable restoration costs to return the asset to its original
condition, for which a corresponding amount is recognised within Provisions. The ROU asset is depreciated over the shorter of the asset's
useful life and the lease term on a straight-line basis. If ownership of the ROU asset transfers to the Group at the end of the lease term or
the cost reflects the exercise of a purchase option, depreciation is calculated using the estimated useful life of the asset.
Lease liabilities
Lease liabilities are initially measured at their present value, which includes the following lease payments: fixed payments (including in-
substance fixed payments), less any lease incentives receivable; variable lease payments that are based on an index or a rate; amounts
expected to be payable by the Group under residual value guarantees; the exercise price of a purchase option if the Group is reasonably
certain to exercise that option; payments of penalties for terminating the lease, if the lease term reflects the Group exercising that option;
and payments to be made under reasonably certain extension options.
The lease payments are discounted using the interest rate implicit in the lease. The interest rate implicit in the lease is the discount rate that,
at the inception of the lease, causes the aggregate present value of the minimum lease payments and the unguaranteed residual value to
be equal to the fair value of the leased asset and any initial indirect costs of the lessor. For aircraft leases these inputs are either observable
in the contract or readily available from external market data. The initial direct costs of the lessor are considered to be immaterial. If the
interest rate implicit in the lease cannot be determined, the Group entity’s incremental borrowing rate is used.
Each lease payment is allocated between the principal and finance cost. The finance cost is charged to the Income statement over the lease
period so as to produce a constant periodic rate of interest on the remaining balance of the lease liability for each period. After the
commencement date, the amount of lease liabilities is increased to reflect the accretion of interest and reduced for the lease payments
made.
The carrying amount of lease liabilities is remeasured if there is a modification of the lease contract, a re-assessment of the lease term
(specifically in regard to assumptions regarding extension and termination options) and changes in variable lease payments that are based
on an index or a rate.
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INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021
199
NOTES TO THE ACCOUNTS CONTINUED
For the year to December 31, 2021
2
Significant accounting policies continued
The Group has elected not to recognise ROU assets and lease liabilities for short-term leases that have a lease term of 12 months or less and
those leases of low-value assets. Payments associated with short-term leases and leases of low-value assets are recognised on a straight-
line basis as an expense in the Income statement. Short-term leases are leases with a lease term of 12 months or less, that do not contain a
purchase option. Low-value assets comprise IT equipment and small items of office furniture.
The Group is exposed to potential future increases in variable lease payments based on an index or rate, which are not included in the lease
liability until they take effect. When adjustments to lease payments based on an index or rate take effect, the lease liability is re-assessed
and adjusted against the ROU asset. Extension options are included in a number of aircraft, property and equipment leases across the
Group and are reflected in the lease payments where the Group is reasonably certain that it will exercise the option. The Group is also
exposed to variable lease payments based on usage or revenue generated over a defined period. Such variable lease payments are
expensed to the Income statement as incurred.
The Group regularly uses sale and lease transactions to finance the acquisition of aircraft. Each transaction is assessed as to whether it
meets the criteria within IFRS 15 ‘Revenue from contracts with customers’ for a sale to have occurred. If a sale has occurred, then the
associated asset is de-recognised and a ROU asset and lease liability are recognised. The ROU asset recognised is based on the proportion
of the previous carrying amount of the asset that is retained. Any gain or loss is restricted to the amount that relates to the rights that have
been transferred to the counter-party to the transaction. Where a sale has not occurred, the asset is retained on the balance sheet within
Property, plant and equipment and an asset financed liability recognised equal to the financing proceeds. The principal criteria for assessing
whether a sale has occurred or not, is whether the contract contains the option, at the discretion of the Group, to repurchase the aircraft
over the lease term; with the existence of such a repurchase option resulting in a sale having been deemed not to have occurred, and; if no
such repurchase option exists, then a sale is deemed to have occurred.
Cash flow presentation
Lease payments are presented as follows in the Consolidated cash flow statement: the proceeds received from sale and leaseback
transactions are presented within cash flows from investing activities; the repayments of the principal element of lease liabilities are
presented within cash flows from financing activities; the payments of the interest element of lease liabilities are included within cash flows
from operating activities; and the payments arising from variable elements of a lease, short-term leases and low-value assets are presented
within cash flows from operating activities.
COVID-19 related rent concessions
On May 28, 2020, the IASB issued ‘COVID-19 Related Rent Concessions – amendments to IFRS 16 Leases’. The EU subsequently adopted
the amendment on October 9, 2020. The amendment provides a practical expedient for lessees, up to June 30, 2021, not to assess whether
a COVID-19 related rent concession is a lease modification. On March 31, 2021, the IASB extended the period for the application of these
concessions through to June 30, 2022. The EU subsequently adopted the amendment on August 31, 2021. The extended amendment is
effective for annual reporting periods commencing on or after April 1, 2021 and the Group has elected to adopt this amendment for the year
to December 31, 2021.
Lessor accounting
From time to time the Group will lease, to third parties, specific assets, including certain property, plant and equipment. On inception of the
lease, the Group determines whether each lease is a finance lease or an operating lease.
In order to make this determination, the Group assesses whether the lease transfers substantially all of the risks and rewards of ownership
to the lessee. Factors in making this assessment include, but are not limited to, whether the lease term is for the major part of the economic
life of the underlying asset and whether the underlying asset transfers to the lessee or the lessee has the option to purchase the underlying
asset at the end of the lease. Where substantially all of the risks and rewards of ownership have been transferred, then the lease is recorded
as a finance lease, otherwise it is recorded as an operating lease.
Intangible assets
a Goodwill
Goodwill arises on the acquisition of subsidiaries, associates and joint ventures and represents the excess of the consideration paid over the
net fair value of the identifiable assets and liabilities of the acquiree. Where the net fair value of the identifiable assets and liabilities of the
acquiree is in excess of the consideration paid, a gain on bargain purchase is recognised immediately in the Income statement.
For the purpose of assessing impairment, goodwill is grouped at the lowest levels for which there are separately identifiable cash flows
(cash generating units). Goodwill is tested for impairment annually and whenever indicators exist that the carrying value may not be
recoverable.
b Brands
Brands arising on the acquisition of subsidiaries are initially recognised at fair value at the acquisition date. Long-established brands that are
expected to be used indefinitely are not amortised but assessed annually for impairment.
c Customer loyalty programmes
Customer loyalty programmes arising on the acquisition of subsidiaries are initially recognised at fair value at the acquisition date. A
customer loyalty programme with an expected useful life is amortised over the expected remaining useful life. Established customer loyalty
programmes that are expected to be used indefinitely are not amortised but assessed annually for impairment.
d Landing rights
Landing rights acquired in a business combination are recognised at fair value at the acquisition date. Landing rights acquired from other
airlines are capitalised at cost.
Capitalised landing rights based outside of the United Kingdom and the EU are amortised on a straight-line basis over a period not
exceeding 20 years. Capitalised landing rights based within the United Kingdom and the EU are not amortised, as regulations provide that
these landing rights are perpetual.
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200 INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021
Financial Statements NOTES TO THE ACCOUNTS CONTINUED
For the year to December 31, 2021
2
Significant accounting policies continued
The Group has elected not to recognise ROU assets and lease liabilities for short-term leases that have a lease term of 12 months or less and
those leases of low-value assets. Payments associated with short-term leases and leases of low-value assets are recognised on a straight-
line basis as an expense in the Income statement. Short-term leases are leases with a lease term of 12 months or less, that do not contain a
purchase option. Low-value assets comprise IT equipment and small items of office furniture.
The Group is exposed to potential future increases in variable lease payments based on an index or rate, which are not included in the lease
liability until they take effect. When adjustments to lease payments based on an index or rate take effect, the lease liability is re-assessed
and adjusted against the ROU asset. Extension options are included in a number of aircraft, property and equipment leases across the
Group and are reflected in the lease payments where the Group is reasonably certain that it will exercise the option. The Group is also
exposed to variable lease payments based on usage or revenue generated over a defined period. Such variable lease payments are
expensed to the Income statement as incurred.
The Group regularly uses sale and lease transactions to finance the acquisition of aircraft. Each transaction is assessed as to whether it
meets the criteria within IFRS 15 ‘Revenue from contracts with customers’ for a sale to have occurred. If a sale has occurred, then the
associated asset is de-recognised and a ROU asset and lease liability are recognised. The ROU asset recognised is based on the proportion
of the previous carrying amount of the asset that is retained. Any gain or loss is restricted to the amount that relates to the rights that have
been transferred to the counter-party to the transaction. Where a sale has not occurred, the asset is retained on the balance sheet within
Property, plant and equipment and an asset financed liability recognised equal to the financing proceeds. The principal criteria for assessing
whether a sale has occurred or not, is whether the contract contains the option, at the discretion of the Group, to repurchase the aircraft
over the lease term; with the existence of such a repurchase option resulting in a sale having been deemed not to have occurred, and; if no
such repurchase option exists, then a sale is deemed to have occurred.
Cash flow presentation
Lease payments are presented as follows in the Consolidated cash flow statement: the proceeds received from sale and leaseback
transactions are presented within cash flows from investing activities; the repayments of the principal element of lease liabilities are
presented within cash flows from financing activities; the payments of the interest element of lease liabilities are included within cash flows
from operating activities; and the payments arising from variable elements of a lease, short-term leases and low-value assets are presented
within cash flows from operating activities.
COVID-19 related rent concessions
On May 28, 2020, the IASB issued ‘COVID-19 Related Rent Concessions – amendments to IFRS 16 Leases’. The EU subsequently adopted
the amendment on October 9, 2020. The amendment provides a practical expedient for lessees, up to June 30, 2021, not to assess whether
a COVID-19 related rent concession is a lease modification. On March 31, 2021, the IASB extended the period for the application of these
concessions through to June 30, 2022. The EU subsequently adopted the amendment on August 31, 2021. The extended amendment is
effective for annual reporting periods commencing on or after April 1, 2021 and the Group has elected to adopt this amendment for the year
From time to time the Group will lease, to third parties, specific assets, including certain property, plant and equipment. On inception of the
lease, the Group determines whether each lease is a finance lease or an operating lease.
In order to make this determination, the Group assesses whether the lease transfers substantially all of the risks and rewards of ownership
to the lessee. Factors in making this assessment include, but are not limited to, whether the lease term is for the major part of the economic
life of the underlying asset and whether the underlying asset transfers to the lessee or the lessee has the option to purchase the underlying
asset at the end of the lease. Where substantially all of the risks and rewards of ownership have been transferred, then the lease is recorded
as a finance lease, otherwise it is recorded as an operating lease.
Goodwill arises on the acquisition of subsidiaries, associates and joint ventures and represents the excess of the consideration paid over the
net fair value of the identifiable assets and liabilities of the acquiree. Where the net fair value of the identifiable assets and liabilities of the
acquiree is in excess of the consideration paid, a gain on bargain purchase is recognised immediately in the Income statement.
For the purpose of assessing impairment, goodwill is grouped at the lowest levels for which there are separately identifiable cash flows
(cash generating units). Goodwill is tested for impairment annually and whenever indicators exist that the carrying value may not be
Brands arising on the acquisition of subsidiaries are initially recognised at fair value at the acquisition date. Long-established brands that are
expected to be used indefinitely are not amortised but assessed annually for impairment.
c Customer loyalty programmes
Customer loyalty programmes arising on the acquisition of subsidiaries are initially recognised at fair value at the acquisition date. A
customer loyalty programme with an expected useful life is amortised over the expected remaining useful life. Established customer loyalty
programmes that are expected to be used indefinitely are not amortised but assessed annually for impairment.
d Landing rights
airlines are capitalised at cost.
these landing rights are perpetual.
Landing rights acquired in a business combination are recognised at fair value at the acquisition date. Landing rights acquired from other
Capitalised landing rights based outside of the United Kingdom and the EU are amortised on a straight-line basis over a period not
exceeding 20 years. Capitalised landing rights based within the United Kingdom and the EU are not amortised, as regulations provide that
to December 31, 2021.
Lessor accounting
Intangible assets
a Goodwill
recoverable.
b Brands
e Contract-based intangibles
Contract-based intangibles acquired in a business combination are recognised initially at fair value at the acquisition date and amortised
over the remaining life of the contract.
f
Software
The cost to purchase or develop computer software that is separable from an item of related hardware is capitalised separately and
amortised on a straight-line basis generally over a period not exceeding five years, with certain specific software developments amortised
over a period of up to ten years.
g Emissions allowances
Where an operating company purchases emissions allowances, such that it has a surplus of allowances when compared to the amount
required to discharge its obligations to the relevant authorities, these amounts are recognised at cost and recorded within Other intangible
assets. Emissions allowances recorded within Other intangible assets are not revalued or amortised but are tested for impairment whenever
indicators exist that the carrying value may not be recoverable. Where an operating company has a deficit of allowances compared to the
amount required to discharge its obligations to the relevant authorities, the Group recognises a provision for the outstanding amount,
measured at the market price of such an allowance at the reporting date.
From time to time the Group enters into sale and repurchase transactions for specified emission allowances. Such transactions do not meet
the recognition criteria of a sale under IFRS 15 and accordingly the asset is retained on the balance sheet within Intangible assets and an
Other financing liability recognised equal to the proceeds received.
Impairment of non-financial assets
Assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment. Assets that are subject to
amortisation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be
recoverable. An impairment loss is recognised for the value by which the asset’s carrying value exceeds its recoverable amount. The
recoverable amount is the higher of an asset’s fair value less cost to sell and value-in-use. Non-financial assets other than goodwill that were
subject to an impairment are reviewed for possible reversal of the impairment at each reporting date.
a Property, plant and equipment, including Right of use assets
The carrying value is reviewed for impairment when events or changes in circumstances indicate the carrying value may not be recoverable
and the cumulative impairment losses are shown as a reduction in the carrying value of property, plant and equipment.
b
Intangible assets
Intangible assets are held at cost and are either amortised on a straight-line basis over their economic life, or they are deemed to have an
indefinite economic life and are not amortised. Indefinite life intangible assets are tested annually for impairment or more frequently if
events or changes in circumstances indicate the carrying value may not be recoverable.
Investments in associates and joint ventures
An associate is an undertaking in which the Group has a long-term equity interest and over which it has the power to exercise significant
influence. Where the Group cannot exercise control over an entity in which it has a shareholding greater than 51 per cent, the equity interest
is treated as an associated undertaking.
A joint venture is a type of joint arrangement whereby the parties that have joint control of the arrangement have rights to the net assets of
the joint venture. Joint control is the contractually agreed sharing of control of an arrangement, which exists only when decisions about the
relevant activities require unanimous consent of the parties sharing control. The considerations made in determining significant influence or
joint control are similar to those necessary to determine control over subsidiaries.
Investments in associates and joint ventures are accounted for using the equity method, and initially recognised at cost. The Group’s
interest in the net assets of associates and joint ventures is included in Investments accounted for using the equity method in the Balance
sheet and its interest in their results is included in the Income statement, below operating result. The attributable results of those companies
acquired or disposed of during the year are included for the periods of ownership.
Financial instruments
a Other equity investments
Other equity investments are non-derivative financial assets including listed and unlisted investments, excluding interests in associates and
joint ventures. On initial recognition, these equity investments are irrevocably designated as measured at fair value through Other
comprehensive income. They are subsequently measured at fair value, with changes in fair value recognised in Other comprehensive
income with no recycling of these gains and losses to the Income statement when the investment is sold. Dividends received on other
equity investments are recognised in the Income statement.
The fair value of quoted investments is determined by reference to bid prices at the close of business on the balance sheet date. Where
there is no active market, fair value is determined using valuation techniques.
b
Interest-bearing deposits
Interest-bearing deposits, principally comprising funds held with banks and other financial institutions with contractual cash flows that are
solely payments of principal and interest, and held in order to collect contractual cash flows, are carried at amortised cost using the
effective interest method.
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INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021
201
NOTES TO THE ACCOUNTS CONTINUED
For the year to December 31, 2021
2
Significant accounting policies continued
c Derivative and non-derivative financial instruments and hedging activities
Derivative financial instruments, comprising interest rate swap derivatives, foreign exchange derivatives and fuel hedging derivatives
(including options, swaps and forward contracts) are initially recognised at fair value on the date a derivative contract is entered into and
are subsequently remeasured at their fair value. They are classified as financial instruments through the Income statement. The method of
recognising the resulting gain or loss arising from remeasurement depends on whether the derivative is designated as a hedging
instrument, and if so, the nature of the item being hedged (as detailed below under cash flow hedges). The time value of options is
excluded from the designated hedging instrument and accounted for as a cost of hedging. Movements in the time value of options are
recognised in Other comprehensive income until the underlying transaction affects the Income statement.
When forward contracts are used to hedge forecast transactions, the Group generally designates only the spot component of the forward
contract as the hedging instrument within a hedge relationship. Gains or losses arising on the change in fair value of the spot component
are recognised within Other comprehensive income in the cash flow hedge reserve within equity. The forward component of a forward
contract is not designated within a hedge relationship, with the associated gains and losses on the forward component recorded within
Other comprehensive income in the Cost of hedging reserve within equity until the underlying transaction affects the Income statement.
To manage foreign exchange movements on foreign currency revenues (denominated in US dollars, euros, Japanese yen and Chinese
yuan), certain non-derivative repayment instalments on foreign currency-denominated interest-bearing liabilities are designated as hedging
instruments within a hedge relationship. Revaluations arising from movements in foreign exchange rates are recorded within Other
comprehensive income in the cash flow hedge reserve. Accumulated gains or losses within the cash flow hedge reserve are reclassified to
Passenger revenue in the same period as the forecast transaction occurs or when hedge accounting is discontinued when the forecast
transaction is no longer expected to occur.
When a derivative is designated as a hedging instrument and that instrument expires, is sold or is restructured, if the initial forecast
transaction is still expected to occur, any cumulative gain or loss remains in the cash flow hedge reserve until such time as the hedge item
impacts the Income statement. Where there is a change in the risk management objective, then hedge accounting is discontinued and the
associated cumulative gain or loss arising prior to the change in risk management objective remains in the cash flow hedge reserve until
such time as the underlying hedged item impacts the Income statement had the risk management objective continued to have been met.
Where a forecast transaction which was previously determined to be highly probable and for which hedge accounting applied, is no longer
expected to occur, hedge accounting is discontinued and the cumulative gain or loss in the cash flow hedge reserve is immediately
reclassified to the Income statement.
The Group enters into foreign currency derivative contracts, that are not designated in a hedge relationship, in order to mitigate foreign
exchange movements on financial liabilities designated in currencies other than the presentational currency of the Group, including but not
limited to, lease liabilities. Movements in the fair value of such derivatives are recognised in the Income statement in the period in which they
occur and are presented within Net currency retranslation (charges)/credits.
Exchange gains and losses on monetary investments are taken to the Income statement unless the item has been designated and is
assessed as an effective hedging instrument. Exchange gains and losses on non-monetary investments are reflected in equity.
d Cash flow hedges
Changes in the fair value of derivative financial instruments designated as in a hedge relationship of a highly probable expected future
transaction are assessed for effectiveness and accordingly recorded in the Cash flow hedge reserve within equity.
Hedge effectiveness
Hedge effectiveness is determined at the inception of the hedge relationship, and through periodic prospective effectiveness assessments,
to ensure that an economic relationship exists between the hedged item and hedging instrument. A hedging relationship qualifies for
hedge accounting if it meets all of the following effectiveness requirements: (i) there is ‘an economic relationship’ between the hedged item
and the hedging instrument; (ii) the effect of credit risk does not dominate the value changes that result from that economic relationship;
and (iii) the hedge ratio is aligned with the requirements of the Group’s risk management strategy and in all instances is maintained at a
ratio of 1:1.
Sources of ineffectiveness include the following:
• In hedges of fuel purchases, ineffectiveness may arise if the timing of the forecast transaction changes from what was originally
estimated, or if there are changes in the credit risk of the Group or the derivative counterparty;
• In hedges of foreign currency purchases, ineffectiveness may arise if the timing of the forecast transaction changes from what was
originally estimated, or if there are changes in the credit risk of the Group or the derivative counterparty; and
• In hedges of interest rate payments, ineffectiveness may arise if there are differences in the critical terms between the interest rate
derivative instrument and the underlying hedged item, or if there are changes in the credit risk of the Group or the derivative
counterparty.
Ineffectiveness is recorded within the Income statement as Realised/unrealised (losses)/gains on derivatives not qualifying for hedge
accounting and presented within Other non-operating charges.
Reclassification adjustments
Gains and losses accumulated in the Cash flow hedge reserve within equity are reclassified from the Cash flow hedge reserve when the
hedged item affects the Income statement as follows:
• Where the forecast hedged item results in the recognition of revenue or expenses within the Income statement (such as the purchase of
jet fuel for which both fuel and the associated foreign currency derivatives are designated as the hedging instrument), the accumulated
gains and losses recorded in both the cash flow hedge reserve and the cost of hedging reserve are reclassified and included in the
Income statement within the same caption as the hedged item is presented. Such reclassification occurs in the same period as the
hedged item is recognised;
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202 INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021
Financial Statements
NOTES TO THE ACCOUNTS CONTINUED
For the year to December 31, 2021
2
Significant accounting policies continued
c Derivative and non-derivative financial instruments and hedging activities
Derivative financial instruments, comprising interest rate swap derivatives, foreign exchange derivatives and fuel hedging derivatives
(including options, swaps and forward contracts) are initially recognised at fair value on the date a derivative contract is entered into and
are subsequently remeasured at their fair value. They are classified as financial instruments through the Income statement. The method of
recognising the resulting gain or loss arising from remeasurement depends on whether the derivative is designated as a hedging
instrument, and if so, the nature of the item being hedged (as detailed below under cash flow hedges). The time value of options is
excluded from the designated hedging instrument and accounted for as a cost of hedging. Movements in the time value of options are
recognised in Other comprehensive income until the underlying transaction affects the Income statement.
When forward contracts are used to hedge forecast transactions, the Group generally designates only the spot component of the forward
contract as the hedging instrument within a hedge relationship. Gains or losses arising on the change in fair value of the spot component
are recognised within Other comprehensive income in the cash flow hedge reserve within equity. The forward component of a forward
contract is not designated within a hedge relationship, with the associated gains and losses on the forward component recorded within
Other comprehensive income in the Cost of hedging reserve within equity until the underlying transaction affects the Income statement.
To manage foreign exchange movements on foreign currency revenues (denominated in US dollars, euros, Japanese yen and Chinese
yuan), certain non-derivative repayment instalments on foreign currency-denominated interest-bearing liabilities are designated as hedging
instruments within a hedge relationship. Revaluations arising from movements in foreign exchange rates are recorded within Other
comprehensive income in the cash flow hedge reserve. Accumulated gains or losses within the cash flow hedge reserve are reclassified to
Passenger revenue in the same period as the forecast transaction occurs or when hedge accounting is discontinued when the forecast
transaction is no longer expected to occur.
When a derivative is designated as a hedging instrument and that instrument expires, is sold or is restructured, if the initial forecast
transaction is still expected to occur, any cumulative gain or loss remains in the cash flow hedge reserve until such time as the hedge item
impacts the Income statement. Where there is a change in the risk management objective, then hedge accounting is discontinued and the
associated cumulative gain or loss arising prior to the change in risk management objective remains in the cash flow hedge reserve until
such time as the underlying hedged item impacts the Income statement had the risk management objective continued to have been met.
Where a forecast transaction which was previously determined to be highly probable and for which hedge accounting applied, is no longer
expected to occur, hedge accounting is discontinued and the cumulative gain or loss in the cash flow hedge reserve is immediately
reclassified to the Income statement.
The Group enters into foreign currency derivative contracts, that are not designated in a hedge relationship, in order to mitigate foreign
exchange movements on financial liabilities designated in currencies other than the presentational currency of the Group, including but not
limited to, lease liabilities. Movements in the fair value of such derivatives are recognised in the Income statement in the period in which they
occur and are presented within Net currency retranslation (charges)/credits.
Exchange gains and losses on monetary investments are taken to the Income statement unless the item has been designated and is
assessed as an effective hedging instrument. Exchange gains and losses on non-monetary investments are reflected in equity.
d Cash flow hedges
Hedge effectiveness
Hedge effectiveness is determined at the inception of the hedge relationship, and through periodic prospective effectiveness assessments,
to ensure that an economic relationship exists between the hedged item and hedging instrument. A hedging relationship qualifies for
hedge accounting if it meets all of the following effectiveness requirements: (i) there is ‘an economic relationship’ between the hedged item
and the hedging instrument; (ii) the effect of credit risk does not dominate the value changes that result from that economic relationship;
and (iii) the hedge ratio is aligned with the requirements of the Group’s risk management strategy and in all instances is maintained at a
ratio of 1:1.
Sources of ineffectiveness include the following:
• In hedges of fuel purchases, ineffectiveness may arise if the timing of the forecast transaction changes from what was originally
estimated, or if there are changes in the credit risk of the Group or the derivative counterparty;
• In hedges of foreign currency purchases, ineffectiveness may arise if the timing of the forecast transaction changes from what was
originally estimated, or if there are changes in the credit risk of the Group or the derivative counterparty; and
• In hedges of interest rate payments, ineffectiveness may arise if there are differences in the critical terms between the interest rate
derivative instrument and the underlying hedged item, or if there are changes in the credit risk of the Group or the derivative
counterparty.
Ineffectiveness is recorded within the Income statement as Realised/unrealised (losses)/gains on derivatives not qualifying for hedge
accounting and presented within Other non-operating charges.
Reclassification adjustments
hedged item affects the Income statement as follows:
Gains and losses accumulated in the Cash flow hedge reserve within equity are reclassified from the Cash flow hedge reserve when the
• Where the forecast hedged item results in the recognition of revenue or expenses within the Income statement (such as the purchase of
jet fuel for which both fuel and the associated foreign currency derivatives are designated as the hedging instrument), the accumulated
gains and losses recorded in both the cash flow hedge reserve and the cost of hedging reserve are reclassified and included in the
Income statement within the same caption as the hedged item is presented. Such reclassification occurs in the same period as the
hedged item is recognised;
• Where the forecast hedged item results in the recognition of a non-financial asset (such as the purchase of aircraft for which foreign
currency derivatives are designated as the hedging instrument), the accumulated gains and losses recorded within both the cash flow
hedge reserve and the cost of hedging reserve are included in the initial cost of the asset. These gains or losses are recorded in the
Income statement as the non-financial asset affects the Income statement (which for aircraft is through Depreciation over the expected
life of the aircraft); and
• Where the forecast hedged items results in the recognition of a financial asset or liability (such as variable rate debt for which interest
rate swaps are designated as the hedging instrument), the accumulated gains and losses recorded within the cash flow hedge reserve
are reclassified to Interest expense within the Income statement at the same time as the interest expense arises on the hedged item.
Further information on the risk management activities of the Group are given in note 28d.
e Long-term borrowings
Long-term borrowings are recorded at amortised cost, including lease liabilities which contain interest rate swaps that are closely related to
the underlying financing and as such are not accounted for as an embedded derivative.
f Convertible debt
Convertible bonds are classified as either compound financial instruments or hybrid financial instruments depending on the settlement
alternatives upon redemption. Where the bondholders exercise their equity conversion options and the Group has no alternative other than
to settle the convertible bonds into a fixed number of ordinary shares of the Company, then the bonds are classified as a compound
financial instrument. Where the Group has an alternative settlement mechanism to the convertible bonds that permits settlement in cash,
then the convertible instrument is classified as a hybrid financial instrument.
Convertible bonds that are classified as compound financial instruments consist of a liability and an equity component. At the date of issue,
the fair value of the liability component is estimated using the prevailing market interest rate for similar non-convertible debt, and is
subsequently recorded at an amortised cost basis using the effective interest method until extinguished on conversion or maturity of the
bonds, and is recognised within Long-term borrowings. The difference between the proceeds of issue of the convertible bond and the fair
value assigned to the liability component, representing the embedded option to convert the liability into equity of the Group, is included in
the equity portion of the convertible bond in Other reserves and is not subsequently remeasured. The interest expense on the liability
component is calculated by applying the effective interest rate for similar non-convertible debt to the liability component of the instrument.
The difference between this value and the interest paid is added to the carrying amount of the liability.
Convertible bonds that are classified as hybrid financial instruments consist only of a liability component recognised within Long-term
borrowings. At the date of issue, the entirety of the convertible bonds is accounted for at fair value with subsequent fair value gains or
losses recorded within Long-term borrowings. The fair value of such financial instruments is obtained from their respective quoted prices in
active markets, with the portion of the change in fair value attributable to changes in the credit risk of the convertible bonds recognised in
Other comprehensive income and the portion of the change in fair value attributable to market conditions recognised in the Income
statement within Finance costs.
Issue costs associated with compound financial instruments are apportioned between the liability and equity components of the
convertible bonds where appropriate based on their relative carrying values at the date of issue. The portion relating to the equity
component is charged directly against equity. Issue costs associated with hybrid financial instruments are expensed immediately to the
Income statement.
Changes in the fair value of derivative financial instruments designated as in a hedge relationship of a highly probable expected future
transaction are assessed for effectiveness and accordingly recorded in the Cash flow hedge reserve within equity.
g
Impairment of financial assets
At each balance sheet date, the Group recognises provisions for expected credit losses on financial assets measured at amortised cost,
based on 12-month or lifetime losses depending on whether there has been a significant increase in credit risk since initial recognition. The
simplified approach, based on the calculation and recognition of lifetime expected credit losses, is applied to contracts that have a maturity
of one year or less, including trade receivables.
When determining whether there has been a significant increase in credit risk since initial recognition and when estimating the expected
credit loss, the Group considers reasonable and supportable information that is relevant and available. This includes both quantitative and
qualitative information and analysis, based on the Group's historical experience and informed credit assessment, including forward-looking
information. Such forward-looking information takes into consideration the forecast economic conditions expected to impact the
outstanding balances at the balance sheet date. A financial asset is written off when there is no reasonable expectation of recovery, such as
the customer having filed for liquidation.
h
Interest rate benchmark reform
In 2020 the Group adopted the amendments to IFRS 9 and IFRS 7 relating to the interest rate benchmark reform Phase 1, (‘Phase 1’) and in
2021 the Group has adopted the amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16 relating to the interest rate benchmark reform
Phase 2, (‘Phase 2’).
The Phase 1 amendments provide temporary relief from applying certain hedge accounting requirements to hedging relationships directly
affected by IBOR reform. The reliefs have the effect that IBOR reform does not cause hedge accounting to terminate prior to contracts
being amended. Where transition to an alternative benchmark rate has taken place, the Group ceases to apply the Phase 1 amendments
and instead applies the Phase 2 amendments.
Hedge accounting
Where the Group continues to apply the Phase 1 amendments, the following reliefs are applied:
• when considering the highly probable requirement, the Group has assumed that those benchmark rates that need to be transitioned to
an alternative benchmark rate, on which the Group’s hedged long-term borrowings are based, do not change as a result of IBOR reform;
• in assessing whether the hedge is expected to be highly effective on a forward-looking basis the Group has assumed that those
benchmark rates that need to be transitioned to an alternative benchmark rate, on which the cash flows of the hedged long-term
borrowings and the interest rate swaps that hedge them are based, are not altered by IBOR reform; and
• the Group has not recycled the cash flow hedge reserve relating to the period after the IBOR reform is expected to take effect.
202
203
INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021 203
NOTES TO THE ACCOUNTS CONTINUED
For the year to December 31, 2021
2
Significant accounting policies continued
When the Group ceases to apply the Phase 1 amendments, the Group amends its hedge designation to reflect changes which are required
by IBOR reform, but only to make one or more of the following changes:
• designating an alternative benchmark rate (contractually or non-contractually specified) as the hedged risk;
• amending the description of the hedged item, including the description of the designated portion of the cash flows being hedged; or
• amending the description of the hedging instrument.
The associated hedge documentation is updated to reflect these changes in designation by the end of the reporting period in which the
changes are made. Such amendments do not give rise to the hedge relationship being discontinued.
When the Group transitions to an alternative benchmark rate, the accumulated amounts within the cash flow hedge reserve are determined
to be based on the alternative benchmark rate and no reclassification adjustments are made from the cash flow hedge reserve to the
Income statement.
Long-term borrowings and lease liabilities
Phase 2 of the amendments requires that, for financial instruments measured using amortised cost measurement, changes to the basis for
determining the contractual cash flows required by interest rate benchmark reform are reflected by adjusting their effective interest rate
prospectively. No gain or loss is recognised upon transition to the new benchmark. The expedient is only applicable to direct changes that
are required by interest rate benchmark reform.
For lease liabilities where there is a change to the basis for determining the contractual cash flows, as a practical expedient the lease liability
is remeasured by discounting the revised lease payments using a discount rate that reflects the change in the interest rate where the
change is required by IBOR reform.
Further information on the management of and uncertainty arising from interest rate reform is given in note 27i. No amounts have been
recorded in the current or prior periods as a result of these amendments.
Employee benefit plans
a Pension obligations
The Group has both defined benefit and defined contribution plans. A defined contribution plan is a pension plan under which the Group
pays fixed contributions into a separate entity. The Group has no legal or constructive obligations to pay further contributions if the fund
does not hold sufficient assets to pay all employees the benefits relating to employee service in the current and prior years.
Typically defined benefit plans define an amount of pension benefit that an employee will receive on retirement, usually dependent on one
or more factors such as age, years of service and compensation.
The Group’s net obligation in respect of defined benefit pension plans is calculated separately for each plan by estimating the amount of
future benefit that employees have earned in return for their service in the current and prior years. The benefit is discounted to determine
its present value, and the fair value of any plan assets are deducted. The discount rate is the yield at the balance sheet date on AA-rated
corporate bonds of the appropriate currency that have durations approximating those of the Group’s obligations. The calculation is
performed by a qualified actuary using the projected unit credit method. When the net obligation calculation results in an asset for the
Group, the recognition of an asset is limited to the present value of any future refunds, net of the relevant taxes, from the plan or reductions
in future contributions to the plan (‘the asset ceiling’). The fair value of the plan assets is based on market price information and, in the case
of quoted securities, is the published bid price. The fair value of insurance policies which exactly match the amount and timing of some or
all benefits payable under the scheme are deemed to be the present value of the related obligations. Longevity swaps are measured at their
fair value.
Current service costs are recognised within employee costs in the year in which they arise. Past service costs are recognised in the event of
a plan amendment or curtailment, or when the Group recognises related restructuring costs or severance obligations. The net interest is
calculated by applying the discount rate used to measure the defined benefit obligation at the beginning of the period to the net defined
benefit liability or asset, taking into account any changes in the net defined benefit liability or asset during the period as a result of
contributions and benefit payments. Net interest and other expenses related to the defined benefit plans are recognised in the Income
statement. Remeasurements, comprising IAS 19 gains and losses, the effect of the asset ceiling (excluding interest) and the return on plan
assets (excluding interest), are recognised immediately in Other comprehensive income. Remeasurements are not reclassified to the
Income statement in subsequent periods.
b Severance obligations
Severance obligations are recognised when employment is terminated by the Group before the normal retirement date, or whenever an
employee accepts voluntary redundancy in exchange for these benefits. The Group recognises a provision for severance payments when it
is demonstrably committed to either terminating the employment of current employees according to a detailed formal plan without
realistic possibility of withdrawal, or providing severance payments as a result of an offer made to encourage voluntary redundancy.
Other employee benefits are recognised when there is deemed to be a present obligation.
Taxation
Current income tax assets and liabilities are measured at the amount expected to be recovered from or paid to the taxation authorities,
based on tax rates and laws that are enacted or substantively enacted at the balance sheet date.
Deferred income tax is recognised on all temporary differences arising between the tax bases of assets and liabilities and their carrying
amounts in the financial statements, with the following exceptions:
• Where the temporary difference arises from the initial recognition of goodwill or of an asset or liability in a transaction that is not a
business combination that at the time of the transaction affects neither accounting nor taxable profit or loss;
• In respect of taxable temporary differences associated with investments in subsidiaries or associates, where the timing of the reversal of
the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future;
and
204
204 INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021
Financial Statements NOTES TO THE ACCOUNTS CONTINUED
For the year to December 31, 2021
2
Significant accounting policies continued
When the Group ceases to apply the Phase 1 amendments, the Group amends its hedge designation to reflect changes which are required
by IBOR reform, but only to make one or more of the following changes:
• designating an alternative benchmark rate (contractually or non-contractually specified) as the hedged risk;
• amending the description of the hedged item, including the description of the designated portion of the cash flows being hedged; or
• amending the description of the hedging instrument.
The associated hedge documentation is updated to reflect these changes in designation by the end of the reporting period in which the
changes are made. Such amendments do not give rise to the hedge relationship being discontinued.
Income statement.
Long-term borrowings and lease liabilities
Phase 2 of the amendments requires that, for financial instruments measured using amortised cost measurement, changes to the basis for
determining the contractual cash flows required by interest rate benchmark reform are reflected by adjusting their effective interest rate
prospectively. No gain or loss is recognised upon transition to the new benchmark. The expedient is only applicable to direct changes that
are required by interest rate benchmark reform.
For lease liabilities where there is a change to the basis for determining the contractual cash flows, as a practical expedient the lease liability
is remeasured by discounting the revised lease payments using a discount rate that reflects the change in the interest rate where the
change is required by IBOR reform.
Employee benefit plans
a Pension obligations
The Group has both defined benefit and defined contribution plans. A defined contribution plan is a pension plan under which the Group
pays fixed contributions into a separate entity. The Group has no legal or constructive obligations to pay further contributions if the fund
does not hold sufficient assets to pay all employees the benefits relating to employee service in the current and prior years.
Typically defined benefit plans define an amount of pension benefit that an employee will receive on retirement, usually dependent on one
or more factors such as age, years of service and compensation.
The Group’s net obligation in respect of defined benefit pension plans is calculated separately for each plan by estimating the amount of
future benefit that employees have earned in return for their service in the current and prior years. The benefit is discounted to determine
its present value, and the fair value of any plan assets are deducted. The discount rate is the yield at the balance sheet date on AA-rated
corporate bonds of the appropriate currency that have durations approximating those of the Group’s obligations. The calculation is
performed by a qualified actuary using the projected unit credit method. When the net obligation calculation results in an asset for the
Group, the recognition of an asset is limited to the present value of any future refunds, net of the relevant taxes, from the plan or reductions
in future contributions to the plan (‘the asset ceiling’). The fair value of the plan assets is based on market price information and, in the case
of quoted securities, is the published bid price. The fair value of insurance policies which exactly match the amount and timing of some or
all benefits payable under the scheme are deemed to be the present value of the related obligations. Longevity swaps are measured at their
fair value.
Current service costs are recognised within employee costs in the year in which they arise. Past service costs are recognised in the event of
a plan amendment or curtailment, or when the Group recognises related restructuring costs or severance obligations. The net interest is
calculated by applying the discount rate used to measure the defined benefit obligation at the beginning of the period to the net defined
benefit liability or asset, taking into account any changes in the net defined benefit liability or asset during the period as a result of
contributions and benefit payments. Net interest and other expenses related to the defined benefit plans are recognised in the Income
statement. Remeasurements, comprising IAS 19 gains and losses, the effect of the asset ceiling (excluding interest) and the return on plan
assets (excluding interest), are recognised immediately in Other comprehensive income. Remeasurements are not reclassified to the
Income statement in subsequent periods.
b Severance obligations
Severance obligations are recognised when employment is terminated by the Group before the normal retirement date, or whenever an
employee accepts voluntary redundancy in exchange for these benefits. The Group recognises a provision for severance payments when it
is demonstrably committed to either terminating the employment of current employees according to a detailed formal plan without
realistic possibility of withdrawal, or providing severance payments as a result of an offer made to encourage voluntary redundancy.
Other employee benefits are recognised when there is deemed to be a present obligation.
Taxation
and
Current income tax assets and liabilities are measured at the amount expected to be recovered from or paid to the taxation authorities,
based on tax rates and laws that are enacted or substantively enacted at the balance sheet date.
Deferred income tax is recognised on all temporary differences arising between the tax bases of assets and liabilities and their carrying
amounts in the financial statements, with the following exceptions:
• Where the temporary difference arises from the initial recognition of goodwill or of an asset or liability in a transaction that is not a
business combination that at the time of the transaction affects neither accounting nor taxable profit or loss;
• In respect of taxable temporary differences associated with investments in subsidiaries or associates, where the timing of the reversal of
the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future;
When the Group transitions to an alternative benchmark rate, the accumulated amounts within the cash flow hedge reserve are determined
to be based on the alternative benchmark rate and no reclassification adjustments are made from the cash flow hedge reserve to the
Cash and cash equivalents
• Deferred income tax assets are recognised only to the extent that it is probable that taxable profit will be available against which the
deductible temporary differences, carried forward tax credits or tax losses can be utilised.
Deferred income tax assets and liabilities are measured on an undiscounted basis at the tax rates that are expected to apply when the
related asset is realised or liability is settled, based on tax rates and laws enacted or substantively enacted at the balance sheet date.
Income tax is charged or credited directly to equity if it relates to items that are credited or charged to equity. Otherwise income tax is
recognised in the Income statement.
Inventories
Inventories are valued at the lower of cost and net realisable value. Such cost is determined by the weighted average cost method.
Inventories include mainly aircraft spare parts, repairable aircraft engine parts and fuel.
Cash and cash equivalents include cash in hand and deposits with any qualifying financial institution repayable on demand or maturing
within three months of the date of acquisition and which are subject to an insignificant risk of change in value.
Share-based payments
The Group operates a number of equity-settled, share-based payment plans, under which the Group awards equity instruments of the
Group for services rendered by employees. The fair value of the share-based payment plans is measured at the date of grant using a
valuation model provided by external specialists. The resulting cost, as adjusted for the expected and actual level of vesting of the plan, is
charged to the Income statement over the period in which the options vest. At each balance sheet date before vesting, the cumulative
expense is calculated, representing the extent to which the vesting period has expired and management’s best estimate of the achievement
or otherwise of non-market conditions, and accordingly the number of equity instruments that will ultimately vest. The movement in the
cumulative expense since the previous balance sheet date is recognised in the Income statement with a corresponding entry in equity.
Further information on the management of and uncertainty arising from interest rate reform is given in note 27i. No amounts have been
recorded in the current or prior periods as a result of these amendments.
Provisions
Provisions are made when an obligation exists for a present liability in respect of a past event and where the amount of the obligation can
be reliably estimated and where it is considered probable that an outflow of economic resources will be required to settle the obligation.
Where it is not considered probable that there will be an outflow of economic resources required to settle the obligation, the Group does
not recognise a provision, but discloses the matter as a contingent liability. The Group assesses whether each matter is probable of there
being an outflow of economic resources to settle the obligation at each reporting date.
Employee leaving indemnities and other employee provisions are recorded for flight crew who, meeting certain conditions, have the option
of being placed on reserve or of taking early retirement. The Group is obligated to remunerate these employees until they reach the
statutory retirement age. The calculation is performed by independent actuaries using the projected unit credit method.
Other employee-related provisions are recognised for direct expenditures of business reorganisation such as severance payments
(restructuring provisions) where plans are sufficiently detailed and well advanced, and where appropriate communication to those affected
has been undertaken at the balance sheet date.
Restoration and handback provisions arising on inception of a lease are recognised as a provision with a corresponding amount recognised
as part of the ROU asset. Any subsequent change in estimation relating to such costs are reflected in the ROU asset. Maintenance and
handback provisions that occur through usage or through the passage of time are recognised as such activity occurs, with a corresponding
expense recorded in the Income statement. Any subsequent change in estimation are recognised in the Income statement.
The method for determining legal claims provisions is determined on a claim-by-claim basis. Where a claim includes a significant population
of items, the weighted average provision is estimated by determining all potential outcomes and the probability of their occurrence. Where
a claim relates to a single item, then the Group determines the associated provision by applying the most likely outcome giving
consideration to alternative outcomes. Where an individual claim is significant, the disclosure of quantitative information is restricted to the
extent that it does not prejudice the outcome of the claim. If the effect is material, expected future cash flows are discounted using a rate
that reflects, where appropriate, the risks specific to the provision. Where discounting is used, the effect of unwinding the discount rate is
recognised as a finance cost in the Income statement.
Revenue recognition
Passenger revenue
The Group’s revenue primarily derives from transportation services for both passengers and cargo. Revenue is recognised when the
transportation service has been provided.
Passenger tickets are generally paid for in advance of transportation and are recognised, net of discounts, as Deferred revenue on ticket
sales in current liabilities until either the customer has flown or, for flexible tickets, when unused ticket revenue is recognised or the ticket
expires unused.
At the time of expected travel, revenue is recognised in relation to flexible tickets where a customer can reschedule the date of intended
travel, that are not expected to be used, a term referred to as ‘unused tickets’. This revenue is recognised based on the terms and
conditions of the ticket and analysis of historical experience. For these unused flexible tickets, revenue is recognised only when the risk
of a significant reversal of revenue is remote based on the terms and conditions of the ticket and analysis of historical experience. The
estimation regarding historical experience is updated at each reporting date.
204
205
INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021 205
NOTES TO THE ACCOUNTS CONTINUED
For the year to December 31, 2021
2
Significant accounting policies continued
Where a flight is cancelled, the passenger is entitled to either compensation, a refund, changing to an alternative flight or the receipt of a
voucher. Where compensation is issued to the customer, such payments are presented net within Passenger revenue against the original
ticket purchased. Where the Group provides a refund to a customer, Deferred revenue on ticket sales is reduced and no amount is
recorded within revenue. Where a voucher is issued it is retained within Deferred revenue on ticket sales until such time as it is redeemed
for a flight or it expires, at which time it is recorded within Passenger revenue. The Group also recognises revenue by estimating the amount
of vouchers that are not expected to be redeemed prior to expiry using analysis of historical experience. The estimation regarding historical
experience is updated at each reporting date. The amount of such revenue recognised is constrained, where necessary, such that the risk of
a significant reversal of revenue in the future is remote.
Payments received in relation to certain ancillary services regarding passenger transportation, such as change fees, are not considered to
be distinct from the performance obligation to provide the passenger flight. Payments relating to these ancillary services are recognised in
Deferred revenue on ticket sales in current liabilities until the customer has flown.
The Group considers whether it is an agent or a principal in relation to passenger transportation services by considering whether it has a
performance obligation to provide services to the customer or whether the obligation is to arrange for the services to be provided by a
third party. The Group acts as an agent where (i) it collects various taxes, duties and fees assessed on the sale of tickets to passengers and
remits these to the relevant taxing authorities; and (ii) where it provides interline services to airline partners outside of the Group.
Commissions earned in relation to agency services are recognised as revenue when the underlying goods or services have been transferred
to the customer. In all other instances, the Group considers it acts as the principal in relation to passenger transportation services.
Cargo revenue
The Group has identified a single performance obligation in relation to cargo services and the associated revenue is measured at its
standalone selling price and recognised on satisfaction of the performance obligation, which occurs on the fulfilment of the transportation
service.
Other revenue
The Group has identified several performance obligations in relation to services that give rise to revenue being recognised within Other
revenue. These services, their performance obligations and associated revenue recognition include:
• the provision of maintenance services and overhaul services for engines and airframes, where the Group is engaged to enhance an asset
while the customer retains control of the asset. Accordingly, the performance obligations are satisfied, and revenue recognised, over
time. The Group estimates the proportion of the contract completed at the reporting date and recognises revenue based on the
percentage of completion of the contract;
• the provision of ground handling services, where the performance obligations are fulfilled when the services are provided, which occurs
upon the provision of the service; and
• the provision of holiday and hotel services, where the performance obligations are satisfied over time as the customer receives the
benefit of the service.
Customer loyalty programmes
The Group operates four loyalty programmes: the British Airways Executive Club, Iberia Plus, Vueling Club and the Aer Lingus Aer Club.
The customer loyalty programmes award travellers Avios to redeem for various rewards, primarily redemption travel, including flights,
hotels and car hire. Avios are also sold to commercial partners to use in loyalty activity.
Avios issuance
When issued, the standalone selling price of an Avios is recorded within Deferred revenue on ticket sales in current liabilities until the
customer redeems the Avios. The standalone selling price of Avios is based on the value of the awards for which the points could be
redeemed. The Group also recognises revenue associated with the proportion of Avios which are not expected to be redeemed, referred
to as ‘breakage’, based on the results of modelling using historical experiences up until the reporting date. The amount of such revenue
recognised is limited, where necessary, such that the risk of a significant reversal of revenue in the future is remote.
Where the issuance of Avios arises from travel on the Group’s airlines, the consideration received from the customer may differ to the
aggregation of the relative standalone selling prices. In such instances the allocation of the consideration to each performance obligation
is undertaken using a proportional basis using the relative standalone selling prices.
The Group has contractual arrangements with non-Group airlines and non-air partners for the issuance and redemption of Avios, for which
it has identified the following performance obligations:
Brand and marketing activities
For both air and non-air partners, the Group licenses the Avios and the airline brands for certain activities, such as the creation of co-
branded credit cards. In addition, the Group has certain contractual arrangements whereby it commits to provide marketing services to the
members of the loyalty schemes on behalf of those partners. For both the provision of brand and marketing services, the partner receives
benefits incremental to the issuance of Avios. The Group estimates the standalone selling price of the brand and marketing performance
obligations, using valuation techniques, by reference to the amount that a third party would be prepared to pay in an arm’s length
transaction for access to comparable brands for the period over which they use the brand. For brand services, as the Group considers
that the partner has the right to use the brand, revenue is recognised as the brand service is provided and not over time. For marketing
performance obligations, revenue is recognised as the marketing activities occur based on when the partner receives the benefit of
those services.
Upfront payments
Where a partner makes an upfront payment to the Group which does not relate to any specific performance obligation, then the Group
considers such payments as advance payments for future goods and services and the associated revenue is recognised as those goods
and services are provided, as detailed above. In such instances the payment is allocated across all of the performance obligations over the
contract term. The Group estimates the expected level of Avios to be issued over the contract term using experience, historical and
expected future trends, and allocates the payments to the relevant performance obligations accordingly. At each reporting date, the Group
206
206 INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021
Financial Statements NOTES TO THE ACCOUNTS CONTINUED
For the year to December 31, 2021
2
Significant accounting policies continued
Where a flight is cancelled, the passenger is entitled to either compensation, a refund, changing to an alternative flight or the receipt of a
voucher. Where compensation is issued to the customer, such payments are presented net within Passenger revenue against the original
ticket purchased. Where the Group provides a refund to a customer, Deferred revenue on ticket sales is reduced and no amount is
recorded within revenue. Where a voucher is issued it is retained within Deferred revenue on ticket sales until such time as it is redeemed
for a flight or it expires, at which time it is recorded within Passenger revenue. The Group also recognises revenue by estimating the amount
of vouchers that are not expected to be redeemed prior to expiry using analysis of historical experience. The estimation regarding historical
experience is updated at each reporting date. The amount of such revenue recognised is constrained, where necessary, such that the risk of
a significant reversal of revenue in the future is remote.
Payments received in relation to certain ancillary services regarding passenger transportation, such as change fees, are not considered to
be distinct from the performance obligation to provide the passenger flight. Payments relating to these ancillary services are recognised in
Deferred revenue on ticket sales in current liabilities until the customer has flown.
The Group considers whether it is an agent or a principal in relation to passenger transportation services by considering whether it has a
performance obligation to provide services to the customer or whether the obligation is to arrange for the services to be provided by a
third party. The Group acts as an agent where (i) it collects various taxes, duties and fees assessed on the sale of tickets to passengers and
remits these to the relevant taxing authorities; and (ii) where it provides interline services to airline partners outside of the Group.
Commissions earned in relation to agency services are recognised as revenue when the underlying goods or services have been transferred
to the customer. In all other instances, the Group considers it acts as the principal in relation to passenger transportation services.
The Group has identified a single performance obligation in relation to cargo services and the associated revenue is measured at its
standalone selling price and recognised on satisfaction of the performance obligation, which occurs on the fulfilment of the transportation
Cargo revenue
service.
Other revenue
The Group has identified several performance obligations in relation to services that give rise to revenue being recognised within Other
revenue. These services, their performance obligations and associated revenue recognition include:
• the provision of maintenance services and overhaul services for engines and airframes, where the Group is engaged to enhance an asset
while the customer retains control of the asset. Accordingly, the performance obligations are satisfied, and revenue recognised, over
time. The Group estimates the proportion of the contract completed at the reporting date and recognises revenue based on the
• the provision of ground handling services, where the performance obligations are fulfilled when the services are provided, which occurs
• the provision of holiday and hotel services, where the performance obligations are satisfied over time as the customer receives the
percentage of completion of the contract;
upon the provision of the service; and
benefit of the service.
Customer loyalty programmes
The Group operates four loyalty programmes: the British Airways Executive Club, Iberia Plus, Vueling Club and the Aer Lingus Aer Club.
The customer loyalty programmes award travellers Avios to redeem for various rewards, primarily redemption travel, including flights,
hotels and car hire. Avios are also sold to commercial partners to use in loyalty activity.
Avios issuance
When issued, the standalone selling price of an Avios is recorded within Deferred revenue on ticket sales in current liabilities until the
customer redeems the Avios. The standalone selling price of Avios is based on the value of the awards for which the points could be
redeemed. The Group also recognises revenue associated with the proportion of Avios which are not expected to be redeemed, referred
to as ‘breakage’, based on the results of modelling using historical experiences up until the reporting date. The amount of such revenue
recognised is limited, where necessary, such that the risk of a significant reversal of revenue in the future is remote.
Where the issuance of Avios arises from travel on the Group’s airlines, the consideration received from the customer may differ to the
aggregation of the relative standalone selling prices. In such instances the allocation of the consideration to each performance obligation
is undertaken using a proportional basis using the relative standalone selling prices.
The Group has contractual arrangements with non-Group airlines and non-air partners for the issuance and redemption of Avios, for which
it has identified the following performance obligations:
Brand and marketing activities
For both air and non-air partners, the Group licenses the Avios and the airline brands for certain activities, such as the creation of co-
branded credit cards. In addition, the Group has certain contractual arrangements whereby it commits to provide marketing services to the
members of the loyalty schemes on behalf of those partners. For both the provision of brand and marketing services, the partner receives
benefits incremental to the issuance of Avios. The Group estimates the standalone selling price of the brand and marketing performance
obligations, using valuation techniques, by reference to the amount that a third party would be prepared to pay in an arm’s length
transaction for access to comparable brands for the period over which they use the brand. For brand services, as the Group considers
that the partner has the right to use the brand, revenue is recognised as the brand service is provided and not over time. For marketing
performance obligations, revenue is recognised as the marketing activities occur based on when the partner receives the benefit of
those services.
Upfront payments
Where a partner makes an upfront payment to the Group which does not relate to any specific performance obligation, then the Group
considers such payments as advance payments for future goods and services and the associated revenue is recognised as those goods
and services are provided, as detailed above. In such instances the payment is allocated across all of the performance obligations over the
contract term. The Group estimates the expected level of Avios to be issued over the contract term using experience, historical and
expected future trends, and allocates the payments to the relevant performance obligations accordingly. At each reporting date, the Group
updates its estimate of the number of Avios expected to be issued over the total contract term and recognises a cumulative catch-up
adjustment where necessary.
When a partner makes an upfront payment to the Group, the Group assesses whether such a payment is representative of a significant
financing event. Where a significant financing component is identified, the Group estimates a market rate of interest that an arm’s length
financial liability of similar size and tenor would yield. The Group recognises the imputed interest as a Finance expense in the Income
statement.
Other considerations
The Group considers whether it is an agent or a principal in relation to the loyalty services by considering whether it has a performance
obligation to provide services to the customer or whether the obligation is to arrange for the services to be provided by a third party. In
particular, the Group acts as an agent where customers redeem their Avios on interline partner flights outside of the Group, where the fees
payable to interline partner are presented net against the associated release of the Deferred revenue from ticket sales.
Exceptional items
Exceptional items are those that in management’s view need to be separately disclosed by virtue of their size or nature and where such
presentation is relevant to an understanding of the Group’s financial performance. While management has a defined list of items and a
quantitative threshold that would merit categorisation as exceptional that has been established through historical experience, the Group
retains the flexibility to add additional items should their size or nature merit such presentation. The classification of an item as exceptional
is approved by the Board, through the Audit and Compliance Committee.
The financial performance of the Group is monitored by the Management Committee and the Board on a pre-exceptional basis to enable
comparison to prior reporting periods as well as to other selected companies, but also for making strategic, financial and operational
decisions.
The exceptional items recorded in the Income statement include, but are not limited to, items such as significant settlement agreements
with the Group’s pension schemes; significant restructuring; the impact of business combination transactions that do not contribute to the
ongoing results of the Group; significant discontinuance of hedge accounting; legal settlements; individual significant tax transactions; and
the impact of the sale, disposal or impairment of an asset or investment in a business. Where exceptional items are separately disclosed, the
resultant tax impact is additionally separately disclosed. While certain exceptional items may cover more than a single reporting period,
such as significant restructuring events, they are non-recurring in nature.
Further information is given in the Alternative performance measures section.
Government grants
Government grants are recognised where there is reasonable assurance that the grant will be received. Loans provided and/or guaranteed
by governments that represent market rates of interest are recorded at the amount of the proceeds received and recognised within
Borrowings. Those loans provided and/or guaranteed by governments that represent below-market rates of interest are measured at
inception at their fair value and recognised within Borrowings, with the differential to the proceeds received recorded within Deferred
income and released to the relevant financial statement caption in the Income statement on a systematic basis. Grants that compensate the
Group for expenses incurred are recognised in the Income statement in the relevant financial statement caption on a systematic basis in the
periods in which the expenses are recognised.
Critical accounting estimates, assumptions and judgements
The preparation of financial statements requires management to make judgements, estimates and assumptions that affect the application
of policies and reported amounts of assets and liabilities, income and expenses. These judgements, estimates and associated assumptions
are based on historical experience and various other factors believed to be reasonable under the circumstances. Actual results in the future
may differ from judgements and estimates upon which financial information has been prepared. These underlying assumptions are
reviewed on an ongoing basis. Revisions to accounting estimates are recognised prospectively.
Estimates
The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities
within the next financial year are as follows:
a Employee benefit obligations, employee leaving indemnities, other employee-related restructuring
At December 31, 2021 the Group recognised €1,775 million in respect of employee benefit assets (2020 restated: €334 million) and €285
million in respect of employee benefit obligations (2020 restated: €477 million). Further information on employee benefit obligations is
disclosed in note 32.
The cost of employee benefit obligations, employee leaving indemnities and other employee-related provisions is determined using the
valuation requirements of IAS 19. These valuations involve making assumptions about discount rates, expected rates of return on assets,
future salary increases, mortality rates and future pension increases. Due to the long-term nature of these schemes, such assumptions are
subject to significant uncertainty. The assumptions relating to these schemes are disclosed in note 32. The Group determines the
assumptions to be adopted in discussion with qualified actuaries. Any difference between these assumptions and the actual outcome will
impact future net assets and total comprehensive income. The sensitivity to changes in pension assumptions is disclosed in note 32.
Under the Group’s APS and NAPS defined benefit schemes, increases to pensions are based on the annual Government Pension Increase
(Review) Orders, which since 2011 have been based on the Consumer Prices Index (CPI). Additionally, in APS there is provision for the
Trustee to pay increases up to the level of the Retail Prices Index (RPI), subject to certain affordability tests. Historically market
expectations for RPI could be derived by comparing the prices of UK Government fixed-interest and index-linked gilts, with CPI assessed
by considering the Bank of England’s inflation target and comparison of the construction of the two inflation indices.
206
207
INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021 207
NOTES TO THE ACCOUNTS CONTINUED
For the year to December 31, 2021
2
Significant accounting policies continued
In February 2019, following the UK House of Lords Economic Affairs Committee report on measuring inflation, the National Statistician
concluded that the existing methodology was unsatisfactory and proposed a number of options to the UK Statistics Authority (UKSA).
In March 2019, the UKSA recommended to the UK Chancellor of the Exchequer that the publication of the RPI cease at a point to be
determined in the future and in the intervening period, the RPI be addressed by bringing in the methods of the CPIH (a proposed variant to
CPI). In September 2019, the UK Chancellor of the Exchequer announced his intention to consult with the Bank of England and the UKSA on
whether to implement these proposed changes to RPI in the period of 2025 to 2030. Following consultation during 2020, on November 25,
2020 the UK Chancellor of the Exchequer and the UKSA confirmed that from February 2030 onwards CPIH will replace RPI with no
compensation to holders of index-linked gilts.
Following the Chancellor of the Exchequer’s announcement in September 2019 and through to December 31, 2021, market-implied
breakeven RPI inflation forward rates for periods after 2030 have reduced in the investment market. Therefore, in assessing RPI and CPI
from investment market data, allowance has been made for partial alignment between RPI and CPI from 2030 onwards.
b Revenue recognition
At December 31, 2021 the Group recognised €6,552 million (2020: €5,130 million) in respect of deferred revenue on ticket sales of which
€2,820 million (2020: €2,725 million) related to customer loyalty programmes.
Passenger revenue is recognised when the transportation service is provided. At the time of transportation, revenue is also recognised in
respect of unused tickets and is estimated based on the terms and conditions of the tickets and historical experience. The Group considers
that there is no reasonably possible change to unused ticket assumptions that would have a material impact on Passenger revenue
recorded in the year.
Revenue associated with the issuance of Avios under customer loyalty programmes is based on the relative standalone selling prices of the
related performance obligations (brand, marketing and Avios), determined using estimation techniques. The transaction price of brand and
marketing services is determined using specific brand valuation methodologies. The transaction price of the points is based on the value of
the Avios for which the points can be redeemed and is reduced to take account of the proportion of Avios that are not expected to be
redeemed by customers.
The Group estimates the number of Avios not expected to be redeemed using modelling and historical experience. A five percentage point
increase in the assumption of Avios outstanding and not expected to be redeemed would result in an adjustment to Deferred revenue from
ticket sales of €100 million, with an offsetting adjustment to increase revenue and operating profit recognised in the year.
c
Income taxes
At December 31, 2021 the Group recognised €1,282 million in respect of deferred tax assets (2020: €1,075 million). Further information on
current and deferred tax is disclosed in note 10.
The Group is subject to income taxes in numerous jurisdictions. Estimates are required in determining the worldwide provision for income
taxes. There are many transactions and calculations for which the ultimate tax determination is uncertain because it may be unclear how
tax law applies to a particular transaction or circumstance. Where the Group determines that it is more likely than not that the tax
authorities would accept the position taken in the tax return, amounts are recognised in the financial statements on that basis. Where the
amount of tax payable or recoverable is uncertain, the Group recognises a liability based on either: the Group’s judgement of the most likely
outcome; or, when there is a wide range of possible outcomes, a probability-weighted average approach.
The Group recognises deferred income tax assets only to the extent that it is probable that the taxable profit will be available against which
the deductible temporary differences, carried forward tax credits or tax losses can be utilised. Management uses judgement, including the
consideration of past and current operating performance and the future projections of performance laid out in the approved business plan
in order to assess the probability of recoverability.
In exercising this judgement, while there are no time restrictions on the utilisation of historic tax losses in the principal jurisdictions in which
the Group operates, future cash flow projections are forecast for a period of up to ten years from the balance sheet date, which represents
the period over which it is probable that future taxable profits will be available.
At December 31, 2021, the Group had unrecognised deferred tax assets of €2,458 million relating to tax losses the Group does not
reasonably expect to utilise. In applying the aforementioned judgement, had the Group extended the period of future cash flow projections
indefinitely, then the amount of unrecognised deferred tax assets would have reduced by €2,068 million.
d
Impairment of non-financial assets
At December 31, 2021 the Group recognised €2,439 million (2020: €2,390 million) in respect of intangible assets with an indefinite life,
including goodwill. Further information on these assets is included in note 17.
Goodwill and intangible assets with indefinite economic lives are tested, as part of the cash generating units to which they relate, for
impairment annually and at other times when such indicators exist. The recoverable amounts of cash generating units have been
determined based on value-in-use calculations, which use a weighted average multi-scenario discounted cash flow model, which are then
compared to the carrying amount of the associated cash generating unit.
In determining the carrying value of each cash generating unit, the Group allocates all associated operating tangible and intangible assets,
including ROU assets. In addition the Group has allocated certain liabilities to the carrying value of each CGU where those liabilities are
critical to the underlying operations of the cash generating unit and in the event of a disposal of the cash generating unit would be required
to be transferred to the purchaser. Such liabilities include lease liabilities.
The Group has applied judgement in the weighting of each scenario in the discounted cash flow model and these calculations require the
use of estimates in the determination of key assumptions and sensitivities as disclosed in note 17.
The Group assesses whether there are any indicators of impairment for all non-financial assets at each reporting date. When such indicators
are identified, then non-financial assets are tested for impairment.
208
208 INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021
Financial Statements NOTES TO THE ACCOUNTS CONTINUED
For the year to December 31, 2021
2
Significant accounting policies continued
In February 2019, following the UK House of Lords Economic Affairs Committee report on measuring inflation, the National Statistician
concluded that the existing methodology was unsatisfactory and proposed a number of options to the UK Statistics Authority (UKSA).
In March 2019, the UKSA recommended to the UK Chancellor of the Exchequer that the publication of the RPI cease at a point to be
determined in the future and in the intervening period, the RPI be addressed by bringing in the methods of the CPIH (a proposed variant to
CPI). In September 2019, the UK Chancellor of the Exchequer announced his intention to consult with the Bank of England and the UKSA on
whether to implement these proposed changes to RPI in the period of 2025 to 2030. Following consultation during 2020, on November 25,
2020 the UK Chancellor of the Exchequer and the UKSA confirmed that from February 2030 onwards CPIH will replace RPI with no
compensation to holders of index-linked gilts.
Following the Chancellor of the Exchequer’s announcement in September 2019 and through to December 31, 2021, market-implied
breakeven RPI inflation forward rates for periods after 2030 have reduced in the investment market. Therefore, in assessing RPI and CPI
from investment market data, allowance has been made for partial alignment between RPI and CPI from 2030 onwards.
b Revenue recognition
At December 31, 2021 the Group recognised €6,552 million (2020: €5,130 million) in respect of deferred revenue on ticket sales of which
€2,820 million (2020: €2,725 million) related to customer loyalty programmes.
Passenger revenue is recognised when the transportation service is provided. At the time of transportation, revenue is also recognised in
respect of unused tickets and is estimated based on the terms and conditions of the tickets and historical experience. The Group considers
that there is no reasonably possible change to unused ticket assumptions that would have a material impact on Passenger revenue
recorded in the year.
Revenue associated with the issuance of Avios under customer loyalty programmes is based on the relative standalone selling prices of the
related performance obligations (brand, marketing and Avios), determined using estimation techniques. The transaction price of brand and
marketing services is determined using specific brand valuation methodologies. The transaction price of the points is based on the value of
the Avios for which the points can be redeemed and is reduced to take account of the proportion of Avios that are not expected to be
redeemed by customers.
The Group estimates the number of Avios not expected to be redeemed using modelling and historical experience. A five percentage point
increase in the assumption of Avios outstanding and not expected to be redeemed would result in an adjustment to Deferred revenue from
ticket sales of €100 million, with an offsetting adjustment to increase revenue and operating profit recognised in the year.
c
Income taxes
current and deferred tax is disclosed in note 10.
At December 31, 2021 the Group recognised €1,282 million in respect of deferred tax assets (2020: €1,075 million). Further information on
The Group is subject to income taxes in numerous jurisdictions. Estimates are required in determining the worldwide provision for income
taxes. There are many transactions and calculations for which the ultimate tax determination is uncertain because it may be unclear how
tax law applies to a particular transaction or circumstance. Where the Group determines that it is more likely than not that the tax
authorities would accept the position taken in the tax return, amounts are recognised in the financial statements on that basis. Where the
amount of tax payable or recoverable is uncertain, the Group recognises a liability based on either: the Group’s judgement of the most likely
outcome; or, when there is a wide range of possible outcomes, a probability-weighted average approach.
The Group recognises deferred income tax assets only to the extent that it is probable that the taxable profit will be available against which
the deductible temporary differences, carried forward tax credits or tax losses can be utilised. Management uses judgement, including the
consideration of past and current operating performance and the future projections of performance laid out in the approved business plan
in order to assess the probability of recoverability.
In exercising this judgement, while there are no time restrictions on the utilisation of historic tax losses in the principal jurisdictions in which
the Group operates, future cash flow projections are forecast for a period of up to ten years from the balance sheet date, which represents
the period over which it is probable that future taxable profits will be available.
At December 31, 2021, the Group had unrecognised deferred tax assets of €2,458 million relating to tax losses the Group does not
reasonably expect to utilise. In applying the aforementioned judgement, had the Group extended the period of future cash flow projections
indefinitely, then the amount of unrecognised deferred tax assets would have reduced by €2,068 million.
d
Impairment of non-financial assets
At December 31, 2021 the Group recognised €2,439 million (2020: €2,390 million) in respect of intangible assets with an indefinite life,
including goodwill. Further information on these assets is included in note 17.
Goodwill and intangible assets with indefinite economic lives are tested, as part of the cash generating units to which they relate, for
impairment annually and at other times when such indicators exist. The recoverable amounts of cash generating units have been
determined based on value-in-use calculations, which use a weighted average multi-scenario discounted cash flow model, which are then
compared to the carrying amount of the associated cash generating unit.
In determining the carrying value of each cash generating unit, the Group allocates all associated operating tangible and intangible assets,
including ROU assets. In addition the Group has allocated certain liabilities to the carrying value of each CGU where those liabilities are
critical to the underlying operations of the cash generating unit and in the event of a disposal of the cash generating unit would be required
to be transferred to the purchaser. Such liabilities include lease liabilities.
The Group has applied judgement in the weighting of each scenario in the discounted cash flow model and these calculations require the
use of estimates in the determination of key assumptions and sensitivities as disclosed in note 17.
The Group assesses whether there are any indicators of impairment for all non-financial assets at each reporting date. When such indicators
are identified, then non-financial assets are tested for impairment.
e Engineering and other aircraft costs
At December 31, 2021, the Group recognised €1,832 million in respect of maintenance, restoration and handback provisions (2020: €1,588
million). Information on movements on the provision is disclosed in note 26.
The Group has a number of contracts with service providers to replace or repair engine parts and for other maintenance checks. These
agreements are complex and generally cover a number of years. Provisions for maintenance, restoration and handback are made based on
the best estimate of the likely committed cash outflow. In determining this best estimate, the Group applies significant judgement as to the
level of forecast costs expected to be incurred when the aircraft is returned to the lessor. The assumptions of this significant judgement
include aircraft utilisation, expected maintenance intervals, future maintenance costs and the aircraft’s condition. The associated forecast
costs are discounted to their present value, the effect of which is not considered to be material. The Group considers that there is no
reasonably possible change to a single assumption that would have a material impact on the provisions, however a combination of changes
in multiple assumptions may.
Judgements
a Determining the lease term of contracts with renewal and termination options
The Group determines the lease term as the non-cancellable term of the lease, together with any periods covered by an option to extend
the lease if it is reasonably certain to be exercised, or any periods covered by an option to terminate the lease, if it is reasonably certain not
to be exercised. The Group applies judgement in evaluating whether it is reasonably certain whether or not to exercise the option to renew
or terminate the lease. Such judgement includes consideration of fleet plans which underpin approved business plans and historical
experience regarding the extension of leases. After the commencement date, the Group re-assesses the lease term if there is a significant
event or change in circumstances that affects the Group’s ability to exercise or not to exercise the option to renew or to terminate. Further
information is given in note 14.
New standards, amendments and interpretations
The following amendments and interpretations apply for the first time in 2021, but do not have a material impact on the consolidated
financial statements of the Group:
• COVID-19 related rent concessions beyond June 30, 2021 – Amendments to IFRS 16 Leases; and
• Interest rate benchmark reform – Phase 2 – amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16 effective for periods beginning
on or after January 1, 2021.
The IASB and IFRIC have issued the following standards, amendments and interpretations with an effective date after the year end of these
financial statements which management believe could impact the Group in future periods. The Group has assessed of the impact of these
standards, amendments and interpretations and it is not expected that these will have a material effect on the reported income or net
assets of the Group. Unless otherwise stated, the Group plans to adopt the following standards, interpretations and amendments on the
date they become mandatory:
• Property, plant and equipment: proceeds before intended use – amendments to IAS 16 effective for periods beginning on or after
January 1, 2022;
• Reference to the Conceptual Framework – amendments to IFRS 3 effective for periods beginning on or after January 1, 2022;
• Onerous contracts – cost of fulfilling a contract – amendments to IAS 37 effective for periods beginning on or after January 1, 2022;
• Annual improvements to IFRS standards 2018–2020 – effective for periods beginning on or after January 1, 2022;
• Classification of liabilities as current or non-current – amendments to IAS 1 effective for periods beginning on or after January 1, 2023;
• Definition of accounting estimate – amendments to IAS 8 effective for periods beginning on or after January 1, 2023;
• Disclosure of accounting policies – Amendments to IAS 1 and IFRS Practice statement 2 effective for periods beginning on or after
January 1, 2023; and
• Deferred tax related to assets and liabilities arising from a single transaction – Amendments to IAS 12 effective for periods beginning
on or after January 1, 2023.
3 Impact of COVID-19 on financial reporting
Significant transactions and accounting estimates, assumptions and judgements in the determination of the impact of COVID-19
As a result of COVID-19 the Group has experienced a significant decline in the level of flight activity and does not expect to return to the
level of 2019 activity until at least 2023. Accordingly, the Group has applied estimation and judgement in the evaluation of the impact of
COVID-19 regarding the recognition and measurement of assets and liabilities within the Consolidated financial statements.
Accounting estimates, assumptions and judgements – cash flow forecast estimation
The Group has applied estimation and judgement in the evaluation of the impact of COVID-19 on the estimation uncertainty of determining
cash flow forecasts as part of the approved business plans. The details regarding the inputs and assumptions used in the determination of
these cash flow forecasts are given in the going concern basis of preparation.
The following critical accounting estimates, assumptions and judgements utilise these cash flow forecasts consistently, which are in some
instances significantly different from judgements applied in periods prior to the COVID-19 pandemic:
208
209
INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021 209
NOTES TO THE ACCOUNTS CONTINUED
For the year to December 31, 2021
3 Impact of COVID-19 on financial reporting continued
a Discontinuance of hedge accounting
In determining whether hedge accounting is required to be discontinued or to remain in a hedge relationship, judgement is required as to
whether a forecast transaction that was previously highly probable continues to be expected to occur or is no longer expected to occur.
The Group applied the capacity output from the cash flow forecasts as part of the approved business plans in order to determine the
forecast level of revenue generation and fuel consumption over the periods in which hedge accounting has been applied.
In the year to December 31, 2021, the Group recognised a credit of €159 million (2020: expense of €1,756 million) arising from a combination
of the discontinuance of hedge accounting in the year to December 31, 2021 and the fair value movement on those relationships where
hedge accounting was discontinued in the year to December 31, 2020, but for which the underlying hedging instrument had not matured at
January 1, 2021. This was represented by a credit of €162 million (2020: expense of €1,781 million) relating to fuel derivatives and an expense
of €8 million (2020: credit of €87 million) related to the associated fuel foreign currency derivatives. The credit to Passenger revenue of
€5 million (2020: charge of €62 million) relates to the discontinuation of hedge accounting of the associated foreign currency derivatives
on forecast revenue.
The Group’s risk management strategy has been to build up these hedges gradually over a three-year period when the level of forecast
passenger revenue and fuel consumption were higher than current expectations. Accordingly, the hedge accounting for these transactions
has been discontinued and the credit recognised in the Income statement. The credit relating to revenue derivatives and fuel derivatives
has been recorded in the Income statement within Passenger revenue and Fuel, oil and emission charges, respectively.
Further information is given in the Alternative performance measures section.
b Long-term fleet plans and associated impairment
The Group derives long-term fleet plans from the cash flow forecasts arising from the approved business plans. In deriving the long-term
fleet plans, the Group applies judgement with respect to consideration of the period of temporary and permanent grounding of fleet assets,
the deferral of the delivery of certain aircraft and the assumptions around specific provisions relating to leased fleet assets.
During the year to December 31, 2021, the Group recognised impairment reversals of €21 million, represented by an amount of €14 million
relating to the reversal of aircraft impairment and an amount of €7 million relating to the reversal of engine impairment. The aircraft
impairment reversal relates to four Airbus A320 aircraft in Vueling, previously permanently stood down in the fourth quarter of 2020, being
stood up in the third quarter of 2021 following the successful slot allocation at Paris Orly and the resultant increased capacity. The engine
impairment reversal relates to certain engines which had been fully impaired during 2020 having been leased to a third party in the fourth
quarter of 2021. Of the impairment reversal, €9 million was recorded within Property, plant and equipment relating to owned aircraft and
€12 million was recorded within Right of use assets relating to leased aircraft.
In the year to December 31, 2020 the Group recognised an impairment charge of €856 million, represented by an impairment of fleet assets
of €837 million and an impairment of other assets of €19 million. The fleet impairment related to 82 aircraft, their associated engines and
rotable inventories that were stood down permanently and 2 further aircraft which were impaired down to their recoverable value at
December 31, 2020, which includes 32 Boeing 747 aircraft, 23 Airbus A320 aircraft, 15 Airbus A340 aircraft, 4 Airbus A330-200 aircraft,
2 Airbus A318 aircraft, 1 Airbus A321 aircraft, 1 Airbus A319 aircraft, 2 Boeing 777-200 aircraft and 4 Embraer E170 aircraft. Of the fleet
impairment, €676 million was recorded within Property, plant and equipment relating to owned aircraft and €161 million was recorded
within Right of use assets relating to leased aircraft.
Further information is given in the Alternative performance measures section, note 13 and note 14.
c
Impairment testing of the Group’s cash generating units
Due to the estimation uncertainty of the timing and duration of the recovery from COVID-19, the Group has adopted a weighted average
multi-scenario discounted cash flow model derived from the cash flow forecasts from the approved business plans. The Group exercises
judgement in determining the weighting between these scenarios in the value-in-use model.
Having undertaken this impairment testing, in the year to December 31, 2021, the Group has not recognised any impairment charge
(2020: €nil). While no impairment charge is arising, the headroom in the impairment test of the British Airways, Iberia and Aer Lingus cash
generating units are particularly sensitive to changes in key assumptions. Further information is given in note 17.
d Recoverability of deferred tax assets
In determining the recoverable amounts of the Group’s deferred tax assets, the Group applied the future cash flow projections from the
approved business plans. Given the estimation uncertainty of the timing and duration of the recovery from COVID-19, the Group exercises
judgement in the determination of cash flows during this recovery and subsequent periods.
In exercising this judgement, while there are no time restrictions on the utilisation of historic tax losses in the principal jurisdictions in which
the Group operates, future cash flow projections are forecast for a period of up to ten years from the balance sheet date.
210
210 INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021
Financial Statements
NOTES TO THE ACCOUNTS CONTINUED
For the year to December 31, 2021
3 Impact of COVID-19 on financial reporting continued
a Discontinuance of hedge accounting
In determining whether hedge accounting is required to be discontinued or to remain in a hedge relationship, judgement is required as to
whether a forecast transaction that was previously highly probable continues to be expected to occur or is no longer expected to occur.
The Group applied the capacity output from the cash flow forecasts as part of the approved business plans in order to determine the
forecast level of revenue generation and fuel consumption over the periods in which hedge accounting has been applied.
In the year to December 31, 2021, the Group recognised a credit of €159 million (2020: expense of €1,756 million) arising from a combination
of the discontinuance of hedge accounting in the year to December 31, 2021 and the fair value movement on those relationships where
hedge accounting was discontinued in the year to December 31, 2020, but for which the underlying hedging instrument had not matured at
January 1, 2021. This was represented by a credit of €162 million (2020: expense of €1,781 million) relating to fuel derivatives and an expense
of €8 million (2020: credit of €87 million) related to the associated fuel foreign currency derivatives. The credit to Passenger revenue of
€5 million (2020: charge of €62 million) relates to the discontinuation of hedge accounting of the associated foreign currency derivatives
on forecast revenue.
The Group’s risk management strategy has been to build up these hedges gradually over a three-year period when the level of forecast
passenger revenue and fuel consumption were higher than current expectations. Accordingly, the hedge accounting for these transactions
has been discontinued and the credit recognised in the Income statement. The credit relating to revenue derivatives and fuel derivatives
has been recorded in the Income statement within Passenger revenue and Fuel, oil and emission charges, respectively.
Further information is given in the Alternative performance measures section.
b Long-term fleet plans and associated impairment
The Group derives long-term fleet plans from the cash flow forecasts arising from the approved business plans. In deriving the long-term
fleet plans, the Group applies judgement with respect to consideration of the period of temporary and permanent grounding of fleet assets,
the deferral of the delivery of certain aircraft and the assumptions around specific provisions relating to leased fleet assets.
During the year to December 31, 2021, the Group recognised impairment reversals of €21 million, represented by an amount of €14 million
relating to the reversal of aircraft impairment and an amount of €7 million relating to the reversal of engine impairment. The aircraft
impairment reversal relates to four Airbus A320 aircraft in Vueling, previously permanently stood down in the fourth quarter of 2020, being
stood up in the third quarter of 2021 following the successful slot allocation at Paris Orly and the resultant increased capacity. The engine
impairment reversal relates to certain engines which had been fully impaired during 2020 having been leased to a third party in the fourth
quarter of 2021. Of the impairment reversal, €9 million was recorded within Property, plant and equipment relating to owned aircraft and
€12 million was recorded within Right of use assets relating to leased aircraft.
In the year to December 31, 2020 the Group recognised an impairment charge of €856 million, represented by an impairment of fleet assets
of €837 million and an impairment of other assets of €19 million. The fleet impairment related to 82 aircraft, their associated engines and
rotable inventories that were stood down permanently and 2 further aircraft which were impaired down to their recoverable value at
December 31, 2020, which includes 32 Boeing 747 aircraft, 23 Airbus A320 aircraft, 15 Airbus A340 aircraft, 4 Airbus A330-200 aircraft,
2 Airbus A318 aircraft, 1 Airbus A321 aircraft, 1 Airbus A319 aircraft, 2 Boeing 777-200 aircraft and 4 Embraer E170 aircraft. Of the fleet
impairment, €676 million was recorded within Property, plant and equipment relating to owned aircraft and €161 million was recorded
within Right of use assets relating to leased aircraft.
c
Impairment testing of the Group’s cash generating units
Due to the estimation uncertainty of the timing and duration of the recovery from COVID-19, the Group has adopted a weighted average
multi-scenario discounted cash flow model derived from the cash flow forecasts from the approved business plans. The Group exercises
judgement in determining the weighting between these scenarios in the value-in-use model.
Having undertaken this impairment testing, in the year to December 31, 2021, the Group has not recognised any impairment charge
(2020: €nil). While no impairment charge is arising, the headroom in the impairment test of the British Airways, Iberia and Aer Lingus cash
generating units are particularly sensitive to changes in key assumptions. Further information is given in note 17.
d Recoverability of deferred tax assets
In determining the recoverable amounts of the Group’s deferred tax assets, the Group applied the future cash flow projections from the
approved business plans. Given the estimation uncertainty of the timing and duration of the recovery from COVID-19, the Group exercises
judgement in the determination of cash flows during this recovery and subsequent periods.
In exercising this judgement, while there are no time restrictions on the utilisation of historic tax losses in the principal jurisdictions in which
the Group operates, future cash flow projections are forecast for a period of up to ten years from the balance sheet date.
Accounting estimates, assumptions and judgements – other transactions
In addition to the estimation uncertainty relating to cash flow forecasts, the Group has applied the following accounting estimates,
assumptions and judgements that impact the consolidated financial statements:
e Revenue recognition
Historically, where a voucher has been issued to a customer in the event of a flight cancellation, the Group estimated, based on historical
experience, the level of such vouchers not expected to be used prior to expiry and recognised revenue accordingly. Due to the significant
level of flight cancellations arising from COVID-19 there remains insufficient historical data by which to reliably estimate the amount of these
vouchers that will not be used prior to expiry and accordingly, the Group is unable to estimate with a sufficiently high degree of probability
that there will not be a significant reversal of revenue in the future. As such, consistent with the approach taken at December 31, 2020, the
Group does not recognise revenue arising from those vouchers issued due to COVID-19 related cancellations until either the voucher is
redeemed or it expires.
Revenue associated with the issuance of Avios under customer loyalty programmes is determined using estimation techniques, with the
transaction price based on the value for which the Avios can be redeemed and is reduced taking into consideration breakage. The Group
estimates breakage using modelling and historical experience. Due to the significant restrictions imposed on the ability of customers to
redeem Avios coupled with the disruption in the patterns of redemption caused by COVID-19, the Group considers that the trends
experienced since the start of the COVID-19 pandemic are not reflective of the long-term expected patterns of redemption, which the
Group considers will return to pre-COVID-19 levels in the future. Accordingly, consistent with the approach taken at December 31, 2020,
the Group has maintained breakage at the pre-COVID-19 levels.
Significant transactions as a result of COVID-19
The Group has recorded the following additional significant transactions as a result of management actions in response to COVID-19:
f
Loans and borrowings
To enhance liquidity due to the impact of COVID-19, the Group has entered into a number of financing arrangements during 2021, which
have been fully drawn unless otherwise stated, including:
• On February 22, 2021, British Airways entered into a 5-year term loan Export Development Guarantee Facility of €2.3 billion (£2.0 billion)
underwritten by a syndicate of banks, with 80 per cent of the principal guaranteed by UKEF. On November 1, 2021, British Airways
entered into a further 5-year Export Development Guarantee Facility credit facility of €1.2 billion (£1.0 billion) underwritten by a syndicate
of banks, with 80 per cent of the principal guaranteed by UKEF. At December 31, 2021 no amounts had been drawn under the facility;
• On March 23, 2021, the Group entered into a three-year US dollar secured Revolving Credit Facility accessible by British Airways, Iberia
and Aer Lingus. The amount available under the facility is $1.755 billion. As at December 31, 2021 no amounts had been drawn under the
facility. Concurrent to entering into the facility, British Airways extinguished its US dollar secured Revolving Credit Facility due to mature
in June 2021;
• On March 25, 2021, two senior unsecured bonds were issued by the Group for an aggregate principal amount of €1.2 billion; €500 million
fixed rate 2.75 per cent due in 2025, and €700 million fixed rate 3.75 per cent due in 2029;
• On December 23, 2020, Aer Lingus entered into a financing arrangement with the Ireland Strategic Investment Fund for €75 million.
On March 27, 2021, Aer Lingus entered into a further financing arrangement to extend the total amount to €150 million. The facility is
repayable in 2023;
• On May 18, 2021, the Group issued an €825 million senior unsecured convertible bond due 2028 and bearing a fixed rate of 1.125 per cent;
Further information is given in the Alternative performance measures section, note 13 and note 14.
and
• In April 2021, British Airways fully repaid the Coronavirus Corporate Finance Facility of €350 million (£300 million), which was entered
into in April 2020.
Further information is given in note 25.
g Government assistance
Given the significant reduction in operations that have occurred during the COVID-19 pandemic, the Group has availed itself of the various
employee support mechanisms in the jurisdictions in which it operates. This has led to an amount of €424 million being received directly
from governments (classified as government grants) and savings of €135 million (classified as government assistance) where employees
have been paid directly by their respective governments. Those amounts received in the form of government assistance have been
recorded net within Employee costs. Further information is given in note 34.
h Defined benefit pension scheme contributions
On December 18, 2020 British Airways reached agreement with the Trustee of NAPS to defer deficit contributions on an interim basis for
the period between October 1, 2020 and January 31, 2021. The deferral of such contributions amounted to €165 million. On February 19,
2021 British Airways reached further agreement with the Trustee of NAPS to defer deficit contributions through to September 30, 2021.
The deferral of such contributions amounted to €330 million. Further information is given in note 32 on the deferral of contributions.
i
Renegotiation of Air Europa acquisition and subsequent termination
On November 4, 2019, the Group entered into an agreement to acquire the entire share capital of Air Europa for €1 billion, subject to receipt
of the approval by the European Commission. As a result of the impact COVID-19 has had on both the Group and Air Europa during 2020,
on January 19, 2021, the Group announced the execution of an amended agreement to acquire the entire share capital of Air Europa, which
resulted in the reduction of the purchase price to €500 million and deferred this payment until the sixth anniversary of the date of
completion of the acquisition conditional on the satisfactory negotiation between Iberia and Sociedad Estatal de Participaciones Industriales
or ‘SEPI’ (the Spanish state holding company that has a direct participation in Air Europa) regarding the non-financial terms associated with
the financial support provided by SEPI to Air Europa.
On December 16, 2021, the Group announced that Iberia and Globalia had terminated the agreement regarding the acquisition of the share
capital of Air Europa, with the Group paying €75 million. This payment is recorded in Other non-operating charges in the Income statement
and was settled prior to December 31, 2021 and recorded within Other investing movements within the Statement of cash flows.
Further information is given in the Alternative performance measures section.
210
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INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021
211
NOTES TO THE ACCOUNTS CONTINUED
For the year to December 31, 2021
4 Impact of climate change on financial reporting
Significant transactions and critical accounting estimates, assumptions and judgements in the determination of the impact of climate
change
As a result of climate change the Group has designed and approved its Flightpath Net Zero climate strategy, which commits the Group to
net zero emissions by 2050. While approved business plans currently have a duration of three years, the Flightpath Net Zero climate
strategy impacts both the short, medium and long-term operations of the Group.
The details regarding the inputs and assumptions used in the determination of the Flightpath Net Zero climate strategy include, but are not
limited to, the following that are within the control of the Group:
• The additional cost of the Group’s commitment to increasing the level of Sustainable Aviation Fuels to ten per cent by 2030 and to fifty
per cent by 2050;
• The cost of incurring an increase in the level of carbon offsetting and carbon capture schemes; and
• The impact of introducing more fuel-efficient aircraft and being able to operate these more efficiently.
In addition to these inputs and measures within the control of management, Flightpath Net Zero includes assumptions pertaining to
consumers, governments and regulators regarding the following:
• The impact on passenger demand for air travel as a result of both passenger trends regarding climate change and government policies;
• Investment and policy regarding the development of Sustainable Aviation Fuel production facilities;
• Investment and improvements in air traffic management;
• The price of carbon through the EU and UK Emissions Trading Schemes (ETS) and the UN Carbon Offsetting and Reduction Scheme for
International Aviation (CORSIA); and
• Effective market-based policy measures in addition to the EU and UK ETS and CORSIA.
The level of uncertainty regarding the impact of these factors increases over time. Accordingly, the Group has applied critical estimation
and judgement in the evaluation of the impact of climate change regarding the recognition and measurement of assets and liabilities within
the financial statements.
Critical accounting estimates, assumptions and judgements – cash flow forecast estimation
With the Flightpath Net Zero climate strategy assessing the impact over a long-term horizon to 2050, the level of estimation uncertainty in
the determination of cash flow forecasts increases over time. For those assets and liabilities, where their recoverability is dependent on
long-term cash flows, the following critical accounting estimates, assumptions and judgements, to the extent they can be reliably measured,
have been applied:
a
Long-term fleet plans and useful economic lives
The Group’s Flightpath Net Zero climate strategy has been developed in conjunction with the long-term fleet plans of each operating
company. This includes the annual assessment of useful lives and the residual values of each aircraft type.
During the course of 2020 as a result of the impact of COVID-19, the Group permanently stood down 82 aircraft, their associated engines
and rotable inventories. These permanently stood-down aircraft were older-generation aircraft, that were less fuel efficient, more carbon
intensive and more expensive to operate than more modern models.
With the permanent standing down of these aircraft, coupled with the future delivery of 110 fuel-efficient aircraft as detailed in note 15,
the Group considers the existing fleet assets align with the long-term fleet plans to achieve its Flightpath Net Zero strategy. All aircraft in
the fleet, and those due to be delivered in the future, have the capability to utilise SAF in their operations without impediment. Accordingly,
no impairment has arisen in the current or prior year as a result of the Group’s decarbonisation plans.
b
Impairment testing of the Group’s cash generating units
The Group applies discounted cash flow models, for each cash generating unit, derived from the cash flow forecasts from the approved
three-year business plans. The Group’s Flightpath Net Zero climate strategy is long-term in nature and includes commitments that will
occur at differing points over this time horizon. To the extent that certain of those commitments occur over the short-term, then they have
been incorporated into the three-year business plans.
The Group adjusts the final year of the three-year business plan to incorporate the impacts of climate change that the Group can reliably
estimate at the reporting date. However, given the long-term nature of the Group’s sustainability commitments, there are other aspects of
these commitments that cannot be reliably estimated at the reporting date and have been excluded from these adjustments. These
adjustments incorporate the increased utilisation of sustainable aviation fuel as well as price assumptions relating to sustainable aviation
fuels and the price of carbon (both ETS and CORSIA), which are derived from externally sourced prices. Where the Group considers such
costs will be recovered through increased passenger ticket fares, then a corresponding adjustment is made to increase passenger revenue.
As detailed in note 17, the Group applies a long-term growth rate to this adjusted three-year business plan, per CGU, and each of the long-
term growth rates include a specific adjustment to reduce the rate to reflect the Group’s assumptions regarding the reduced demand
impact arising from climate change. This demand impact is derived with reference to external market data.
Further, in preparing the impairment models, the Group cash flow projections are prepared on the basis of using the current fleet in its
current condition. The Group excludes the estimated cash flows expected to arise from future restructuring, assets not currently in use by
the Group and expected technological advancements in aircraft and other technologies not available at the reporting date. The Group
excludes potential future legislation/regulation regarding carbon pricing and/or alternative schemes not currently enacted, such as the
implementation of kerosene taxes.
Given the inherent uncertainty associated with the impact of climate change, the Group has applied additional sensitivities in note 17 to
reflect a more adverse impact of climate change than currently expected. This has been captured through both the downward sensitivities
of the long-term growth rates, ASKs, operating margins and the increased fuel price sensitivity.
212
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INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021
Financial Statements
c Valuation of employee benefit scheme assets
The Group’s employee benefit schemes are principally represented by the British Airways APS and NAPS schemes in the UK. The schemes
are structured to make post-employment payments to members over the long term, with the Trustees having established both return-
seeking assets and liability-matching assets that mature over the long-term to align with the forecast benefit payments.
The assets of these schemes are invested predominantly in a diversified range of equities, bonds and property. The valuation of these assets
ranges from those with quoted prices in active markets, where prices are readily and regularly available, through to those where the
valuations are not based on observable market data, often requiring complex valuation models. The trustees of the schemes have
integrated climate change considerations into their long-term decision-making and reporting processes across all classes of assets, actively
engaging with all fund and portfolio managers to ensure that where unobservable inputs are required into valuation models, that such
valuation models incorporate long-term expectations regarding the impact of climate change.
d Recoverability of deferred tax assets
In determining the recoverable amounts of the Group’s deferred tax assets, the Group applies the future cash flow projections for a period
of up to ten years derived from the approved three-year business plans. The Group applies a medium-term growth rate subsequent to the
three-year business plans, specific to each operating company. In considering the impact of the Group’s Flightpath Net Zero climate
strategy, management adjusts this medium-term growth rate, where applicable, to incorporate the impacts on both revenue and costs to
the Group.
5 Segment information
a Business segments
The chief operating decision-maker is responsible for allocating resources and assessing performance of the operating segments, and has
been identified as the IAG Management Committee (IAG MC).
The Group has a number of entities which are managed as individual operating companies including airline and platform functions. Each
airline operates its network operations as a single business unit and the IAG MC assesses performance based on measures including
operating profit, and makes resource allocation decisions for the airlines based on network profitability, primarily by reference to the
passenger markets in which the companies operate. The objective in making resource allocation decisions is to optimise consolidated
financial results.
The Group has determined its operating segments based on the way that it treats its businesses and the manner in which resource
allocation decisions are made. British Airways, Iberia, Vueling and Aer Lingus have been identified for financial reporting purposes as
reportable operating segments. IAG Loyalty and LEVEL are also operating segments but do not exceed the quantitative thresholds to be
reportable and management has concluded that there are currently no other reasons why they should be separately disclosed.
The platform functions of the business primarily support the airline operations. These activities are not considered to be reportable
operating segments as they either earn revenues incidental to the activities of the Group and resource allocation decisions are made based
on the passenger business or are not reviewed regularly by the IAG MC and are included within Other Group companies.
NOTES TO THE ACCOUNTS CONTINUED
For the year to December 31, 2021
4 Impact of climate change on financial reporting
Significant transactions and critical accounting estimates, assumptions and judgements in the determination of the impact of climate
change
As a result of climate change the Group has designed and approved its Flightpath Net Zero climate strategy, which commits the Group to
net zero emissions by 2050. While approved business plans currently have a duration of three years, the Flightpath Net Zero climate
strategy impacts both the short, medium and long-term operations of the Group.
The details regarding the inputs and assumptions used in the determination of the Flightpath Net Zero climate strategy include, but are not
limited to, the following that are within the control of the Group:
• The additional cost of the Group’s commitment to increasing the level of Sustainable Aviation Fuels to ten per cent by 2030 and to fifty
per cent by 2050;
• The cost of incurring an increase in the level of carbon offsetting and carbon capture schemes; and
• The impact of introducing more fuel-efficient aircraft and being able to operate these more efficiently.
In addition to these inputs and measures within the control of management, Flightpath Net Zero includes assumptions pertaining to
consumers, governments and regulators regarding the following:
• The impact on passenger demand for air travel as a result of both passenger trends regarding climate change and government policies;
• Investment and policy regarding the development of Sustainable Aviation Fuel production facilities;
• Investment and improvements in air traffic management;
• The price of carbon through the EU and UK Emissions Trading Schemes (ETS) and the UN Carbon Offsetting and Reduction Scheme for
International Aviation (CORSIA); and
• Effective market-based policy measures in addition to the EU and UK ETS and CORSIA.
The level of uncertainty regarding the impact of these factors increases over time. Accordingly, the Group has applied critical estimation
and judgement in the evaluation of the impact of climate change regarding the recognition and measurement of assets and liabilities within
the financial statements.
Critical accounting estimates, assumptions and judgements – cash flow forecast estimation
With the Flightpath Net Zero climate strategy assessing the impact over a long-term horizon to 2050, the level of estimation uncertainty in
the determination of cash flow forecasts increases over time. For those assets and liabilities, where their recoverability is dependent on
long-term cash flows, the following critical accounting estimates, assumptions and judgements, to the extent they can be reliably measured,
have been applied:
a
Long-term fleet plans and useful economic lives
The Group’s Flightpath Net Zero climate strategy has been developed in conjunction with the long-term fleet plans of each operating
company. This includes the annual assessment of useful lives and the residual values of each aircraft type.
During the course of 2020 as a result of the impact of COVID-19, the Group permanently stood down 82 aircraft, their associated engines
and rotable inventories. These permanently stood-down aircraft were older-generation aircraft, that were less fuel efficient, more carbon
intensive and more expensive to operate than more modern models.
With the permanent standing down of these aircraft, coupled with the future delivery of 110 fuel-efficient aircraft as detailed in note 15,
the Group considers the existing fleet assets align with the long-term fleet plans to achieve its Flightpath Net Zero strategy. All aircraft in
the fleet, and those due to be delivered in the future, have the capability to utilise SAF in their operations without impediment. Accordingly,
no impairment has arisen in the current or prior year as a result of the Group’s decarbonisation plans.
b
Impairment testing of the Group’s cash generating units
The Group applies discounted cash flow models, for each cash generating unit, derived from the cash flow forecasts from the approved
three-year business plans. The Group’s Flightpath Net Zero climate strategy is long-term in nature and includes commitments that will
occur at differing points over this time horizon. To the extent that certain of those commitments occur over the short-term, then they have
been incorporated into the three-year business plans.
The Group adjusts the final year of the three-year business plan to incorporate the impacts of climate change that the Group can reliably
estimate at the reporting date. However, given the long-term nature of the Group’s sustainability commitments, there are other aspects of
these commitments that cannot be reliably estimated at the reporting date and have been excluded from these adjustments. These
adjustments incorporate the increased utilisation of sustainable aviation fuel as well as price assumptions relating to sustainable aviation
fuels and the price of carbon (both ETS and CORSIA), which are derived from externally sourced prices. Where the Group considers such
costs will be recovered through increased passenger ticket fares, then a corresponding adjustment is made to increase passenger revenue.
As detailed in note 17, the Group applies a long-term growth rate to this adjusted three-year business plan, per CGU, and each of the long-
term growth rates include a specific adjustment to reduce the rate to reflect the Group’s assumptions regarding the reduced demand
impact arising from climate change. This demand impact is derived with reference to external market data.
Further, in preparing the impairment models, the Group cash flow projections are prepared on the basis of using the current fleet in its
current condition. The Group excludes the estimated cash flows expected to arise from future restructuring, assets not currently in use by
the Group and expected technological advancements in aircraft and other technologies not available at the reporting date. The Group
excludes potential future legislation/regulation regarding carbon pricing and/or alternative schemes not currently enacted, such as the
implementation of kerosene taxes.
Given the inherent uncertainty associated with the impact of climate change, the Group has applied additional sensitivities in note 17 to
reflect a more adverse impact of climate change than currently expected. This has been captured through both the downward sensitivities
of the long-term growth rates, ASKs, operating margins and the increased fuel price sensitivity.
212
213
INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021
213
NOTES TO THE ACCOUNTS CONTINUED
For the year to December 31, 2021
5 Segment information continued
For the year to December 31, 2021
€ million
Revenue
Passenger revenue
Cargo revenue
Other revenue
External revenue
Inter-segment revenue
Segment revenue
Depreciation and amortisation charge
Impairment (charge)/reversal
British
Airways
2,607
1,268
314
4,189
129
4,318
(1,104)
(30)
2021
Iberia
Vueling
Aer
Lingus
Other Group
companies1
1,707
333
443
2,483
301
2,784
(350)
–
1,011
–
5
1,016
–
1,016
(240)
13
302
65
4
371
5
376
(140)
–
208
7
181
396
370
766
(81)
–
Total
5,835
1,673
947
8,455
805
9,260
(1,915)
(17)
Operating (loss)/profit
(2,041)
(220)
(233)
(338)
67
(2,765)
Exceptional items2
151
14
29
9
2
205
Operating (loss)/profit before exceptional items
(2,192)
(234)
(262)
(347)
65
(2,970)
Net non-operating costs4
Loss before tax
Total assets3
Total liabilities
20,891
(18,795)
6,919
(7,062)
2,671
(3,364)
1,820
(1,806)
2,105
(2,533)
Includes eliminations on total assets of €16,023 million and total liabilities of €5,833 million.
1
2 For details on exceptional items refer to the Alternative performance measures section.
3 Included within total assets associated with Other Group companies is €4,527 million of Cash and cash equivalents.
4 Includes €75 million of exceptional items relating to the Air Europa termination settlement payment. Refer to note 3i for further information.
For the year to December 31, 2020
€ million
Revenue
Passenger revenue
Cargo revenue
Other revenue
External revenue
Inter-segment revenue
Segment revenue
Depreciation and amortisation charge
Impairment charge
Operating loss
Exceptional items 2
British
Airways
3,242
994
232
4,468
90
4,558
(1,214)
(445)
20201
Iberia
Vueling
Aer Lingus
Other Group
companies1
1,148
224
605
1,977
282
2,259
(370)
(242)
577
–
5
582
(8)
574
(277)
(68)
376
88
–
464
3
467
(133)
(24)
169
–
146
315
343
658
(84)
(98)
(4,403)
(1,411)
(875)
(563)
(199)
(7,451)
(1,778)
(652)
(252)
(202)
(177)
(3,061)
(742)
(3,507)
34,406
(33,560)
Total
5,512
1,306
988
7,806
710
8,516
(2,078)
(877)
Operating loss before exceptional items
(2,625)
(759)
(623)
(361)
(22)
(4,390)
Net non-operating costs
Loss before tax
Total assets3
Total liabilities3
17,759
(15,737)
7,009
(7,014)
2,850
(3,299)
1,814
(1,495)
884
(1,161)
30,316
(28,706)
(376)
(7,827)
1 Segment information for 2020 has been restated for the treatment of administration costs associated with the Group’s defined benefit pension schemes.
Further information is given in note 2 and 36.
2 For details on exceptional items refer to the Alternative performance measures section.
3 Includes eliminations on total assets of €14,998 million and total liabilities of €5,100 million.
214
214
INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021
Financial Statements
NOTES TO THE ACCOUNTS CONTINUED
For the year to December 31, 2021
5 Segment information continued
For the year to December 31, 2021
€ million
Revenue
Passenger revenue
Cargo revenue
Other revenue
External revenue
Inter-segment revenue
Segment revenue
Depreciation and amortisation charge
Impairment (charge)/reversal
British
Airways
2,607
1,268
314
4,189
129
4,318
(1,104)
(30)
Iberia
Vueling
Aer
Lingus
Other Group
companies1
2021
1,707
333
443
2,483
301
2,784
(350)
–
1,011
–
5
–
1,016
1,016
(240)
13
302
65
4
371
5
376
(140)
–
208
7
181
396
370
766
(81)
–
Total
5,835
1,673
947
8,455
805
9,260
(1,915)
(17)
Operating (loss)/profit
(2,041)
(220)
(233)
(338)
67
(2,765)
Exceptional items2
151
14
29
9
2
205
Operating (loss)/profit before exceptional items
(2,192)
(234)
(262)
(347)
65
(2,970)
1
Includes eliminations on total assets of €16,023 million and total liabilities of €5,833 million.
2 For details on exceptional items refer to the Alternative performance measures section.
3 Included within total assets associated with Other Group companies is €4,527 million of Cash and cash equivalents.
4 Includes €75 million of exceptional items relating to the Air Europa termination settlement payment. Refer to note 3i for further information.
For the year to December 31, 2020
20,891
(18,795)
6,919
(7,062)
2,671
(3,364)
1,820
(1,806)
2,105
(2,533)
Net non-operating costs4
Loss before tax
Total assets3
Total liabilities
€ million
Revenue
Passenger revenue
Cargo revenue
Other revenue
External revenue
Inter-segment revenue
Segment revenue
Operating loss
Exceptional items 2
Net non-operating costs
Loss before tax
Total assets3
Total liabilities3
Depreciation and amortisation charge
Impairment charge
(742)
(3,507)
34,406
(33,560)
Total
5,512
1,306
988
7,806
710
8,516
(2,078)
(877)
(376)
(7,827)
b Geographical analysis
Revenue by area of original sale
€ million
UK
Spain
USA
Rest of world
Assets by area
December 31, 2021
€ million
UK
Spain
USA
Rest of world
December 31, 2020
€ million
UK
Spain
USA
Rest of world
British
Airways
3,242
994
232
4,468
90
4,558
(1,214)
(445)
20201
Iberia
Vueling
Aer Lingus
Other Group
companies1
1,148
224
605
1,977
282
2,259
(370)
(242)
577
–
5
582
(8)
574
(277)
(68)
376
88
–
464
3
467
(133)
(24)
169
–
146
315
343
658
(84)
(98)
(4,403)
(1,411)
(875)
(563)
(199)
(7,451)
6 Expenses by nature
Operating result is arrived at after charging
Depreciation, amortisation and impairment of non-current assets:
€ million
Depreciation charge on right of use assets
Depreciation charge on owned assets
Impairment (reversal)/charge on owned property, plant and equipment
Amortisation and impairment of intangible assets
Impairment charge on right of use assets
Depreciation charge on other leasehold assets
Cost of inventories:
€ million
Cost of inventories recognised as an expense, principally fuel
Impairment charge on inventories1
Operating loss before exceptional items
(2,625)
(759)
(623)
(361)
(22)
(4,390)
(1,778)
(652)
(252)
(202)
(177)
(3,061)
1 For details regarding the impairment charge on inventories refer to note 3b.
1 Segment information for 2020 has been restated for the treatment of administration costs associated with the Group’s defined benefit pension schemes.
Further information is given in note 2 and 36.
2 For details on exceptional items refer to the Alternative performance measures section.
3 Includes eliminations on total assets of €14,998 million and total liabilities of €5,100 million.
17,759
(15,737)
7,009
(7,014)
2,850
(3,299)
1,814
(1,495)
884
(1,161)
30,316
(28,706)
Year to December 31
2021
2,435
2,189
931
2,900
8,455
2020
2,390
1,845
933
2,638
7,806
Property,
plant
and
equipment
11,544
4,404
76
1,137
17,161
Property,
plant
and
equipment
11,313
4,850
122
1,246
17,531
Intangible
assets
1,317
1,333
13
576
3,239
Intangible
assets
1,251
1,353
15
589
3,208
2021
1,058
638
(4)
178
20
42
2020
1,153
720
681
196
161
44
1,932
2,955
2021
1,038
–
1,038
2020
1,405
71
1,476
214
215
INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021
215
2020
4,180
696
532
30
350
1,036
370
55
7,249
2020
2,236
385
272
(8)
700
2021
2,135
307
232
23
316
3,013
3,585
NOTES TO THE ACCOUNTS CONTINUED
For the year to December 31, 2021
7 Auditor’s remuneration
The fees for the year ended December 31, 2021, for audit and non-audit services provided by the auditor of the Group’s consolidated
financial statements and of certain individual financial statements of the consolidated companies, KPMG S.L. (2020: Ernst & Young S.L.), and
by companies belonging to KPMG’s network (2020: Ernst & Young’s network), were as follows:
€’000
Fees payable for the audit of the Group and individual accounts
Fees payable for other services:
Audit of the Group's subsidiaries pursuant to legislation
Other services pursuant to legislation
Other services relating to taxation
Other audit and assurance services
Services relating to working capital review
Services relating to corporate finance transactions
All other services
2021
4,860
532
431
–
569
776
–
–
7,168
The fees payable to the Group’s auditor for the audit of the Group’s pension scheme during the year totalled €182 thousand.
8 Employee costs and numbers
€ million
Wages and salaries
Social security costs
Costs related to pension scheme benefits 1
Share-based payment charge/(credit)
Other employee costs2
Total employee costs
1 Refer to notes 2 and 36 for the change in accounting policy relating to pension administration costs.
2 Other employee costs include allowances and accommodation for crew.
The number of employees during the year and at December 31 was as follows:
In the air:
Cabin crew
Pilots
On the ground:
Airports
Corporate
Maintenance
Senior executives
2021
December 31, 2021
2020
December 31, 2020
Average
number of
employees1
Number of
employees
Percentage
of women
Average
number of
employees
Number of
employees
Percentage
of women
9,304
3,879
6,728
8,612
6,345
167
17,865
7,607
12,842
10,709
7,448
187
35,035
56,658
70%
6%
37%
52%
8%
34%
42%
7,689
4,787
8,841
7,954
5,153
196
17,946
7,794
14,339
11,246
6,410
193
34,620
57,928
71%
6%
39%
48%
7%
30%
1 The average number of employees excludes those employees on furlough, wage support and equivalent schemes, including the Temporary Redundancy
Plan arrangements in Spain. For further details see note 34. The total average number of employees including these schemes is 56,618.
The number of employees is based on actual headcount. The average manpower equivalent for 2021 was 50,222 (2020: 60,612), which
includes employees on furlough, wage support and equivalent schemes, including Temporary Redundancy Plan arrangements in Spain.
216
216
INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021
Financial Statements
The fees for the year ended December 31, 2021, for audit and non-audit services provided by the auditor of the Group’s consolidated
financial statements and of certain individual financial statements of the consolidated companies, KPMG S.L. (2020: Ernst & Young S.L.), and
by companies belonging to KPMG’s network (2020: Ernst & Young’s network), were as follows:
NOTES TO THE ACCOUNTS CONTINUED
For the year to December 31, 2021
7 Auditor’s remuneration
€’000
Fees payable for the audit of the Group and individual accounts
Fees payable for other services:
Audit of the Group's subsidiaries pursuant to legislation
Other services pursuant to legislation
Other services relating to taxation
Other audit and assurance services
Services relating to working capital review
Services relating to corporate finance transactions
All other services
8 Employee costs and numbers
€ million
Wages and salaries
Social security costs
Costs related to pension scheme benefits 1
Share-based payment charge/(credit)
Other employee costs2
Total employee costs
The fees payable to the Group’s auditor for the audit of the Group’s pension scheme during the year totalled €182 thousand.
1 Refer to notes 2 and 36 for the change in accounting policy relating to pension administration costs.
2 Other employee costs include allowances and accommodation for crew.
The number of employees during the year and at December 31 was as follows:
In the air:
Cabin crew
Pilots
On the ground:
Airports
Corporate
Maintenance
Senior executives
2021
December 31, 2021
2020
December 31, 2020
Average
number of
employees1
Number of
employees
Percentage
of women
Average
number of
employees
Number of
employees
Percentage
of women
9,304
3,879
6,728
8,612
6,345
167
17,865
7,607
12,842
10,709
7,448
187
70%
6%
37%
52%
8%
34%
42%
7,689
4,787
8,841
7,954
5,153
196
17,946
7,794
14,339
11,246
6,410
193
71%
6%
39%
48%
7%
30%
35,035
56,658
34,620
57,928
1 The average number of employees excludes those employees on furlough, wage support and equivalent schemes, including the Temporary Redundancy
Plan arrangements in Spain. For further details see note 34. The total average number of employees including these schemes is 56,618.
The number of employees is based on actual headcount. The average manpower equivalent for 2021 was 50,222 (2020: 60,612), which
includes employees on furlough, wage support and equivalent schemes, including Temporary Redundancy Plan arrangements in Spain.
2021
4,860
532
431
–
569
776
–
–
7,168
2021
2,135
307
232
23
316
2020
4,180
696
532
30
350
1,036
370
55
7,249
2020
2,236
385
272
(8)
700
3,013
3,585
9 Finance costs, income and other non-operating (charges)/credits
a Finance costs
€ million
Interest expense on:
Bank borrowings
Asset financed liabilities
Lease liabilities
Provisions unwinding of discount
Other borrowings
Capitalised interest on progress payments
Other finance costs
b Finance income
€ million
Interest on other interest-bearing deposits
Other finance income
c Net financing (charge)/credit relating to pensions
€ million
Net financing (charge)/credit relating to pensions
1 Refer to notes 2 and 36 for the change in accounting policy relating to pension administration costs.
d Other non-operating charges
€ million
Gains on sale of property, plant and equipment and investments2
Credit related to equity investments (note 19)
Share of profits in investments accounted for using the equity method (note 18)
Realised gains/(losses) on derivatives not qualifying for hedge accounting
Unrealised gains/(losses) on derivatives not qualifying for hedge accounting
Air Europa termination settlement payment1
2021
2020
(133)
(65)
(408)
(12)
(153)
3
(62)
(830)
2021
5
8
13
2021
(2)
2021
59
–
2
37
47
(75)
70
(45)
(41)
(442)
(14)
(103)
8
(33)
(670)
2020
21
20
41
20201
12
2020
38
1
1
(13)
(31)
–
(4)
1 Refer to note 3i for further information in relation to the Air Europa termination settlement expense.
2 Includes a gain of €24 million arising from the disposal of Compañía Auxiliar al Cargo Exprés, S.A. and Auxiliar Logística Aeroportuaria, S.A. The Group
previously owned 75 per cent of the share capital of these companies and disposed of them during the fourth quarter of 2021. The disposal led to the de-
recognition of €12 million of net assets from the consolidated financial statements of the Group.
216
217
INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021
217
NOTES TO THE ACCOUNTS CONTINUED
For the year to December 31, 2021
10 Tax
a Tax credits/(charges)
Tax credits/(charges) recognised in the Income statement, Other comprehensive income and directly in equity:
€ million
Current tax
Movement in respect of prior years
Movement in respect of current
year
Total current tax
Deferred tax
Movement in respect of prior years
Movement in respect of current
year
Rate change / rate differences
Total deferred tax
2021
Income
statement
Other
comprehensive
income
Recognised
directly in
equity
10
(9)
1
(23)
518
78
573
–
5
5
–
(420)
61
(359)
(1)
–
(1)
–
–
–
–
Total
9
(4)
5
(23)
98
139
214
20201
Income
statement
Other
comprehensive
income
Recognised
directly in
equity
6
273
279
(8)
695
(74)
613
–
(17)
(17)
–
124
44
168
–
–
–
–
(2)
–
(2)
Total
6
256
262
(8)
817
(30)
779
Total tax
574
(354)
(1)
219
892
151
(2)
1,041
1 Refer to notes 2 and 36 for the change in accounting policy relating to pension administration costs.
The current tax credit in Other comprehensive income relates to the fair value movements on the convertible bond of €5 million (2020:
€nil) and cash flow hedges of €nil (2020: €17 million).
Tax recognised directly in equity relates to share-based payment schemes of €1 million (2020: €2 million).
Within tax in Other comprehensive income is a tax charge of €123 million (2020: tax credit of €92 million) that may be reclassified to the
Income statement and a tax charge of €231 million (2020: tax credit of €59 million) that will not.
b Current tax (liability)/asset
€ million
Balance at January 1
Income statement
Other comprehensive income
Recognised directly in equity
Cash
Offset against other taxes1
Exchange movements and other
Balance at December 31
Current tax asset
Current tax liability
Balance at December 31
2021
53
1
5
(1)
(63)
–
–
(5)
16
(21)
(5)
2020
(6)
279
(17)
–
(45)
(152)
(6)
53
101
(48)
53
1 During 2020 the Group elected, in the UK, to carry back losses and apply them to the 2019 taxable profits. This led to a €152 million corporate tax
overpayment in relation to 2019, which HMRC offset against deferred liabilities arising in relation to other taxes. No such offset arose in 2021.
218
218
INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021
Financial Statements
NOTES TO THE ACCOUNTS CONTINUED
For the year to December 31, 2021
10 Tax
a Tax credits/(charges)
Tax credits/(charges) recognised in the Income statement, Other comprehensive income and directly in equity:
2021
Other
Recognised
20201
Other
Recognised
Income
comprehensive
directly in
Income
comprehensive
directly in
statement
income
equity
Total
statement
income
equity
Total
Movement in respect of prior years
Movement in respect of current
€ million
Current tax
year
Total current tax
Deferred tax
10
(9)
1
Movement in respect of prior years
(23)
Movement in respect of current
year
Rate change / rate differences
Total deferred tax
518
78
573
(420)
61
(359)
–
5
5
–
(1)
–
(1)
–
–
–
–
9
(4)
5
(23)
98
139
214
6
273
279
(8)
695
(74)
613
–
(17)
(17)
–
124
44
168
–
–
–
–
(2)
–
(2)
Total tax
574
(354)
(1)
219
892
151
(2)
1,041
1 Refer to notes 2 and 36 for the change in accounting policy relating to pension administration costs.
The current tax credit in Other comprehensive income relates to the fair value movements on the convertible bond of €5 million (2020:
€nil) and cash flow hedges of €nil (2020: €17 million).
Tax recognised directly in equity relates to share-based payment schemes of €1 million (2020: €2 million).
Within tax in Other comprehensive income is a tax charge of €123 million (2020: tax credit of €92 million) that may be reclassified to the
Income statement and a tax charge of €231 million (2020: tax credit of €59 million) that will not.
b Current tax (liability)/asset
€ million
Balance at January 1
Income statement
Other comprehensive income
Recognised directly in equity
Cash
Offset against other taxes1
Exchange movements and other
Balance at December 31
Current tax asset
Current tax liability
Balance at December 31
1 During 2020 the Group elected, in the UK, to carry back losses and apply them to the 2019 taxable profits. This led to a €152 million corporate tax
overpayment in relation to 2019, which HMRC offset against deferred liabilities arising in relation to other taxes. No such offset arose in 2021.
6
256
262
(8)
817
(30)
779
2020
(6)
279
(17)
–
(45)
(152)
(6)
53
101
(48)
53
2021
53
1
5
(1)
(63)
–
–
(5)
16
(21)
(5)
c Deferred tax asset/(liability)
€ million
Balance at January 1, 2021
Income statement1
Other comprehensive
income1,3
Recognised directly in
equity
Exchange movements and
other
Balance at December 31,
2021
Balance at January 1, 2020
Income statement
Other comprehensive
income2
Recognised directly in
equity
Exchange movements and
other
Balance at December 31,
2020
Fixed
assets
(589)
106
Right of
use
assets
(248)
67
–
–
–
–
6
(39)
–
–
1
(732)
116
(195)
(76)
–
–
–
–
27
23
(589)
(248)
24
(2)
–
–
(1)
21
Employee
leaving
indemniti
es and
others
194
Lease
liabilities
21
Employee
benefit
plans1
298
Fair value
gains/
losses2
195
Share-
based
payment
schemes
10
(3)
9
(11)
(14)
(9)
(237)
(133)
Tax loss
carried
forward
and tax
credits
1,090
408
20
–
55
Other
temporary
differences
64
10
–
–
(13)
Total
1,035
573
(359)
–
33
1
–
–
–
11
1,573
61
1,282
19
(6)
–
(2)
(1)
401
643
56
–
34
50
–
–
(10)
(20)
256
613
168
(2)
–
–
2
–
12
312
(120)
3
–
323
8
(9)
–
(1)
(24)
–
9
57
70
–
118
–
7
(477)
(220)
19
196
62
194
298
195
10
1,090
64
1,035
1 Refer to notes 2 and 36 for the change in accounting policy relating to pension administration costs.
2 Fair value gains/losses include both the Cash flow hedge reserve and the Cost of hedging reserve, of which the movement in relation to Other comprehensive
income recognised in the Cash flow hedge reserve for 2021 was €142 million (refer to note 28d).
3 Movements in Other comprehensive income relating to post-employment benefit obligations increase the Group’s tax losses by €20 million (tax value) at
December 31, 2021 and have therefore been disclosed as tax loss carried forward and tax credits in the above table.
€ million
Deferred tax asset
Deferred tax liability
Balance at December 31
2021
1,282
–
1,282
2020
1,075
(40)
1,035
The deferred tax assets mainly arise in Spain and the UK and are expected to reverse beyond one year. Recognition of the deferred tax
assets is supported by the expected reversal of deferred tax liabilities in corresponding periods, and projections of operating performance
laid out in the management approved business plans.
d Reconciliation of the total tax charge in the Income statement
The tax (charge)/credit is calculated at the domestic rates applicable to profits/(losses) in the country in which the profits/(losses) arise.
The tax credit on the loss for the year to December 31, 2021 (2020: loss) is lower (2020: lower) than the notional tax credit (2020: credit).
The differences are explained below:
€ million
Accounting loss before tax
Weighted average tax credit of the Group1
Unrecognised losses and deductible temporary differences arising in the year
Disposal and write down of investments
Effect of tax rate changes
Prior year tax assets recognised/(derecognised)
Effect of lower tax rate in the Canary Islands
Movement in respect of prior years
Non-deductible expenses
Other items
Tax credit in the Income statement
2021
(3,507)
20202
(7,827)
683
(193)
8
78
44
(23)
(13)
(15)
5
574
1,619
(342)
(83)
(74)
(176)
(40)
(2)
(21)
11
892
1 The expected tax credit is calculated by aggregating the expected tax credits/(charges) arising in each company in the Group and changes each year as tax
rates and profit mix change. The corporate tax rates for the Group's main countries of operation are Spain 25% (2020: 25%), the UK 19% (2020: 19%) and
Ireland 12.5% (2020: 12.5%).
2 Refer to notes 2 and 36 for the change in accounting policy relating to pension administration costs.
218
219
INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021
219
NOTES TO THE ACCOUNTS CONTINUED
For the year to December 31, 2021
10 Tax continued
e Payroll-related taxes and UK Air Passenger Duty
The Group was also subject to other taxes paid during the year which are as follows:
€ million
Payroll-related taxes
UK Air Passenger Duty
f
Factors that may affect future tax charges
Unrecognised deductible temporary differences and losses
€ million
Income tax losses
Spanish corporate income tax losses
Openskies SASU trading losses
UK trading losses
Other tax losses
Other losses and temporary differences
Spanish deductible temporary differences
UK capital losses
Irish capital losses
2021
310
204
514
2020
400
307
707
2021
2020
1,993
390
72
3
2,458
648
361
17
1,026
848
450
39
–
1,337
1,287
350
25
1,662
None of the unrecognised temporary differences have an expiry date. Further information with regard to the sensitivity of the recoverability
of deferred tax assets is given in note 2.
Unrecognised temporary differences – investment in subsidiaries and associates
No deferred tax liability has been recognised in respect of €617 million (2020: €547 million) of temporary differences relating to subsidiaries
and associates. The Group either controls the reversal of these temporary differences and it is probable that they will not reverse in the
foreseeable future or no tax consequences would arise from their reversal to a material extent.
Tax rate changes
On March 3, 2021 the UK Chancellor 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 €78 million is recorded in the Income statement and a credit of
€61 million is recorded in Other comprehensive income.
On October 8, 2021 Ireland 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 effect of the proposed rate change is not expected to be material over the period of the management approved business
plan.
Tax policy developments
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. The new
framework is expected to be enacted in 2022, and effective from 2023. The implications for the Group will be determined when the relevant
legislation is available.
g Tax-related contingent liabilities
The Group has certain contingent liabilities, across all taxes, which at December 31, 2021 amounted to €106 million (December 31, 2020:
€166 million). No material losses are likely to arise from such contingent liabilities. As such the Group does not consider it appropriate to
make a provision for these amounts. Included in the tax related contingent liabilities is the following:
Merger gain
Following tax audits covering the period 2011 to 2014, the Spanish Tax Authorities issued a corporate income tax assessment to the
Company regarding the merger in 2011 between British Airways and Iberia. The maximum exposure in this case is €95 million (December 31,
2020: €92 million), being the amount in the tax assessment with an estimate of the interest accrued on that assessment through to
December 31, 2021.
The Company appealed the assessment to the Tribunal Económico-Administrativo Central or ‘TEAC’ (Central Administrative Tax Tribunal).
On October 23, 2019 the TEAC ruled in favour of the Spanish Tax Authorities. The Company subsequently appealed this ruling to the
Audiencia Nacional (National High Court) on December 20, 2019, and on July 24, 2020 filed submissions in support of its case. The
Company does not expect a hearing at the National High Court until the second half of 2022 at the earliest.
The Company disputes the technical merits of the assessment and ruling of the TEAC, both in terms of whether a gain arose and in terms of
the quantum of any gain. The Company believes that it has strong arguments to support its appeals. The Company does not consider it
appropriate to make a provision for these amounts and accordingly has classified this matter as a contingent liability.
220
220 INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021
Financial Statements
11 Earnings per share
€ million
Losses attributable to equity holders of the parent for basic losses
Diluted losses attributable to equity holders of the parent and diluted losses per share
Weighted average number of ordinary shares in issue2
Weighted average number for diluted loss per share
2021
2020
€ cents
Basic loss per share
Diluted loss per share
2021
(2,933)
(2,933)
20201
(6,935)
(6,935)
2021
Number
‘000
4,963,945
2020
Number
‘0001
3,528,052
4,963,945
3,528,052
2021
(59.1)
(59.1)
20201
(196.6)
(196.6)
1 Earnings per share information has been restated for the comparative period presented for the effects of the change in accounting policy in respect to
pension administration costs (note 2).
2 In 2020, includes 734,657 thousand shares as the weighted average impact for 2,979,443 thousand new ordinary shares issued through the rights issue
(note 29).
The effect of the assumed conversion of the IAG €500 million convertible bond 2022, the IAG €825 million convertible bond 2028 and
outstanding employee share schemes is antidilutive for the year to December 31, 2021, and therefore has not been included in the diluted
loss per share calculation.
The calculation of basic and diluted loss per share before exceptional items is included in the Alternative performance measures section.
12 Dividends
The Directors propose that no dividend be paid for the year to December 31, 2021 (2020: €nil). The dividend paid in the year to December
31, 2020 of €53 million relates to the withholding tax on the 2019 interim dividend, which was proposed in October 2019.
The future dividend capacity of the Group is dependent on the liquidity requirements and the distributable reserves of the Group’s main
operating companies and their capacity to pay dividends to the Company, together with the Company’s distributable reserves and liquidity.
Certain debt obligations place restrictions or conditions on the payment of dividends from the Group’s main operating companies to the
Company, including a loan to British Airways partially guaranteed by UKEF and loans to Iberia and Vueling partially guaranteed by the
Instituto de Crédito Oficial (ICO) in Spain; these loans can be repaid early without penalty at the election of each company. In Spain, Iberia
and Vueling are not permitted to make dividend payments in the reporting period in which they are in receipt of Expedientes de Regulación
Temporal de Empleo or ‘ERTE’ (Temporary Employment Regulation Records). British Airways agreed with the Trustee of its main UK
defined benefit pension scheme (NAPS) as part of an agreement to defer £450 million of contributions that no dividends will be paid to IAG
before 2024 and that any dividends paid to IAG from 2024 will trigger a pension contribution of 50 per cent of the amount of the dividend,
until the deferred pension contributions have been paid.
NOTES TO THE ACCOUNTS CONTINUED
For the year to December 31, 2021
10 Tax continued
€ million
Payroll-related taxes
UK Air Passenger Duty
e Payroll-related taxes and UK Air Passenger Duty
The Group was also subject to other taxes paid during the year which are as follows:
f
Factors that may affect future tax charges
Unrecognised deductible temporary differences and losses
Spanish corporate income tax losses
Openskies SASU trading losses
€ million
Income tax losses
UK trading losses
Other tax losses
Other losses and temporary differences
Spanish deductible temporary differences
UK capital losses
Irish capital losses
2021
310
204
514
1,993
390
72
3
2,458
648
361
17
1,026
2020
400
307
707
848
450
39
–
1,337
1,287
350
25
1,662
None of the unrecognised temporary differences have an expiry date. Further information with regard to the sensitivity of the recoverability
of deferred tax assets is given in note 2.
Unrecognised temporary differences – investment in subsidiaries and associates
No deferred tax liability has been recognised in respect of €617 million (2020: €547 million) of temporary differences relating to subsidiaries
and associates. The Group either controls the reversal of these temporary differences and it is probable that they will not reverse in the
foreseeable future or no tax consequences would arise from their reversal to a material extent.
Tax rate changes
On March 3, 2021 the UK Chancellor 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 €78 million is recorded in the Income statement and a credit of
€61 million is recorded in Other comprehensive income.
On October 8, 2021 Ireland 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 effect of the proposed rate change is not expected to be material over the period of the management approved business
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. The new
framework is expected to be enacted in 2022, and effective from 2023. The implications for the Group will be determined when the relevant
plan.
Tax policy developments
legislation is available.
g Tax-related contingent liabilities
The Group has certain contingent liabilities, across all taxes, which at December 31, 2021 amounted to €106 million (December 31, 2020:
€166 million). No material losses are likely to arise from such contingent liabilities. As such the Group does not consider it appropriate to
make a provision for these amounts. Included in the tax related contingent liabilities is the following:
Following tax audits covering the period 2011 to 2014, the Spanish Tax Authorities issued a corporate income tax assessment to the
Company regarding the merger in 2011 between British Airways and Iberia. The maximum exposure in this case is €95 million (December 31,
2020: €92 million), being the amount in the tax assessment with an estimate of the interest accrued on that assessment through to
Merger gain
December 31, 2021.
The Company appealed the assessment to the Tribunal Económico-Administrativo Central or ‘TEAC’ (Central Administrative Tax Tribunal).
On October 23, 2019 the TEAC ruled in favour of the Spanish Tax Authorities. The Company subsequently appealed this ruling to the
Audiencia Nacional (National High Court) on December 20, 2019, and on July 24, 2020 filed submissions in support of its case. The
Company does not expect a hearing at the National High Court until the second half of 2022 at the earliest.
The Company disputes the technical merits of the assessment and ruling of the TEAC, both in terms of whether a gain arose and in terms of
the quantum of any gain. The Company believes that it has strong arguments to support its appeals. The Company does not consider it
appropriate to make a provision for these amounts and accordingly has classified this matter as a contingent liability.
220
221
INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021
221
NOTES TO THE ACCOUNTS CONTINUED
For the year to December 31, 2021
13 Property, plant and equipment
€ million
Cost
Balance at January 1, 2020
Additions
Modification of leases
Disposals
Reclassifications
Exchange movements
Balance at December 31, 2020
Additions
Modification of leases
Disposals
Reclassifications
Transfers to Non-current assets held for sale (note 16)
Exchange movements
December 31, 2021
Depreciation and impairment
Balance at January 1, 2020
Depreciation charge for the year1
Impairment charge for the year1
Disposals
Exchange movements
Balance at December 31, 2020
Depreciation charge for the year
Impairment (reversal)/charge for the year1
Disposals
Modification of leases
Transfers to Non-current assets held for sale (note 16)
Exchange movements
December 31, 2021
Fleet
Property
Equipment
Total
29,382
2,854
21
(3,878)
(4)
(1,439)
26,936
709
236
(3,035)
(4)
(111)
1,265
25,996
12,707
1,659
820
(2,886)
(729)
11,571
1,500
(3)
(2,699)
–
(91)
602
3,162
1,605
84
16
(95)
8
(193)
2,982
38
(2)
(74)
–
–
181
32
(1)
(50)
(4)
(81)
1,501
37
(26)
(135)
(1)
–
74
3,125
1,450
1,249
1,025
165
–
(52)
(80)
93
22
(44)
(61)
1,282
1,035
34,149
2,970
36
(4,023)
–
(1,713)
31,419
784
208
(3,244)
(5)
(111)
1,520
30,571
14,981
1,917
842
(2,982)
(870)
13,888
1,738
16
154
19
(63)
–
–
81
84
–
(105)
(2,867)
(14)
–
57
(14)
(91)
740
10,880
1,473
1,057
13,410
1 For details regarding the impairment reversal on fleet assets refer to note 3 and the Alternative performance measures section. For details regarding the
operating segment in which the impairment charges arose, refer to note 5. In 2021, certain of the impairments recorded in 2020, that arose from the
permanent grounding of specific fleet assets, were reversed. In addition, certain fleet assets in 2020 were impaired down to their fair value, which was
determined based on independent appraisals of their market value.
Net book values
December 31, 2021
December 31, 2020
Analysis at December 31, 2021
Owned
Right of use assets (note 14)
Progress payments
Assets not in current use
Property, plant and equipment
Analysis at December 31, 2020
Owned
Right of use assets (note 14)
Progress payments
Assets not in current use
Property, plant and equipment
15,116
15,365
1,652
1,700
393
466
17,161
17,531
5,736
8,626
748
6
15,116
5,457
9,124
710
74
916
640
96
–
1,652
920
695
85
–
15,365
1,700
330
37
26
–
393
382
56
28
–
466
6,982
9,303
870
6
17,161
6,759
9,875
823
74
17,531
222
222 INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021
Financial Statements
NOTES TO THE ACCOUNTS CONTINUED
For the year to December 31, 2021
13 Property, plant and equipment
Transfers to Non-current assets held for sale (note 16)
€ million
Cost
Balance at January 1, 2020
Additions
Modification of leases
Disposals
Reclassifications
Exchange movements
Balance at December 31, 2020
Additions
Modification of leases
Disposals
Reclassifications
Exchange movements
December 31, 2021
Depreciation and impairment
Balance at January 1, 2020
Depreciation charge for the year1
Impairment charge for the year1
Disposals
Exchange movements
Balance at December 31, 2020
Depreciation charge for the year
Disposals
Modification of leases
Exchange movements
December 31, 2021
Net book values
December 31, 2021
December 31, 2020
Analysis at December 31, 2021
Owned
Right of use assets (note 14)
Progress payments
Assets not in current use
Property, plant and equipment
Analysis at December 31, 2020
Owned
Right of use assets (note 14)
Progress payments
Assets not in current use
Property, plant and equipment
Fleet
Property
Equipment
Total
3,162
1,605
29,382
2,854
(3,878)
21
(4)
(1,439)
26,936
709
236
(3,035)
(4)
(111)
1,265
25,996
12,707
1,659
820
(2,886)
(729)
11,571
1,500
(3)
(2,699)
–
(91)
602
5,736
8,626
748
6
15,116
5,457
9,124
710
74
84
16
(95)
8
(193)
2,982
38
(2)
(74)
–
–
181
165
–
(52)
(80)
154
19
(63)
–
–
81
916
640
96
–
1,652
920
695
85
–
3,125
1,450
1,249
1,025
1,282
1,035
(105)
(2,867)
32
(1)
(50)
(4)
(81)
1,501
37
(26)
(135)
(1)
–
74
93
22
(44)
(61)
84
–
(14)
–
57
330
37
26
–
393
382
56
28
–
466
34,149
2,970
36
(4,023)
–
(1,713)
31,419
784
208
(3,244)
(5)
(111)
1,520
30,571
14,981
1,917
842
(2,982)
(870)
13,888
1,738
16
(14)
(91)
740
6,982
9,303
870
6
17,161
6,759
9,875
823
74
17,531
15,116
15,365
1,652
1,700
393
466
17,161
17,531
Impairment (reversal)/charge for the year1
Transfers to Non-current assets held for sale (note 16)
1 For details regarding the impairment reversal on fleet assets refer to note 3 and the Alternative performance measures section. For details regarding the
operating segment in which the impairment charges arose, refer to note 5. In 2021, certain of the impairments recorded in 2020, that arose from the
permanent grounding of specific fleet assets, were reversed. In addition, certain fleet assets in 2020 were impaired down to their fair value, which was
determined based on independent appraisals of their market value.
10,880
1,473
1,057
13,410
The net book value of property comprises:
€ million
Freehold
Right of use assets (note 14)
Long leasehold improvements >50 years
Short leasehold improvements <50 years
Property
2021
495
640
311
206
1,652
2020
485
695
297
223
1,700
At December 31, 2021, bank and other loans of the Group are secured on owned fleet assets with a net book value of €3,081 million
(2020: €2,794 million).
14 Leases
a Amounts recognised in the Consolidated balance sheet
Property, plant and equipment includes the following amounts relating to right of use assets:
€ million
Cost
Balance at January 1, 2020
Additions
Modifications of leases
Disposals
Reclassifications1
Exchange movements
December 31, 2020
Additions
Modification of leases
Disposals
Reclassifications1
Exchange movements
December 31, 2021
Depreciation and impairment
Balance at January 1, 2020
Depreciation charge for the year
Impairment charge for the year2
Disposals
Reclassifications1
Exchange movements
December 31, 2020
Depreciation charge for the year
Impairment charge for the year2
Disposals
Modification of leases
Reclassifications1
Exchange movements
December 31, 2021
Net book value
December 31, 2021
December 31, 2020
Fleet
Property
Equipment
Total
13,854
1,194
21
(77)
(389)
(595)
14,008
240
236
(72)
(759)
565
882
58
16
(6)
–
(57)
893
15
(2)
(12)
–
55
14,218
949
4,108
1,035
161
(53)
(166)
(201)
4,884
963
4
(71)
–
(394)
206
5,592
108
103
–
(5)
–
(8)
198
87
16
(4)
–
–
12
309
123
1
(1)
(22)
3
(5)
99
–
(26)
(1)
–
2
74
55
15
–
(22)
(3)
(2)
43
8
–
(1)
(14)
–
1
37
14,859
1,253
36
(105)
(386)
(657)
15,000
255
208
(85)
(759)
622
15,241
4,271
1,153
161
(80)
(169)
(211)
5,125
1,058
20
(76)
(14)
(394)
219
5,938
8,626
9,124
640
695
37
56
9,303
9,875
15,365
1,700
1 Amounts with a net book value of €365 million (2020: €217 million) were reclassified from ROU assets to Owned Property, plant and equipment at the
cessation of the respective leases. The assets reclassified relate to leases with purchase options that were grandfathered as ROU assets upon transition to
IFRS 16, for which the Group had been depreciating over the expected useful life of the aircraft, incorporating the purchase option.
2 For details regarding the impairment charge on fleet assets refer to the Alternative performance measures section.
222
223
INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021 223
NOTES TO THE ACCOUNTS CONTINUED
For the year to December 31, 2021
14 Leases continued
Interest-bearing long-term borrowings includes the following amount relating to lease liabilities:
€ million
January 1
Additions
Modifications of leases
Repayments
Interest expense
Disposals
Exchange movements
December 31
Current
Non-current
b Amounts recognised in the Consolidated income statement
€ million
Amounts not included in the measurement of lease liabilities
Variable lease payments
Expenses relating to short-term leases
Expenses relating to leases of low-value assets, excluding short-term leases of low-value assets
Amounts expensed as a result of the recognition of ROU assets and lease liabilities
Interest expense on lease liabilities
Gain arising from sale and leaseback transactions
Depreciation charge for the year
Impairment charge for the year
2021
10,024
310
208
(1,855)
400
(8)
558
9,637
1,521
8,116
2020
11,046
1,179
20
(1,919)
442
–
(744)
10,024
1,560
8,464
2021
2020
1
26
–
400
(6)
1,058
20
1
42
–
442
(10)
1,153
161
During 2020 the IASB issued ‘COVID-19 related rent concessions – amendment to IFRS 16 Leases’ to provide a practical expedient to
lessees from applying IFRS 16 guidance on lease modification accounting for rent concessions for those lease modifications arising as a
direct result of COVID-19. During 2021, the IASB extended the period for the application of the practical expedient.
The Group has applied this practical expedient to all such modifications in the preparation of the consolidated financial statements. The net
impact on the Income statement for 2021 has been a credit of €8 million (2020: credit of €2 million) reflecting the changes to lease
payments that arose from such concessions.
c Amounts recognised in the Consolidated cash flow statement
The Group had total cash outflows for leases of €1,912 million in 2021 (2020: €1,997 million).
The Group had total cash inflows associated with sale and leaseback transactions of €213 million in 2021 (2020: €898 million).
The Group is exposed to future cash outflows (on an undiscounted basis) as at December 31, 2021, for which no amount has been
recognised in relation to leases not yet commenced to which the Group is committed, of €nil (2020: €183 million).
d Maturity profile of the lease liabilities
The maturity profile of the lease liabilities is disclosed in note 27f.
e Extension options
The Group has certain leases which contain extension options exercisable by the Group prior to the non-cancellable contract period. Where
practicable, the Group seeks to include extension options in new leases to provide operational flexibility. The Group assesses at lease
commencement whether it is reasonably certain to exercise the extension options.
The Group is exposed to future cash outflows (on an undiscounted basis) as at December 31, 2021, for which no amount has been
recognised, for potential extension options of €795 million (2020: €998 million) due to it not being reasonably certain that these leases will
be extended.
224
224 INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021
Financial Statements
2021
10,024
310
208
(1,855)
400
(8)
558
9,637
1,521
8,116
1
26
–
400
(6)
1,058
20
2020
11,046
1,179
20
(1,919)
442
–
(744)
10,024
1,560
8,464
1
42
–
442
(10)
1,153
161
f
Lessor accounting
The Group leases out certain of its property, plant and equipment. The Group has classified those leases that transfer substantially all of the
risks and rewards of ownership to the lessee as finance leases and those leases that do not transfer substantially all of the risks and rewards
of ownership to the lessee as operating leases.
Operating leases
Rental income from operating leases recognised by the Group in 2021 was €nil (2020: €nil). Rental income is recorded within Property, IT
and other within the Income statement.
The following table sets out a maturity analysis of operating lease receipts, showing the undiscounted lease receipts to be received after the
reporting date:
€ million
Within one year
One to two years
Two to five years
More than five years
TToottaall
2021
4
5
2
–
11
2020
–
–
–
–
–
2021
2020
15 Capital expenditure commitments
Capital expenditure authorised and contracted for but not provided for in the accounts amounts to €10,911 million (December 31, 2020:
€10,545 million). The majority of capital expenditure commitments are denominated in US dollars, and as such are subject to changes in
exchange rates.
The outstanding commitments include €10,813 million for the acquisition of 22 Airbus A320s (from 2022 to 2025), 34 Airbus A321s (from
2022 to 2024), 26 Airbus A350s (from 2022 to 2025), 18 Boeing 777-9s (from 2025 to 2027) and 10 Boeing 787s (from 2022 to 2024). 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, 2021.
16 Non-current assets held for sale
The non-current assets held for sale of €20 million represent three Airbus A321-200 aircraft. No gain or loss was recognised on classification
as non-current assets held for sale. These aircraft are presented within the Aer Lingus segment and will exit the business within 12 months of
December 31, 2021.
NOTES TO THE ACCOUNTS CONTINUED
For the year to December 31, 2021
14 Leases continued
Interest-bearing long-term borrowings includes the following amount relating to lease liabilities:
€ million
January 1
Additions
Modifications of leases
Repayments
Interest expense
Disposals
Exchange movements
December 31
Current
Non-current
€ million
b Amounts recognised in the Consolidated income statement
Amounts not included in the measurement of lease liabilities
Variable lease payments
Expenses relating to short-term leases
Expenses relating to leases of low-value assets, excluding short-term leases of low-value assets
Amounts expensed as a result of the recognition of ROU assets and lease liabilities
Interest expense on lease liabilities
Gain arising from sale and leaseback transactions
Depreciation charge for the year
Impairment charge for the year
During 2020 the IASB issued ‘COVID-19 related rent concessions – amendment to IFRS 16 Leases’ to provide a practical expedient to
lessees from applying IFRS 16 guidance on lease modification accounting for rent concessions for those lease modifications arising as a
direct result of COVID-19. During 2021, the IASB extended the period for the application of the practical expedient.
The Group has applied this practical expedient to all such modifications in the preparation of the consolidated financial statements. The net
impact on the Income statement for 2021 has been a credit of €8 million (2020: credit of €2 million) reflecting the changes to lease
payments that arose from such concessions.
c Amounts recognised in the Consolidated cash flow statement
The Group had total cash outflows for leases of €1,912 million in 2021 (2020: €1,997 million).
The Group had total cash inflows associated with sale and leaseback transactions of €213 million in 2021 (2020: €898 million).
The Group is exposed to future cash outflows (on an undiscounted basis) as at December 31, 2021, for which no amount has been
recognised in relation to leases not yet commenced to which the Group is committed, of €nil (2020: €183 million).
d Maturity profile of the lease liabilities
The maturity profile of the lease liabilities is disclosed in note 27f.
e Extension options
The Group has certain leases which contain extension options exercisable by the Group prior to the non-cancellable contract period. Where
practicable, the Group seeks to include extension options in new leases to provide operational flexibility. The Group assesses at lease
commencement whether it is reasonably certain to exercise the extension options.
The Group is exposed to future cash outflows (on an undiscounted basis) as at December 31, 2021, for which no amount has been
recognised, for potential extension options of €795 million (2020: €998 million) due to it not being reasonably certain that these leases will
be extended.
224
225
INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021 225
NOTES TO THE ACCOUNTS CONTINUED
For the year to December 31, 2021
17 Intangible assets and impairment review
a
Intangible assets
€ million
Cost
Balance at January 1, 2020
Additions
Disposals
Reclassifications
Exchange movements
Balance at December 31, 2020
Additions
Disposals
Exchange movements
December 31, 2021
Amortisation and impairment
Balance at January 1, 2020
Amortisation charge for the year
Impairment charge for the year
Disposals
Exchange movements
Balance at December 31, 2020
Amortisation charge for the year
Disposals
Exchange movements
December 31, 2021
Net book values
December 31, 2021
December 31, 2020
Goodwill
Brand
Customer
loyalty
programmes
Landing
rights1
Software
Other
Total
598
451
253
1,616
1,376
–
–
–
(5)
593
–
–
3
–
–
–
–
–
–
–
–
451
253
–
–
–
–
–
–
–
–
–
(61)
1,555
–
(6)
56
141
(18)
43
(68)
1,474
149
(19)
70
596
451
253
1,605
1,674
249
–
–
–
–
249
–
–
–
249
347
344
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
115
6
15
–
(4)
132
6
–
4
710
151
20
(7)
(38)
836
167
(13)
42
142
1,032
451
451
253
253
1,463
1,423
642
638
282
51
(121)
(46)
(5)
161
34
(49)
3
149
60
4
–
–
(2)
62
5
–
(1)
66
83
99
4,576
192
(139)
(3)
(139)
4,487
183
(74)
132
4,728
1,134
161
35
(7)
(44)
1,279
178
(13)
45
1,489
3,239
3,208
1 The net book value includes non-UK and non-EU based landing rights of €75 million (2020: €81 million) that have a definite life. The remaining average life of
these landing rights is 14 years.
226
226 INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021
Financial Statements
NOTES TO THE ACCOUNTS CONTINUED
For the year to December 31, 2021
17 Intangible assets and impairment review
Balance at January 1, 2020
598
451
253
1,616
1,376
Balance at December 31, 2020
451
253
a
Intangible assets
€ million
Cost
Additions
Disposals
Reclassifications
Exchange movements
Additions
Disposals
Exchange movements
December 31, 2021
Amortisation and impairment
Balance at January 1, 2020
Amortisation charge for the year
Impairment charge for the year
Disposals
Exchange movements
Balance at December 31, 2020
Amortisation charge for the year
Disposals
Exchange movements
December 31, 2021
Net book values
December 31, 2021
December 31, 2020
Goodwill
Brand
programmes
Software
Other
Total
Customer
loyalty
Landing
rights1
596
451
253
1,605
1,674
(5)
593
–
–
–
–
–
3
–
–
–
–
–
–
–
249
249
249
347
344
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(61)
1,555
–
(6)
56
115
6
15
–
(4)
132
6
–
4
141
(18)
43
(68)
1,474
149
(19)
70
710
151
20
(7)
(38)
836
167
(13)
42
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
142
1,032
451
451
253
253
1,463
1,423
642
638
282
51
(121)
(46)
(5)
161
34
(49)
3
149
60
4
–
–
(2)
62
5
–
(1)
66
83
99
4,576
192
(139)
(3)
(139)
4,487
183
(74)
132
4,728
1,134
161
35
(7)
(44)
1,279
178
(13)
45
1,489
3,239
3,208
1 The net book value includes non-UK and non-EU based landing rights of €75 million (2020: €81 million) that have a definite life. The remaining average life of
these landing rights is 14 years.
b
Impairment review
The carrying amounts of intangible assets with indefinite life and goodwill allocated to cash generating units (CGUs) of the Group are:
€ million
2021
Iberia
January 1 and December 31, 2021
British Airways
January 1, 2021
Disposals
Exchange movements
December 31, 2021
Vueling
January 1 and December 31, 2021
Aer Lingus
January 1 and December 31, 2021
IAG Loyalty
January 1 and December 31, 2021
Goodwill
Landing
rights
Customer
loyalty
programmes
Brand
–
423
306
44
–
3
47
763
(6)
52
809
–
–
–
–
28
94
35
272
62
110
–
–
–
–
–
–
–
Total
729
807
(6)
55
856
157
444
–
–
–
253
253
December 31, 2021
347
1,388
451
253
2,439
€ million
2020
Iberia
January 1 and December 31, 2020
British Airways
January 1, 2020
Exchange movements
December 31, 2020
Vueling
January 1 and December 31, 2020
Aer Lingus
January 1 and December 31, 2020
IAG Loyalty
January 1 and December 31, 2020
Other CGUs
January 1, 2020
Impairment charge for the year
January 1 and December 31, 2020
Goodwill
Landing
rights
Customer
loyalty
programmes
Brand
–
423
306
49
(5)
44
816
(53)
763
–
–
–
28
94
35
272
62
110
–
–
–
–
–
–
Total
729
865
(58)
807
157
444
–
–
–
–
–
12
(12)
–
–
–
–
–
253
253
–
–
–
12
(12)
–
December 31, 2020
344
1,342
451
253
2,390
226
227
INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021 227
NOTES TO THE ACCOUNTS CONTINUED
For the year to December 31, 2021
17 Intangible assets and impairment review continued
Basis for calculating recoverable amount
The recoverable amounts of Group’s CGUs have been measured based on their value-in-use, which utilises a weighted average multi-
scenario discounted cash flow model. The details of these scenarios are given in the going concern section of note 2, with a weighting of 70
per cent to the base case, 20 per cent to the downside case and 10 per cent to the downside lockdown case. Cash flow projections are
based on the business plans approved by the relevant operating companies covering a three-year period. Cash flows extrapolated beyond
the three-year period are projected to increase based on long-term growth rates. Cash flow projections are discounted using each CGU’s
pre-tax discount rate.
Annually the relevant operating companies prepare and approve three-year business plans, and the Board approved the Group three-year
business plan in the fourth quarter of the year. Adjustments have been made to the terminal year of the business plan cash flows to
incorporate the impacts of climate change that the Group can reliably estimate at the reporting date. However, given the long-term nature
of the Group’s sustainability commitments, there are other aspects of these commitments that cannot be reliably estimated and
accordingly have been excluded from the value-in-use calculations (refer to note 4). The business plan cash flows used in the value-in-use
calculations also reflect all restructuring of the business where relevant that has been approved by the Board and which can be executed
by management under existing agreements.
Key assumptions
The value-in-use calculations for each CGU reflected the increased risks arising from COVID-19, including updated projected cash flows for
the decreased activity from 2022 through to the end of 2024 and an increase in the pre-tax discount rates to incorporate increased equity
market volatility. For each of the Group’s CGUs the key assumptions used in the value-in-use calculations are as follows:
Per cent
Operating margin1
ASKs as a proportion of 20191,2
Long-term growth rate
Pre-tax discount rate
Per cent
Operating margin1
ASKs as a proportion of 20191,2
Long-term growth rate
Pre-tax discount rate
British
Airways
3–13
75–103
1.9
11.8
British
Airways
(20)–16
45–95
2.1
11.2
Iberia
2–12
77–100
1.7
11.4
Iberia
(12)–11
49–98
2.0
11.6
2021
Vueling
2–11
97–119
1.6
11.1
2020
Vueling
(22)–12
46–107
1.8
11.5
Aer Lingus
0–14
IAG Loyalty
22–24
84–115
1.7
10.1
n/a
1.6
12.0
Aer Lingus
(14) –13
IAG Loyalty
25–27
40–100
1.9
10.4
n/a
2.0
10.3
1 Operating margin and ASKs as a proportion of 2019 are both stated as the weighted average derived from the multi-scenario discounted cash flow model.
2 In prior periods the Group applied the average ASK growth per annum as a key assumption. Given the impact of COVID-19, the Group has presented ASKs as
a proportion of the level of ASKs achieved in 2019, prior to the application of the terminal value calculation.
Jet fuel price ($ per MT)
2021
2020
Within 12
months
690
373
1-2 years
673
420
2-3 years
659
449
3 years and
thereafter
659
449
Forecast ASKs reflect the range of ASKs as a percentage of the 2019 actual ASKs over the forecast period, based on planned network
growth and taking into account management’s expectation of the market.
The long-term growth rate is calculated for each CGU based on the forecast weighted average exposure in each primary market using
gross domestic product (GDP) (source: Oxford Economics). The terminal value cash flows and long term growth rate incorporate the
impacts of climate change insofar as they can be determined (note 4). The airlines’ network plans are reviewed annually as part of the
Business plan and reflect management’s plans in response to specific market risk or opportunity.
Pre-tax discount rates represent the current market assessment of the risks specific to each CGU, taking into consideration the time value
of money and underlying risks of its primary market. The discount rate calculation is based on the circumstances of the airline industry, the
Group and the CGU. It is derived from the weighted average cost of capital (WACC). The WACC takes into consideration both debt and
equity available to airlines. The cost of equity is derived from the expected return on investment by airline investors and the cost of debt is
derived from both market data and the Group’s existing debt structure. CGU-specific risk is incorporated by applying individual beta factors
which are evaluated annually based on available market data. The pre-tax discount rate reflects the timing of future tax flows.
Jet fuel price assumptions are derived from forward price curves in the fourth quarter of each year and sourced externally. The cash flow
forecasts reflect these price increases after taking into consideration of level of fuel derivatives and their associated prices that the Group
has in place.
228
228 INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021
Financial Statements
NOTES TO THE ACCOUNTS CONTINUED
For the year to December 31, 2021
17 Intangible assets and impairment review continued
Basis for calculating recoverable amount
The recoverable amounts of Group’s CGUs have been measured based on their value-in-use, which utilises a weighted average multi-
scenario discounted cash flow model. The details of these scenarios are given in the going concern section of note 2, with a weighting of 70
per cent to the base case, 20 per cent to the downside case and 10 per cent to the downside lockdown case. Cash flow projections are
based on the business plans approved by the relevant operating companies covering a three-year period. Cash flows extrapolated beyond
the three-year period are projected to increase based on long-term growth rates. Cash flow projections are discounted using each CGU’s
pre-tax discount rate.
Annually the relevant operating companies prepare and approve three-year business plans, and the Board approved the Group three-year
business plan in the fourth quarter of the year. Adjustments have been made to the terminal year of the business plan cash flows to
incorporate the impacts of climate change that the Group can reliably estimate at the reporting date. However, given the long-term nature
of the Group’s sustainability commitments, there are other aspects of these commitments that cannot be reliably estimated and
accordingly have been excluded from the value-in-use calculations (refer to note 4). The business plan cash flows used in the value-in-use
calculations also reflect all restructuring of the business where relevant that has been approved by the Board and which can be executed
by management under existing agreements.
Key assumptions
The value-in-use calculations for each CGU reflected the increased risks arising from COVID-19, including updated projected cash flows for
the decreased activity from 2022 through to the end of 2024 and an increase in the pre-tax discount rates to incorporate increased equity
market volatility. For each of the Group’s CGUs the key assumptions used in the value-in-use calculations are as follows:
Per cent
Operating margin1
ASKs as a proportion of 20191,2
Long-term growth rate
Pre-tax discount rate
Per cent
Operating margin1
ASKs as a proportion of 20191,2
Long-term growth rate
Pre-tax discount rate
Jet fuel price ($ per MT)
2021
2020
British
Airways
3–13
75–103
1.9
11.8
British
Airways
(20)–16
45–95
2.1
11.2
Iberia
2–12
77–100
1.7
11.4
Iberia
(12)–11
49–98
2.0
11.6
2021
Vueling
2–11
97–119
1.6
11.1
2020
Vueling
(22)–12
46–107
1.8
11.5
Aer Lingus
IAG Loyalty
0–14
84–115
1.7
10.1
22–24
n/a
1.6
12.0
Aer Lingus
IAG Loyalty
(14) –13
40–100
1.9
10.4
25–27
n/a
2.0
10.3
Within 12
months
690
373
1-2 years
2-3 years
673
420
659
449
3 years and
thereafter
659
449
1 Operating margin and ASKs as a proportion of 2019 are both stated as the weighted average derived from the multi-scenario discounted cash flow model.
2 In prior periods the Group applied the average ASK growth per annum as a key assumption. Given the impact of COVID-19, the Group has presented ASKs as
a proportion of the level of ASKs achieved in 2019, prior to the application of the terminal value calculation.
Forecast ASKs reflect the range of ASKs as a percentage of the 2019 actual ASKs over the forecast period, based on planned network
growth and taking into account management’s expectation of the market.
The long-term growth rate is calculated for each CGU based on the forecast weighted average exposure in each primary market using
gross domestic product (GDP) (source: Oxford Economics). The terminal value cash flows and long term growth rate incorporate the
impacts of climate change insofar as they can be determined (note 4). The airlines’ network plans are reviewed annually as part of the
Business plan and reflect management’s plans in response to specific market risk or opportunity.
Pre-tax discount rates represent the current market assessment of the risks specific to each CGU, taking into consideration the time value
of money and underlying risks of its primary market. The discount rate calculation is based on the circumstances of the airline industry, the
Group and the CGU. It is derived from the weighted average cost of capital (WACC). The WACC takes into consideration both debt and
equity available to airlines. The cost of equity is derived from the expected return on investment by airline investors and the cost of debt is
derived from both market data and the Group’s existing debt structure. CGU-specific risk is incorporated by applying individual beta factors
which are evaluated annually based on available market data. The pre-tax discount rate reflects the timing of future tax flows.
Jet fuel price assumptions are derived from forward price curves in the fourth quarter of each year and sourced externally. The cash flow
forecasts reflect these price increases after taking into consideration of level of fuel derivatives and their associated prices that the Group
has in place.
Summary of results
At December 31, 2021 management reviewed the recoverable amount of each of the CGUs and concluded the recoverable amounts
exceeded the carrying values.
Reasonable possible changes in key assumptions, both individually and in combination, have been considered for each CGU, where
applicable, which include reducing the operating margin by 2 percentage points in each year, ASKs by 5 per cent in each year, long-term
growth rates in the terminal value calculation to zero, increasing pre-tax discount rates by 2.5 percentage points, changing the weighting of
the base case and the downside case to be 100 per cent weighted towards the downside lockdown case, and increasing the fuel price by
40 per cent with no assumed cost recovery. Given the inherent uncertainty associated with the impact of climate change, these sensitivities
represent a reasonably possible greater impact of climate change on the CGUs than that included in the impairment models.
For the British Airways, Iberia, Vueling and Aer Lingus CGUs, while the recoverable amounts are estimated to exceed the carrying amounts
by €3,402 million, €2,166 million, €2,271 million and €1,614 million, respectively, the recoverable amounts would be below the carrying
amounts when applying reasonable possible changes in assumptions in each of the following scenarios:
• British Airways: (i) if ASKs had been five per cent lower combined with a fuel price increase of 4 per cent; (ii) if ASKs had been five per
cent lower combined with a reduction of the long-term growth rate to 1.3 per cent; (iii) if operating margin had been two percentage
points lower; and (iv) if the fuel price had been 11 per cent higher;
• Iberia: (i) if ASKs had been five per cent lower combined with a fuel price increase of 15 per cent; and (ii) if the fuel price had been
21 per cent higher;
• Vueling: (i) if ASKs had been five per cent lower combined with a fuel price increase of 32 per cent; and (ii) if the fuel price had been
39 per cent higher; and
• Aer Lingus: (i) if ASKs had been five per cent lower combined with a fuel price increase of 23 per cent; and (ii) if the fuel price had been
31 per cent higher.
For the remainder of the reasonable possible changes in key assumptions applied to the British Airways, Iberia and Aer Lingus CGUs and
for all the reasonable possible changes in key assumptions applied to the remaining CGUs, no impairment arises.
For impairment charges, and impairment reversals, recognised in relation to landing rights and fleet assets stood down permanently at
December 31, 2021 and December 31, 2020, refer to note 3 and the Alternative performance measures section.
18 Investments
a
Investments in subsidiaries
The Group’s subsidiaries at December 31, 2021 are listed in the Group investments section.
All subsidiary undertakings are included in the consolidation. The proportion of the voting rights in the subsidiary undertakings held directly
do not differ from the proportion of ordinary shares held. There have been no significant changes in ownership interests of subsidiaries
during the year.
The total non-controlling interest at December 31, 2021 is €6 million (2020: €6 million).
British Airways Employee Benefit Trustee (Jersey) Limited, a wholly-owned subsidiary of British Airways, governs the British Airways Plc
Employee Share Ownership Trust (the Trust). The Trust is not a legal subsidiary of IAG; however, it is consolidated within the Group results.
b
Investments in associates and joint ventures
The share of assets, liabilities, revenue and profit of the Group’s associates and joint ventures, which are included in the Group’s financial
statements, are as follows:
€ million
Total assets
Total liabilities
Revenue
Profit for the year
The detail of the movement in Investment in associates and joint ventures is shown as follows:
€ million
At beginning of year
Additions
Share of retained profits
Dividends received
Exchange movements
2021
115
(85)
64
2
2021
29
9
2
(1)
1
40
2020
73
(50)
22
1
2020
31
–
1
(3)
–
29
At December 31, 2021 there are no restrictions on the ability of associates or joint ventures to transfer funds to the parent and there are no
related contingent liabilities.
At both December 31, 2021 and December 31, 2020 the investment in Sociedad Conjunta para la Emisión y Gestión de Medios de Pago EFC,
S.A. exceeded 50 per cent ownership by the Group (50.5 per cent). The entity is treated as a joint venture as decisions regarding its
strategy and operations require the unanimous consent of the parties who share control, including IAG.
228
229
INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021 229
NOTES TO THE ACCOUNTS CONTINUED
For the year to December 31, 2021
19 Other equity investments
Other equity investments include the following:
€ million
Unlisted securities
The credit relating to other equity investments was €nil (2020: €1 million).
20 Trade and other receivables
€ million
Amounts falling due within one year
Trade receivables
Provision for expected credit loss
Net trade receivables
Prepayments and accrued income
Other non-trade receivables
Amounts falling due after one year
Prepayments and accrued income
Other non-trade receivables
Movements in the provision for expected credit loss were as follows:
€ million
At beginning of year
Provided during the year
Released during the year
Receivables written off during the year
Exchange movements
Trade receivables are generally non-interest-bearing and on 30 days terms (2020: 30 days).
The credit risk exposure on the Group's trade receivables is set out below:
2021
31
31
2020
29
29
2021
2020
850
(115)
735
764
196
682
(125)
557
596
196
1,695
1,349
248
2
250
2021
125
8
(11)
(10)
3
115
226
2
228
2020
113
18
(2)
(1)
(3)
125
December 31, 2021
€ million
Trade receivables
Expected credit loss rate
Provision for expected credit loss
December 31, 2020
€ million
Trade receivables
Expected credit loss rate
Provision for expected credit loss
Current
498
0.2%
1
Current
345
0.9%
3
<30 days
132
30-180 days
94
180-365 days
10
> 365 days
116
0.1%
–
1.1%
1
20.0%
95.7%
2
111
<30 days
114
30-180 days
88
180-365 days
11
> 365 days
124
0.2%
–
1.1%
1
72.7%
8
91.1%
113
21 Cash, cash equivalents and other current interest-bearing deposits
€ million
Cash at bank and in hand
Short-term deposits maturing within three months
Cash and cash equivalents
Current interest-bearing deposits maturing after three months
Cash, cash equivalents and other interest-bearing deposits
2021
2,569
5,323
7,892
51
7,943
2020
1,882
3,892
5,774
143
5,917
Cash at bank is primarily held in AAA money market funds and bank deposits. Short-term deposits are for periods up to three months and
earn interest based on the floating deposit rates.
At December 31, 2021 the Group had no outstanding bank overdrafts (2020: nil).
Current interest-bearing deposits have maturities in excess of three months and typically within 12 months of the reporting date and earn
interest based on the market rates available at the time the deposit was made.
At December 31, 2021 Aer Lingus held €35 million of restricted cash (2020: €38 million) within interest-bearing deposits maturing after
more than three months to be used for employee-related obligations.
230
230 INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021
Financial Statements
The credit relating to other equity investments was €nil (2020: €1 million).
NOTES TO THE ACCOUNTS CONTINUED
For the year to December 31, 2021
19 Other equity investments
Other equity investments include the following:
€ million
Unlisted securities
20 Trade and other receivables
€ million
Amounts falling due within one year
Trade receivables
Provision for expected credit loss
Net trade receivables
Prepayments and accrued income
Other non-trade receivables
Amounts falling due after one year
Prepayments and accrued income
Other non-trade receivables
€ million
At beginning of year
Provided during the year
Released during the year
Receivables written off during the year
Exchange movements
December 31, 2021
€ million
Trade receivables
Expected credit loss rate
Provision for expected credit loss
December 31, 2020
€ million
Trade receivables
Expected credit loss rate
Provision for expected credit loss
Movements in the provision for expected credit loss were as follows:
Trade receivables are generally non-interest-bearing and on 30 days terms (2020: 30 days).
The credit risk exposure on the Group's trade receivables is set out below:
Current
<30 days
30-180 days
180-365 days
> 365 days
498
0.2%
1
345
0.9%
3
132
0.1%
–
114
0.2%
–
94
1.1%
1
88
1.1%
1
Current
<30 days
30-180 days
180-365 days
> 365 days
21 Cash, cash equivalents and other current interest-bearing deposits
€ million
Cash at bank and in hand
Short-term deposits maturing within three months
Cash and cash equivalents
Current interest-bearing deposits maturing after three months
Cash, cash equivalents and other interest-bearing deposits
Cash at bank is primarily held in AAA money market funds and bank deposits. Short-term deposits are for periods up to three months and
earn interest based on the floating deposit rates.
At December 31, 2021 the Group had no outstanding bank overdrafts (2020: nil).
Current interest-bearing deposits have maturities in excess of three months and typically within 12 months of the reporting date and earn
interest based on the market rates available at the time the deposit was made.
At December 31, 2021 Aer Lingus held €35 million of restricted cash (2020: €38 million) within interest-bearing deposits maturing after
more than three months to be used for employee-related obligations.
2021
31
31
2020
29
29
2021
2020
1,695
1,349
850
(115)
735
764
196
248
2
250
2021
125
8
(11)
(10)
3
115
682
(125)
557
596
196
226
2
228
2020
113
18
(2)
(1)
(3)
125
20.0%
10
2
116
95.7%
111
72.7%
11
8
2021
2,569
5,323
7,892
51
7,943
124
91.1%
113
2020
1,882
3,892
5,774
143
5,917
a Net debt
Movements in net debt were as follows:
€ million
Bank, other loans, asset financed liabilities and other
financing liabilities
Lease liabilities
Cash and cash equivalents
Current interest-bearing deposits
€ million
Bank, other loans and asset financed liabilities
Lease liabilities
Cash and cash equivalents
Current interest-bearing deposits
22 Trade and other payables
€ million
Trade creditors1
Other creditors
Other taxation and social security
Accruals and deferred income
Balance at
January 1,
2021
Cash flows
Exchange
movements
New leases
and
modifications Other items
Balance at
December 31,
2021
5,655
10,024
(5,774)
(143)
9,762
Balance at
January 1,
2020
3,208
11,046
(4,062)
(2,621)
7,571
4,033
(1,481)
(1,913)
91
730
261
559
(205)
1
616
–
518
–
–
518
24
17
–
–
41
9,973
9,637
(7,892)
(51)
11,667
Cash flows
2,589
Exchange
movements
(227)
(1,536)
(1,940)
2,366
1,479
(726)
228
112
(613)
New leases
and
modifications Other items
85
–
1,179
–
–
1,179
61
–
–
146
2021
2,068
898
176
570
3,712
Balance at
December 31,
2020
5,655
10,024
(5,774)
(143)
9,762
2020
1,609
679
149
373
2,810
1 Trade creditors includes €89 million (2020: €55 million) due to suppliers that have signed up to supply chain financing programmes offered by a number of
partner financial institutions. Under these programmes either or both: (i) the suppliers can elect on an invoice-by-invoice basis to receive a discounted early
payment from the partner financial institutions rather than being paid in line with the agreed payment terms; and/or (ii) the Group elects on an invoice-by-
invoice basis for the partner financial institution to pay the supplier in line with the agreed payment terms and the Group enters into payment terms with the
partner financial institution of up to 150 days with interest incurred at rates between 1.5 per cent and 3.0 per cent.
The Group assesses the arrangement against indicators to assess if liabilities which suppliers have transferred to the partner financial
institutions under the supplier financing programmes continue to meet the definition of trade creditors or should be classified as
borrowings. The cash flows arising from such arrangements are reported within cash flows from operating activities or within cash flows
from financing activities, in the Consolidated cash flow statement, depending on whether the associated liabilities meet the definition of
trade creditors or as borrowings.
At December 31, 2021 these liabilities met these criteria of Trade creditors and are excluded from the Net debt table in note 21a.
Average payment days to suppliers – Spanish Group companies
Days
Average payment days for payment to suppliers
Ratio of transactions paid
Ratio of transactions outstanding for payment
€ million
Total payments made
Total payments outstanding
2021
34
32
78
2021
3,945
147
2020
43
36
135
2020
3,694
293
230
231
INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021
231
NOTES TO THE ACCOUNTS CONTINUED
For the year to December 31, 2021
23 Deferred revenue on ticket sales
€ million
Balance at January 1, 2021
Revenue recognised in the Income statement1, 2
Financing charge recognised in the Income statement
Loyalty points issued to customers
Cash received from customers3, 4
Exchange movements
Balance at December 31, 2021
Analysis:
Current
Non-current
€ million
Balance at January 1, 2020
Changes in estimates
Revenue recognised in the Income statement1, 2
Loyalty points issued to customers
Cash received from customers3, 4
Exchange movements
Balance at December 31, 2020
Analysis:
Current
Non-current
Customer
loyalty
programmes
2,725
Sales in
advance of
carriage
2,405
Total
5,130
(524)
(6,518)
(7,042)
37
407
–
175
2,820
2,429
391
2,820
–
40
7,689
116
3,732
3,732
–
3,732
Customer
loyalty
programmes
1,917
Sales in
advance of
carriage
3,569
–
291
37
447
7,689
291
6,552
6,161
391
6,552
Total
5,486
291
(260)
(6,032)
(6,292)
361
850
(143)
2,725
2,252
473
2,725
8
4,714
(145)
2,405
2,405
–
2,405
369
5,564
(288)
5,130
4,657
473
5,130
1 Where the Group acts as an agent in the provision of redemption products and services to customers through loyalty programmes, or in the provision of
interline flights to passengers, revenue is recognised in the Income statement net of the related costs.
2 Included within revenue recognised in the Income statement during 2021 is an amount of €780 million previously held as deferred revenue at January 1, 2021
(recognised during 2020 previously held as deferred revenue at January 1, 2020: €2,006 million).
3 Included within cash received from customers at December 31, 2021 is an amount of €nil (December 31, 2020: €830 million) received from American Express
upon signing of the multi-year commercial partnership renewal with IAG Loyalty and which unwinds over the duration of the contract term as the associated
performance obligations are fulfilled.
4 Cash received from customers is net of refunds.
The unsatisfied performance obligation under the Group’s customer loyalty programmes that is classified as non-current was €391 million at
December 31, 2021. Of this amount, €279 million is expected to be recognised as revenue in 1 to 5 years from the reporting date and €112
million thereafter.
Deferred revenue relating to customer loyalty programmes consists primarily of revenue allocated to performance obligations associated
with Avios. Avios are issued by the Group's airlines through their loyalty programmes, or are sold to third parties such as credit card
providers, who issue them as part of their loyalty programme. Avios do not have an expiry date and can be redeemed at any time in the
future. Revenue may therefore be recognised at any time in the future.
Deferred revenue in respect of sales in advance of carriage consists of revenue allocated to airline tickets to be used for future travel.
Typically these tickets expire within 12 months after the planned travel date, if they are not used within that time period, however, with the
significant disruption caused by the COVID-19 pandemic, the Group has extended the expiry period up to 24 months after the planned
travel date, depending on the operating company. In addition, the significant disruption caused by the COVID-19 pandemic led to a number
of flight cancellations during both 2020 and 2021, which entitled the customer to either a refund or the issuance of a voucher for future
redemption. Vouchers are presented within sales in advance of carriage.
232
232 INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021
Financial Statements
Customer
Sales in
loyalty
advance of
programmes
2,725
(524)
37
407
–
175
2,820
2,429
391
2,820
1,917
–
361
850
(143)
2,725
2,252
473
2,725
carriage
2,405
(6,518)
–
40
7,689
116
3,732
3,732
–
3,732
carriage
3,569
291
8
4,714
(145)
2,405
2,405
–
2,405
Customer
Sales in
loyalty
advance of
programmes
Total
5,130
(7,042)
37
447
7,689
291
6,552
6,161
391
6,552
Total
5,486
291
369
5,564
(288)
5,130
4,657
473
5,130
NOTES TO THE ACCOUNTS CONTINUED
For the year to December 31, 2021
23 Deferred revenue on ticket sales
€ million
Balance at January 1, 2021
Revenue recognised in the Income statement1, 2
Financing charge recognised in the Income statement
Loyalty points issued to customers
Cash received from customers3, 4
Exchange movements
Balance at December 31, 2021
Analysis:
Current
Non-current
€ million
Balance at January 1, 2020
Changes in estimates
Loyalty points issued to customers
Cash received from customers3, 4
Exchange movements
Balance at December 31, 2020
Analysis:
Current
Non-current
Revenue recognised in the Income statement1, 2
(260)
(6,032)
(6,292)
1 Where the Group acts as an agent in the provision of redemption products and services to customers through loyalty programmes, or in the provision of
interline flights to passengers, revenue is recognised in the Income statement net of the related costs.
2 Included within revenue recognised in the Income statement during 2021 is an amount of €780 million previously held as deferred revenue at January 1, 2021
(recognised during 2020 previously held as deferred revenue at January 1, 2020: €2,006 million).
3 Included within cash received from customers at December 31, 2021 is an amount of €nil (December 31, 2020: €830 million) received from American Express
upon signing of the multi-year commercial partnership renewal with IAG Loyalty and which unwinds over the duration of the contract term as the associated
performance obligations are fulfilled.
4 Cash received from customers is net of refunds.
The unsatisfied performance obligation under the Group’s customer loyalty programmes that is classified as non-current was €391 million at
December 31, 2021. Of this amount, €279 million is expected to be recognised as revenue in 1 to 5 years from the reporting date and €112
million thereafter.
Deferred revenue relating to customer loyalty programmes consists primarily of revenue allocated to performance obligations associated
with Avios. Avios are issued by the Group's airlines through their loyalty programmes, or are sold to third parties such as credit card
providers, who issue them as part of their loyalty programme. Avios do not have an expiry date and can be redeemed at any time in the
future. Revenue may therefore be recognised at any time in the future.
Deferred revenue in respect of sales in advance of carriage consists of revenue allocated to airline tickets to be used for future travel.
Typically these tickets expire within 12 months after the planned travel date, if they are not used within that time period, however, with the
significant disruption caused by the COVID-19 pandemic, the Group has extended the expiry period up to 24 months after the planned
travel date, depending on the operating company. In addition, the significant disruption caused by the COVID-19 pandemic led to a number
of flight cancellations during both 2020 and 2021, which entitled the customer to either a refund or the issuance of a voucher for future
redemption. Vouchers are presented within sales in advance of carriage.
24 Other long-term liabilities
€ million
Non-current trade creditors
Accruals and deferred income
25 Long-term borrowings
a Total borrowings
€ million
Bank and other loans
Bank and other loans less than 12 months1
Asset financed liabilities
Other financing liabilities2
Lease liabilities
Interest-bearing borrowings
2021
121
87
208
2020
49
91
140
2021
Current
761
Non-current
6,724
–
171
73
1,521
2,526
–
2,244
–
8,116
17,084
Total
7,485
–
2,415
73
9,637
19,610
2020
Current Non-current
2,950
90
329
139
97
1,560
2,215
–
2,050
–
8,464
13,464
Total
3,040
329
2,189
97
10,024
15,679
1 Bank and other loans less than 12 months represents borrowings with a term on inception of less than 12 months in duration.
2 Other financing liabilities include sale and repurchase agreements entered into during the course of 2020 and 2021 with regard to emission allowances and
represents the amount the Group expects to repurchase during the course of 2021 and 2022, respectively.
Long-term borrowings of the Group amounting to €2,434 million (December 31, 2020: €2,412 million) are secured on owned fleet assets
with a net book value of €2,938 million (December 31, 2020: €2,794 million). Asset financed liabilities are all secured on the associated
aircraft or other property, plant and equipment.
b Bank and other loans
€ million
Floating rate GBP term loan guaranteed by UKEF1
Floating rate ICO guaranteed loans2
€825 million fixed rate 1.125 per cent convertible bond 20283
€700 million fixed rate 3.75 per cent unsecured bond 20294
€500 million fixed rate 2.75 per cent unsecured bond 20254
€500 million fixed rate 0.50 per cent bond 20235
€500 million fixed rate 1.50 per cent bond 20275
€500 million fixed rate 0.625 per cent convertible bond 20226
Floating rate euro mortgage loans secured on aircraft7
ISIF facility8
Fixed rate unsecured bonds9
Fixed rate unsecured US dollar mortgage loan10
Fixed rate Chinese yuan mortgage loans secured on aircraft11
Fixed rate unsecured euro loans with the Spanish State (Department of Industry)12
CCFF pound sterling commercial paper13
Less current instalments due on bank and other loans
2021
2,358
1,095
757
710
508
499
498
491
171
149
138
85
11
15
–
7,485
(761)
6,724
2020
–
1,009
–
–
–
498
497
480
198
75
137
97
25
24
329
3,369
(419)
2,950
1. On February 22, 2021, British Airways entered into a five-year term loan Export Development Guarantee Facility of €2.3 billion
(£2.0 billion) underwritten by a syndicate of banks, with 80 per cent of the principal guaranteed by UKEF. On November 1, 2021,
British Airways entered into a further 5-year term loan Export Development Guarantee Facility of €1.2 million (£1.0 billion)
unwritten by a syndicate of banks, with 80 per cent of the principal guaranteed by UKEF. The further facility had not been drawn
as at December 31, 2021. The annual rate of interest associated with the UKEF is consistent with the prevailing market rate of
interest at the time of executing the term loan.
2. On April 30, 2020, Iberia and Vueling entered into floating rate syndicated financing agreements of €750 million and €260 million
respectively. The loans are repayable between 2023 and 2025. The ICO in Spain guarantees 70 per cent of the value of loans. The
loans contain a number of non-financial covenants to protect the position of the banks involved, including restrictions on the
upstreaming of cash to the rest of the IAG companies.
3. Senior unsecured bond convertible into ordinary shares of IAG was issued by the Group on May 11, 2021; €825 million fixed rate
1.125 per cent raising net proceeds of €818 million and due in 2028. The Group holds an option to redeem the convertible bond at
its principal amount, together with accrued interest, no earlier than two years prior to the final maturity date. The bond contains
dividend protection and a total of 244,850,715 options at inception and at December 31, 2021 to convert into ordinary shares of
IAG. The Group also holds an option to redeem the convertible bond, in full or in part, in cash in the event that bondholders
exercise their right to convert the bond into ordinary shares of IAG.
232
233
INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021 233
NOTES TO THE ACCOUNTS CONTINUED
For the year to December 31, 2021
25 Long-term borrowings continued
4. On March 25, 2021, the Group issued two tranches of senior unsecured bonds for an aggregate principal amount of €1.2 billion,
€500 million due March 25, 2025 and €700 million due March 25, 2029. The bonds bear a fixed rate of interest of 2.75 per cent
and 3.75 per cent per annum, payable in arrears, respectively. The bonds were issued at 100 per cent of their principal amount,
respectively, and, unless previously redeemed or purchased and cancelled, will be redeemed at 100 per cent of their principal
amount on their respective maturity dates.
5. In July 2019, the Group issued two tranches of senior unsecured bonds for an aggregate principal amount of €1 billion, €500
million due July 4, 2023 and €500 million due July 4, 2027. The bonds bear a fixed rate of interest of 0.5 per cent and 1.5 per cent
per annum annually payable in arrears, respectively. The bonds were issued at 99.417 per cent and 98.803 per cent of their
principal amount, respectively, and, unless previously redeemed or purchased and cancelled, will be redeemed at 100 per cent of
their principal amount on their respective maturity dates.
6. Senior unsecured bond convertible into ordinary shares of IAG was issued by the Group in November 2015; €500 million fixed
rate 0.625 per cent raising net proceeds of €494 million and due in 2022. The Group holds an option to redeem the convertible
bond at its principal amount, together with accrued interest, no earlier than two years prior to the final maturity date. The bond
contains dividend protection and a total of 40,306,653 options related to the bond were outstanding at December 31, 2021.
7. Floating rate euro mortgage loans are secured on specific aircraft assets of the Group and bear interest of between 0.04 and 1.01
per cent. The loans are repayable between 2024 and 2027.
8. On December 23, 2020, Aer Lingus entered into a floating rate financing agreement with the Ireland Strategic Investment Fund
(ISIF) for €75 million. On March 27, 2021, Aer Lingus entered into a further floating rate financing agreement with the ISIF for an
additional €75 million. The facility is repayable in 2023.
9. Total of €200 million fixed rate unsecured bonds between 3.5 to 3.75 per cent coupon repayable between 2022 and 2027.
10. Fixed rate unsecured US dollar mortgage loan bearing interest between 1.38 to 2.86 per cent. The loan is repayable between 2023
and 2026.
11. Fixed rate Chinese yuan mortgage loans are secured on specific aircraft assets of the Group and bear interest of 5.20 per cent.
The loans are repayable in 2022.
12. Fixed rate unsecured euro loans with the Spanish State (Department of Industry) bear interest of between nil and 5.68 per cent
and are repayable between 2021 and 2028.
13. On April 12, 2020, British Airways availed itself of the Coronavirus Corporate Finance Facility (CCFF) implemented by the
Government of the United Kingdom. Under the CCFF, British Airways issued commercial paper to the Government of the United
Kingdom of €350 million (£300 million). This loan was repaid in April 2021.
In addition, on March 23, 2021, the Group entered into a three-year US dollar secured Revolving Credit Facility accessible by British Airways,
Iberia and Aer Lingus. The amount available under the facility is $1.755 billion. As at December 31, 2021 no amounts had been drawn under
the facility. Concurrent to entering into the facility, British Airways extinguished its US dollar secured Revolving Credit Facility due to
mature in June 2021, and which had $786 million undrawn and available at December 31, 2020. While the Group does not forecast drawing
down on the Revolving Credit Facility, should it do so, the resultant debt would be securitised against specific landing rights and aircraft in
the respective operating companies.
Details of the 2028 convertible bond
The convertible bond provides bondholders with dividend protection and includes a total of 244,850,715 options at inception and at
December 31, 2021 to convert into ordinary shares of IAG. The Group holds an option to redeem the convertible bond at its principal
amount, together with accrued interest, no earlier than two years prior to the final maturity date. The Group also holds an option to redeem
the convertible bond, in full or in part, in cash in the event that bondholders exercise their right to convert the bond into ordinary shares of
IAG.
The convertible bond is recorded at its fair value, which at December 31, 2021 was €756 million, representing a decrease of €69 million since
issuance. Of this decrease, the amount recorded in Other comprehensive income arising from credit risk of the convertible bonds was
€20 million and a credit recorded within Finance costs in the Income statement attributable to changes in market conditions of €89 million.
Transactions with unconsolidated entities
In July 2021, the Group entered into an asset-financing structure, under which seven aircraft were financed. These transactions mature
between 2031 and 2035. This arrangement was transacted through an unconsolidated structured entity, which in turn issued the British
Airways Pass Through Certificates, Series 2021-1, commonly referred to as Enhanced Equipment Trust Certificates (EETCs). In doing so the
Group recognised €204 million of Asset financed liabilities.
In the fourth quarter of 2020, the Group entered into an asset-financing structure, under which nine aircraft were financed. These
transactions mature between 2028 and 2032. This arrangement was transacted through an unconsolidated structured entity, which in
turn issued the British Airways Pass Through Certificates, Series 2020-1. In doing so the Group recognised €472 million of Asset financed
liabilities.
In the third quarter of 2019, the Group entered into an asset-financing structure, under which eight aircraft were financed, with the
transactions maturing between 2029 and 2034. This arrangement was transacted through an unconsolidated structured entity, which in
turn issued the British Airways Pass Through Certificates, Series 2019-1. In doing so the Group recognised €725 million of Asset financed
liabilities.
As at December 31, 2021, Asset financed liabilities include cumulative amounts of €1,489 million (2020: €1,312 million) associated with
transactions with unconsolidated structured entities having issued EETCs.
234
234 INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021
Financial Statements
NOTES TO THE ACCOUNTS CONTINUED
For the year to December 31, 2021
25 Long-term borrowings continued
4. On March 25, 2021, the Group issued two tranches of senior unsecured bonds for an aggregate principal amount of €1.2 billion,
€500 million due March 25, 2025 and €700 million due March 25, 2029. The bonds bear a fixed rate of interest of 2.75 per cent
and 3.75 per cent per annum, payable in arrears, respectively. The bonds were issued at 100 per cent of their principal amount,
respectively, and, unless previously redeemed or purchased and cancelled, will be redeemed at 100 per cent of their principal
amount on their respective maturity dates.
5. In July 2019, the Group issued two tranches of senior unsecured bonds for an aggregate principal amount of €1 billion, €500
million due July 4, 2023 and €500 million due July 4, 2027. The bonds bear a fixed rate of interest of 0.5 per cent and 1.5 per cent
per annum annually payable in arrears, respectively. The bonds were issued at 99.417 per cent and 98.803 per cent of their
principal amount, respectively, and, unless previously redeemed or purchased and cancelled, will be redeemed at 100 per cent of
their principal amount on their respective maturity dates.
6. Senior unsecured bond convertible into ordinary shares of IAG was issued by the Group in November 2015; €500 million fixed
rate 0.625 per cent raising net proceeds of €494 million and due in 2022. The Group holds an option to redeem the convertible
bond at its principal amount, together with accrued interest, no earlier than two years prior to the final maturity date. The bond
contains dividend protection and a total of 40,306,653 options related to the bond were outstanding at December 31, 2021.
7. Floating rate euro mortgage loans are secured on specific aircraft assets of the Group and bear interest of between 0.04 and 1.01
per cent. The loans are repayable between 2024 and 2027.
8. On December 23, 2020, Aer Lingus entered into a floating rate financing agreement with the Ireland Strategic Investment Fund
(ISIF) for €75 million. On March 27, 2021, Aer Lingus entered into a further floating rate financing agreement with the ISIF for an
additional €75 million. The facility is repayable in 2023.
9. Total of €200 million fixed rate unsecured bonds between 3.5 to 3.75 per cent coupon repayable between 2022 and 2027.
10. Fixed rate unsecured US dollar mortgage loan bearing interest between 1.38 to 2.86 per cent. The loan is repayable between 2023
and 2026.
The loans are repayable in 2022.
11. Fixed rate Chinese yuan mortgage loans are secured on specific aircraft assets of the Group and bear interest of 5.20 per cent.
12. Fixed rate unsecured euro loans with the Spanish State (Department of Industry) bear interest of between nil and 5.68 per cent
and are repayable between 2021 and 2028.
13. On April 12, 2020, British Airways availed itself of the Coronavirus Corporate Finance Facility (CCFF) implemented by the
Government of the United Kingdom. Under the CCFF, British Airways issued commercial paper to the Government of the United
Kingdom of €350 million (£300 million). This loan was repaid in April 2021.
In addition, on March 23, 2021, the Group entered into a three-year US dollar secured Revolving Credit Facility accessible by British Airways,
Iberia and Aer Lingus. The amount available under the facility is $1.755 billion. As at December 31, 2021 no amounts had been drawn under
the facility. Concurrent to entering into the facility, British Airways extinguished its US dollar secured Revolving Credit Facility due to
mature in June 2021, and which had $786 million undrawn and available at December 31, 2020. While the Group does not forecast drawing
down on the Revolving Credit Facility, should it do so, the resultant debt would be securitised against specific landing rights and aircraft in
the respective operating companies.
Details of the 2028 convertible bond
The convertible bond provides bondholders with dividend protection and includes a total of 244,850,715 options at inception and at
December 31, 2021 to convert into ordinary shares of IAG. The Group holds an option to redeem the convertible bond at its principal
amount, together with accrued interest, no earlier than two years prior to the final maturity date. The Group also holds an option to redeem
the convertible bond, in full or in part, in cash in the event that bondholders exercise their right to convert the bond into ordinary shares of
The convertible bond is recorded at its fair value, which at December 31, 2021 was €756 million, representing a decrease of €69 million since
issuance. Of this decrease, the amount recorded in Other comprehensive income arising from credit risk of the convertible bonds was
€20 million and a credit recorded within Finance costs in the Income statement attributable to changes in market conditions of €89 million.
Transactions with unconsolidated entities
In July 2021, the Group entered into an asset-financing structure, under which seven aircraft were financed. These transactions mature
between 2031 and 2035. This arrangement was transacted through an unconsolidated structured entity, which in turn issued the British
Airways Pass Through Certificates, Series 2021-1, commonly referred to as Enhanced Equipment Trust Certificates (EETCs). In doing so the
Group recognised €204 million of Asset financed liabilities.
In the fourth quarter of 2020, the Group entered into an asset-financing structure, under which nine aircraft were financed. These
transactions mature between 2028 and 2032. This arrangement was transacted through an unconsolidated structured entity, which in
turn issued the British Airways Pass Through Certificates, Series 2020-1. In doing so the Group recognised €472 million of Asset financed
In the third quarter of 2019, the Group entered into an asset-financing structure, under which eight aircraft were financed, with the
transactions maturing between 2029 and 2034. This arrangement was transacted through an unconsolidated structured entity, which in
turn issued the British Airways Pass Through Certificates, Series 2019-1. In doing so the Group recognised €725 million of Asset financed
As at December 31, 2021, Asset financed liabilities include cumulative amounts of €1,489 million (2020: €1,312 million) associated with
transactions with unconsolidated structured entities having issued EETCs.
IAG.
liabilities.
liabilities.
c Reconciliation of movements of liabilities to cash flows arising from financing activities
€ million
Balance at January 1, 2021
Proceeds from borrowings
Repayment of borrowings
Repayment of lease liabilities
Settlement of derivative financial instruments
Total changes from financing cash flows
Interest paid
Interest expense
New leases and lease modifications
Fair value movements
Other non-cash movements
Effect of changes in foreign exchange rates
Balance at December 31, 2021
€ million
Balance at January 1, 2020
Proceeds from borrowings
Repayment of borrowings
Repayment of lease liabilities
Proceeds from rights issue
Settlement of derivative financial instruments
Total changes from financing cash flows
Interest paid
Interest expense
New leases and lease modifications
Fair value movements
Other non-cash movements
Effect of changes in foreign exchange rates
Total financial liability-related other changes
Total other related movements
Balance at December 31, 2020
Bank, other
loans and
asset
financed
liabilities
5,655
4,817
(784)
–
–
4,033
(212)
307
–
(69)
(2)
261
9,973
Lease
liabilities
11,046
–
–
(1,536)
–
–
Bank, other
loans and
asset
financed
liabilities
3,208
3,567
(978)
–
–
–
2,589
(1,536)
(117)
108
–
–
94
(227)
(142)
–
(421)
445
1,179
–
37
(726)
514
–
5,655
10,024
Derivatives
to mitigate
volatility in
financial
liabilities
429
–
–
–
(268)
(268)
(26)
–
–
(286)
15
–
Total
16,108
4,817
(784)
(1,481)
(268)
2,284
(605)
700
518
(355)
4
820
(136)
19,474
Lease
liabilities
10,024
–
–
(1,481)
–
(1,481)
(367)
393
518
–
(9)
559
9,637
Derivatives
to mitigate
volatility in
financial
liabilities
128
Share capital
/ premium
6,323
–
–
–
–
59
59
(15)
–
–
273
(16)
–
242
–
429
–
–
–
2,674
–
2,674
–
–
–
–
–
–
–
(730)
8,267
Total
20,705
3,567
(978)
(1,536)
2,674
59
3,786
(553)
553
1,179
273
115
(953)
614
(730)
24,375
234
235
INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021 235
NOTES TO THE ACCOUNTS CONTINUED
For the year to December 31, 2021
25 Long-term borrowings continued
d Total loans, lease liabilities, other financing liabilities and asset financed liabilities
Million
Loans
Bank:
US dollar
Euro
Pound sterling
Chinese yuan
Fixed rate bonds:
Euro
Asset financed liabilities
US dollar
Euro
Japanese yen
Other financing liabilities
Euro
Lease liabilities
US dollar
Euro
Japanese yen
Pound sterling
Total interest-bearing borrowings
2021
2020
$98
€1,430
£2,003
CNY 78
€3,883
$121
€1,303
£299
CNY 201
€1,756
€3,602
€3,602
€1,613
€1,613
$2,192
€408
¥8,226
€2,415
$2,080
€448
¥4,883
€2,189
€73
€73
€97
€97
$7,709
€1,547
$8,436
€1,858
¥75,450
¥74,734
£569
£608
€9,637
€10,024
€19,610
€15,679
236
236 INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021
Financial Statements
NOTES TO THE ACCOUNTS CONTINUED
For the year to December 31, 2021
25 Long-term borrowings continued
d Total loans, lease liabilities, other financing liabilities and asset financed liabilities
Million
Loans
Bank:
US dollar
Euro
Pound sterling
Chinese yuan
Fixed rate bonds:
Euro
Asset financed liabilities
US dollar
Euro
Japanese yen
Other financing liabilities
Euro
Lease liabilities
US dollar
Euro
Japanese yen
Pound sterling
Total interest-bearing borrowings
2021
2020
$98
€1,430
£2,003
CNY 78
€3,883
$121
€1,303
£299
CNY 201
€1,756
€3,602
€3,602
€1,613
€1,613
$2,192
€408
¥8,226
€2,415
$2,080
€448
¥4,883
€2,189
€73
€73
€97
€97
$7,709
€1,547
$8,436
€1,858
¥75,450
¥74,734
£569
£608
€9,637
€10,024
€19,610
€15,679
26 Provisions
€ million
Net book value January 1, 2021
Reclassifications
Provisions recorded during the year
Utilised during the year
Release of unused amounts
Unwinding of discount
Remeasurements
Exchange differences
Net book value December 31, 2021
Analysis:
Current
Non-current
Restoration and handback provisions
Restoration
and
handback
provisions
1,588
Restructuring
provisions
432
Employee
leaving
indemnities
and other
employee-
related
provisions
714
Legal claims
and
contractual
disputes
provisions
84
Other
provisions
94
(2)
267
(101)
(41)
10
–
111
1,832
431
1,401
1,832
–
30
(171)
(22)
–
–
5
274
142
132
274
–
66
(30)
–
2
(34)
2
720
59
661
720
(7)
85
(57)
(18)
–
–
3
90
69
21
90
–
63
(62)
(16)
–
–
4
83
31
52
83
Total
2,912
(9)
511
(421)
(97)
12
(34)
125
2,999
732
2,267
2,999
The provision for restoration and handback costs is maintained to meet the contractual maintenance and return conditions on aircraft held
under lease. The provision also includes an amount relating to leased land and buildings where restoration costs are contractually required
at the end of the lease. Such costs are capitalised within ROU assets. The provision is long-term in nature, typically covering the leased asset
term, which for aircraft is up to 12 years.
Included within the release of unused restoration and handback provisions is an amount of €7 million relating to the reversal of contractual
lease provisions, which represent the estimation of the cost to fulfil the handback conditions associated with the leased aircraft that had
been permanently stood down and impaired during the year ended December 31, 2020, which have subsequently been stood back up with
a resultant impairment reversal during the year ended December 31, 2021.
Where amounts are finalised and the uncertainty relating to these provisions removed, the associated liability is reclassified to either current
or non-current Other creditors, dependent on the expecting timing of settlement.
Restructuring provisions
The restructuring provision includes provisions for voluntary redundancies including the collective redundancy programme for Iberia's
Transformation Plan implemented prior to 2021, which provides for payments to affected employees until they reach the statutory
retirement age. The amount provided for has been determined by an actuarial valuation made by independent actuaries, and was based on
the same assumptions as those made to determine the provisions for obligations to flight crew below, with the exception of the discount
rate, which in this case was 0.00 per cent. The payments related to this provision will continue over the next eight years.
At December 31, 2021, €270 million of this provision related to collective redundancy programmes (2020: €428 million).
Employee leaving indemnities and other employee-related provisions
This provision includes employees leaving indemnities relating to staff under various contractual arrangements.
The Group recognises a provision relating to flight crew who, having met certain conditions, have the option of being placed on reserve and
retaining their employment relationship until reaching the statutory retirement age, or taking early retirement. The Group is required to
remunerate these employees until they reach the statutory retirement age, and an initial provision was recognised based on an actuarial
valuation. The provision was reviewed at December 31, 2021 with the use of independent actuaries using the projected unit credit method,
based on a discount rate consistent with the iBoxx index of 0.91 per cent and 0.00 per cent (2020: iBoxx index of 0.37 per cent and 0.00
per cent) depending on whether the employees are currently active or not, the PERM/F-2000P mortality tables, and assuming a 2 per cent
annual increase in the Consumer Price Index (CPI) in 2022 and 1.5 per cent in 2023. This is mainly a long-term provision. Remeasurements in
the valuation of this provision are recorded in Other comprehensive income. The amount relating to this provision was €644 million at
December 31, 2021 (2020: €654 million).
Legal claims and contractual disputes provisions
Legal claims and contractual disputes provisions include:
• amounts for multi-party claims from groups of employees on a number of matters related to its operations, including claims for additional
holiday pay and for age discrimination;
• amounts related to ongoing contractual disputes arising from the Group’s ongoing provisions; and
• amounts related to investigations by a number of competition authorities in connection with alleged anti-competitive activity concerning
the Group’s passenger and cargo businesses.
The final amount required to pay the remaining claims and fines is subject to uncertainty.
Other provisions
Other provisions include a provision for the Emissions Trading Scheme for CO2 emitted on flights within the United Kingdom and the EU in
excess of the relevant United Kingdom and EU Emission Allowances granted.
236
237
INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021 237
NOTES TO THE ACCOUNTS CONTINUED
For the year to December 31, 2021
27 Financial risk management objectives and policies
The Group is exposed to a variety of financial risks: market risk (including fuel price risk, foreign currency risk and interest rate risk), credit
risk and liquidity risk. The principal impact of these on the financial statements are discussed below:
a Fuel price risk
The Group is exposed to fuel price risk. In order to mitigate such risk, under the Group’s fuel price risk management strategy a variety of
over the counter derivative instruments are entered into. The Group strategy is to hedge a proportion of fuel consumption up to two years
(previously three years) within the approved hedging profile.
The following table demonstrates the sensitivity of financial instruments to a reasonable possible change in fuel prices, with all other
variables held constant, on result before tax and equity1:
Increase/(decrease)
in fuel price
per cent
30
(30)
2021
Effect on result
before tax
€ million
–
–
Effect on
equity
€ million
834
(520)
Increase/(decrease)
in fuel price
per cent
30
(30)
2020
Effect on result
before tax
€ million
189
(219)
Effect on
equity
€ million
525
(664)
1 The sensitivity analysis on equity excludes the sensitivity amounts recognised in the result before tax.
During the year to December 31, 2021, following a substantial recovery in the global price of crude oil, the fair value of such net asset
derivative instruments was €288 million at December 31, 2021, representing an increase of €1,066 million since January 1, 2021. Since the
outbreak of COVID-19, a significant proportion of the associated hedge relationships are no longer expected to occur and subsequently fuel
hedge accounting was discontinued, with subsequent mark-to-market movements recorded in the Income statement. However, as a result
of the updated forecasts as detailed in note 3, a further €72 million of the gains recognised in Other comprehensive income were
reclassified to the Income statement and recognised within Fuel, oil costs and emission costs in the year to December 31, 2021.
The gain arising from the derecognition of fuel hedges has been recorded as an exceptional item. Refer to Alternative performance
measures section for further details.
b Foreign currency risk
The Group is exposed to foreign currency risk on revenue, purchases and borrowings that are denominated in a currency other than the
functional currency of the Group. The currencies in which these transactions are denominated are primarily euro, US dollar and pound
sterling. The Group has a number of strategies to hedge foreign currency risk. The Group strategy is to hedge a proportion of its foreign
currency sales and purchases for up to three years.
The following table demonstrates the sensitivity of the Group’s principal foreign exchange exposure to a reasonable possible change in the
US dollar, pound sterling and Japanese yen exchange rates, with all other variables held constant on result before tax and equity1. The
sensitivity analysis has been performed on interest-bearing liabilities, lease liabilities and derivatives (both designated in hedge relationships
and those not designated in hedge relationships) denominated in foreign currencies, with the disclosure for 2020 updated to align with the
current methodology. The methodology has been updated to better reflect the foreign exchange exposures arising from the Group’s
operations.
Strengthening/
(weakening) in
US dollar rate
per cent
10
Effect on
result before
tax
€ million
255
(10)
(260)
10
(10)
234
(273)
2021
2020
Strengthening/
(weakening) in
pound
sterling rate
per cent
10
Effect on
result before
tax
€ million
(10)
(10)
10
(10)
10
9
(9)
Effect on
equity
€ million
523
(481)
283
(345)
Strengthening/
(weakening) in
Japanese yen
rate
per cent
10
Effect on
result before
tax
€ million
(17)
(10)
10
(10)
17
(16)
16
Effect on
equity
€ million
134
(134)
(167)
157
Effect on
equity
€ million
(41)
41
(42)
42
1 The sensitivity analysis on equity, excludes the sensitivity amounts recognised in the result before tax.
At December 31, 2021, the fair value of foreign currency net asset derivative instruments was €185 million, representing an increase of €652
million since January 1, 2021. These comprise both derivatives designated in hedge relationships and those derivatives that are not
designated into a hedge relationship at inception. As per the fuel price risk above, a significant proportion of the derivatives designated in
hedge relationships have no longer been expected to occur and subsequently hedge accounting has been discontinued, with subsequent
mark-to-market movements recorded in the Income statement. However, as a result of the updated forecasts as detailed in note 3, a further
€5 million of the gains recognised in Other comprehensive income were reclassified to the Income statement and recognised within Fuel, oil
costs and emission costs and within Passenger revenue. Those derivatives not designated in a hedge relationship on inception have their
mark-to-market movements recorded directly in the Income statement and recognised within Net currency retranslation (charges)/credits.
238
238 INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021
Financial Statements
NOTES TO THE ACCOUNTS CONTINUED
For the year to December 31, 2021
27 Financial risk management objectives and policies
c
Interest rate risk
The Group is exposed to a variety of financial risks: market risk (including fuel price risk, foreign currency risk and interest rate risk), credit
risk and liquidity risk. The principal impact of these on the financial statements are discussed below:
a Fuel price risk
The Group is exposed to fuel price risk. In order to mitigate such risk, under the Group’s fuel price risk management strategy a variety of
over the counter derivative instruments are entered into. The Group strategy is to hedge a proportion of fuel consumption up to two years
(previously three years) within the approved hedging profile.
The following table demonstrates the sensitivity of financial instruments to a reasonable possible change in fuel prices, with all other
variables held constant, on result before tax and equity1:
Increase/(decrease)
Effect on result
Increase/(decrease)
Effect on result
in fuel price
per cent
30
(30)
2021
before tax
€ million
–
–
Effect on
equity
€ million
834
(520)
in fuel price
per cent
30
(30)
2020
before tax
€ million
189
(219)
Effect on
equity
€ million
525
(664)
1 The sensitivity analysis on equity excludes the sensitivity amounts recognised in the result before tax.
During the year to December 31, 2021, following a substantial recovery in the global price of crude oil, the fair value of such net asset
derivative instruments was €288 million at December 31, 2021, representing an increase of €1,066 million since January 1, 2021. Since the
outbreak of COVID-19, a significant proportion of the associated hedge relationships are no longer expected to occur and subsequently fuel
hedge accounting was discontinued, with subsequent mark-to-market movements recorded in the Income statement. However, as a result
of the updated forecasts as detailed in note 3, a further €72 million of the gains recognised in Other comprehensive income were
reclassified to the Income statement and recognised within Fuel, oil costs and emission costs in the year to December 31, 2021.
The gain arising from the derecognition of fuel hedges has been recorded as an exceptional item. Refer to Alternative performance
measures section for further details.
b Foreign currency risk
The Group is exposed to foreign currency risk on revenue, purchases and borrowings that are denominated in a currency other than the
functional currency of the Group. The currencies in which these transactions are denominated are primarily euro, US dollar and pound
sterling. The Group has a number of strategies to hedge foreign currency risk. The Group strategy is to hedge a proportion of its foreign
currency sales and purchases for up to three years.
The following table demonstrates the sensitivity of the Group’s principal foreign exchange exposure to a reasonable possible change in the
US dollar, pound sterling and Japanese yen exchange rates, with all other variables held constant on result before tax and equity1. The
sensitivity analysis has been performed on interest-bearing liabilities, lease liabilities and derivatives (both designated in hedge relationships
and those not designated in hedge relationships) denominated in foreign currencies, with the disclosure for 2020 updated to align with the
current methodology. The methodology has been updated to better reflect the foreign exchange exposures arising from the Group’s
operations.
2021
2020
Strengthening/
Effect on
(weakening) in
result before
US dollar rate
tax
per cent
€ million
Effect on
equity
€ million
Strengthening/
(weakening) in
sterling rate
per cent
Effect on
tax
€ million
Strengthening/
(weakening) in
rate
per cent
Effect on
tax
€ million
Effect on
equity
€ million
pound
result before
Japanese yen
result before
10
(10)
10
(10)
255
(260)
234
(273)
523
(481)
283
(345)
10
(10)
10
(10)
Effect on
equity
€ million
134
(134)
(167)
157
(10)
10
9
(9)
10
(10)
10
(10)
(17)
17
(16)
16
(41)
41
(42)
42
1 The sensitivity analysis on equity, excludes the sensitivity amounts recognised in the result before tax.
At December 31, 2021, the fair value of foreign currency net asset derivative instruments was €185 million, representing an increase of €652
million since January 1, 2021. These comprise both derivatives designated in hedge relationships and those derivatives that are not
designated into a hedge relationship at inception. As per the fuel price risk above, a significant proportion of the derivatives designated in
hedge relationships have no longer been expected to occur and subsequently hedge accounting has been discontinued, with subsequent
mark-to-market movements recorded in the Income statement. However, as a result of the updated forecasts as detailed in note 3, a further
€5 million of the gains recognised in Other comprehensive income were reclassified to the Income statement and recognised within Fuel, oil
costs and emission costs and within Passenger revenue. Those derivatives not designated in a hedge relationship on inception have their
mark-to-market movements recorded directly in the Income statement and recognised within Net currency retranslation (charges)/credits.
The Group is exposed to changes in interest rates on debt and on cash deposits. Interest rate risk on floating rate debt is managed through
interest rate swaps, cross currency swaps and interest rate collars.
The following table demonstrates the sensitivity of the Group’s interest rate exposure to a reasonable possible change in the US dollar, euro
and sterling interest rates, on result before tax and equity1:
Strengthening/
(weakening) in
US interest
rate
Basis points
50
Effect on
result before
tax
€ million
–
Strengthening/
(weakening) in
euro interest
rate
Basis points
50
Effect on
result before
tax
€ million
3
Effect on
equity
€ million
–
(50)
50
(50)
–
–
–
–
–
–
(50)
50
(50)
(3)
9
(9)
2021
2020
Strengthening/
(weakening) in
sterling
interest
rate
Basis points
50
Effect on
result before
tax
€ million
(2)
Effect on
equity
€ million
–
(50)
50
(50)
2
–
–
–
–
–
Effect on
equity
€ million
10
(9)
(8)
7
1 The sensitivity analysis on equity, excludes the sensitivity amounts recognised in the result before tax.
For details regarding the Group’s management of interest rate benchmark reform, refer to note 27i.
d Credit risk
Credit risk is the risk that a counterparty will not meet its obligations under a financial instrument or customer contract, leading to a financial
loss. The Group is exposed to credit risk from its financing activities, including deposits with banks and financial institutions, foreign
exchange transactions and other financial instruments. The Group has policies and procedures to monitor the risk by assigning limits to
each counterparty by underlying exposure and by operating company and by only entering into transactions with counterparties with a
very low credit risk.
At each period end, the Group assesses the effect of counterparties’ and the Group’s own credit risk on the fair value of derivatives and any
ineffectiveness arising is immediately recognised in the Income statement within Other non-operating expenses.
e Counterparty risk
The Group is exposed to the non-performance by its counterparties in respect of financial assets receivable. The Group has policies and
procedures to monitor the risk by assigning limits to each counterparty by underlying exposure and by operating company. The underlying
exposures are monitored on a daily basis and the overall exposure limit by counterparty is periodically reviewed by using available market
information.
The financial assets recognised in the financial statements, net of impairment losses (if any), represent the Group's maximum exposure to
credit risk, without taking into account any guarantees in place or other credit enhancements.
At December 31, 2021 the Group’s credit risk position, allocated by region, in respect of treasury managed cash and derivatives was as
follows:
Region
United Kingdom
Spain
Ireland
Rest of Eurozone
Rest of world
Mark-to-market of treasury
controlled financial
instruments allocated by
geography
2020
53%
2021
44%
–
18%
34%
4%
3%
7%
16%
21%
238
239
INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021 239
NOTES TO THE ACCOUNTS CONTINUED
For the year to December 31, 2021
27 Financial risk management objectives and policies continued
f
Liquidity risk
The Group invests cash in interest-bearing accounts, time deposits and money market funds, choosing instruments with appropriate
maturities or liquidity to retain sufficient headroom to readily generate cash inflows required to manage liquidity risk. The Group has also
committed revolving credit facilities.
At December 31, 2021 the Group had undrawn overdraft facilities of €53 million (2020: €52 million). The Group held undrawn uncommitted
money market lines of €nil (2020: €nil).
The Group held undrawn general and committed aircraft financing facilities:
Million
General facilities1
Euro facilities expiring between January and July 2022
Euro facilities expiring March 2023
US dollar facility expiring May 2022
Pound sterling facility expiring November 2025
US dollar facility expiring March 2024
Committed aircraft facilities
US dollar facility expiring September 20222
US dollar facilities expiring March 20243
Million
General facilities1
Euro facilities expiring between January and June 2021
Euro facilities expiring between January and July 2022
US dollar facility expiring June 2021
US dollar facility expiring May 2022
Committed aircraft facilities
US dollar facility expiring March 20212
US dollar facilities expiring July 20233
2021
Currency
€ equivalent
€27
€60
$50
£1,000
$1,755
$635
$635
27
60
44
1,177
1,556
2,864
563
563
1,126
2020
Currency
€ equivalent
€126
€95
$786
$50
$428
$1,013
126
95
643
41
905
351
829
1,180
1 The general facilities can be drawn at any time at the discretion of the Group subject to the provision of up to three days’ notice of the intended utilisation,
depending on the facility.
2 The aircraft facility maturing in 2022 is available for specific committed aircraft deliveries and further information is given in note 25b.
3 The aircraft facilities maturing in 2024 (2020: maturing in 2023) are available for specific committed aircraft deliveries and require the Group to give three
months’ notice to the counterparty of its intention to utilise the facilities.
240
240 INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021
Financial Statements
27 Financial risk management objectives and policies continued
The Group invests cash in interest-bearing accounts, time deposits and money market funds, choosing instruments with appropriate
maturities or liquidity to retain sufficient headroom to readily generate cash inflows required to manage liquidity risk. The Group has also
At December 31, 2021 the Group had undrawn overdraft facilities of €53 million (2020: €52 million). The Group held undrawn uncommitted
The Group held undrawn general and committed aircraft financing facilities:
NOTES TO THE ACCOUNTS CONTINUED
For the year to December 31, 2021
f
Liquidity risk
committed revolving credit facilities.
money market lines of €nil (2020: €nil).
Million
General facilities1
Euro facilities expiring between January and July 2022
Euro facilities expiring March 2023
US dollar facility expiring May 2022
Pound sterling facility expiring November 2025
US dollar facility expiring March 2024
Committed aircraft facilities
US dollar facility expiring September 20222
US dollar facilities expiring March 20243
Million
General facilities1
Euro facilities expiring between January and June 2021
Euro facilities expiring between January and July 2022
US dollar facility expiring June 2021
US dollar facility expiring May 2022
Committed aircraft facilities
US dollar facility expiring March 20212
US dollar facilities expiring July 20233
1 The general facilities can be drawn at any time at the discretion of the Group subject to the provision of up to three days’ notice of the intended utilisation,
depending on the facility.
2 The aircraft facility maturing in 2022 is available for specific committed aircraft deliveries and further information is given in note 25b.
3 The aircraft facilities maturing in 2024 (2020: maturing in 2023) are available for specific committed aircraft deliveries and require the Group to give three
months’ notice to the counterparty of its intention to utilise the facilities.
2021
Currency
€ equivalent
€27
€60
$50
£1,000
$1,755
$635
$635
€126
€95
$786
$50
$428
$1,013
27
60
44
1,177
1,556
2,864
563
563
1,126
126
95
643
41
905
351
829
1,180
2020
Currency
€ equivalent
The following table analyses the Group’s (outflows) and inflows in respect of financial liabilities and derivative financial instruments into
relevant maturity groupings based on the remaining period at December 31 to the contractual maturity date. The amounts disclosed in the
table are the contractual undiscounted cash flows and include interest.
€ million
Interest-bearing loans and borrowings:
Asset financing liabilities
Lease liabilities
Fixed rate borrowings
Floating rate borrowings
Other financing liabilities
Trade and other payables
Derivative financial instruments (assets):
Interest rate derivatives
Foreign exchange contracts
Fuel derivatives
Derivative financial instruments (liabilities):
Interest rate derivatives
Foreign exchange contracts
Fuel derivatives
December 31, 2021
€ million
Interest-bearing loans and borrowings:
Asset financing obligations
Lease liabilities
Fixed rate borrowings
Floating rate borrowings
Other financing liabilities
Trade and other payables
Derivative financial instruments (assets):
Forward contracts
Fuel derivatives
Derivative financial instruments (liabilities):
Interest rate swaps
Forward contracts
Fuel derivatives
At December 31, 2020
Within 6
months
6-12
months
(122)
(920)
(151)
(129)
(73)
(3,712)
–
227
157
(12)
(67)
(14)
(116)
(854)
(529)
(285)
–
–
1
52
129
(10)
(38)
(13)
1-2
years
(230)
(1,814)
(578)
(428)
–
(208)
2
46
48
(7)
(33)
(18)
2-5
years
More than 5
years
Total
2021
(678)
(3,839)
(690)
(3,368)
(1,714)
(5,524)
(2,094)
(16)
–
–
3
1
–
(3)
(6)
–
–
–
–
–
–
–
–
–
(2,860)
(12,951)
(4,042)
(4,226)
(73)
(3,920)
6
326
334
(32)
(144)
(45)
(4,816)
(1,663)
(3,220)
(8,580)
(9,348)
(27,627)
Within 6
months
6-12
months
1-2
years
2-5
years
More than 5
years
Total
2020
(101)
(901)
(360)
(78)
(97)
(2,810)
73
6
(13)
(370)
(423)
(5,074)
(97)
(919)
(37)
(32)
–
–
41
2
(13)
(91)
(314)
(1,460)
(193)
(1,500)
(631)
(58)
–
–
33
1
(25)
(115)
(108)
(571)
(4,122)
(666)
(1,179)
(1,673)
(5,962)
(587)
(41)
–
–
8
–
(14)
(56)
(4)
–
–
–
–
(2)
–
–
(2,635)
(13,404)
(2,281)
(1,388)
(97)
(2,810)
155
9
(67)
(632)
(849)
(2,596)
(6,604)
(8,265)
(23,999)
240
241
INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021
241
NOTES TO THE ACCOUNTS CONTINUED
For the year to December 31, 2021
27 Financial risk management objectives and policies continued
g Offsetting financial assets and liabilities
The Group enters into derivative transactions under ISDA (International Swaps and Derivatives Association) documentation. In general,
under such agreements the amounts owed by each counterparty on a single day in respect of all transactions outstanding are aggregated
into a single net amount that is payable by one party to the other.
The following financial assets and liabilities are subject to offsetting, enforceable master netting arrangements and similar agreements.
December 31, 2021
€ million
Financial assets
Derivative financial assets
Financial liabilities
Derivative financial liabilities
Gross
amounts set
off in the
balance
sheet1
Net amounts
of financial
instruments
in the
balance
sheet
Related
amounts not
offset in the
balance
sheet1
Gross value
of financial
instruments
Net amount
628
(8)
620
(30)
590
181
(8)
173
30
203
1 The Group has pledged cash and cash equivalents as collateral against certain of its derivative financial liabilities. As December 31, 2021, the Group recognised
€nil of collateral (2020: €66 million) offset in the balance sheet and €30 million (2020: €24 million) not offset in the balance sheet.
December 31, 2020
€ million
Financial assets
Derivative financial assets
Financial liabilities
Derivative financial liabilities
h Capital risk management
Gross
amounts set
off in the
balance
sheet
Net amounts
of financial
instruments
in the
balance
sheet
Related
amounts not
offset in the
balance
sheet
Gross value
of financial
instruments
Net amount
165
(1)
164
(13)
151
1,537
(67)
1,470
(37)
1,433
The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern, to maintain an optimal
capital structure, to reduce the cost of capital and to provide returns to shareholders.
The Group monitors capital on the basis of the net debt to EBITDA ratio. For the year to December 31, 2021, the net debt to EBITDA was
minus 11.5 times (2020: minus 4.3 times). The definition and calculation for this performance measure is included in the Alternative
performance measures section.
Further detail on liquidity and capital resources and capital risk management is disclosed in the going concern section in note 2.
i Managing interest rate benchmark reform and associated risks
Overview
A reform of major interest rate benchmarks is being undertaken globally, including the replacement of certain interbank offered rates
(IBORs) with alternative nearly risk-free rates (referred to as ‘IBOR reform’). The Group has exposures to IBORs on its financial instruments
that are expected to mature subsequent to December 31, 2021, and as such will be replaced as part of these market-wide initiatives. The
Group anticipates that IBOR reform will impact its risk management and hedge accounting.
During 2020 the Group established an IBOR transition working group and project plan, led by Group Treasury. This project has and
continues to consider the required changes to systems, processes, risk management and valuation models, as well as managing any
accounting and tax implications. During the course of 2021, the Group, and the counterparties to the financial instruments, have transitioned
the majority of such instruments to an alternative benchmark rate and in order to enable such transitions, changes to systems, processes
and models have been implemented. Those financial instruments that have not transitioned at December 31, 2021 predominantly relate to
those with a US dollar LIBOR component, which is not expected to convert to an alternative risk-free rate until mid-2023, subject to further
consultation.
In addition, during 2021, the Group has enquired of the trustees of the Group’s pension schemes to understand the status of their IBOR
transitions, if any. The Group has satisfied itself that all material derivative financial and non-derivative financial instruments with an IBOR
component have been transitioned to an alternative benchmark at December 31, 2021.
Reforms to the Euro Interbank Offered Rate (EURIBOR) methodology to enable it to meet the criteria of a risk-free rate were completed in
2019. As such the Group expects to continue to utilise financial instruments with a EURIBOR component without transitioning to an
alternative benchmark rate.
242
242 INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021
Financial Statements
NOTES TO THE ACCOUNTS CONTINUED
For the year to December 31, 2021
27 Financial risk management objectives and policies continued
g Offsetting financial assets and liabilities
The Group enters into derivative transactions under ISDA (International Swaps and Derivatives Association) documentation. In general,
under such agreements the amounts owed by each counterparty on a single day in respect of all transactions outstanding are aggregated
into a single net amount that is payable by one party to the other.
The following financial assets and liabilities are subject to offsetting, enforceable master netting arrangements and similar agreements.
Gross
amounts set
off in the
balance
sheet1
Net amounts
of financial
instruments
in the
balance
sheet
Related
amounts not
offset in the
balance
sheet1
Gross value
of financial
instruments
Net amount
628
(8)
620
(30)
590
December 31, 2021
€ million
Financial assets
Derivative financial assets
Financial liabilities
Derivative financial liabilities
December 31, 2020
€ million
Financial assets
Derivative financial assets
Financial liabilities
Derivative financial liabilities
h Capital risk management
The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern, to maintain an optimal
capital structure, to reduce the cost of capital and to provide returns to shareholders.
The Group monitors capital on the basis of the net debt to EBITDA ratio. For the year to December 31, 2021, the net debt to EBITDA was
minus 11.5 times (2020: minus 4.3 times). The definition and calculation for this performance measure is included in the Alternative
performance measures section.
Further detail on liquidity and capital resources and capital risk management is disclosed in the going concern section in note 2.
i Managing interest rate benchmark reform and associated risks
Overview
A reform of major interest rate benchmarks is being undertaken globally, including the replacement of certain interbank offered rates
(IBORs) with alternative nearly risk-free rates (referred to as ‘IBOR reform’). The Group has exposures to IBORs on its financial instruments
that are expected to mature subsequent to December 31, 2021, and as such will be replaced as part of these market-wide initiatives. The
Group anticipates that IBOR reform will impact its risk management and hedge accounting.
During 2020 the Group established an IBOR transition working group and project plan, led by Group Treasury. This project has and
continues to consider the required changes to systems, processes, risk management and valuation models, as well as managing any
accounting and tax implications. During the course of 2021, the Group, and the counterparties to the financial instruments, have transitioned
the majority of such instruments to an alternative benchmark rate and in order to enable such transitions, changes to systems, processes
and models have been implemented. Those financial instruments that have not transitioned at December 31, 2021 predominantly relate to
those with a US dollar LIBOR component, which is not expected to convert to an alternative risk-free rate until mid-2023, subject to further
consultation.
In addition, during 2021, the Group has enquired of the trustees of the Group’s pension schemes to understand the status of their IBOR
transitions, if any. The Group has satisfied itself that all material derivative financial and non-derivative financial instruments with an IBOR
component have been transitioned to an alternative benchmark at December 31, 2021.
Reforms to the Euro Interbank Offered Rate (EURIBOR) methodology to enable it to meet the criteria of a risk-free rate were completed in
2019. As such the Group expects to continue to utilise financial instruments with a EURIBOR component without transitioning to an
alternative benchmark rate.
Derivative and non-derivative financial instruments and hedge accounting
While the Group has transitioned a number of its derivative and non-derivative financial instruments to an alternative benchmark rate,
certain interest rate swap derivative financial instruments and non-derivative financial instruments continue to have their floating legs
indexed to US dollar LIBOR. These derivative financial instruments continue to be recognised as hedging instruments in hedge relationships,
with the hedged item being those non-derivative financial instruments indexed to US dollar LIBOR.
For such derivative financial instruments the Group has evaluated the extent to which its cash flow hedging relationships are subject to
uncertainty driven by IBOR reform as at December 31, 2021. As part of this evaluation, the Group has applied the hedging relief provided by
the IFRS 9 amendments for IBOR reform Phase 1.
There remains uncertainty about when and how replacement may occur with respect to the relevant hedged items and hedging
instruments. Such uncertainty may impact the hedging relationship. Hedging relationships impacted by IBOR reform may experience
ineffectiveness attributable to market participant’s expectations of when the change in rates will occur, which may differ between the
hedged item and the hedging instrument.
The table below provides an overview of the IBOR-related exposures as at December 31, 2021. Non-derivative financial instruments are
presented on the basis of their carrying values, while derivative financial instruments are presented on the basis of their nominal amounts.
1 The Group has pledged cash and cash equivalents as collateral against certain of its derivative financial liabilities. As December 31, 2021, the Group recognised
€nil of collateral (2020: €66 million) offset in the balance sheet and €30 million (2020: €24 million) not offset in the balance sheet.
181
(8)
173
30
203
€ million
GBP LIBOR
USD LIBOR
Other LIBOR
Non-derivative
financial
instruments –
carrying value1
–
Derivative
financial
instruments –
nominal
amount
–
600
–
782
–
Gross
amounts set
off in the
balance
sheet
Net amounts
of financial
instruments
in the
balance
sheet
Related
amounts not
offset in the
balance
Gross value
of financial
instruments
sheet
Net amount
1 Non-derivative financial instruments include floating rate borrowings, asset financed liabilities and lease liabilities.
The principal outstanding IBOR-related exposures relate to those lease liabilities with a USD LIBOR component. The Group has such leases
with a limited number of counterparties for which the Group expects to transition to an alternative benchmark by June 30, 2023.
165
(1)
164
(13)
151
a Financial assets and liabilities by category
28 Financial instruments
1,537
(67)
1,470
(37)
1,433
December 31, 2021
The detail of the Group’s financial instruments at December 31, 2021 and December 31, 2020 by nature and classification for measurement
purposes is as follows:
€ million
Non-current assets
Other equity investments
Derivative financial instruments
Other non-current assets
Current assets
Trade receivables
Other current assets
Derivative financial instruments
Other current interest-bearing deposits
Cash and cash equivalents
€ million
Non-current liabilities
Lease liabilities
Interest-bearing long-term borrowings
Derivative financial instruments
Other long-term liabilities
Current liabilities
Lease liabilities
Current portion of long-term borrowings
Trade and other payables
Derivative financial instruments
Financial assets
Amortised
cost
Fair value
through Other
comprehensive
income
Fair value
through
Income
statement
Non-financial
assets
Total
carrying
amount by
balance sheet
item
–
–
126
735
363
–
51
7,892
31
–
10
–
–
–
–
–
–
77
–
–
–
543
–
–
–
–
114
–
597
–
–
–
3311
7777
225500
773355
996600
554433
5511
77,,889922
Financial liabilities
Amortised
cost
Fair value
through Other
comprehensive
income
Fair value
through
Income
statement
Total
carrying
amount by
balance sheet
item
Non-
financial
liabilities
8,116
8,220
–
132
1,521
996
3,506
–
–
–
–
–
–
–
–
–
–
748
47
–
–
9
–
126
–
–
–
76
–
–
206
–
8,116
8,968
47
208
1,521
1,005
3,712
126
242
243
INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021 243
NOTES TO THE ACCOUNTS CONTINUED
For the year to December 31, 2021
28 Financial instruments continued
December 31, 2020
€ million
Non-current assets
Other equity investments
Derivative financial instruments
Other non-current assets
Current assets
Trade receivables
Other current assets
Derivative financial instruments
Other current interest-bearing deposits
Cash and cash equivalents
€ million
Non-current liabilities
Lease liabilities
Interest-bearing long-term borrowings
Derivative financial instruments
Other long-term liabilities
Current liabilities
Lease liabilities
Current portion of long-term borrowings
Trade and other payables
Derivative financial instruments
Financial assets
Amortised
cost
Fair value
through Other
comprehensive
income
Fair value
through
Income
statement
Non-financial
assets
Total
carrying
amount by
balance
sheet item
–
–
119
557
350
–
143
5,774
29
–
10
–
–
–
–
–
–
42
–
–
–
122
–
–
–
–
99
–
442
–
–
–
Financial liabilities
Amortised
cost
Fair value
through Other
comprehensive
income
Fair value
through
Income
statement
Non-
financial
liabilities
8,464
5,000
–
80
1,560
655
2,572
–
–
–
–
–
–
–
–
–
–
–
310
–
–
–
–
1,160
–
–
–
533
–
–
238
–
29
42
228
557
792
122
143
5,774
Total
carrying
amount by
balance
sheet
item
8,464
5,000
310
613
1,560
655
2,810
1,160
b Fair value of financial assets and financial liabilities
The fair values of the Group’s financial instruments are disclosed in hierarchy levels depending on the nature of the inputs used in
determining the fair values and using the following methods and assumptions:
Level 1: Quoted prices (unadjusted) in active markets for identical assets and liabilities. A market is regarded as active if quoted prices are
readily and regularly available from an exchange, dealer, broker, industry group, pricing service, or regulatory agency, and those prices
represent actual and regularly occurring market transactions on an arm’s length basis. Level 1 methodologies (market values at the balance
sheet date) were used to determine the fair value of listed asset investments classified as equity investments and listed interest-bearing
borrowings. The fair value of financial liabilities and financial assets incorporates own credit risk and counterparty credit risk, respectively.
Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. The
fair value of financial instruments that are not traded in an active market is determined by valuation techniques. These valuation techniques
maximise the use of observable market data where it is available and rely as little as possible on entity-specific estimates.
Derivative instruments are measured based on the market value of instruments with similar terms and conditions using forward pricing
models, which include forward exchange rates, forward interest rates, forward fuel curves and corresponding volatility surface data at the
reporting date. The fair value of derivative financial assets and liabilities are determined as follows, incorporating adjustments for own credit
risk and counterparty credit risk:
• commodity reference contracts including swaps and options transactions, referenced to (i) CIF NWE cargoes jet fuel; (ii) ICE Gasoil ; (iii)
ICE Brent; (iv) ICE Gasoil Brent crack; (v) Jet Differential and (vi) Jet fuel Brent crack – the mark-to-market valuation prices are
determined by reference to current forward curve and standard option pricing valuation models, values are discounted to the reporting
date based on the corresponding interest rate;
• currency forward and option contracts – by reference to current forward prices and standard option pricing valuation models, values are
discounted to the reporting date based on the corresponding interest rate; and
• interest rate swap contracts – by discounting the future cash flows of the swap contracts at market interest rate valued with the current
forward curve.
244
244 INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021
Financial Statements
NOTES TO THE ACCOUNTS CONTINUED
For the year to December 31, 2021
28 Financial instruments continued
December 31, 2020
€ million
Non-current assets
Other equity investments
Derivative financial instruments
Other non-current assets
Current assets
Trade receivables
Other current assets
Derivative financial instruments
Other current interest-bearing deposits
Cash and cash equivalents
€ million
Non-current liabilities
Lease liabilities
Interest-bearing long-term borrowings
Derivative financial instruments
Other long-term liabilities
Current liabilities
Lease liabilities
Current portion of long-term borrowings
Trade and other payables
Derivative financial instruments
Financial assets
Amortised
cost
Fair value
through Other
comprehensive
income
Fair value
through
Income
statement
Non-financial
assets
Total
carrying
amount by
balance
sheet item
–
–
119
557
350
–
143
5,774
8,464
5,000
–
80
1,560
655
2,572
–
29
–
10
–
–
–
–
–
–
–
–
–
–
–
–
–
–
42
–
122
–
–
–
–
–
–
310
–
–
–
–
1,160
–
–
99
442
–
–
–
–
–
–
–
–
–
–
533
238
29
42
228
557
792
122
143
5,774
Total
carrying
amount by
balance
sheet
item
8,464
5,000
310
613
1,560
655
2,810
1,160
Financial liabilities
Amortised
cost
Fair value
through Other
comprehensive
income
Fair value
through
Income
statement
Non-
financial
liabilities
b Fair value of financial assets and financial liabilities
The fair values of the Group’s financial instruments are disclosed in hierarchy levels depending on the nature of the inputs used in
determining the fair values and using the following methods and assumptions:
Level 1: Quoted prices (unadjusted) in active markets for identical assets and liabilities. A market is regarded as active if quoted prices are
readily and regularly available from an exchange, dealer, broker, industry group, pricing service, or regulatory agency, and those prices
represent actual and regularly occurring market transactions on an arm’s length basis. Level 1 methodologies (market values at the balance
sheet date) were used to determine the fair value of listed asset investments classified as equity investments and listed interest-bearing
borrowings. The fair value of financial liabilities and financial assets incorporates own credit risk and counterparty credit risk, respectively.
Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. The
fair value of financial instruments that are not traded in an active market is determined by valuation techniques. These valuation techniques
maximise the use of observable market data where it is available and rely as little as possible on entity-specific estimates.
Derivative instruments are measured based on the market value of instruments with similar terms and conditions using forward pricing
models, which include forward exchange rates, forward interest rates, forward fuel curves and corresponding volatility surface data at the
reporting date. The fair value of derivative financial assets and liabilities are determined as follows, incorporating adjustments for own credit
risk and counterparty credit risk:
• commodity reference contracts including swaps and options transactions, referenced to (i) CIF NWE cargoes jet fuel; (ii) ICE Gasoil ; (iii)
ICE Brent; (iv) ICE Gasoil Brent crack; (v) Jet Differential and (vi) Jet fuel Brent crack – the mark-to-market valuation prices are
determined by reference to current forward curve and standard option pricing valuation models, values are discounted to the reporting
date based on the corresponding interest rate;
• currency forward and option contracts – by reference to current forward prices and standard option pricing valuation models, values are
discounted to the reporting date based on the corresponding interest rate; and
• interest rate swap contracts – by discounting the future cash flows of the swap contracts at market interest rate valued with the current
forward curve.
The fair value of the Group’s interest-bearing borrowings including leases is determined by discounting the remaining contractual cash
flows at the relevant market interest rates at the balance sheet date. The fair value of the Group’s interest-bearing borrowings is adjusted
for own credit risk.
Level 3: Inputs for the asset or liability that are not based on observable market data. The principal method of such valuation is performed
using a valuation model that considers the present value of the dividend cash flows expected to be generated by the associated assets.
The fair value of cash and cash equivalents, other current interest-bearing deposits, trade receivables, other current assets and trade and
other payables approximate their carrying value largely due to the short-term maturities of these instruments.
The carrying amounts and fair values of the Group’s financial assets and liabilities at December 31, 2021 are as follows:
€ million
Financial assets
Other equity investments
Derivative financial assets:
Interest rate swaps1
Foreign exchange contracts1
Fuel derivatives1
Financial liabilities
Interest-bearing loans and borrowings:
Asset financed liabilities
Fixed rate borrowings
Floating rate borrowings
Other financing liabilities
Derivative financial liabilities:
Interest rate derivatives2
Foreign exchange contracts2
Fuel derivatives2
Level 1
Level 2
Fair value
Level 3
Total
–
–
–
–
–
3,492
–
–
–
–
–
–
5
314
301
2,583
265
3,622
73
31
129
13
31
–
–
–
–
–
–
–
–
–
–
31
5
314
301
2,583
3,757
3,622
73
31
129
13
1 Current portion of derivative financial assets is €543 million.
2 Current portion of derivative financial liabilities is €126 million.
The carrying amounts and fair values of the Group’s financial assets and liabilities at December 31, 2020 are set out below:
€ million
Financial assets
Other equity investments
Derivative financial assets:
Interest rate swaps1
Foreign exchange contracts1
Fuel derivatives1
Financial liabilities
Interest-bearing loans and borrowings:
Asset financed liabilities
Fixed rate borrowings
Floating rate borrowings
Other financing liabilities
Derivative financial liabilities:
Interest rate derivatives2
Foreign exchange contracts2
Fuel derivatives2
Level 1
Level 2
Level 3
Total
Fair value
–
–
–
–
–
1,510
–
–
–
–
–
–
1
154
9
2,417
560
1,206
97
63
620
787
29
–
–
–
–
–
–
–
–
–
–
29
1
154
9
2,417
2,070
1,206
97
63
620
787
Carrying
value
Total
31
5
314
301
2,415
3,863
3,622
73
31
129
13
Carrying
value
Total
29
1
154
9
2,189
2,163
1,206
97
63
620
787
1 Current portion of derivative financial assets is €122 million.
2 Current portion of derivative financial liabilities is €1,160 million.
There have been no transfers between levels of fair value hierarchy during the year.
Financial assets, other equity instruments, financial liabilities and derivative financial assets and liabilities are all measured at fair value in the
consolidated financial statements. Interest-bearing borrowings, with the exception of the IAG €825 million convertible bond due 2028
which is measured at fair value, are measured at amortised cost.
244
245
INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021 245
NOTES TO THE ACCOUNTS CONTINUED
For the year to December 31, 2021
28 Financial instruments continued
c
Level 3 financial assets reconciliation
The following table summarises key movements in Level 3 financial assets:
€ million
Opening balance for the year
Additions
Losses recognised in other comprehensive income
Exchange movements
Closing balance for the year
d Hedges
Cash flow hedges
2021
29
2
–
–
31
2020
72
3
(44)
(2)
29
At December 31, 2021 the Group’s principal risk management activities that were hedging future forecast transactions were:
• Foreign exchange contracts, hedging foreign currency exchange risk on revenue cash inflows and certain operational payments.
Remeasurement gains and losses on the derivatives are (i) recognised in equity and transferred to the Income statement, where the
hedged item is recorded directly in the Income statement, to the same caption as the underlying hedged item is classified; (ii) recognised
in equity and transferred to the Balance sheet, where the hedged item is a non-financial asset or liability, are recorded to the Balance
sheet to the same caption as the hedged item is recognised; and (iii) recognised in equity and transferred to the Income statement,
where the hedged item is a financial asset or liability, at the same time as the financial asset or liability is recorded in the Income
statement. Reclassification gains and losses on derivatives, arising from the discontinuance of hedge accounting, are recognised in the
Income statement when the future transaction is no longer expected to occur and recorded in the relevant Income statement caption to
which the hedged item is classified;
• Forward crude, gas oil and jet kerosene derivative contracts, hedging price risk on fuel expenditure. Remeasurement gains and losses on
the derivatives are recognised in equity and transferred to the Income statement within Fuel, oil costs and emissions charges to match
against the related fuel cash outflow. Reclassification gains and losses on derivatives, arising from the discontinuance of hedge
accounting, are recognised in the Income statement within Fuel, oil costs and emissions charges when the future transaction is no longer
expected to occur;
• Interest rate contracts, hedging interest rate risk on floating rate debt and certain operational payments. Remeasurement gains and
losses on the derivatives are recognised in equity and transferred to the Income statement within Interest expense; and
• Future loan repayments denominated in foreign currency are designated in a hedge relationship hedging foreign exchange fluctuations
on revenue cash inflows. Remeasurement gains and losses on the associated loans are recognised in equity and transferred to the
Income statement within Passenger revenue when the loan repayments are made (generally in instalments over the life of the loan).
The amounts included in equity including the periods over which the related cash flows are expected to occur are summarised below:
(Gains)/losses in respect of cash flow hedges included within equity
€ million
Loan repayments to hedge future revenue
Foreign exchange contracts to hedge future revenue and expenditure1
Crude, gas oil and jet kerosene derivative contracts1
Derivatives used to hedge interest rates1
Instruments for which hedge accounting no longer applies1, 2
Related deferred tax credit
Total amount included within equity
1 The carrying value of derivative instruments recognised in assets and liabilities is analysed in parts a and b above.
2 Relates to previously terminated hedge relationships for which the underlying forecast transaction remains expected to occur.
2021
98
25
(276)
58
247
152
(24)
128
2020
220
168
295
66
276
1,025
(168)
857
246
246 INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021
Financial Statements
The following table summarises key movements in Level 3 financial assets:
NOTES TO THE ACCOUNTS CONTINUED
For the year to December 31, 2021
28 Financial instruments continued
c
Level 3 financial assets reconciliation
Losses recognised in other comprehensive income
Opening balance for the year
€ million
Additions
Exchange movements
Closing balance for the year
d Hedges
Cash flow hedges
2021
29
2
–
–
31
2020
72
3
(44)
(2)
29
At December 31, 2021 the Group’s principal risk management activities that were hedging future forecast transactions were:
• Foreign exchange contracts, hedging foreign currency exchange risk on revenue cash inflows and certain operational payments.
Remeasurement gains and losses on the derivatives are (i) recognised in equity and transferred to the Income statement, where the
hedged item is recorded directly in the Income statement, to the same caption as the underlying hedged item is classified; (ii) recognised
in equity and transferred to the Balance sheet, where the hedged item is a non-financial asset or liability, are recorded to the Balance
sheet to the same caption as the hedged item is recognised; and (iii) recognised in equity and transferred to the Income statement,
where the hedged item is a financial asset or liability, at the same time as the financial asset or liability is recorded in the Income
statement. Reclassification gains and losses on derivatives, arising from the discontinuance of hedge accounting, are recognised in the
Income statement when the future transaction is no longer expected to occur and recorded in the relevant Income statement caption to
which the hedged item is classified;
• Forward crude, gas oil and jet kerosene derivative contracts, hedging price risk on fuel expenditure. Remeasurement gains and losses on
the derivatives are recognised in equity and transferred to the Income statement within Fuel, oil costs and emissions charges to match
against the related fuel cash outflow. Reclassification gains and losses on derivatives, arising from the discontinuance of hedge
accounting, are recognised in the Income statement within Fuel, oil costs and emissions charges when the future transaction is no longer
expected to occur;
• Interest rate contracts, hedging interest rate risk on floating rate debt and certain operational payments. Remeasurement gains and
losses on the derivatives are recognised in equity and transferred to the Income statement within Interest expense; and
• Future loan repayments denominated in foreign currency are designated in a hedge relationship hedging foreign exchange fluctuations
on revenue cash inflows. Remeasurement gains and losses on the associated loans are recognised in equity and transferred to the
Income statement within Passenger revenue when the loan repayments are made (generally in instalments over the life of the loan).
The amounts included in equity including the periods over which the related cash flows are expected to occur are summarised below:
(Gains)/losses in respect of cash flow hedges included within equity
€ million
Loan repayments to hedge future revenue
Foreign exchange contracts to hedge future revenue and expenditure1
Crude, gas oil and jet kerosene derivative contracts1
Derivatives used to hedge interest rates1
Instruments for which hedge accounting no longer applies1, 2
Related deferred tax credit
Total amount included within equity
1 The carrying value of derivative instruments recognised in assets and liabilities is analysed in parts a and b above.
2 Relates to previously terminated hedge relationships for which the underlying forecast transaction remains expected to occur.
2021
98
25
(276)
58
247
152
(24)
128
2020
220
168
295
66
276
1,025
(168)
857
The notional amounts of significant financial instruments used as cash flow hedging instruments are set out below, with the prior period
presentation amended to reflect the current presentation:
Notional principal amounts
(€ million)
Foreign exchange contracts to hedge future revenue and
expenditure from US dollars to pound sterling3
Foreign exchange contracts to hedge future revenue and
expenditure from US dollars to euros3
Foreign exchange contracts to hedge future revenue and
expenditure from euros to pound sterling3
Fuel commodity price contracts to hedge future US dollar
fuel expenditure1
Interest rate contracts to hedge future interest expenditure2
Average
hedge rate
Hedge range
Within 1
year
1-2 years
2-5
years
5+
years
Total
December
31, 2021
1.31
1.15 to 1.45
2,606
1,030
42
1.18
1.08 to 1.32
1,632
735
26
–
–
3,678
2,393
1.23
1.08 to 1.42
396
334
543
166
1,439
649
1.40
395 to 737
2,386
826
–
(0.03) to 3.13
3,099
1,080
738
–
60
3,212
4,977
1 Notional amounts of fuel commodity price hedging instruments represent 5.8 million metric tonnes of jet fuel equivalent and the hedge range is expressed as
the US dollar price per metric tonne, which for those products typically priced in barrels, has been determined using a conversion factor of 7.88.
2 The hedge range for interest rate contracts is expressed as a percentage.
3 Expenditure includes both operating and capital expenditure.
Notional principal amounts
(€ million)
Foreign exchange contracts to hedge future revenue and
expenditure from US dollars to pound sterling3
Foreign exchange contracts to hedge future revenue and
expenditure from US dollars to euros3
Foreign exchange contracts to hedge future revenue and
expenditure from euros to pound sterling3
Fuel commodity price contracts to hedge future US dollar
fuel expenditure1
Interest rate contracts to hedge future interest expenditure2
Average
hedge rate
Hedge range
Within
1 year
1-2 years
2-5
years
5+
years
Total
December
31, 2020
1.31
1.15 to 1.50 2,402
1,321
442
1.18
0.74 to 1.37
1,380
989
212
–
–
4,165
2,581
1.23
1.08 to 1.42
373
359
661
309
1,702
702
1.47
363 to 941 2,350
0.08 to 3.18 3,286
1,081
1,493
65
862
–
161
3,496
5,802
1 Notional amounts of fuel commodity price hedging instruments represent 9.3 million metric tonnes of jet fuel equivalent and the hedge range is expressed as
the US dollar price per metric tonne, which for those products typically priced in barrels, has been determined using a conversion factor of 7.88.
2 The hedge range for interest rate contracts is expressed as a percentage.
3 Expenditure includes both operating and capital expenditure.
For the year to December 31, 2021
(€ million)
Foreign exchange contracts to hedge future
revenue and expenditure
Crude, gas oil and jet kerosene derivative
contracts
Derivatives used to hedge interest rates
Loan repayments to hedge future revenue
Instruments for which hedge accounting no
longer applies
Related deferred tax
Total movements recorded in the cash flow
hedge reserve
Amounts recognised in the Income statement
Ineffectiveness1
Discontinuance
of hedge
accounting
Recycling to
the Income
Statement
Total
recognised
movements
Fair value
movements
recognised in
Other
comprehensive
income2
Amounts
reclassified to
the Balance
sheet
–
(1)
–
–
–
(1)
4
73
–
–
–
77
39
88
(29)
(15)
(54)
29
43
(178)
(24)
160
(29)
(15)
(54)
105
(24)
(737)
21
(120)
–
(1,014)
166
81
(848)
–
–
–
–
(24)
3
(21)
1
Ineffectiveness recognised in the Income statement is presented as Realised and Unrealised gains and losses on derivatives not qualifying for hedge
accounting within non-operating items.
2 Amounts recognised in Other comprehensive income represent gains and losses on the hedging instrument.
246
247
INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021 247
NOTES TO THE ACCOUNTS CONTINUED
For the year to December 31, 2021
28 Financial instruments continued
For the year to December 31, 2020
(€ million)
Foreign exchange contracts to hedge future
revenue and expenditure
Crude, gas oil and jet kerosene derivative
contracts
Derivatives used to hedge interest rates
Loan repayments to hedge future revenue
Instruments for which hedge accounting no
longer applies
Related deferred tax
Total movements recorded in the cash flow
hedge reserve
Amounts recognised in the Income statement
Ineffectiveness1
Discontinuance
of hedge
accounting
Recycling to
the Income
Statement
Total
recognised
movements
Fair value
movements
recognised in
Other
comprehensive
income2
Amounts
reclassified to
the Balance
sheet
–
2
–
–
–
2
54
55
109
88
(1,757)
–
(22)
–
(1,725)
(461)
(30)
(19)
(63)
(518)
(2,216)
2,369
(30)
(41)
(63)
(2,241)
370
59
123
–
2,639
(468)
(1,871)
2,171
32
–
(32)
–
–
–
–
–
1
Ineffectiveness recognised in the Income statement is presented as Realised and Unrealised gains and losses on derivatives not qualifying for hedge
accounting within non-operating items.
2 Amounts recognised in Other comprehensive income represent gains and losses on the hedging instrument.
The losses associated with the discontinuance of hedge accounting recognised in the Income statement and the subsequent fair value
movements of those derivative instruments recorded in the Income statement through to the earlier of the balance sheet date and the
maturity date of the derivative are set out below:
€ million
(Gains)/losses associated with the discontinuance of hedge accounting recognised in the Income statement
Fair value movements subsequently recorded in the Income statement
Total effect of discontinuance of hedge accounting in the Income statement1
1 Refer to note 3 and the Alternative performance measures section.
The Group has no significant fair value hedges at December 31, 2021 and 2020.
29 Share capital, share premium and treasury shares
2021
(77)
(82)
(159)
2020
1,725
31
1,756
Allotted, called up and fully paid
January 1, 2020: Ordinary shares of €0.50 each
Share capital reduction
Rights issue
December 31, 2020: Ordinary shares of €0.10 each
December 31, 2021: Ordinary shares of €0.10 each
a Share capital reduction
Number of
shares
'000s
1,992,033
Ordinary
share capital
€ million
996
–
2,979,443
4,971,476
4,971,476
(797)
298
497
497
Share
premium
€ million
5,327
–
2,443
7,770
7,770
On September 8, 2020, the Company undertook a share capital reduction of €797 million, that reduced the nominal value of each ordinary
share from €0.50 per share to €0.10 per share. A corresponding amount has been recognised within Capital reserves (note 31).
b Rights issue
On October 2, 2020, the Company raised €2,741 million (and incurred related transaction costs of €70 million as detailed in note 31)
through a rights issue of 2,979,443,376 new ordinary shares at a price of 92 € cents per share on the basis of 3 shares for every 2 existing
shares.
c Treasury shares
A total of 5.4 million shares (2020: 2.6 million) were issued to employees during the year as a result of vesting of employee share schemes.
At December 31, 2021 the Group held 10.2 million shares (2020: 5.1 million) which represented 0.20 per cent (2020: 0.10 per cent) of the
issued share capital of the Company.
248
248 INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021
Financial Statements
NOTES TO THE ACCOUNTS CONTINUED
For the year to December 31, 2021
28 Financial instruments continued
For the year to December 31, 2020
(€ million)
Foreign exchange contracts to hedge future
revenue and expenditure
Crude, gas oil and jet kerosene derivative
contracts
Derivatives used to hedge interest rates
Loan repayments to hedge future revenue
Instruments for which hedge accounting no
longer applies
Related deferred tax
Total movements recorded in the cash flow
hedge reserve
Amounts recognised in the Income statement
Fair value
movements
recognised in
Amounts
Ineffectiveness1
Discontinuance
Recycling to
Total
Other
reclassified to
of hedge
accounting
the Income
Statement
recognised
comprehensive
the Balance
movements
income2
sheet
54
55
109
88
32
–
2
–
–
–
2
(1,757)
–
(22)
–
(1,725)
(461)
(30)
(19)
(63)
(518)
(2,216)
2,369
(30)
(41)
(63)
(2,241)
370
59
123
–
2,639
(468)
(1,871)
2,171
(32)
–
–
–
–
–
–
1
Ineffectiveness recognised in the Income statement is presented as Realised and Unrealised gains and losses on derivatives not qualifying for hedge
accounting within non-operating items.
2 Amounts recognised in Other comprehensive income represent gains and losses on the hedging instrument.
The losses associated with the discontinuance of hedge accounting recognised in the Income statement and the subsequent fair value
movements of those derivative instruments recorded in the Income statement through to the earlier of the balance sheet date and the
maturity date of the derivative are set out below:
€ million
(Gains)/losses associated with the discontinuance of hedge accounting recognised in the Income statement
Fair value movements subsequently recorded in the Income statement
Total effect of discontinuance of hedge accounting in the Income statement1
1 Refer to note 3 and the Alternative performance measures section.
The Group has no significant fair value hedges at December 31, 2021 and 2020.
29 Share capital, share premium and treasury shares
2021
(77)
(82)
(159)
2020
1,725
31
1,756
Number of
shares
'000s
1,992,033
–
2,979,443
4,971,476
4,971,476
Ordinary
share capital
€ million
996
(797)
298
497
497
Share
premium
€ million
5,327
–
2,443
7,770
7,770
Allotted, called up and fully paid
January 1, 2020: Ordinary shares of €0.50 each
Share capital reduction
Rights issue
December 31, 2020: Ordinary shares of €0.10 each
December 31, 2021: Ordinary shares of €0.10 each
a Share capital reduction
b Rights issue
shares.
c Treasury shares
On October 2, 2020, the Company raised €2,741 million (and incurred related transaction costs of €70 million as detailed in note 31)
through a rights issue of 2,979,443,376 new ordinary shares at a price of 92 € cents per share on the basis of 3 shares for every 2 existing
A total of 5.4 million shares (2020: 2.6 million) were issued to employees during the year as a result of vesting of employee share schemes.
At December 31, 2021 the Group held 10.2 million shares (2020: 5.1 million) which represented 0.20 per cent (2020: 0.10 per cent) of the
issued share capital of the Company.
30 Share-based payments
The Group operates share-based payment schemes as part of the total remuneration package provided to employees. These schemes
comprise both share option schemes where employees acquire shares at an option price and share award plans whereby shares are issued
to employees at no cost, subject to the achievement by the Group of specified performance targets.
a
IAG Performance Share Plan
The IAG Performance Share Plan (PSP) is granted to senior executives and managers of the Group who are most directly involved in
shaping and delivering business success over the medium to long term. Since 2015, awards have been made as nil-cost options, with a two-
year holding period following the three-year performance period, before options can be exercised. All awards since 2015 have three
independent performance measures with equal weighting: Total Shareholder Return (TSR) relative to the STOXX Europe 600 Travel and
Leisure Index (for 2020 awards) or MSCI European Transportation Index (for prior to 2020 awards), earnings per share, and Return on
Invested Capital.
In 2020, the outstanding PSP awards granted to participants other than Executive Directors from 2018 onwards were modified, and the
resulting incremental fair value granted of £1.61 per award is recognised over the remaining vesting period.
b
IAG Restricted Share Plan
During 2021, the Group revised its approach to long-term incentives, replacing the existing PSP with a Restricted Share Plan proposal under
the new Executive Share Plan (RSP) approved by shareholders in June 2021. The RSP was introduced to increase the alignment of both
interests and outcomes between the Group’s senior management and shareholders through the build-up and maintenance of senior
management shareholdings and an increased focus on the long-term, sustainable performance of the Group. Awards have been made as
nil-cost options, with a two-year holding period following the three-year performance period, before options can be exercised. There are no
performance measures associated with the awards, although approval at the end of the vesting period will be at the discretion of the
Remuneration Committee, considering the Group’s overall performance, including financial and non-financial performance measures over
the course of the vesting period, as well as any material risk or regulatory failures identified.
c
IAG Full Potential Incentive Plan
During 2021, the Group launched the new Full Potential Incentive Plan (FPIP), which is granted to key individuals involved in the delivery of
a series of transformation projects that will enable the Group to deliver business success over the medium to long term. The Awards have
been made as nil-cost options, vesting in 2025 and dependent on stretch performance targets for 2024 and the approval of the Board.
d
IAG Incentive Award Deferral Plan
The IAG Incentive Award Deferral Plan (IADP) is granted to qualifying employees based on performance and service tests. It will be
awarded when an incentive award is triggered subject to the employee remaining in employment with the Group for three years after the
grant date. The relevant population will receive 50 per cent of their incentive award up front in cash, and the remaining 50 per cent in
shares after three years through the IADP.
e Share-based payment schemes summary
Performance Share Plan
Restricted Share Plan
Full Potential Incentive Plan
Incentive Award Deferral Plan
Outstanding
at January 1,
2021
‘000s
32,800
–
–
8,367
41,167
Granted
number
‘000s
–
16,260
28,067
–
Lapsed
number
‘000s
5,768
62
188
218
44,327
6,236
Vested
number
‘000s
2,326
–
–
2,790
5,116
Outstanding
at December
31, 2021
‘000s
24,706
Exercisable
December 31,
2021
‘000s
1,748
16,198
27,879
5,359
74,142
–
–
6
1,754
On September 8, 2020, the Company undertook a share capital reduction of €797 million, that reduced the nominal value of each ordinary
share from €0.50 per share to €0.10 per share. A corresponding amount has been recognised within Capital reserves (note 31).
The weighted average share price at the date of exercise of options exercised during the year to December 31, 2021 was £1.78 (2020:
£3.89).
The fair value of equity-settled share-based payment plans determined using the Monte-Carlo valuation model last granted in 2020, taking
into account the terms and conditions upon which the plans were granted, used the following assumptions:
Expected share price volatility (per cent)
Expected comparator group volatility (per cent)
Expected comparator group correlation (per cent)
Expected life of options (years)
Weighted average share price at date of grant (£)
Weighted average fair value (£)
December 31,
2021
–
December 31,
2020
35
–
–
–
–
–
20
70
4.6
4.59
1.84
Volatility was calculated with reference to the Group’s weekly pound sterling share price volatility. The expected volatility reflects the
assumption that the historical volatility is indicative of future trends, which may not necessarily be the actual outcome. The fair value of the
PSP also takes into account a market condition of TSR as compared to strategic competitors. No other features of share-based payment
plans granted were incorporated into the measurement of fair value.
The Group recognised a share-based payment charge of €23 million for the year to December 31, 2021 (2020: credit of €8 million).
248
249
INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021 249
NOTES TO THE ACCOUNTS CONTINUED
For the year to December 31, 2021
31 Other reserves and non-controlling interests
For the year to December 31, 2021
€ million
January 1, 2021 restated7
Other comprehensive loss for the year
Cash flow hedges reclassified and
reported in net loss:
Passenger revenue
Fuel and oil costs
Currency differences
Finance costs
Discontinuance of hedge accounting
Net change in fair value of cash flow
hedges
Net change in fair value of cost of
hedging
Cost of hedging reclassified and
reported in the net profit
Fair value movements on liabilities
attributable to credit risk changes
Currency translation differences
Hedges reclassified and reported in
property, plant and equipment
December 31, 2021
Unrealised
gains and
losses1
(867)
Cost of
hedging
reserve2
38
Other reserves
Equity
portion of
convertible
bond4
62
Currency
translation3
(53)
Merger
reserve5
(2,467)
Capital
reserves6
867
Total other
reserves
(2,420)
Non-
controlling
interest
6
18
(45)
(15)
23
(62)
848
–
–
(15)
–
21
(94)
–
–
–
–
–
–
10
(12)
–
–
(12)
24
–
–
–
–
–
–
–
–
–
(12)
–
(65)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
18
(45)
(15)
23
(62)
848
10
(12)
(15)
(12)
9
62
(2,467)
867
(1,673)
–
–
–
–
–
–
–
–
–
–
–
6
250
250 INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021
Financial Statements
NOTES TO THE ACCOUNTS CONTINUED
For the year to December 31, 2021
31 Other reserves and non-controlling interests
For the year to December 31, 2021
€ million
January 1, 2021 restated7
Other comprehensive loss for the year
Cash flow hedges reclassified and
reported in net loss:
Passenger revenue
Fuel and oil costs
Currency differences
Finance costs
Discontinuance of hedge accounting
Net change in fair value of cash flow
hedges
hedging
Net change in fair value of cost of
Cost of hedging reclassified and
reported in the net profit
Fair value movements on liabilities
attributable to credit risk changes
Currency translation differences
Hedges reclassified and reported in
property, plant and equipment
December 31, 2021
Unrealised
gains and
losses1
(867)
Cost of
hedging
reserve2
38
Currency
convertible
translation3
(53)
bond4
62
Merger
reserve5
(2,467)
Capital
reserves6
867
reserves
(2,420)
Total other
controlling
Non-
interest
6
Other reserves
Equity
portion of
18
(45)
(15)
23
(62)
848
–
–
(15)
–
21
(94)
–
–
–
–
–
–
10
(12)
–
–
(12)
24
–
–
–
–
–
–
–
–
–
–
(12)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
18
(45)
(15)
23
(62)
848
10
(12)
(15)
(12)
9
–
–
–
–
–
–
–
–
–
–
–
6
(65)
62
(2,467)
867
(1,673)
€ million
January 1, 2020
Other comprehensive income for the
year
Cash flow hedges reclassified and
reported in net profit:
Passenger revenue
Fuel and oil costs
Currency differences
Finance costs
Discontinuance of hedge accounting
Net change in fair value of cash flow
hedges
Net change in fair value of other equity
investments
Net change in fair value of cost of
hedging
Cost of hedging reclassified and
reported in the net profit
Currency translation differences7
Hedges reclassified and reported in
property, plant and equipment
Share capital reduction
December 31, 2020 restated7
Unrealised
gains and
losses1
(464)
Cost of
hedging
reserve2
60
Currency
translation3
160
Other reserves
Equity
portion of
convertible
bond4
62
Merger
reserve5
(2,467)
Capital
reserves6
70
Total other
reserves
(2,579)
Non-
controlling
interest
6
50
356
18
12
1,435
(2,216)
(53)
–
–
–
(5)
–
(867)
–
–
–
–
–
–
–
10
(19)
–
(13)
–
38
–
–
–
–
–
–
–
–
–
(213)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(53)
62
(2,467)
–
–
–
–
–
–
–
–
–
–
–
797
867
50
356
18
12
1,435
(2,216)
(53)
10
(19)
(213)
(18)
797
(2,420)
–
–
–
–
–
–
–
–
–
–
–
–
6
1 The unrealised gains and losses reserve records fair value changes on equity investments and the portion of the amounts on hedging instruments in cash flow
hedges that are determined to be effective hedges. The amounts at December 31, 2021 that relate to the fair value changes on equity instruments and to the
cash flow hedge reserve were €9 million credit and €128 million charge, respectively.
2 The cost of hedging reserve records, amongst others, changes on the time value of options.
3 The currency translation reserve records exchange differences arising from the translation of the financial statements of non-euro functional currency
subsidiaries and investments accounted for under the equity method into the Group’s reporting currency of euros. The movement through this reserve is
affected by the fluctuations in the pound sterling to euro foreign exchange translation rate.
4 The equity portion of convertible bond reserve represents the equity portion of convertible bonds issued. At December 31, 2021 and 2020, this related to the
€500 million fixed rate 0.625 per cent convertible bond maturing 2022 (note 25).
5 The merger reserve originated from the merger transaction between British Airways and Iberia. The balance represents the difference between the fair value
of the Group on the transaction date, and the fair value of Iberia and the book value of British Airways (including its reserves).
6 Capital reserves include a Redeemed capital reserve of €70 million (2020: €70 million) associated with the decrease in share capital relating to cancelled
shares and a Share capital reduction reserve of €797 million (2020: 797 million) associated with a reduction in the nominal value of the Company’s share
capital (note 29).
7 Refer to notes 2 and 36 for the change in accounting policy relating to pension administration costs.
250
251
INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021
251
NOTES TO THE ACCOUNTS CONTINUED
For the year to December 31, 2021
32 Employee benefit obligations
The Group operates a variety of post-employment benefit arrangements, covering both defined contribution and defined benefit schemes.
The Group also has a scheme for flight crew who meet certain conditions and therefore have the option of being placed on reserve and
retaining their employment relationship until reaching the statutory retirement age, or taking early retirement (note 26).
Defined contribution schemes
The Group operates a number of defined contribution schemes for its employees.
Costs recognised in respect of defined contribution pension plans in Spain, UK and Ireland for the year to December 31, 2021 were €200
million (2020: €235 million).
Defined benefit schemes
The principal funded defined benefit pension schemes within the Group are the Airways Pension Scheme (APS) and the New Airways
Pension Scheme (NAPS), both of which are in the UK and are closed to new members.
APS has been closed to new members since 1984, but remains open to future accrual. The benefits provided under APS are based on final
average pensionable pay and, for the majority of members, are subject to inflationary increases in payment.
NAPS has been closed to new members since 2004 and closed to future accrual since 2018, resulting in a reduction of the defined benefit
obligation. Following closure members’ deferred pensions will now be increased annually by inflation up to five per cent per annum
(measured using the Government’s annual Pension Increase (Review) Orders, which since 2011 have been based on CPI).
APS and NAPS are governed by separate Trustee Boards. Although APS and NAPS have separate Trustee Boards, much of the business of
the two schemes is common. Some main Board and committee meetings are held in tandem although each Trustee Board reaches its
decisions independently. There are three sub committees which are separately responsible for the governance, operation and investments
of each scheme. British Airways Pension Trustees Limited holds the assets of both schemes on behalf of their respective Trustees.
32 Employee benefit obligations continued
Triennially, the Trustees of APS and NAPS undertake actuarial valuations, which are subsequently agreed with British Airways to determine
the cash contributions and any deficit payments plans through to the next valuation date, as well as ensuring that the schemes have
sufficient funds available to meet future benefit payments to members. These actuarial valuations are prepared using the principles set out
in UK Pension legislation. This differs from the IAS 19 ‘Employee benefits’ valuation, which is used for deriving the Income statement and
Balance sheet positions, and uses a best-estimate approach overall. The different purpose and principles lead to different assumptions
being used, and therefore a different estimate for the liabilities and deficit.
At December 31, 2021, the triennial valuations as at March 31, 2021 were not finalised and accordingly the latest actuarial valuations of both
APS and NAPS were performed as at March 31, 2018, which resulted in a surplus of €683 million for APS and a deficit of €2,736 million for
NAPS. The actuarial valuations performed for APS and NAPS are different to the valuation performed as at December 31, 2021 under IAS 19
‘Employee Benefits’ mainly due to timing differences of the measurement dates and to the specific scheme assumptions in the actuarial
valuation compared with IAS 19 guidance used in the accounting valuation assumptions.
Other plans
British Airways also operates post-retirement schemes in a number of jurisdictions outside of the UK. The principal scheme is the British
Airways Plc Pension Plan (USA) based in the United States and referred to as the ‘US Plan’. The US Plan is considered to be a defined
benefit scheme and is closed to new members and to future accrual.
The majority of the British Airways other plans are fully funded, but there are also a number of unfunded plans, where the Group meets the
benefit payment obligations as they fall due.
In addition, Aer Lingus operates certain defined benefit plans, both funded and unfunded.
Risk associated with the defined benefit schemes
The defined benefit schemes expose the Group to a range of risks, with the following being the most significant:
• Asset volatility risk – the scheme obligations are calculated using a discount rate set with reference to high quality corporate bond yields.
If scheme assets underperform this yield, this will reduce the surplus / increase the deficit, depending on the scheme. Certain of the
schemes hold a significant proportion of equities, which are expected to outperform corporate bonds in the long term while creating
volatility and risk in the short term;
• Longevity risk – the majority of the scheme obligations are to provide benefits over the life of the scheme members. An increase in life
expectancy will result in a corresponding increase in the defined benefit obligation;
• Interest rate risk – a decrease in interest rates will increase plan liabilities, although this will be partially offset by an increase in the value of
certain of the scheme assets;
• Inflation risk – a significant proportion of the scheme obligations are linked to inflation, such that any increase in inflation will cause an
increase in the obligations. While certain of the scheme assets are indexed to inflation, any expected increase in the scheme assets from
inflation would be disproportionately lower than the increase in the scheme obligations; and
• Currency risk – a number of scheme assets are denominated in currencies other than the pound sterling. Weakening of those currencies,
or strengthening of the pound sterling, in the long term, will have the effect of reducing the value of scheme assets.
252
252 INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021
Financial Statements
NOTES TO THE ACCOUNTS CONTINUED
For the year to December 31, 2021
32 Employee benefit obligations
The Group operates a variety of post-employment benefit arrangements, covering both defined contribution and defined benefit schemes.
The Group also has a scheme for flight crew who meet certain conditions and therefore have the option of being placed on reserve and
retaining their employment relationship until reaching the statutory retirement age, or taking early retirement (note 26).
Defined contribution schemes
The Group operates a number of defined contribution schemes for its employees.
Costs recognised in respect of defined contribution pension plans in Spain, UK and Ireland for the year to December 31, 2021 were €200
million (2020: €235 million).
Defined benefit schemes
The principal funded defined benefit pension schemes within the Group are the Airways Pension Scheme (APS) and the New Airways
Pension Scheme (NAPS), both of which are in the UK and are closed to new members.
APS has been closed to new members since 1984, but remains open to future accrual. The benefits provided under APS are based on final
average pensionable pay and, for the majority of members, are subject to inflationary increases in payment.
NAPS has been closed to new members since 2004 and closed to future accrual since 2018, resulting in a reduction of the defined benefit
obligation. Following closure members’ deferred pensions will now be increased annually by inflation up to five per cent per annum
(measured using the Government’s annual Pension Increase (Review) Orders, which since 2011 have been based on CPI).
APS and NAPS are governed by separate Trustee Boards. Although APS and NAPS have separate Trustee Boards, much of the business of
the two schemes is common. Some main Board and committee meetings are held in tandem although each Trustee Board reaches its
decisions independently. There are three sub committees which are separately responsible for the governance, operation and investments
of each scheme. British Airways Pension Trustees Limited holds the assets of both schemes on behalf of their respective Trustees.
32 Employee benefit obligations continued
Triennially, the Trustees of APS and NAPS undertake actuarial valuations, which are subsequently agreed with British Airways to determine
the cash contributions and any deficit payments plans through to the next valuation date, as well as ensuring that the schemes have
sufficient funds available to meet future benefit payments to members. These actuarial valuations are prepared using the principles set out
in UK Pension legislation. This differs from the IAS 19 ‘Employee benefits’ valuation, which is used for deriving the Income statement and
Balance sheet positions, and uses a best-estimate approach overall. The different purpose and principles lead to different assumptions
being used, and therefore a different estimate for the liabilities and deficit.
At December 31, 2021, the triennial valuations as at March 31, 2021 were not finalised and accordingly the latest actuarial valuations of both
APS and NAPS were performed as at March 31, 2018, which resulted in a surplus of €683 million for APS and a deficit of €2,736 million for
NAPS. The actuarial valuations performed for APS and NAPS are different to the valuation performed as at December 31, 2021 under IAS 19
‘Employee Benefits’ mainly due to timing differences of the measurement dates and to the specific scheme assumptions in the actuarial
valuation compared with IAS 19 guidance used in the accounting valuation assumptions.
Other plans
British Airways also operates post-retirement schemes in a number of jurisdictions outside of the UK. The principal scheme is the British
Airways Plc Pension Plan (USA) based in the United States and referred to as the ‘US Plan’. The US Plan is considered to be a defined
benefit scheme and is closed to new members and to future accrual.
The majority of the British Airways other plans are fully funded, but there are also a number of unfunded plans, where the Group meets the
benefit payment obligations as they fall due.
In addition, Aer Lingus operates certain defined benefit plans, both funded and unfunded.
Risk associated with the defined benefit schemes
The defined benefit schemes expose the Group to a range of risks, with the following being the most significant:
• Asset volatility risk – the scheme obligations are calculated using a discount rate set with reference to high quality corporate bond yields.
If scheme assets underperform this yield, this will reduce the surplus / increase the deficit, depending on the scheme. Certain of the
schemes hold a significant proportion of equities, which are expected to outperform corporate bonds in the long term while creating
volatility and risk in the short term;
• Longevity risk – the majority of the scheme obligations are to provide benefits over the life of the scheme members. An increase in life
expectancy will result in a corresponding increase in the defined benefit obligation;
• Interest rate risk – a decrease in interest rates will increase plan liabilities, although this will be partially offset by an increase in the value of
certain of the scheme assets;
• Inflation risk – a significant proportion of the scheme obligations are linked to inflation, such that any increase in inflation will cause an
increase in the obligations. While certain of the scheme assets are indexed to inflation, any expected increase in the scheme assets from
inflation would be disproportionately lower than the increase in the scheme obligations; and
• Currency risk – a number of scheme assets are denominated in currencies other than the pound sterling. Weakening of those currencies,
or strengthening of the pound sterling, in the long term, will have the effect of reducing the value of scheme assets.
a Cash payments and funding arrangements
Cash payments in respect to pension obligations comprise normal employer contributions by the Group and deficit contributions based on
the agreed deficit payment plan with APS and NAPS. Total payments for the year to December 31, 2021 net of service costs made by the
Group were €38 million (2020: €313 million) being the employer contributions of €41 million (2020: €318 million) less the current service
cost of €3 million (2020: €5 million) (note 32b).
Future funding arrangements
Pension contributions for APS and NAPS were determined by actuarial valuations made at March 31, 2018, using assumptions and
methodologies agreed between the Group and Trustee of each scheme.
In total, the Group expects to pay €1 million in employer contributions to APS and NAPS in 2022.
The following graph provides the undiscounted benefit payments to be made by the trustees of APS and NAPS over the remaining
expected duration of the schemes:
Projected benefit payments from the valuation date (€ million, unaudited)
1000
800
600
400
200
0
2
2
0
2
7
2
0
2
APS
NAPS
2
3
0
2
7
3
0
2
2
4
0
2
7
4
0
2
2
5
0
2
7
5
0
2
2
6
0
2
7
6
0
2
2
7
0
2
7
7
0
2
2
8
0
2
7
8
0
2
2
9
0
2
The amounts and timing of these projected benefit payments are subject to the aforementioned risks to the schemes.
Deficit contributions and deferred deficit contributions
At the date of the actuarial valuation, the actuarial deficit of NAPS amounted to €2,736 million. In order to address the deficit in the scheme,
the Group has also committed to deficit contribution payments through to the end of the first quarter of 2023 amounting to approximately
€130 million per quarter. The deficit contribution plan includes an over-funding protection mechanism, based on the triennial valuation
methodology for measuring the deficit, whereby deficit contributions are paid into an escrow account if the scheme funding position
reaches 97 per cent, and are suspended if the funding position reaches 100 per cent, with a mechanism for contributions to resume if the
contribution level subsequently falls below 100 per cent, which includes additional contributions equivalent to those months where
contributions had been suspended, or until such point as the scheme funding level reaches 97 per cent.
During the year ended and as at December 31, 2021, the NAPS funding position exceeded 100 per cent and accordingly deficit contributions
were suspended. At December 31, 2021, the valuation of the funding level incorporates significant forward-looking assumptions, such that
the Group currently does not expect to make further deficit contributions. Given the long-term nature of the NAPS scheme, these
assumptions are subject to uncertainty and there can be no guarantee that deficit contributions will not resume in the future or that
additional deficit contributions will be incorporated into future triennial actuarial valuations.
At December 31, 2021, had the over-funding protection mechanism not been applied, then the asset ceiling adjustment (as detailed in note
32c) would have been €289 million higher.
On December 18, 2020 British Airways reached agreement with the Trustee of NAPS to defer deficit contributions on an interim basis for
the period between September 1, 2020 and January 31, 2021. On February 19, 2021 British Airways reached further agreement with the
Trustee of NAPS to defer deficit contributions previously agreed in October 2019 on the March 31, 2018 valuation, through to August 31,
2021. Under this deferral agreement, the deferred payments will be incorporated into the future deficit payment plan and associated deficit
contributions arising from the triennial valuation of the NAPS scheme as at March 31, 2021. The deferred deficit contribution payments do
not include an over-funding protection mechanism.
At December 31, 2021, the Group is committed to the following undiscounted deficit payments, which are deductible for tax purposes at the
statutory rate of tax:
€ million
Within 12 months
1-2 years
2-5 years
Greater than 5 years
Total expected deficit payments
NAPS
–
397
175
–
572
Other
schemes
4
–
–
–
4
Deficit payments in respect of local arrangements outside of the UK have been determined in accordance with local practice.
Under the contribution deferral agreement between British Airways and the Trustee of NAPS, in the period up to December 31, 2023, no
dividend payment is permitted from British Airways to IAG. From 2024 onwards, any dividends paid by British Airways will be matched by
contributions to NAPS of 50 per cent of the value of dividends paid. Any such payments to NAPS will reduce the outstanding repayment
balance and are capped at that level. The requirement to make such payments to NAPS ceases after deferred contributions have been
repaid.
252
253
INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021 253
NOTES TO THE ACCOUNTS CONTINUED
For the year to December 31, 2021
32 Employee benefit obligations continued
b Employee benefit scheme amounts recognised in the financial statements
i Amounts recognised on the Balance sheet
€ million
Scheme assets at fair value
Present value of scheme liabilities4
Net pension asset/(liability)
Effect of the asset ceiling1
Other employee benefit obligations
December 31, 2021
Represented by:
Employee benefit asset
Employee benefit obligation
Net employee benefit asset3, 4
€ million
Scheme assets at fair value
Present value of scheme liabilities2, 4
Net pension asset/(liability)2
Effect of the asset ceiling1, 2
Other employee benefit obligations
December 31, 2020
Represented by:
Employee benefit asset2
Employee benefit obligation2
Net employee benefit obligation3, 4
APS
8,869
2021
NAPS
25,055
(8,333)
(22,583)
536
(186)
–
350
2,472
(1,061)
–
1,411
APS
8,537
2020
NAPS
22,240
(8,064)
(21,778)
473
(151)
–
322
462
(610)
–
(148)
Other
446
(706)
(260)
–
(11)
(271)
Other
408
(714)
(306)
–
(11)
(317)
Total
34,370
(31,622)
2,748
(1,247)
(11)
1,490
1,775
(285)
1,490
Total
31,185
(30,556)
629
(761)
(11)
(143)
334
(477)
(143)
1 APS and NAPS have an accounting surplus under IAS 19, which would be available to the Group as a refund upon wind up of the scheme. This refund is
restricted due to withholding taxes that would be payable by the Trustee arising on both the net pension asset and the future contractual minimum funding
requirements.
2 The 2020 results have been restated for the treatment of administration costs associated with the Group’s defined benefit pension schemes. Further
information is given in note 2.
3 The net deferred tax asset recognised on the net employee benefit asset (2020: obligation) was €62 million at December 31, 2021 (2020: €322 million).
The defined benefit obligation includes €25 million (2020: €24 million) arising from unfunded plans.
4 Includes Additional Voluntary Contributions (AVCs), which the Trustees hold as assets to secure additional benefits on a defined contribution basis for those
members who elect to make such AVCs. At December 31, 2021, such assets were €391 million (2020: €436 million) with a corresponding amount recorded in
the scheme liabilities.
ii Amounts recognised in the Income statement
Pension costs charged to operating result are:
€ million
Defined benefit plans:
Current service cost
Past service cost1
Administrative expenses2
Defined contribution plans
Pension costs recorded as employee costs
Includes a past service credit of €nil (2020: €nil) relating to schemes other than APS and NAPS.
1
2 The 2020 results have been restated for the treatment of administration costs associated with the Group’s defined benefit pension schemes. Further
information is given in note 2.
€ million
Interest income on scheme assets
Interest expense on scheme liabilities1
Interest expense on asset ceiling
Net financing charge/(credit) relating to pensions
2021
(432)
425
9
2
1 The 2020 results have been restated for the treatment of administration costs associated with the Group’s defined benefit pension schemes. Further
information is given in note 2.
254
254 INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021
2021
2020
3
–
29
32
200
232
5
7
25
37
235
272
2020
(599)
573
14
(12)
Financial Statements
NOTES TO THE ACCOUNTS CONTINUED
For the year to December 31, 2021
32 Employee benefit obligations continued
b Employee benefit scheme amounts recognised in the financial statements
i Amounts recognised on the Balance sheet
€ million
Scheme assets at fair value
Present value of scheme liabilities4
Net pension asset/(liability)
Effect of the asset ceiling1
Other employee benefit obligations
December 31, 2021
Represented by:
Employee benefit asset
Employee benefit obligation
Net employee benefit asset3, 4
€ million
Scheme assets at fair value
Present value of scheme liabilities2, 4
Net pension asset/(liability)2
Effect of the asset ceiling1, 2
Other employee benefit obligations
December 31, 2020
Represented by:
Employee benefit asset2
Employee benefit obligation2
Net employee benefit obligation3, 4
requirements.
information is given in note 2.
the scheme liabilities.
ii Amounts recognised in the Income statement
Pension costs charged to operating result are:
€ million
Defined benefit plans:
Current service cost
Past service cost1
Administrative expenses2
Defined contribution plans
Pension costs recorded as employee costs
information is given in note 2.
€ million
Interest income on scheme assets
Interest expense on scheme liabilities1
Interest expense on asset ceiling
Net financing charge/(credit) relating to pensions
APS
8,869
(8,333)
536
(186)
–
350
2021
NAPS
25,055
(22,583)
2,472
(1,061)
–
1,411
(8,064)
(21,778)
APS
8,537
473
(151)
–
322
2020
NAPS
22,240
462
(610)
–
(148)
Other
446
(706)
(260)
–
(11)
(271)
Other
408
(714)
(306)
–
(11)
(317)
3
–
29
32
200
232
2021
(432)
425
9
2
Total
34,370
(31,622)
2,748
(1,247)
(11)
1,490
1,775
(285)
1,490
Total
31,185
(30,556)
629
(761)
(11)
(143)
334
(477)
(143)
5
7
25
37
235
272
2020
(599)
573
14
(12)
2021
2020
1 APS and NAPS have an accounting surplus under IAS 19, which would be available to the Group as a refund upon wind up of the scheme. This refund is
restricted due to withholding taxes that would be payable by the Trustee arising on both the net pension asset and the future contractual minimum funding
2 The 2020 results have been restated for the treatment of administration costs associated with the Group’s defined benefit pension schemes. Further
3 The net deferred tax asset recognised on the net employee benefit asset (2020: obligation) was €62 million at December 31, 2021 (2020: €322 million).
The defined benefit obligation includes €25 million (2020: €24 million) arising from unfunded plans.
4 Includes Additional Voluntary Contributions (AVCs), which the Trustees hold as assets to secure additional benefits on a defined contribution basis for those
members who elect to make such AVCs. At December 31, 2021, such assets were €391 million (2020: €436 million) with a corresponding amount recorded in
1 The 2020 results have been restated for the treatment of administration costs associated with the Group’s defined benefit pension schemes. Further
information is given in note 2.
iii Amounts recognised in the Statement of other comprehensive income
€ million
Return on plan assets excluding interest income1
Remeasurement of plan liabilities from changes in financial assumptions
Remeasurement of experience losses/(gains)1
Remeasurement of the APS and NAPS asset ceilings1
Exchange movements1
Pension remeasurements charged to Other comprehensive income
Deferred tax arising on pension remeasurements1
Pension remeasurements charged to Other comprehensive income, net of tax
2021
2020
(2,495)
(2,268)
46
427
419
(14)
(1,617)
217
(1,400)
3,633
(421)
(308)
11
647
(60)
587
1 The 2020 results have been restated for the treatment of administration costs associated with the Group’s defined benefit pension schemes. Further
information is given in note 2.
c Fair value of scheme assets
Investment strategies
i
For both APS and NAPS, the Trustee has ultimate responsibility for decision making on investments matters, including the asset-liability
matching strategy. The latter is a form of investing designed to match the movement in pension plan assets with the movement in the
projected benefit obligation over time. The Trustees’ investment committee adopts an annual business plan which sets out investment
objectives and work required to support achievement of these objectives. The committee also deals with the monitoring of performance
and activities, including work on developing the strategic benchmark to improve the risk return profile of the scheme where possible, as
well as having a trigger-based dynamic governance process to be able to take advantage of opportunities as they arise. The investment
committee reviews the existing investment restrictions, performance benchmarks and targets, as well as continuing to develop the de-
risking and liability hedging portfolio.
Both schemes use derivative instruments for investment purposes and to manage exposures to financial risks, such as interest rate, foreign
exchange, longevity and liquidity risks arising in the normal course of business. Exposure to interest rate risk is managed through the use of
Inflation-Linked Swap contracts. Foreign exchange forward contracts are entered into to mitigate the risk of currency fluctuations.
Longevity risk is managed through the use of buy-in insurance contracts, asset swaps and longevity swaps.
The strategic benchmark for asset allocations differentiate between ‘return seeking assets’ and ‘liability matching assets’ depending on the
maturity of each scheme. At December 31, 2021, the benchmark for NAPS was 37 per cent (2020: 42 per cent) in return seeking assets and
63 per cent (2020: 58 per cent) in liability matching investments. Bandwidths are set around these strategic benchmarks that allow for
tactical asset allocation decisions, providing parameters for the investment committee and their investment managers to work within. APS
no longer has a ‘strategic benchmark’ as instead, APS now runs off its liquidation portfolio to a liability matching portfolio of bonds and
cash. The actual asset allocation for APS at December 31, 2021 was 1 per cent (2020: 1 per cent) in return seeking assets and 99 per cent
(2020: 99 per cent) in liability matching investments.
ii Movement in scheme assets
A reconciliation of the opening and closing balances of the fair value of scheme assets is set out below:
€ million
January 1
Interest income
Administrative expenses2
Return on plan assets excluding interest income2
Employer contributions1
Employee contributions
Benefits paid2
Exchange movements
December 31
2021
31,185
432
(21)
2,495
41
13
(1,930)
2,155
34,370
2020
31,681
599
(25)
2,268
313
14
(1,528)
(2,137)
31,185
1
Includes a past service credit of €nil (2020: €nil) relating to schemes other than APS and NAPS.
2 The 2020 results have been restated for the treatment of administration costs associated with the Group’s defined benefit pension schemes. Further
1
Includes employer contributions to APS of €1 million (2020: €2 million) and to NAPS of €nil (2020: €303 million) of which deficit-funding payments
represented €nil for APS (2020: €nil) and €nil for NAPS (2020: €296 million).
2 The 2020 results have been restated for the treatment of administration costs associated with the Group’s defined benefit pension schemes. Further
information is given in note 2.
254
255
INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021 255
NOTES TO THE ACCOUNTS CONTINUED
For the year to December 31, 2021
32 Employee benefit obligations continued
iii Composition of scheme assets
Scheme assets held by the Group at December 31 comprise:
€ million
Return seeking investments
Listed equities - UK
Listed equities - Rest of world
Private equities
Properties
Alternative investments
Liability matching investments
Government issued fixed bonds
Government issued index-linked bonds
Asset and longevity swaps
Insurance contract
Other
Cash and cash equivalents
Derivative financial instruments
Other investments
APS
–
12
39
4
53
2021
NAPS
220
4,222
1,604
2,475
1,829
108
10,350
733
1,311
6,351
–
9,824
7,190
–
–
8,395
17,014
292
84
(10)
366
837
(3,219)
73
(2,309)
Other
Total
20201
4
207
–
2
43
256
124
10
–
27
161
10
–
19
29
224
4,441
1,643
2,481
1,925
10,714
10,681
8,511
6,351
27
25,570
1,139
(3,135)
82
(1,914)
1,468
4,724
1,062
1,798
880
9,932
6,985
6,524
4,424
1,660
19,593
949
(228)
939
1,660
31,185
Total scheme assets
8,869
25,055
446
34,370
1 The scheme assets at December 31, 2020 have been re-presented to conform with the 2021 presentation. There has been no change in the overall fair value of
the scheme assets.
The fair values of the Group’s scheme assets, which are not derived from quoted process on active markets, are determined depending on
the nature of the inputs used in determining the fair values (see note 28b for further details) and using the following methods and
assumptions:
• Private equities are valued at fair value based on the most recent transaction price or third-party net asset, revenue or earnings-based
valuations that generally result in the use of significant unobservable inputs.
• Properties are valued based on an analysis of recent market transactions supported by market knowledge derived from third-party
professional valuers that generally result in the use of significant unobservable inputs.
• Alternative investments fair values, which predominantly include holdings in investment and infrastructure funds are determined based
on the most recent available valuations applying the Net Asset Value methodology and issued by fund administrators or investment
managers and adjusted for any cash movements having occurred from the date of the valuation and the reporting date.
• Other investments predominantly includes: interest receivable on bonds; dividends from listed and private equities that have been
declared but not received at the balance sheet date; receivables from the sale of assets for which the proceeds have not been collected
at the balance sheet date; and payables for the purchase of assets which have not been settled at the balance sheet date.
• Asset and longevity swaps - APS has a contract with Rothesay Life, entered into in 2010 and extended in 2013, which covers 25 per cent
(2020: 24 per cent) of the pensioner liabilities for an agreed list of members. Under the contract, to reduce the risk of long-term longevity
risk, Rothesay Life makes benefit payments monthly in respect of the agreed list of members in return for the contractual return
receivable on a portfolio of assets (made up of quoted government debt, asset swaps and longevity swaps) held by the scheme. The
Group holds the portfolio of assets at their fair value, with the government debt held at their quoted market price and the swaps
accounted for at their estimated discounted future cash flows.
During 2011, APS entered into a longevity swap with Rothesay Life, which covers an additional 21 per cent (2020: 20 per cent) of the
pensioner liabilities for the same agreed list of members as the 2010 contract. Under the longevity swap, to reduce the risk of long-term
longevity risk, APS makes a fixed payment to Rothesay Life each month reflecting the prevailing mortality assumptions at the inception
of the contract, and Rothesay Life make a monthly payment to APS reflecting the actual monthly benefit payments to members. The
cash flows are settled net each month. If pensioners live longer than expected at inception of the longevity swap, Rothesay Life will make
payments to the scheme to offset the additional cost of paying pensioners and if pensioners do not live as long as expected, then the
scheme will make payments to Rothesay Life. The Group holds the longevity swap at fair value, determined at the estimated discounted
future cash flows.
• Insurance contract - During 2018 the Trustee of APS secured a buy-in contract with Legal & General. The buy-in contract covers all
members in receipt of pensions from APS at March 31, 2018, excluding dependent children, receiving a pension at that date and members
in receipt of equivalent pension-only benefits, who were alive on October 1, 2018. Benefits coming into payment for retirements after
March 31, 2018 are not covered. The contract covers benefits payable from October 1, 2018 onwards. The policy covers approximately 60
per cent of all benefits APS expects to pay out in future. Along with existing contracts with Rothesay Life, APS is 90 per cent protected
against all longevity risk and fully protected in relation to all pensions that were already being paid as at March 31, 2018. It is also more
than 90 per cent protected against interest rates and inflation (on a Retail Price Index basis).
256
256 INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021
Financial Statements
NOTES TO THE ACCOUNTS CONTINUED
For the year to December 31, 2021
32 Employee benefit obligations continued
iii Composition of scheme assets
Scheme assets held by the Group at December 31 comprise:
€ million
Return seeking investments
Listed equities - UK
Listed equities - Rest of world
Private equities
Properties
Alternative investments
Liability matching investments
Government issued fixed bonds
Government issued index-linked bonds
Asset and longevity swaps
Insurance contract
Other
Cash and cash equivalents
Derivative financial instruments
Other investments
2021
NAPS
Other
Total
20201
APS
–
12
39
4
53
733
1,311
6,351
–
292
84
(10)
366
108
10,350
8,395
17,014
220
4,222
1,604
2,475
1,829
9,824
7,190
–
–
837
(3,219)
73
(2,309)
207
4
–
2
43
256
124
10
–
27
161
10
–
19
29
224
4,441
1,643
2,481
1,925
10,714
10,681
8,511
6,351
27
25,570
1,139
(3,135)
82
(1,914)
1,468
4,724
1,062
1,798
880
9,932
6,985
6,524
4,424
1,660
19,593
949
(228)
939
1,660
31,185
1 The scheme assets at December 31, 2020 have been re-presented to conform with the 2021 presentation. There has been no change in the overall fair value of
8,869
25,055
446
34,370
The fair values of the Group’s scheme assets, which are not derived from quoted process on active markets, are determined depending on
the nature of the inputs used in determining the fair values (see note 28b for further details) and using the following methods and
Total scheme assets
the scheme assets.
assumptions:
• Private equities are valued at fair value based on the most recent transaction price or third-party net asset, revenue or earnings-based
valuations that generally result in the use of significant unobservable inputs.
• Properties are valued based on an analysis of recent market transactions supported by market knowledge derived from third-party
professional valuers that generally result in the use of significant unobservable inputs.
• Alternative investments fair values, which predominantly include holdings in investment and infrastructure funds are determined based
on the most recent available valuations applying the Net Asset Value methodology and issued by fund administrators or investment
managers and adjusted for any cash movements having occurred from the date of the valuation and the reporting date.
• Other investments predominantly includes: interest receivable on bonds; dividends from listed and private equities that have been
declared but not received at the balance sheet date; receivables from the sale of assets for which the proceeds have not been collected
at the balance sheet date; and payables for the purchase of assets which have not been settled at the balance sheet date.
• Asset and longevity swaps - APS has a contract with Rothesay Life, entered into in 2010 and extended in 2013, which covers 25 per cent
(2020: 24 per cent) of the pensioner liabilities for an agreed list of members. Under the contract, to reduce the risk of long-term longevity
risk, Rothesay Life makes benefit payments monthly in respect of the agreed list of members in return for the contractual return
receivable on a portfolio of assets (made up of quoted government debt, asset swaps and longevity swaps) held by the scheme. The
Group holds the portfolio of assets at their fair value, with the government debt held at their quoted market price and the swaps
accounted for at their estimated discounted future cash flows.
During 2011, APS entered into a longevity swap with Rothesay Life, which covers an additional 21 per cent (2020: 20 per cent) of the
pensioner liabilities for the same agreed list of members as the 2010 contract. Under the longevity swap, to reduce the risk of long-term
longevity risk, APS makes a fixed payment to Rothesay Life each month reflecting the prevailing mortality assumptions at the inception
of the contract, and Rothesay Life make a monthly payment to APS reflecting the actual monthly benefit payments to members. The
cash flows are settled net each month. If pensioners live longer than expected at inception of the longevity swap, Rothesay Life will make
payments to the scheme to offset the additional cost of paying pensioners and if pensioners do not live as long as expected, then the
scheme will make payments to Rothesay Life. The Group holds the longevity swap at fair value, determined at the estimated discounted
future cash flows.
• Insurance contract - During 2018 the Trustee of APS secured a buy-in contract with Legal & General. The buy-in contract covers all
members in receipt of pensions from APS at March 31, 2018, excluding dependent children, receiving a pension at that date and members
in receipt of equivalent pension-only benefits, who were alive on October 1, 2018. Benefits coming into payment for retirements after
March 31, 2018 are not covered. The contract covers benefits payable from October 1, 2018 onwards. The policy covers approximately 60
per cent of all benefits APS expects to pay out in future. Along with existing contracts with Rothesay Life, APS is 90 per cent protected
against all longevity risk and fully protected in relation to all pensions that were already being paid as at March 31, 2018. It is also more
than 90 per cent protected against interest rates and inflation (on a Retail Price Index basis).
iv Effect of the asset ceiling
In measuring the valuation of the net defined benefit asset for each scheme, the Group limits such measurement to the lower of the surplus
in each scheme and the respective asset ceiling. The asset ceiling represents the present value of the economic benefits available in the
form of a refund or a reduction in future contributions after they are paid into the plan. The Group has determined that the recoverability
of such surpluses, including minimum funding requirements, will be subject to withholding taxes in the UK, payable by the Trustee, of
35 per cent.
The future committed NAPS deficit contributions, as detailed in note 32a, are treated as minimum funding requirements under IAS 19 and
are not recognised as part of the scheme assets or liabilities. The Group has determined that upon the wind up of the scheme, that if the
scheme is in surplus, including the incorporation of the minimum funding requirements, then the surplus will be available as a refund or a
reduction in future contributions after they are paid into the scheme. The recovery of such amounts are subject to UK withholding tax
payable by the Trustee. In measuring the recoverability of the surplus for each scheme, the Group limits such measurement to the lower of
the surplus in each scheme and the respective asset ceiling. The asset ceiling represents the present value of the economic benefits
available upon wind up of the scheme, less the application of withholding taxes in the UK, payable by the Trustee, at 35 per cent.
A reconciliation of the effect of the asset ceiling used in calculating the IAS 19 irrecoverable surplus in APS and NAPS is set out below:
€ million
January 11
Interest expense
Remeasurements1
Exchange movements1
December 31
2021
761
9
419
59
1,248
2020
1,130
14
(307)
(76)
761
1 The 2020 results have been restated for the treatment of administration costs associated with the Group’s defined benefit pension schemes. Further
information is given in note 2.
d Present value of scheme liabilities
i Movement in scheme liabilities
A reconciliation of the opening and closing balances of the present value of the defined benefit obligations is set out below:
€ million
January 11
Current service cost
Past service cost/(credit)
Interest expense1
Remeasurements – financial assumptions
Remeasurements of experience losses/(gains)1
Benefits paid1
Employee contributions
Exchange movements1
December 31
2021
30,556
2020
30,335
3
–
425
46
427
(1,930)
13
2,082
31,622
5
7
573
3,633
(421)
(1,528)
14
(2,062)
30,556
1 The 2020 results have been restated for the treatment of administration costs associated with the Group’s defined benefit pension schemes. Further
information is given in note 2.
Scheme liability assumptions
ii
The principal assumptions used for the purposes of the IAS 19 valuations were as follows:
Per cent per annum
Discount rate1
Rate of increase in pensionable pay2
Rate of increase of pensions in payment3
RPI rate of inflation
CPI rate of inflation
2021
2020
APS
1.80
3.55
3.55
3.55
2.95
NAPS
1.90
Other
schemes
0.3 – 6.5
–
2.0 – 6.0
2.85
3.3
2.85
2.0 – 3.0
1.8 – 2.5
1.8 – 2.5
APS
1.20
2.95
2.95
2.95
2.25
NAPS
1.40
–
2.25
2.80
2.25
Other
schemes
0.5 – 2.4
2.5
1.1 – 3.5
2.5 – 2.7
1.1 – 3.0
1 Discount rate is determined by reference to the yield on high quality corporate bonds of currency and term consistent with the scheme liabilities.
2 Rate of increase in pensionable pay is assumed to be in line with increases in RPI.
3 It has been assumed that the rate of increase of pensions in payment will be in line with CPI for NAPS and APS as at December 31, 2021.
4 The rate of increase in healthcare costs for schemes based in the United States is based on medical trend rates of 6.00 per cent grading down to 5.00 per
cent over five years (2020: 6.25 per cent to 5.00 per cent over five years).
256
257
INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021 257
NOTES TO THE ACCOUNTS CONTINUED
For the year to December 31, 2021
32 Employee benefit obligations continued
In the UK, mortality rates for APS and NAPS are calculated using the standard SAPS mortality tables produced by the CMI. The standard
mortality tables were selected based on the actual recent mortality experience of members and were adjusted to allow for future mortality
changes. Life expectancy assumptions do not reflect any adjustments for the impact of COVID-19 due to the uncertainty of the long-term
effects. The current longevities underlying the values of the scheme liabilities were as follows:
Mortality assumptions
Life expectancy at age 60 for a:
• male currently aged 60
• male currently aged 40
• female currently aged 60
• female currently aged 40
2021
2020
28.1
29.9
29.5
31.9
28.2
29.9
29.3
31.8
For schemes in the United States, mortality rates were based on the MP-2021 mortality tables.
At December 31, 2021, the weighted-average duration of the defined benefit obligation was 12 years for APS (2020: 12 years) and 19 years
for NAPS (2020: 20 years). The weighted-average duration of the defined benefit obligations was 11 to 23 years for other schemes (2020:
11 to 24 years). The weighted average duration represents a single figure for the average number of years over which the employee benefit
liability discounted cash flows is extinguished and is highly dependent on movements in the aforementioned discount rates.
iii Sensitivity analysis
Reasonable possible changes at the reporting date to significant valuation assumptions, holding other assumptions constant, would have
affected the present value of scheme liabilities by the amounts shown:
€ million
Discount rate (decrease of 10 basis points)
Future salary growth (increase of 10 basis points)
Future pension growth (increase of 10 basis points)
Future mortality rate (one year increase in life expectancy)
Increase in scheme liabilities
APS
(35)
n/a
(47)
(35)
NAPS
(424)
n/a
(400)
(871)
Other
schemes
(9)
(3)
(4)
(34)
Although the analysis does not take into account the full distribution of cash flows expected under the plan, it does provide an
approximation of the sensitivity of the assumptions shown.
33 Contingent liabilities and guarantees
Details of contingent liabilities are set out below. The Group does not consider it probable that there will be an outflow of economic
resources with regard to these proceedings and accordingly no provision for these proceedings has been recognised.
Contingent liabilities associated with income and deferred taxes are presented in note 10.
There are a number of other legal and regulatory proceedings against the Group in a number of jurisdictions which at December 31, 2021
amounted to €22 million (December 31, 2020: €56 million).
The Group also has guarantees and indemnities entered into as part of the normal course of business, which at December 31, 2021 are not
expected to result in material losses for the Group.
258
258 INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021
Financial Statements
mortality tables were selected based on the actual recent mortality experience of members and were adjusted to allow for future mortality
changes. Life expectancy assumptions do not reflect any adjustments for the impact of COVID-19 due to the uncertainty of the long-term
effects. The current longevities underlying the values of the scheme liabilities were as follows:
NOTES TO THE ACCOUNTS CONTINUED
For the year to December 31, 2021
32 Employee benefit obligations continued
Mortality assumptions
Life expectancy at age 60 for a:
• male currently aged 60
• male currently aged 40
• female currently aged 60
• female currently aged 40
2021
2020
28.1
29.9
29.5
31.9
28.2
29.9
29.3
31.8
For schemes in the United States, mortality rates were based on the MP-2021 mortality tables.
At December 31, 2021, the weighted-average duration of the defined benefit obligation was 12 years for APS (2020: 12 years) and 19 years
for NAPS (2020: 20 years). The weighted-average duration of the defined benefit obligations was 11 to 23 years for other schemes (2020:
11 to 24 years). The weighted average duration represents a single figure for the average number of years over which the employee benefit
liability discounted cash flows is extinguished and is highly dependent on movements in the aforementioned discount rates.
iii Sensitivity analysis
Reasonable possible changes at the reporting date to significant valuation assumptions, holding other assumptions constant, would have
affected the present value of scheme liabilities by the amounts shown:
€ million
Discount rate (decrease of 10 basis points)
Future salary growth (increase of 10 basis points)
Future pension growth (increase of 10 basis points)
Future mortality rate (one year increase in life expectancy)
Increase in scheme liabilities
APS
(35)
n/a
(47)
(35)
NAPS
(424)
n/a
(400)
(871)
Other
schemes
(9)
(3)
(4)
(34)
Although the analysis does not take into account the full distribution of cash flows expected under the plan, it does provide an
approximation of the sensitivity of the assumptions shown.
33 Contingent liabilities and guarantees
In the UK, mortality rates for APS and NAPS are calculated using the standard SAPS mortality tables produced by the CMI. The standard
The Group has availed itself of government grants and assistance as follows:
34 Government grants and assistance
The Coronavirus Job Retention Scheme (CJRS) – recognised net within Employee costs
The CJRS was implemented by the Government of the United Kingdom from March 1, 2020 to August 30, 2020, where those employees
designated as being ‘furloughed workers’ were eligible to have 80 per cent of their wage costs paid up to a maximum of £2,500 per month.
From September 1, 2020 to September 30, 2020, the level of eligibility reduced to 70 per cent of wage costs and up to a maximum of
£2,197.50 per month. From October 1, 2020 to October 31, 2020, the level of eligibility reduced to 60 per cent of wage costs and up to a
maximum of £1,875 per month. Following the introduction of further lockdown restrictions in the United Kingdom in November 2020, the
CJRS was extended from November 1, 2020 to November 30, 2020 and then further to March 31, 2021 and then further again to September
30, 2021 with the level of eligibility increased to 80 per cent of wage costs and a maximum of £2,500 per month through to the end of June
2021. From July 1, 2021 the eligibility decreased down each month to 60 per cent of wage costs and a maximum of £1,875 per month by
September 30, 2021, at which time the CJRS ended.
Such costs were paid by the Government to the Group in arrears. The Group was obliged to continue to pay the associated social security
costs and employer pension contributions.
The Temporary Wage Subsidy Scheme (TWSS) and the Employment Wage Subsidy Scheme (EWSS) – recognised net within
Employee costs
The TWSS was implemented by the government of Ireland from March 1, 2020 to August 30, 2020, where those employees designated as
being furloughed workers were eligible to have 85 per cent of their wage costs paid up to a maximum of €410 per week. This scheme was
replaced with the EWSS from September 1, 2020 and is expected to run through to April, 2022. For those qualifying employees (earning
less than €1,462 per week), the government will reimburse wage costs up to a maximum of €203 per week. Such costs are paid by the
government to the Group in arrears.
The total amount of the relief received under the CJRS, the TWSS and the EWSS by the Group during 2021 amounted to €286 million
(2020: €344 million).
Temporary Redundancy Plan (ERTE) – no recognition in the financial statements of the Group
The ERTE was implemented by the government of Spain from March 1, 2020 and is expected to run through to February 28, 2022. Under
this plan, employment was temporarily suspended and those designated employees were paid directly by the government and there was
no remittance made to the Group. The Group was obliged to continue to pay the associated social security costs.
Had those designated employees not been temporarily suspended during 2021, the Group would have incurred further employee costs of
€269 million (2020: €214 million).
The Ireland Strategic Investment Fund (ISIF) – recognised within Long-term borrowings
Details of contingent liabilities are set out below. The Group does not consider it probable that there will be an outflow of economic
resources with regard to these proceedings and accordingly no provision for these proceedings has been recognised.
On December 23, 2020, Aer Lingus entered into a financing arrangement for €75 million. On March 27, 2021, Aer Lingus entered into a
further financing arrangement to extend the total amount to €150 million.
Contingent liabilities associated with income and deferred taxes are presented in note 10.
The UK Export Finance (UKEF) – recognised within Long-term borrowings
There are a number of other legal and regulatory proceedings against the Group in a number of jurisdictions which at December 31, 2021
amounted to €22 million (December 31, 2020: €56 million).
The Group also has guarantees and indemnities entered into as part of the normal course of business, which at December 31, 2021 are not
expected to result in material losses for the Group.
On February 22, 2021, British Airways entered into a 5-year term loan Export Development Guarantee Facility of €2.3 billion (£2.0 billion)
underwritten by a syndicate of banks, with 80 per cent of the principal guaranteed by UKEF. The facility is unsecured.
On November 1, 2021, British Airways entered into a further 5-year term loan Export Development Guarantee Facility of €1.2 billion (£1.0
billion) underwritten by a syndicate of banks, with 80 per cent of the principal guaranteed by UKEF. The facility is unsecured. At December
31, 2021 the facility remained undrawn.
258
259
INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021 259
NOTES TO THE ACCOUNTS CONTINUED
For the year to December 31, 2021
35 Related party transactions
The following transactions took place with related parties for the financial years to December 31:
€ million
Sales of goods and services
Sales to associates1
Sales to significant shareholders2
Purchases of goods and services
Purchases from associates3
Purchases from significant shareholders2
Receivables from related parties
Amounts owed by associates4
Amounts owed by significant shareholders5
Payables to related parties
Amounts owed to associates6
Amounts owed to significant shareholders5
2021
2020
6
16
49
69
1
5
3
2
12
23
42
80
1
1
2
1
1 Sales to associates: Consisted primarily of sales for airline-related services to Dunwoody Airline Services (Holding) Limited (Dunwoody) of €5 million (2020:
€9 million), €nil (2020: €1 million) to Viajes Ame S.A. and €1 million (2020: €1 million) to Serpista, S.A. and Multiservicios Aeroportuarios, S.A.
2 Sales to and purchases from significant shareholders related to interline services with Qatar Airways.
3 Purchases from associates: Consisted primarily of €33 million of airport auxiliary services purchased from Multiservicios Aeroportuarios, S.A. (2020: €23
million), €8 million of handling services provided by Dunwoody (2020: €9 million) and €8 million of maintenance services received from Serpista, S.A. (2020:
€7 million).
4 Amounts owed by associates: Consisted primarily of €1 million of services provided to Multiservicios Aeroportuarios, S.A., Serpista, S.A., Dunwoody and
Empresa Hispano Cubana de Mantenimiento de Aeronaves, Ibeca, S.A. (2020: €1 million).
5 Amounts owed by and to significant shareholders related to Qatar Airways.
6 Amounts owed to associates: Consisted primarily of €3 million due to Multiservicios Aeroportuarios, S.A., Empresa Hispano Cubana de Mantenimiento de
Aeronaves, Ibeca, S.A., Viajes Ame S.A, Serpista, S.A. and Dunwoody (2020: €2 million).
During the year to December 31, 2021 British Airways met certain costs of administering its retirement benefit plans, including the provision
of support services to the Trustees. Costs borne on behalf of the retirement benefit plans amounted to €6 million (2020: €7 million) in
relation to the costs of the Pension Protection Fund levy.
The Group has transactions with related parties that are conducted in the normal course of the airline business, which include the provision
of airline and related services. All such transactions are carried out on an arm’s length basis.
For the year to December 31, 2021, the Group has not made any provision for expected credit loss arising relating to amounts owed by
related parties (2020: nil).
Significant shareholders
In this instance, significant shareholders are those parties who have the power to participate in the financial and operating policy decisions
of the Group, as a result of their shareholdings in the Group, but who do not have control over these policies.
At December 31, 2021 the Group had cash deposit balances with shareholders holding a participation of between 3 to 5 per cent, of €nil
(2020: €nil).
Board of Directors and Management Committee remuneration
Compensation received by the Group’s Board of Directors and Management Committee, in 2021 and 2020 is as follows:
€ million
Base salary, fees and benefits
Board of Directors
Short-term benefits
Share based payments
Management Committee
Short-term benefits
Share based payments
Year to December 31
2021
2020
3
–
11
1
3
–
5
–
For the year to December 31, 2021 the Board of Directors includes remuneration for one Executive Director (December 31, 2020: three
Executive Directors). The Management Committee includes remuneration for 14 members (December 31, 2020: 14 members).
The Company provides life insurance for all executive directors and the Management Committee. For the year to December 31, 2021 the
Company's obligation was €35,000 (2020: €38,000).
At December 31, 2021 the transfer value of accrued pensions covered under defined benefit pension obligation schemes, relating to the
current members of the Management Committee totalled €9 million (2020: €9 million).
No loan or credit transactions were outstanding with Directors or officers of the Group at December 31, 2021 (2020: nil).
260
260 INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021
Financial Statements
The following transactions took place with related parties for the financial years to December 31:
NOTES TO THE ACCOUNTS CONTINUED
For the year to December 31, 2021
35 Related party transactions
€ million
Sales of goods and services
Sales to associates1
Sales to significant shareholders2
Purchases of goods and services
Purchases from associates3
Purchases from significant shareholders2
Receivables from related parties
Amounts owed by associates4
Amounts owed by significant shareholders5
Payables to related parties
Amounts owed to associates6
Amounts owed to significant shareholders5
1 Sales to associates: Consisted primarily of sales for airline-related services to Dunwoody Airline Services (Holding) Limited (Dunwoody) of €5 million (2020:
€9 million), €nil (2020: €1 million) to Viajes Ame S.A. and €1 million (2020: €1 million) to Serpista, S.A. and Multiservicios Aeroportuarios, S.A.
2 Sales to and purchases from significant shareholders related to interline services with Qatar Airways.
3 Purchases from associates: Consisted primarily of €33 million of airport auxiliary services purchased from Multiservicios Aeroportuarios, S.A. (2020: €23
million), €8 million of handling services provided by Dunwoody (2020: €9 million) and €8 million of maintenance services received from Serpista, S.A. (2020:
€7 million).
4 Amounts owed by associates: Consisted primarily of €1 million of services provided to Multiservicios Aeroportuarios, S.A., Serpista, S.A., Dunwoody and
Empresa Hispano Cubana de Mantenimiento de Aeronaves, Ibeca, S.A. (2020: €1 million).
5 Amounts owed by and to significant shareholders related to Qatar Airways.
6 Amounts owed to associates: Consisted primarily of €3 million due to Multiservicios Aeroportuarios, S.A., Empresa Hispano Cubana de Mantenimiento de
Aeronaves, Ibeca, S.A., Viajes Ame S.A, Serpista, S.A. and Dunwoody (2020: €2 million).
During the year to December 31, 2021 British Airways met certain costs of administering its retirement benefit plans, including the provision
of support services to the Trustees. Costs borne on behalf of the retirement benefit plans amounted to €6 million (2020: €7 million) in
relation to the costs of the Pension Protection Fund levy.
The Group has transactions with related parties that are conducted in the normal course of the airline business, which include the provision
of airline and related services. All such transactions are carried out on an arm’s length basis.
For the year to December 31, 2021, the Group has not made any provision for expected credit loss arising relating to amounts owed by
related parties (2020: nil).
Significant shareholders
In this instance, significant shareholders are those parties who have the power to participate in the financial and operating policy decisions
of the Group, as a result of their shareholdings in the Group, but who do not have control over these policies.
At December 31, 2021 the Group had cash deposit balances with shareholders holding a participation of between 3 to 5 per cent, of €nil
(2020: €nil).
Board of Directors and Management Committee remuneration
Compensation received by the Group’s Board of Directors and Management Committee, in 2021 and 2020 is as follows:
€ million
Base salary, fees and benefits
Board of Directors
Short-term benefits
Share based payments
Management Committee
Short-term benefits
Share based payments
For the year to December 31, 2021 the Board of Directors includes remuneration for one Executive Director (December 31, 2020: three
Executive Directors). The Management Committee includes remuneration for 14 members (December 31, 2020: 14 members).
The Company provides life insurance for all executive directors and the Management Committee. For the year to December 31, 2021 the
Company's obligation was €35,000 (2020: €38,000).
At December 31, 2021 the transfer value of accrued pensions covered under defined benefit pension obligation schemes, relating to the
current members of the Management Committee totalled €9 million (2020: €9 million).
No loan or credit transactions were outstanding with Directors or officers of the Group at December 31, 2021 (2020: nil).
2021
2020
6
16
49
69
1
5
3
2
12
23
42
80
1
1
2
1
Year to December 31
2021
2020
3
–
11
1
3
–
5
–
36 Change in accounting policy
Change in accounting policy relating to employee benefits
During the course of 2021, the Group has changed its accounting policy with regard to the treatment of administration costs associated
with the APS and NAPS Defined benefit schemes. The change in policy has been adopted to better reflect the underlying management and
operation of these schemes, while remaining in compliance with IAS 19. This change in accounting policy has been applied retrospectively
to the consolidated financial statements and is detailed below.
Previously a discounted estimate of future administration costs was included as part of the APS and NAPS defined benefit obligations.
Under the updated accounting policy, administration costs are now recognised as incurred and included within Employee costs in the
Income statement. This change has had the effect of reducing the defined benefit obligation and increasing retained earnings at both
December 31, 2020 and January 1, 2020. It has in addition increased the charge to Employee costs and the Financing charge relating to
pensions in the Income statement, as well as increased the Remeasurements of post-employment benefit obligations and Currency
translation differences in the Statement of other comprehensive income for the year ended December 31, 2020.
The impact of the changes in these accounting policies on the Consolidated income statement and the Consolidated statement of
comprehensive income for 2020, as well as the Consolidated balance sheet at December 1, 2020 and January 1, 2020 are shown below:
Consolidated income statement (extract for the year to December 31, 2020)
€ million
Total revenue
Employee costs
Other expenditure on operations
Total expenditure on operations
Operating loss
Net financing credit relating to pensions
Other financing items
Other non-operating items
Total net non-operating costs
Loss before tax
Tax
Loss after tax for the year
Reported
7,806
Adjustment –
administration
costs
–
3,560
11,672
15,232
(7,426)
4
(384)
(4)
(384)
(7,810)
887
(6,923)
25
–
25
(25)
8
–
–
8
(17)
5
(12)
Consolidated statement of other comprehensive income (extract for the year to December 31, 2020)
€ million
Items that may be classified subsequently to net profit
Currency translation differences
Other items that may be classified subsequently to net profit
Items that will not be reclassified to net profit
Remeasurements of post-employment benefit obligations
Other items that will not be reclassified to net profit
Total other comprehensive loss for the year, net of tax
Loss after tax for the year
Reported
Adjustment –
administration
costs
(192)
(335)
(632)
(72)
(1,231)
(6,923)
(21)
–
36
–
15
(12)
Restated
7,806
3,585
11,672
15,257
(7,451)
12
(384)
(4)
(376)
(7,827)
892
(6,935)
Restated
(213)
(335)
(596)
(72)
(1,216)
(6,935)
Total comprehensive loss for the year
(8,154)
3
(8,151)
260
261
INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021
261
NOTES TO THE ACCOUNTS CONTINUED
For the year to December 31, 2021
36 Change in accounting policy continued
Consolidated balance sheet (extract at December 31, 2020 and December 31, 2019)
€ million
Non-current assets
Employee benefit assets
Other non-current assets
Current assets
Total assets
Other equity
Other reserves
Total equity
Non-current liabilities
Employee benefit obligations
Other non-current liabilities
Current liabilities
Total liabilities
Total equity and liabilities
Reported
2020
Adjustment –
administration
costs1
Restated
2020
Reported
2019
Adjustment –
administration
costs1
Restated
2019
282
22,142
22,424
7,840
30,264
8,233
(6,917)
1,316
719
16,713
17,432
11,516
28,948
30,264
52
–
52
–
52
–
294
294
(242)
–
(242)
–
(242)
52
334
22,142
22,476
7,840
30,316
8,233
(6,623)
1,610
477
16,713
17,190
11,516
28,706
30,316
314
23,810
24,124
11,327
35,451
6,269
560
6,829
400
15,474
15,874
12,748
28,622
35,451
217
–
217
–
217
–
291
291
(74)
–
(74)
–
(74)
217
531
23,810
24,341
11,327
35,668
6,269
851
7,120
326
15,474
15,800
12,748
28,548
35,668
1 Adjustments made to Employee benefit assets and Employee benefit obligations are presented net of the impact of withholding tax.
37 Post balance sheet events
Between the reporting date and the date of this report there have been no post balance sheet events.
262
262 INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021
Financial Statements
NOTES TO THE ACCOUNTS CONTINUED
For the year to December 31, 2021
36 Change in accounting policy continued
Consolidated balance sheet (extract at December 31, 2020 and December 31, 2019)
€ million
Non-current assets
Employee benefit assets
Other non-current assets
Current assets
Total assets
Other equity
Other reserves
Total equity
Non-current liabilities
Employee benefit obligations
Other non-current liabilities
Current liabilities
Total liabilities
Total equity and liabilities
Adjustment –
Adjustment –
Reported
administration
Restated
Reported
administration
Restated
2020
costs1
2020
2019
costs1
2019
282
22,142
22,424
7,840
30,264
8,233
(6,917)
1,316
719
16,713
17,432
11,516
28,948
30,264
52
–
52
–
52
–
294
294
(242)
(242)
–
–
(242)
52
334
22,142
22,476
7,840
30,316
8,233
(6,623)
1,610
477
16,713
17,190
11,516
28,706
30,316
314
23,810
24,124
11,327
35,451
6,269
560
6,829
400
15,474
15,874
12,748
28,622
35,451
217
–
217
–
217
–
291
291
(74)
(74)
–
–
(74)
217
531
23,810
24,341
11,327
35,668
6,269
851
7,120
326
15,474
15,800
12,748
28,548
35,668
1 Adjustments made to Employee benefit assets and Employee benefit obligations are presented net of the impact of withholding tax.
37 Post balance sheet events
Between the reporting date and the date of this report there have been no post balance sheet events.
ALTERNATIVE PERFORMANCE MEASURES
The performance of the Group is assessed using a number of alternative performance measures (APMs), some of which have been
identified as key performance indicators of the Group. These measures are not defined under International Financial Reporting Standards
(IFRS), should be considered in addition to IFRS measurements, may differ to definitions given by regulatory bodies applicable to the
Group and may differ to similarly titled measures presented by other companies. They are used to measure the outcome of the Group’s
strategy based on ‘Unrivalled customer proposition’, ‘Value accretive and sustainable growth’ and ‘Efficiency and innovation’.
During 2021, while the Group has made no changes to its pre-existing disclosures and treatments of APMs compared to those disclosed in
the Annual Report and Accounts for the year to December 31, 2020, the Group has added an additional APM regarding the Liquidity of the
Group to reflect the increased level of scrutiny, internally and externally, on this measure as a result of the COVID-19 pandemic.
The impact of the COVID-19 pandemic has significantly changed the basis on which the Management Committee and external parties
monitor the performance of the Group. In this regard measures relating to Levered free cash flow, Net debt to EBITDA and Return on
capital employed do not provide the level of meaningful additional information that they have done in the past. However, the Group
continues to present these APMs for consistency and they will become more prominent and relevant subsequent to the recovery from the
COVID-19 pandemic.
The definition of each APM, together with a reconciliation to the nearest measure prepared in accordance with IFRS is presented below.
a
Loss after tax before exceptional items
Exceptional items are those that in management’s view need to be separately disclosed by virtue of their size or incidence to supplement
the understanding the entity’s financial performance. The Management Committee of the Group uses financial performance on a pre-
exceptional basis to evaluate operating performance and to make strategic, financial and operational decisions, and externally because it is
widely used by security analysts and investors in evaluating the performance of the Group between reporting periods and against other
companies.
Exceptional items in the year to December 31, 2021 and 2020 include: significant discontinuation of hedge accounting; significant
restructuring; significant changes in the long-term fleet plans that result in the impairment of fleet assets and the recognition of associated
provisions; and legal settlements.
The table below reconciles the statutory Income statement to the Income statement before exceptional items of the Group:
€ million
Passenger revenue2
Cargo revenue
Other revenue
Total revenue
Employee costs3
Fuel, oil costs and emissions charges2
Handling, catering and other operating costs
Landing fees and en-route charges
Engineering and other aircraft costs4
Property, IT and other costs5
Selling costs
Depreciation, amortisation and impairment6
Currency differences
Total expenditure on operations
Operating (loss)/profit
Finance costs
Finance income
Net change in fair value of convertible bond
Net financing (charge)/credit relating to pensions
Net currency retranslation (charges)/credits
Other non-operating (charges)/credits7
Total net non-operating costs
(Loss)/profit before tax
Tax
(Loss)/profit after tax for the year
Statutory
2021
Exceptional
items
Year to December 31
Before
exceptional
items
2021
Statutory
20201
Exceptional
items
Before
exceptional
items
2020
5,835
1,673
947
8,455
3,013
1,781
1,308
923
1,085
758
434
1,932
(14)
11,220
(2,765)
(830)
13
89
(2)
(82)
70
(742)
(3,507)
574
(2,933)
5
–
–
5
(18)
(154)
–
–
(7)
–
–
(21)
–
5,830
1,673
947
8,450
3,031
1,935
1,308
923
1,092
758
434
1,953
(14)
(200)
205
11,420
(2,970)
5,512
1,306
988
7,806
3,585
3,735
1,340
918
1,456
782
405
2,955
81
15,257
(7,451)
(830)
(670)
–
–
–
–
–
(75)
(75)
130
(25)
105
13
89
(2)
(82)
145
(667)
(3,637)
599
(3,038)
41
–
12
245
(4)
(376)
(7,827)
892
(62)
–
–
(62)
313
1,694
–
–
108
28
–
856
–
2,999
(3,061)
–
–
–
–
–
–
–
(3,061)
463
5,574
1,306
988
7,868
3,272
2,041
1,340
918
1,348
754
405
2,099
81
12,258
(4,390)
(670)
41
–
12
245
(4)
(376)
(4,766)
429
(6,935)
(2,598)
(4,337)
262
263
INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021 263
ALTERNATIVE PERFORMANCE MEASURES CONTINUED
1 Refer to notes 2 and 36 for the change in accounting policy relating to pension administration costs.
The rationale for each exceptional item is given below. In 2021 and 2020 all items were associated with the impact of COVID-19, except the settlement
provision in relation to the charge in 2020 relating to the theft of customer data at British Airways (item 5).
2 Discontinuation of hedge accounting
The exceptional credit of €159 million (2020: expense of €1,756 million) arising from a combination of the discontinuance of hedge accounting in the year to
December 31, 2021 and the fair value movement on those relationships where hedge accounting was discontinued in the year to December 31, 2020, but for
which the underlying hedging instrument had not matured at January 1, 2021. This was represented by credit of €162 million (2020: expense of €1,781 million)
relating to fuel derivatives and an expense of €8 million (2020: credit of €87 million) related to the associated fuel foreign currency derivatives. The credit to
Passenger revenue of €5 million (2020: charge of €62 million) relates to the discontinuation of hedge accounting of the associated foreign currency
derivatives on forecast revenue.
The Group’s risk management strategy is to build up these hedges gradually over a three-year period when the level of forecast passenger revenue and fuel
consumption were higher than current expectations. Accordingly, the hedge accounting for these transactions has been discontinued and the credit
recognised in the Income statement. The credit relating to revenue derivatives and fuel derivatives has been recorded in the Income statement within
Passenger revenue and Fuel, oil and emission charges, respectively.
The cash outflow impact associated with the discontinuance of hedge accounting was €338 million in the year to December 31, 2021 (2020: €1,187 million).
The related tax charge was €26 million (2020: credit of €273 million), with €1 million (2020: credit of €11 million) being attributable to Passenger revenue and
€25 million (2020: credit of €262 million) being attributable to Fuel, oil costs and emissions charges.
3 Restructuring costs
The exceptional credit of €18 million (2020: charge of €319 million) relates to the reversal of restructuring provisions that have been released unutilised. In
2020, the exceptional charge (comprising €313 million of employee severance pay and €6 million of associated legal costs) represented the Group-wide
restructuring programme, which right-sized the Group for the near term. While the restructuring programme affected all of the Group’s operating companies,
the exceptional charges in the year to December 31, 2020 related to British Airways, Aer Lingus, Iberia and LEVEL only, due to the status of negotiations with
employees and their representatives. The exceptional credit (2020: charge) has been recorded within Employee costs (2020: Employee costs and Property, IT
and other costs). There has been no cash flow impact relating to the exceptional restructuring credit in 2021.
The related tax charge was €3 million (2020: credit of €53 million).
4 Engineering and other aircraft costs
The exceptional credit of €7 million (2020: charge of €108 million) relates to the reversal of contractual lease provisions for those aircraft in Vueling that have
been stood up during 2021, where the estimated costs to fulfil the hand back conditions will be recognised over the remaining operating activity of the aircraft.
In 2020, the exceptional charge included an inventory write down expense of €71 million and a charge relating to contractual lease provisions of €37 million.
The inventory write down expense represented those expendable inventories that, given the asset impairments, were no longer expected to be utilised. The
charge relating to the recognition of contractual lease provisions represented the estimation of the additional cost to fulfil the hand back conditions associated
with the leased aircraft that were permanently stood down and impaired. The exceptional credit (2020: charge) is recorded within Engineering and other
aircraft costs. There has been no cash flow impact relating to the exceptional credit in 2021.
There is no tax impact on the recognition of this credit (2020: credit of €14 million).
5 Settlement provision
The exceptional charge of €22 million recognised in 2020 represented the fine issued by the Information Commissioner's Office in the United Kingdom,
relating to the theft of customer data at British Airways in 2018. The exceptional charge was been recorded within Property, IT and other costs in the Income
statement, with a corresponding amount recorded in Provisions.
There was no tax impact on the recognition of this charge
6 Impairment of fleet and associated assets
The exceptional impairment reversal of €21 million includes an amount of €14 million relating to the reversal of aircraft impairment and an amount of €7 million
relating to the reversal of engine impairment. The aircraft impairment reversal relates to four Airbus A320 aircraft in Vueling, previously permanently stood
down in the fourth quarter of 2020, being stood up in the third quarter of 2021 following the successful slot allocation at Paris Orly and the resultant increased
capacity. The engine impairment reversal relates to certain engines which had been fully impaired during 2020 having been leased to a third party in the
fourth quarter of 2021. Of the exceptional impairment reversal, €8 million was recorded within Property, plant and equipment relating to owned aircraft and
€12 million was recorded within Right of use assets relating to leased aircraft. The exceptional impairment reversal is recorded within Depreciation,
amortisation and impairment in the Income statement.
The total exceptional impairment expense of €856 million recorded in 2020 was represented by an impairment of fleet assets of €837 million and an
impairment of other assets of €19 million. The fleet impairment related to 82 aircraft, their associated engines and rotable inventories that had been stood
down permanently and 2 further aircraft which were impaired down to their recoverable value at December 31, 2020, which included 32 Boeing 747 aircraft,
23 Airbus A320 aircraft, 15 Airbus A340 aircraft, 4 Airbus A330-200 aircraft, 2 Airbus A318 aircraft, 1 Airbus A321 aircraft, 1 Airbus A319 aircraft, 2 Boeing 777-
200 aircraft and 4 Embraer E170 aircraft. Of the fleet impairment, €676 million was recorded within Property, plant and equipment relating to owned aircraft
and €161 million was recorded within Right of use assets relating to leased aircraft.
Included within the impairment of other assets was an amount of €15 million relating to the landing rights, classified within Intangible assets, that were held by
the operations of LEVEL in Paris. Following the decision to cease the operations of LEVEL in Paris, these landing rights were recorded at the lower of their
carrying value and their recoverable value.
The exceptional impairment (reversals)/expenses were recorded within Depreciation, amortisation and impairment in the Income statement. There has been
no cash flow impact relating to the exceptional impairment reversals in 2021.
The related tax charge was €1 million (2020: credit of €123 million).
7 Air Europa termination agreement
The exceptional charge of €75 million represents the amount agreed with Globalia to terminate the agreements signed on November 4, 2019 and January 20,
2021 under which Iberia had agreed to acquire the issued share capital of Air Europa. The exceptional charge has been recorded within Other non-operating
charges in the Income statement and was settled prior to December 31, 2021.
The related tax credit was €5 million.
264
264 INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021
Financial Statements
ALTERNATIVE PERFORMANCE MEASURES CONTINUED
1 Refer to notes 2 and 36 for the change in accounting policy relating to pension administration costs.
The rationale for each exceptional item is given below. In 2021 and 2020 all items were associated with the impact of COVID-19, except the settlement
provision in relation to the charge in 2020 relating to the theft of customer data at British Airways (item 5).
2 Discontinuation of hedge accounting
The exceptional credit of €159 million (2020: expense of €1,756 million) arising from a combination of the discontinuance of hedge accounting in the year to
December 31, 2021 and the fair value movement on those relationships where hedge accounting was discontinued in the year to December 31, 2020, but for
which the underlying hedging instrument had not matured at January 1, 2021. This was represented by credit of €162 million (2020: expense of €1,781 million)
relating to fuel derivatives and an expense of €8 million (2020: credit of €87 million) related to the associated fuel foreign currency derivatives. The credit to
Passenger revenue of €5 million (2020: charge of €62 million) relates to the discontinuation of hedge accounting of the associated foreign currency
derivatives on forecast revenue.
The Group’s risk management strategy is to build up these hedges gradually over a three-year period when the level of forecast passenger revenue and fuel
consumption were higher than current expectations. Accordingly, the hedge accounting for these transactions has been discontinued and the credit
recognised in the Income statement. The credit relating to revenue derivatives and fuel derivatives has been recorded in the Income statement within
Passenger revenue and Fuel, oil and emission charges, respectively.
The cash outflow impact associated with the discontinuance of hedge accounting was €338 million in the year to December 31, 2021 (2020: €1,187 million).
The related tax charge was €26 million (2020: credit of €273 million), with €1 million (2020: credit of €11 million) being attributable to Passenger revenue and
€25 million (2020: credit of €262 million) being attributable to Fuel, oil costs and emissions charges.
3 Restructuring costs
The exceptional credit of €18 million (2020: charge of €319 million) relates to the reversal of restructuring provisions that have been released unutilised. In
2020, the exceptional charge (comprising €313 million of employee severance pay and €6 million of associated legal costs) represented the Group-wide
restructuring programme, which right-sized the Group for the near term. While the restructuring programme affected all of the Group’s operating companies,
the exceptional charges in the year to December 31, 2020 related to British Airways, Aer Lingus, Iberia and LEVEL only, due to the status of negotiations with
employees and their representatives. The exceptional credit (2020: charge) has been recorded within Employee costs (2020: Employee costs and Property, IT
and other costs). There has been no cash flow impact relating to the exceptional restructuring credit in 2021.
The related tax charge was €3 million (2020: credit of €53 million).
4 Engineering and other aircraft costs
The exceptional credit of €7 million (2020: charge of €108 million) relates to the reversal of contractual lease provisions for those aircraft in Vueling that have
been stood up during 2021, where the estimated costs to fulfil the hand back conditions will be recognised over the remaining operating activity of the aircraft.
In 2020, the exceptional charge included an inventory write down expense of €71 million and a charge relating to contractual lease provisions of €37 million.
The inventory write down expense represented those expendable inventories that, given the asset impairments, were no longer expected to be utilised. The
charge relating to the recognition of contractual lease provisions represented the estimation of the additional cost to fulfil the hand back conditions associated
with the leased aircraft that were permanently stood down and impaired. The exceptional credit (2020: charge) is recorded within Engineering and other
aircraft costs. There has been no cash flow impact relating to the exceptional credit in 2021.
There is no tax impact on the recognition of this credit (2020: credit of €14 million).
5 Settlement provision
The exceptional charge of €22 million recognised in 2020 represented the fine issued by the Information Commissioner's Office in the United Kingdom,
relating to the theft of customer data at British Airways in 2018. The exceptional charge was been recorded within Property, IT and other costs in the Income
statement, with a corresponding amount recorded in Provisions.
There was no tax impact on the recognition of this charge
6 Impairment of fleet and associated assets
The exceptional impairment reversal of €21 million includes an amount of €14 million relating to the reversal of aircraft impairment and an amount of €7 million
relating to the reversal of engine impairment. The aircraft impairment reversal relates to four Airbus A320 aircraft in Vueling, previously permanently stood
down in the fourth quarter of 2020, being stood up in the third quarter of 2021 following the successful slot allocation at Paris Orly and the resultant increased
capacity. The engine impairment reversal relates to certain engines which had been fully impaired during 2020 having been leased to a third party in the
fourth quarter of 2021. Of the exceptional impairment reversal, €8 million was recorded within Property, plant and equipment relating to owned aircraft and
€12 million was recorded within Right of use assets relating to leased aircraft. The exceptional impairment reversal is recorded within Depreciation,
amortisation and impairment in the Income statement.
The total exceptional impairment expense of €856 million recorded in 2020 was represented by an impairment of fleet assets of €837 million and an
impairment of other assets of €19 million. The fleet impairment related to 82 aircraft, their associated engines and rotable inventories that had been stood
down permanently and 2 further aircraft which were impaired down to their recoverable value at December 31, 2020, which included 32 Boeing 747 aircraft,
23 Airbus A320 aircraft, 15 Airbus A340 aircraft, 4 Airbus A330-200 aircraft, 2 Airbus A318 aircraft, 1 Airbus A321 aircraft, 1 Airbus A319 aircraft, 2 Boeing 777-
200 aircraft and 4 Embraer E170 aircraft. Of the fleet impairment, €676 million was recorded within Property, plant and equipment relating to owned aircraft
and €161 million was recorded within Right of use assets relating to leased aircraft.
Included within the impairment of other assets was an amount of €15 million relating to the landing rights, classified within Intangible assets, that were held by
the operations of LEVEL in Paris. Following the decision to cease the operations of LEVEL in Paris, these landing rights were recorded at the lower of their
carrying value and their recoverable value.
The exceptional impairment (reversals)/expenses were recorded within Depreciation, amortisation and impairment in the Income statement. There has been
no cash flow impact relating to the exceptional impairment reversals in 2021.
The related tax charge was €1 million (2020: credit of €123 million).
7 Air Europa termination agreement
The exceptional charge of €75 million represents the amount agreed with Globalia to terminate the agreements signed on November 4, 2019 and January 20,
2021 under which Iberia had agreed to acquire the issued share capital of Air Europa. The exceptional charge has been recorded within Other non-operating
charges in the Income statement and was settled prior to December 31, 2021.
The related tax credit was €5 million.
The table below provides a reconciliation of the post-exceptional to pre-exceptional condensed alternative income statement by operating
segment for the years to 31 December 2021 and 2020:
Year to December 31, 2021
British Airways (£)
British Airways (€)
Iberia
Vueling
Aer Lingus
y
r
o
t
u
t
a
t
S
l
a
n
o
i
t
p
e
c
x
E
s
m
e
t
i
l
a
n
o
i
t
p
e
c
x
e
e
r
o
f
e
B
s
m
e
t
i
y
r
o
t
u
t
a
t
S
l
a
n
o
i
t
p
e
c
x
E
s
m
e
t
i
l
a
n
o
i
t
p
e
c
x
e
e
r
o
f
e
B
s
m
e
t
i
y
r
o
t
u
t
a
t
S
l
a
n
o
i
t
p
e
c
x
E
s
m
e
t
i
l
a
n
o
i
t
p
e
c
x
e
e
r
o
f
e
B
s
m
e
t
i
y
r
o
t
u
t
a
t
S
l
a
n
o
i
t
p
e
c
x
E
s
m
e
t
i
l
a
n
o
i
t
p
e
c
x
e
e
r
o
f
e
B
s
m
e
t
i
y
r
o
t
u
t
a
t
S
l
a
n
o
i
t
p
e
c
x
E
s
m
e
t
i
l
a
n
o
i
t
p
e
c
x
e
e
r
o
f
e
B
s
m
e
t
i
2,321
1,097
281
3,699
5
–
–
5
2,316
2,715
1,097
1,275
281
328
3,694
4,318
6
–
–
6
2,709
1,724
1,275
328
394
666
4,312
2,784
–
–
–
–
1,724
1,011
394
666
–
5
2,784
1,016
–
–
–
–
1,011
307
(1)
308
-
5
65
4
–
–
65
4
1,016
376
(1)
377
1,471
(11)
1,482
1,708
(13)
1,721
723
(5)
728
200
–
200
180
–
180
830
(109)
939
967
(125)
1,092
519
(9)
528
198
(9)
207
89
(10)
99
979
(6)
985
1,134
(7)
1,141
350
–
350
227
(13)
240
140
2,188
–
2,188
2,550
–
2,550
1,412
–
1,412
624
(7)
631
305
–
–
140
305
5,468
(126)
5,594 6,359
(145)
6,504
3,004
(14)
3,018
1,249
(29)
1,278
714
(10)
724
(1,769)
131
(1,900)
(2,041)
151
(2,192)
(220)
14
(234)
(233)
29
(262)
(338)
9
(347)
(47.8)%
(51.4)%
(7.9)%
(8.4)%
(23.0)%
(25.8)%
(90.0)%
(92.1)%
British Airways (£)1
British Airways (€)1
Year to December 31, 2020
Iberia
Vueling
Aer Lingus
y
r
o
t
u
t
a
t
S
l
a
n
o
i
t
p
e
c
x
E
s
m
e
t
i
l
a
n
o
i
t
p
e
c
x
e
e
r
o
f
e
B
s
m
e
t
i
y
r
o
t
u
t
a
t
S
l
a
n
o
i
t
p
e
c
x
E
s
m
e
t
i
l
a
n
o
i
t
p
e
c
x
e
e
r
o
f
e
B
s
m
e
t
i
y
r
o
t
u
t
a
t
S
l
a
n
o
i
t
p
e
c
x
E
s
m
e
t
i
l
a
n
o
i
t
p
e
c
x
e
e
r
o
f
e
B
s
m
e
t
i
y
r
o
t
u
t
a
t
S
l
a
n
o
i
t
p
e
c
x
E
s
m
e
t
i
l
a
n
o
i
t
p
e
c
x
e
e
r
o
f
e
B
s
m
e
t
i
y
r
o
t
u
t
a
t
S
l
a
n
o
i
t
p
e
c
x
E
s
m
e
t
i
l
a
n
o
i
t
p
e
c
x
e
e
r
o
f
e
B
s
m
e
t
i
2,840
(54)
2,894
3,309
(59)
3,368
1,160
890
217
–
–
890
998
217
251
–
–
998
251
240
859
3,947
(54)
4,001
4,558
(59)
4,617
2,259
–
–
–
–
1,160
569
240
859
–
5
2,259
574
1,938
221
1,717
2,193
243
1,950
798
14
784
196
–
–
–
–
–
569
379
(3)
382
–
5
88
–
–
–
88
–
574
467
(3)
470
196
217
24
193
1,996
837
1,159
2,317
984
1,333
716
344
372
314
154
160
286
144
142
1,475
399
1,076
1,659
445
1,214
612
242
370
345
68
277
157
24
133
2,440
42
2,398
2,792
47
2,745
1,544
52
1,492
594
30
564
370
7
363
7,849
1,499
6,350
8,961
1,719
7,242
3,670
652
3,018
1,449
252
1,197
1,030
199
831
(3,902)
(1,553)
(2,349)
(4,403)
(1,778)
(2,625)
(1,411)
(652)
(759)
(875)
(252)
(623)
(563)
(202)
(361)
(98.9)%
(58.7)%
(62.5)%
(33.6)%
(152.4)%
(108.5)%
(120.6)%
(76.8)%
€ million
Passenger
revenue
Cargo revenue
Other revenue
Total revenue
Employee costs
Fuel, oil costs and
emissions charges
Depreciation,
amortisation and
impairment
Other operating
costs
Total expenditure
on operations
Operating loss
Operating margin
(%)
€ million
Passenger
revenue
Cargo revenue
Other revenue
Total revenue
Employee costs
Fuel, oil costs
and emissions
charges
Depreciation,
amortisation and
impairment
Other operating
costs
Total
expenditure on
operations
Operating loss
Operating
margin (%)
1 Refer to notes 2 and 36 for the change in accounting policy relating to pension administration costs.
264
265
INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021 265
ALTERNATIVE PERFORMANCE MEASURES CONTINUED
b Basic loss per share before exceptional items and adjusted earnings per share (KPI)
Earnings are based on results before exceptional items after tax and adjusted for earnings attributable to equity holders and interest on
convertible bonds, divided by the weighted average number of ordinary shares, adjusted for the dilutive impact of the assumed conversion
of the bonds and employee share schemes outstanding.
€ million
Loss after tax attributable to equity holders of the parent
Exceptional items
Loss after tax attributable to equity holders of the parent before exceptional items
Adjusted loss
Weighted average number of shares used for basic loss per share2
Weighted average number of shares used for diluted loss per share
Basic loss per share (€ cents)
Adjusted loss per share before exceptional items (€ cents)
Note
a
a
11
11
2021
(2,933)
105
(3,038)
(3,038)
4,964
4,964
(61.2)
(61.2)
20201
(6,935)
(2,598)
(4,337)
(4,337)
3,528
3,528
(122.9)
(122.9)
1 Refer to notes 2 and 36 for the change in accounting policy relating to pension administration costs.
2 In 2020, includes 734,657 thousand shares as the weighted average impact for 2,979,443 thousand new ordinary shares issued through the rights issue
(note 29).
c Airline non-fuel costs per ASK
The Group monitors airline unit costs (per ASK, a standard airline measure of capacity) as a means of tracking operating efficiency of the
core airline business. As fuel costs can vary with commodity prices, the Group monitors fuel and non-fuel costs individually. Within non-fuel
costs are the costs associated with generating Other revenue, which typically do not represent the costs of transporting passengers or
cargo and instead represent the costs of handling and maintenance for other airlines, non-flight products in BA Holidays and costs
associated with other miscellaneous non-flight revenue streams. Airline non-fuel costs per ASK is defined as total operating expenditure
before exceptional items, less fuel, oil costs and emission charges and less non-flight specific costs divided by total available seat kilometres
(ASKs), and is shown on a constant currency basis.
€ million
Total expenditure on operations
(Add)/less: exceptional items in operating expenditure
Less: fuel, oil costs and emission charges
Note
a
a
a
Non-fuel costs
Less: Non-flight specific costs
Airline non-fuel costs
ASKs (millions)
Airline non-fuel unit costs per ASK (€ cents)
1 Refer to notes 2 and 36 for the change in accounting policy relating to pension administration costs.
d Levered free cash flow (KPI)
2021
Reported
11,220
ccy
adjustment
41
59
(18)
12
(30)
(200)
1,935
9,485
815
8,670
121,965
7.11
2021 ccy
11,261
(200)
1,994
9,467
827
8,640
20201
15,257
2,999
2,041
10,217
851
9,366
121,965
113,195
7.08
8.27
Levered free cash flow represents the cash generated, and the financing raised, by the businesses before shareholder returns and is defined
as the net increase in cash and cash equivalents taken from the Cash flow statement, adjusting for movements in Current interest-bearing
deposits, less the cash inflows from the rights issue and adding back the cash outflows associated with dividends paid and the acquisition
of treasury shares. The Group believes that this measure is useful to the users of the financial statements in understanding the cash
generating ability of the Group that is available to return to shareholders, to improve leverage and/or to undertake inorganic growth
opportunities.
€ million
Net Increase in cash and cash equivalents
Less: Decrease in other current interest-bearing deposits
Less: Other financing movements
Add: Dividends paid
Levered free cash flow
2021
1,913
(91)
–
–
2020
1,940
(2,366)
(2,674)
53
1,822
(3,047)
266
266 INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021
Financial Statements
ALTERNATIVE PERFORMANCE MEASURES CONTINUED
Earnings are based on results before exceptional items after tax and adjusted for earnings attributable to equity holders and interest on
convertible bonds, divided by the weighted average number of ordinary shares, adjusted for the dilutive impact of the assumed conversion
of the bonds and employee share schemes outstanding.
Loss after tax attributable to equity holders of the parent
Loss after tax attributable to equity holders of the parent before exceptional items
€ million
Exceptional items
Adjusted loss
Weighted average number of shares used for basic loss per share2
Weighted average number of shares used for diluted loss per share
Basic loss per share (€ cents)
Adjusted loss per share before exceptional items (€ cents)
Note
a
a
11
11
2021
(2,933)
105
(3,038)
(3,038)
4,964
4,964
(61.2)
(61.2)
20201
(6,935)
(2,598)
(4,337)
(4,337)
3,528
3,528
(122.9)
(122.9)
1 Refer to notes 2 and 36 for the change in accounting policy relating to pension administration costs.
2 In 2020, includes 734,657 thousand shares as the weighted average impact for 2,979,443 thousand new ordinary shares issued through the rights issue
(note 29).
c Airline non-fuel costs per ASK
The Group monitors airline unit costs (per ASK, a standard airline measure of capacity) as a means of tracking operating efficiency of the
core airline business. As fuel costs can vary with commodity prices, the Group monitors fuel and non-fuel costs individually. Within non-fuel
costs are the costs associated with generating Other revenue, which typically do not represent the costs of transporting passengers or
cargo and instead represent the costs of handling and maintenance for other airlines, non-flight products in BA Holidays and costs
associated with other miscellaneous non-flight revenue streams. Airline non-fuel costs per ASK is defined as total operating expenditure
before exceptional items, less fuel, oil costs and emission charges and less non-flight specific costs divided by total available seat kilometres
(ASKs), and is shown on a constant currency basis.
€ million
Total expenditure on operations
(Add)/less: exceptional items in operating expenditure
Less: fuel, oil costs and emission charges
Non-fuel costs
Less: Non-flight specific costs
Airline non-fuel costs
ASKs (millions)
Note
Reported
adjustment
2021 ccy
a
a
a
2021
11,220
(200)
1,935
9,485
815
8,670
121,965
7.11
ccy
41
59
(18)
12
(30)
11,261
(200)
1,994
9,467
827
8,640
20201
15,257
2,999
2,041
10,217
851
9,366
121,965
113,195
7.08
8.27
Airline non-fuel unit costs per ASK (€ cents)
1 Refer to notes 2 and 36 for the change in accounting policy relating to pension administration costs.
d Levered free cash flow (KPI)
Levered free cash flow represents the cash generated, and the financing raised, by the businesses before shareholder returns and is defined
as the net increase in cash and cash equivalents taken from the Cash flow statement, adjusting for movements in Current interest-bearing
deposits, less the cash inflows from the rights issue and adding back the cash outflows associated with dividends paid and the acquisition
of treasury shares. The Group believes that this measure is useful to the users of the financial statements in understanding the cash
generating ability of the Group that is available to return to shareholders, to improve leverage and/or to undertake inorganic growth
opportunities.
€ million
Net Increase in cash and cash equivalents
Less: Decrease in other current interest-bearing deposits
Less: Other financing movements
Add: Dividends paid
Levered free cash flow
2021
1,913
(91)
–
–
2020
1,940
(2,366)
(2,674)
53
1,822
(3,047)
b Basic loss per share before exceptional items and adjusted earnings per share (KPI)
e Net debt to EBITDA (KPI)
To supplement total borrowings as presented in accordance with IFRS, the Group reviews net debt to EBITDA to assess its level of net debt
in comparison to the underlying earnings generated by the Group in order to evaluate the underlying business performance of the Group.
This measure is used to monitor the Group’s leverage and to assess financial headroom against internal and external security analyst and
investor benchmarks.
Net debt is defined as long-term borrowings (both current and non-current), less cash, cash equivalents and current interest-bearing
deposits. Net debt excludes supply chain financing arrangements which are classified within trade payables (note 22).
EBITDA is defined as operating profit before exceptional items, interest, taxation, depreciation, amortisation and impairment.
The Group believes that this additional measure, which is used internally to assess the Group’s financial capacity, is useful to the users of the
financial statements in helping them to see how the Group’s financial capacity has changed over the year. It is a measure of the profitability
of the Group and of the core operating cash flows generated by the business model.
€ million
Interest-bearing long-term borrowings
Less: Cash and cash equivalents
Less: Other current interest-bearing deposits
Net debt
Operating loss
Add: Exceptional items
Add: Depreciation, amortisation and impairment
EBITDA
Net debt to EBITDA
Note
25
21
21
a
a
a
2021
19,610
(7,892)
(51)
11,667
(2,765)
(205)
1,953
(1,017)
20201
15,679
(5,774)
(143)
9,762
(7,451)
3,061
2,099
(2,291)
(11.5)
(4.3)
1 Refer to notes 2 and 36 for the change in accounting policy relating to pension administration costs.
f
Return on invested capital (KPI)
The Group monitors return on invested capital (RoIC) as it gives an indication of the Group’s capital efficiency relative to the capital
invested as well as the ability to fund growth and to pay dividends. RoIC is defined as EBITDA, less fleet depreciation adjusted for inflation,
depreciation of other property, plant and equipment, and amortisation of software intangibles, divided by average invested capital and is
expressed as a percentage.
Invested capital is defined as the average of property, plant and equipment and software intangible assets over a 12-month period between
the opening and closing net book values. The fleet aspect of property, plant and equipment is inflated over the average age of the fleet to
approximate the replacement cost of the associated assets.
€ million
EBITDA
Less: Fleet depreciation multiplied by inflation adjustment
Less: Other property, plant and equipment depreciation
Less: Software intangible amortisation
Invested capital
Average fleet value3
Less: average progress payments4
Fleet book value less progress payments
Inflation adjustment2
Average net book value of other property, plant and equipment5
Average net book value of software intangible assets6
Total invested capital
Return on Invested Capital
Note
e
13
13
13
17
2021
(1,017)
(1,777)
(257)
(167)
(3,218)
15,241
(729)
14,512
1.16
16,893
2,106
640
19,639
(16.4)%
20201
(2,291)
(1,921)
(258)
(151)
(4,621)
16,020
(1,117)
14,903
1.18
17,520
2,329
652
20,501
(22.5)%
1 Refer to notes 2 and 36 for the change in accounting policy relating to pension administration costs.
2 Presented to two decimal places and calculated using a 1.5 per cent inflation (December 31, 2020: 1.5 per cent inflation) rate over the weighted average age of
the fleet December 31, 2021: 10.6 years (December 31, 2020: 9.8 years).
3 The average net book value of aircraft is calculated from an amount of €15,365 million at December 31, 2020 and €15,116 million at December 31, 2021.
4 The average net book value of progress payments is calculated from an amount of €710 million at December 31, 2020 and €748 million at December 31, 2021.
5 The average net book value of other property, plant and equipment is calculated from an amount of €2,166 million at December 31, 2020 and €2,045 million at
December 31, 2021.
6 The average net book value of software intangible assets is calculated from an amount of €638 million at December 31, 2020 and €642 million at December
31, 2021.
266
267
INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021 267
ALTERNATIVE PERFORMANCE MEASURES CONTINUED
g Results on a constant currency (ccy) basis
Movements in foreign exchange rates impact the Group’s financial results. The Group reviews the results, including revenue and operating
costs at constant rates of exchange (abbreviated to ‘ccy’). The Group calculates these financial measures at constant rates of exchange
based on a retranslation, at prior year exchange rates, of the current year’s results of the Group. Although the Group does not believe that
these measures are a substitute for IFRS measures, the Group does believe that such results excluding the impact of currency fluctuations
year-on-year provide additional useful information to investors regarding the Group’s operating performance on a constant currency basis.
Accordingly, the financial measures at constant currency within the discussion of the Group Financial review should be read in conjunction
with the information provided in the Group financial statements.
The following table represents the main average and closing exchange rates for the reporting periods. Where 2021 figures are stated at a
constant currency basis, they have applied the 2020 rates stated below:
Foreign exchange rates
Pound sterling to euro
Euro to US dollar
Pound sterling to US dollar
h Liquidity
Weighted average
Closing
2021
1.15
1.20
1.38
2020
1.13
1.13
1.27
2021
1.18
1.13
1.33
2020
1.10
1.22
1.35
The Management Committee monitors liquidity in order to assess the resilience of the Group to adverse events and uncertainty and
develops funding initiatives to maintain this resilience.
Liquidity is used by analysts, investors and other users of the financial statements as a measure to the financial health and resilience of the
Group.
Liquidity is defined as Cash and cash equivalents plus Current interest-bearing deposits, plus Committed general undrawn facilities and
committed aircraft undrawn facilities.
€ million
Cash and cash equivalents
Current interest-bearing deposits
Committed general undrawn facilities
Committed aircraft undrawn facilities
Overdrafts and other facilities
Total liquidity
Note
21
21
27f
27f
27f
2021
7,892
51
2,864
1,126
53
11,986
2020
5,774
143
905
1,180
52
8,054
268
268 INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021
Financial Statements
GROUP INVESTMENTS
Subsidiaries
British Airways
Name and address
Avios Group (AGL) Limited*
Astral Towers, Betts Way, London Road, Crawley, West Sussex, RH10 9XY
BA and AA Holdings Limited*
Waterside, PO Box 365, Harmondsworth, UB7 0GB
BA Call Centre India Private Limited (callBA)
F-42, East of Kailash, New-Delhi, 110065
BA Cityflyer Limited*
Waterside, PO Box 365, Harmondsworth, UB7 0GB
BA European Limited
Waterside, PO Box 365, Harmondsworth, UB7 0GB
BA Excepted Group Life Scheme Limited
Waterside, PO Box 365, Harmondsworth, UB7 0GB
BA Healthcare Trust Limited
Waterside, PO Box 365, Harmondsworth, UB7 0GB
BA Holdco Limited
Waterside, PO Box 365, Harmondsworth, UB7 0GB
BA Number One Limited
Waterside, PO Box 365, Harmondsworth, UB7 0GB
BA Number Two Limited
IFC 5, St Helier, JE1 1ST
Bealine Plc
Waterside, PO Box 365, Harmondsworth, UB7 0GB
BritAir Holdings Limited*
Waterside, PO Box 365, Harmondsworth, UB7 0GB
British Airways (BA) Limited
Waterside, PO Box 365, Harmondsworth, UB7 0GB
British Airways 777 Leasing Limited*
Waterside, PO Box 365, Harmondsworth, UB7 0GB
British Airways Associated Companies Limited
Waterside, PO Box 365, Harmondsworth, UB7 0GB
British Airways Avionic Engineering Limited*
Waterside, PO Box 365, Harmondsworth, UB7 0GB
British Airways Capital Limited
Queensway House, Hilgrove Street, St Helier, JE1 1ES
British Airways Holdings B.V.
Strawinskylaan 3105, Atrium, Amsterdam, 1077ZX
British Airways Holidays Limited*
Waterside, PO Box 365, Harmondsworth, UB7 0GB
British Airways Interior Engineering Limited*
Waterside, PO Box 365, Harmondsworth, UB7 0GB
British Airways Leasing Limited*
Waterside, PO Box 365, Harmondsworth, UB7 0GB
British Airways Maintenance Cardiff Limited*
Waterside, PO Box 365, Harmondsworth, UB7 0GB
British Airways Pension Trustees (No 2) Limited
Waterside, PO Box 365, Harmondsworth, UB7 0GB
British Midland Airways Limited
Waterside, PO Box 365, Harmondsworth, UB7 0GB
British Midland Limited
Waterside, PO Box 365, Harmondsworth, UB7 0GB
Flyline Tele Sales & Services GmbH
Hermann Koehl-Strasse 3, 28199, Bremen
Gatwick Ground Services Limited
Waterside, PO Box 365, Harmondsworth, UB7 0GB
Overseas Air Travel Limited
Waterside, PO Box 365, Harmondsworth, UB7 0GB
Speedbird Insurance Company Limited*
Canon’s Court, 22 Victoria Street, Hamilton, HM 12
British Mediterranean Airways Limited
Waterside, PO Box 365, Harmondsworth, UB7 0GB
BA Euroflyer Limited
Waterside, PO Box 365, Harmondsworth, UB7 0GB
Teleflight Limited
Waterside, PO Box 365, Harmondsworth, UB7 0GB
Principal activity
Country of
Incorporation
Percentage of
equity owned
Airline marketing
England
Holding company
England
Call centre
India
Airline operations
England
Holding company
England
Life insurance
England
Healthcare
England
Holding company
England
Dormant
England
Dormant
Jersey
Dormant
England
Holding company
England
Dormant
England
Aircraft leasing
England
Holding company
Aircraft
maintenance
England
England
Aircraft financing
Jersey
Holding company Netherlands
Tour operator
Aircraft
maintenance
Aircraft leasing
Aircraft
maintenance
England
England
England
England
Trustee company
England
Former airline
England
Dormant
England
Call centre
Germany
Ground services
England
Transport
England
Insurance
Bermuda
Former airline
England
Airline operations
England
Call centre
England
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
99%
100%
100%
INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021 269
GROUP INVESTMENTS CONTINUED
Iberia
Name and address
Compañía Explotación Aviones Cargueros Cargosur, S.A.
Calle Martínez Villergas 49, Madrid, 28027
Compañía Operadora de Corto y Medio Radio Iberia Express, S.A.*
Calle Alcañiz 23, Madrid, 28006
Iberia Líneas Aéreas de España, S.A. Operadora*
Calle Martínez Villergas 49, Madrid, 28027
Iberia México, S.A.*
Calle Montes Urales 424, Colonia Lomas de Chapultepec V, Ciudad de
México, 11000
Iberia Operadora UK Limited
Waterside, PO Box 365, Harmondsworth, UB7 0GB
Iberia Tecnología, S.A.*
Calle Martínez Villergas 49, Madrid, 28027
Iberia Desarrollo Barcelona, S.L.*
Avenida de les Garrigues 38-44, Edificio B,
El Prat de Llobregat, Barcelona, 08220
Aer Lingus
Name and address
Aer Lingus (Ireland) Limited
Dublin Airport, Dublin
Aer Lingus 2009 DCS Trustee Limited
Dublin Airport, Dublin
Aer Lingus Beachey Limited
Penthouse Suite, Analyst House, Peel Road, IM1 4LZ
Aer Lingus Group DAC*
Dublin Airport, Dublin
Aer Lingus Limited*
Dublin Airport, Dublin
Aer Lingus (UK) Limited
Aer Lingus Base, Belfast City Airport, Sydenham Bypass, Belfast, Co.
Antrim, BT3 9JH
ALG Trustee Limited
33-37 Athol Street, Douglas, IM1 1LB
Dirnan Insurance Company Limited
Canon’s Court, 22 Victoria Street, Hamilton, Bermuda, HM 12
Santain Developments Limited
Dublin Airport, Dublin
IAG Loyalty
Name and address
Avios South Africa Proprietary Limited
Block C, 1 Marignane Drive, Bonaero Park, Gauteng, 1619
IAG Loyalty Limited
Waterside, PO Box 365, Harmondsworth, UB7 0GB
Principal activity
Country of
Incorporation
Percentage
of equity
owned
Cargo transport
Spain
100%
Airline operations
Spain
100%
Airline operations and
maintenance
Storage and custody
services
Spain
100%1
Mexico
100%
Dormant
England
100%
Aircraft maintenance
Spain
100%
Airport infrastructure
development
Spain
75%
Principal activity
Airline operations
Trustee
Country of
Incorporation
Republic of
Ireland
Republic of
Ireland
Percentage
of equity
owned
100%
100%
Dormant
Isle of Man
100%
Holding company
Airline operations
Republic of
Ireland
Republic of
Ireland
100%2
100%
Airline operations Northern Ireland
100%
Trustee
Isle of Man
100%
Insurance
Bermuda
100%
Dormant
Republic of
Ireland
100%
Principal activity
Country of
Incorporation
Percentage
of equity
owned
Dormant
South Africa
100%
Dormant
England
100%
270 INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021
Financial Statements IAG Cargo
Name and address
Cargo Innovations Limited
Carrus Cargo Centre, PO Box 99, Sealand Road, London Heathrow Airport,
Hounslow, Middlesex, TW6 2JS
Zenda Group Limited
Carrus Cargo Centre, PO Box 99, Sealand Road, London Heathrow Airport,
Hounslow, Middlesex, TW6 2JS
Vueling
Name and address
Yellow Handling, S.L.U
Plaça Pla de l’Estany 5, Parque de Negocios Mas Blau II,
El Prat de Llobregat, Barcelona, 08820
Vueling Airlines, S.A.*
Plaça Pla de l’Estany 5, Parque de Negocios Mas Blau II,
El Prat de Llobregat, Barcelona, 08820
LEVEL
Name and address
FLYLEVEL UK Limited
Waterside, PO Box 365, Harmondsworth, UB7 0GB
Openskies SASU
3 Rue le Corbusier, Rungis, 94150
International Consolidated Airlines Group, S.A.
Name and address
AERL Holding Limited
Waterside, PO Box 365, Harmondsworth, UB7 0GB
British Airways Plc*
Waterside, PO Box 365, Harmondsworth, UB7 0GB
FLY LEVEL, S.L.
Camino de la Muñoza s/n, El Caserío,
Iberia Zona Industrial 2, Madrid, 28042
IAG Cargo Limited*
Carrus Cargo Centre, PO Box 99, Sealand Road, London Heathrow Airport,
Hounslow, TW6 2JS
IAG Connect Limited
Waterside, PO Box 365, Harmondsworth, UB7 0GB
IAG GBS Limited*
Waterside, PO Box 365, Harmondsworth, UB7 0GB
IAG GBS Poland sp z.o.o.*
Ul. Opolska 114, Krakow, 31-323
IB Opco Holding, S.L.
Calle Martínez Villergas 49, Madrid, 28027
Veloz Holdco, S.L.
Plaça Pla de l’Estany 5, Parque de Negocios Mas Blau II,
El Prat de Llobregat, Barcelona, 08820
* Principal subsidiaries
Principal activity
Country of
Incorporation
Percentage
of equity
owned
Dormant
England
100%
Dormant
England
100%
Principal activity
Country of
incorporation
Percentage
of equity
owned
Ground handling services
Spain
100%
Airline operations
Spain
99.5%
Principal activity
Country of
Incorporation
Percentage
of equity
owned
Airline operations
England
100%
Airline operations
France
100%
Principal activity
Country of
Incorporation
Percentage
of equity
owned
Holding company
England
100%
Airline operations
England
100%3
Airline operations
Spain
100%
Air freight operations
England
100%
Inflight eCommerce
platform
Republic of
Ireland
100%
IT, finance, procurement
services
IT, finance, procurement
services
England
100%
Poland
100%
Holding company
Spain
100%1
Holding company
Spain
100%
1 The Group holds 49.9% of both the total nominal share capital and the total number of voting rights in IB Opco Holding, S.L. (and thus, indirectly, in
Iberia Líneas Aéreas de España, S.A. Operadora), such stake having almost 100% of the economic rights in these companies. The remaining shares,
representing 50.1% of both the total nominal share capital and the total number of voting rights belong to a Spanish company incorporated for the
purposes of implementing the Iberia nationality structure.
2 The Group holds 49.75% of the total number of voting rights and the majority of the economic rights in Aer Lingus Group DAC. The remaining voting
rights, representing 50.25%, correspond to a trust established for implementing the Aer Lingus nationality structure.
3 The Group holds 49.9% of the total number of voting rights and 99.65% of the total nominal share capital in British Airways Plc, such stake having
almost 100% of the economic rights. The remaining nominal share capital and voting rights, representing 0.35% and 50.1% respectively, are held by a
trust established for the purposes of implementing the British Airways nationality structure.
INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021
271
GROUP INVESTMENTS CONTINUED
Associates
Name and address
Empresa Hispano Cubana de Mantenimiento de Aeronaves, Ibeca, S.A.
Avenida de Vantroi y Final,
Jose Martí Airport, Havana
Empresa Logística de Carga Aérea, S.A.
Carretera de Wajay km 15,
Jose Martí Airport, Havana
Multiservicios Aeroportuarios, S.A.
Avenida de Manoteras 46, 2ª planta, Madrid, 28050
Dunwoody Airline Services Limited
Building 552 Shoreham Road East, London Heathrow Airport, Hounslow, TW6 3UA
Serpista, S.A.
Calle Cardenal Marcelo Spínola 10, Madrid, 28016
Air Miles España, S.A.
Avenida de Bruselas 20, Alcobendas, Madrid, 28108
Inloyalty by Travel Club, S.L.U.
Avenida de Bruselas 20, Alcobendas, Madrid, 28108
Viajes Ame, S.A.
Avenida de Bruselas 20, Alcobendas, Madrid, 28108
DeepAir Solutions Limited
Ground Floor North, 86 Brook Street, London, W1K 5AY
LanzaJet
520 Lake Cook Road, Suite 680, Deerfield, Illinois, 60015, USA
Joint ventures
Name and address
Sociedad Conjunta para la Emisión y Gestión de Medios de Pago EFC, S.A.
Calle de O’Donnell 12, Madrid, 28009
Other equity investments
The Group’s principal other equity investments are as follows:
Country of
Incorporation
Percentage
of equity
owned
Cuba
Cuba
Spain
England
Spain
Spain
Spain
Spain
England
United
States
50%
50%
49%
40%
39%
26.7%
26.7%
26.7%
23%
16.7%
Country of
Incorporation
Percentage
of equity
owned
Spain
50.5%
Name and address
Servicios de Instrucción de Vuelo, S.L.
Camino de la Muñoza s/n, El Caserío,
Iberia Zona Industrial 2, Madrid, 28042
The Airline Group Limited
5th Floor, Brettenham House South, Lancaster Place, London, WC2N
7EN
Travel Quinto Centenario, S.A.
Calle Alemanes 3, Sevilla, 41004
i6 Group Limited
Farnborough Airport, Ively Road, Farnborough, Hampshire, GU14 6XA
Monese Limited
1 King Street, London, EC2V 8AU
NAYAKJV1, S.L.
C/ d’Osona, 2, El Prat de Llobregat, 08820
Country of
Incorporation
Percentage
of equity
owned
Shareholder’s
funds
(million)
Profit/(loss)
before tax
(million)
Currency
Spain
19.9%
EUR
71
(0.6)
England
16.7%
GBP
Spain
10%
EUR
England
7.4%
GBP
England
5.9%
GBP
Spain
5%
EUR
n/a
n/a
4
(13)
n/a
n/a
n/a
(1)
(25)
n/a
272 INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021
Financial Statements STATEMENT OF DIRECTORS’ RESPONSIBILITIES
LIABILITY STATEMENT OF DIRECTORS FOR THE PURPOSES ENVISAGED UNDER ARTICLE 8.1.b OF SPANISH ROYAL DECREE
1362/2007 OF 19 OCTOBER (REAL DECRETO 1362/2007).
At a meeting held on February 24, 2022, the directors of International Consolidated Airlines Group, S.A. state that, to the best of their
knowledge, the individual and consolidated financial statements for the year to December 31, 2021, prepared in accordance with the
applicable set of accounting standards and in single electronic format, give a true and fair view of the assets, liabilities, financial position
and profit or loss of the Company and the undertakings included in the consolidation taken as a whole, and that the individual and
consolidated management reports include a fair review of the development and performance of the business and the position of the
Company and the undertakings included in the consolidation taken as a whole, together with the description of the principal risks and
uncertainties that they face.
February 24, 2022
Javier Ferrán Larraz
Chairman
Luis Gallego Martín
Chief Executive Officer
Giles Agutter
Peggy Bruzelius
Eva Castillo Sanz
Margaret Ewing
Maurice Lam
Heather Ann McSharry
Robin Phillips
Emilio Saracho Rodríguez de Torres
Lucy Nicola Shaw
Alberto Terol Esteban
INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021 273
274 INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021
Financial Statements INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021 275
276 INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021
Financial Statements INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021 277
278 INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021
Financial Statements INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021 279
280 INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021
Financial Statements INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021
281
282 INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021
Financial Statements INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021 283
GLOSSARY
Adjusted earnings per share
Airline non-fuel costs
Earnings are based on results before exceptional items after tax, adjusted for earnings
attributable to equity holders and interest on convertible bonds, divided by the weighted
average number of ordinary shares, adjusted for the dilutive impact of the assumed conversion
of the bonds and employee share schemes outstanding
Total operating expenditure before exceptional items, less fuel, oil costs and emission charges
and less non-flight specific costs. Within non-fuel costs are the costs associated with generating
Other revenue, which typically do not represent the costs of transporting passengers or cargo
and instead represent the costs of handling and maintenance for other airlines, non-flight
products in BA Holidays and costs associated with other miscellaneous non-flight revenue
streams. Shown on a constant currency basis
Airline non-fuel costs per ASK
Airline non-fuel costs divided by ASK
Available seat kilometres (ASK)
The number of seats available for sale multiplied by the distance flown
Available tonne kilometres (ATK)
Block hours
The number of tonnes of capacity available for the carriage of load (passenger and cargo)
multiplied by the distance flown
Hours of service for aircraft, measured from the time that the aircraft leaves the gate at the
departure airport to the time that it arrives at the gate at the destination airport
Cargo revenue per CTK
Cargo revenue divided by CTK
Cargo tonne kilometres (CTK)
The number of tonnes of cargo carried that generate revenue (freight and mail) multiplied by the
distance flown
Dividend cover
EBITDA
Gross capex
Interest cover
Invested capital
Levered free cash flow
Liquidity
Manpower equivalent
Merger effective date
Net debt
The number of times the result for the year covers the dividends paid and proposed
Operating result before exceptional items, interest, taxation, depreciation, amortisation and
impairment
Gross capital expenditure is the total investment in fleet, customer product, IT and infrastructure
before any proceeds from the sale of property, plant and equipment as shown in the Cash flow
statement (‘Acquisition of property, plant and equipment and intangible assets’)
The number of times the (loss)/profit before taxation and exceptional items adding back net
interest expense and interest income cover the net interest expense and interest income
The average of property, plant and equipment and software intangible assets over a 12-month
period between the opening and closing net book values. The fleet aspect of property, plant and
equipment is inflated over the average age of the fleet to approximate the replacement cost of
the associated assets
The cash generated in the year, including movements in borrowings and before returns to
shareholders. It is calculated as the net increase in cash and cash equivalents taken from the
Cash flow statement, adjusting for movements in Current interest-bearing deposits, less the cash
inflows from the rights issue and adding back the cash outflows associated with dividends paid
and the acquisition of treasury shares
Cash and cash equivalents plus Current interest-bearing deposits, plus committed general
undrawn facilities and committed aircraft undrawn facilities
Number of employees adjusted for part-time workers, overtime and contractors
January 21, 2011, the date British Airways and Iberia signed a merger agreement to create
International Airlines Group
Current and long-term interest-bearing borrowings less cash and cash equivalents and current
interest-bearing deposits
284 INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021
Net Promoter Score (NPS)
Operating margin
Overall load factor
The Net Promoter Score (NPS) is a metric based on survey responses to the ‘likelihood to
recommend’ question and is calculated by subtracting the percentage of customers who are
‘Detractors’ (score 0-6, unlikely to recommend) from the percentage of customers who are
‘Promoters’ (score 9-10, likely to recommend)
Operating result before exceptional items as a percentage of total revenue
RTK expressed as a percentage of ATK
Passenger load factor
RPK expressed as a percentage of ASK
Passenger unit revenue per ASK
(PRASK)
Passenger revenue before exceptional items divided by ASK
Passenger revenue per RPK (yield) Passenger revenue before exceptional items divided by RPK
Productivity
Punctuality
Regularity
ASK divided by average manpower equivalent
The industry’s standard, measured as the percentage of flights departing within 15 minutes of
schedule
The percentage of flights completed to flights scheduled, excluding flights cancelled for
commercial reasons
Return on Invested Capital (RoIC) EBITDA, less fleet depreciation adjusted for inflation, depreciation of other property, plant and
Revenue passenger kilometres
(RPK)
equipment, and amortisation of software intangibles, divided by average invested capital and is
expressed as a percentage
The number of passengers that generate revenue carried multiplied by the distance flown
Revenue tonne kilometres (RTK)
The revenue load in tonnes multiplied by the distance flown
Sector
Sold cargo tonnes
Total capital
A one-way revenue flight
The number of cargo tonnes sold, including freight, courier, mail and interline
Total equity plus net debt
Total revenue per ASK (RASK)
Total revenue before exceptional items divided by ASK
Total operating expenditure
excluding fuel per ASK
Total operating expenditure
per ASK (CASK)
Total operating expenditure before exceptional items excluding fuel divided by ASK
Total operating expenditure before exceptional items divided by ASK
Total traffic revenue per ATK
Revenue from total traffic before exceptional items (passenger and cargo) divided by ATK
INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021 285
AIRCRAFT FLEET
Airbus A319
Airbus A320
Airbus A321
Airbus A330-200
Airbus A330-300
Airbus A350
Airbus A380
Boeing 777-200
Boeing 777-300
Boeing 777-9
Boeing 787-8
Boeing 787-9
Boeing 787-10
Embraer E170
Embraer E190
Group total
Owned
Right of use
Total
December 31,
2021
Total
December 31,
2020
Changes since
December 31,
2020
Future
deliveries
Options
8
63
16
–
5
10
2
38
4
–
–
1
2
–
9
158
31
177
57
18
13
7
10
5
12
–
12
17
–
–
14
373
39
240
73
18
18
17
12
43
16
–
12
18
2
–
23
531
49
232
72
19
18
17
12
43
16
–
12
18
2
1
22
533
(10)
8
1
(1)
–
–
–
–
–
–
–
–
–
(1)
1
(2)
–
22
34
–
–
26
–
–
–
18
–
–
10
–
–
–
76
14
–
–
52
–
–
–
24
–
–
6
–
–
110
172
At December 31, 2021, the Group held 29 aircraft not in service, pending disposal.
286 INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021
OPERATING AND FINANCIAL STATISTICS
Total Group operations
Traffic and capacity
Available seat km (ASK)
Revenue passenger km (RPK)
Cargo tonne km (CTK)
Passengers carried
Sold cargo tonnes
Sectors
Block hours
Operations
Average manpower equivalent
Aircraft in service at year end
Aircraft utilisation - Longhaul (average hours per aircraft
per day)
Aircraft utilisation - Shorthaul (average hours per aircraft
per day)
Punctuality – within 15 minutes
Regularity
Financial
Passenger unit revenue per ASK (PRASK)1
Passenger revenue per RPK1
Cargo revenue per CTK1
Total revenue per ASK (RASK)1
Average fuel price
Fuel cost per ASK1
Operating (loss)/profit before depreciation and
amortisation (EBITDA)1
Total operating expenditure excluding fuel per ASK
(CASK ex. fuel)1
Operating margin1
Lease adjusted operating margin1
Total operating expenditure per ASK (CASK)1
Dividend cover
Interest cover
Net debt
Equity
Adjusted net debt to EBITDA1
Net debt to EBITDA1
Exchange rates
Translation - weighted average
Transaction
Transaction
Transaction
2021
20202
20192
20183
20174
million
million
million
‘000
‘000
121,965
78,689
3,970
38,864
539
113,195
72,262
3,399
31,275
444
337,754
324,808
306,185
285,745
270,657
252,819
5,580
118,253
682
5,713
5,762
112,920
104,829
702
701
307,519
267,748
775,486
754,700
717,325
hours
892,455
820,983 2,272,904 2,207,374 2,100,089
50,222
60,612
66,034
64,734
63,422
531
8.1
4.5
86.4
96.7
4.78
7.41
42.14
6.93
587
1.59
533
6.4
2.7
88.8
91.8
4.92
7.71
38.42
6.95
376
1.80
598
13.5
8.6
77.8
98.7
6.65
7.86
20.02
7.55
628
1.78
573
13.5
9.0
75.5
98.7
6.59
7.91
20.53
7.47
687
1.63
546
13.5
8.9
81.8
99.1
6.63
8.02
19.65
7.47
519
1.51
hours
hours
%
%
€cents
€cents
€cents
€cents
($/metric tonne)
€cents
€million
(1,017)
(2,291)
5,361
5,481
4,134
€cents
%
%
€cents
times
times
€million
€million
times
times
£:€
£:€
€:$
£:$
7.78
(35.1)
n/a
9.36
n/a
(4.0)
11,667
846
n/a
(11.5)
1.15
1.15
1.20
1.38
9.03
(55.8)
n/a
10.83
n/a
(6.6)
9,762
1,610
n/a
(4.3)
1.13
1.13
1.13
1.27
4.81
12.7
n/a
6.59
3.8
6.2
7,571
7,120
n/a
1.4
1.13
1.13
1.12
1.27
4.77
14.4
14.4
6.40
3.9
6.7
6,430
6,720
1.6
1.2
1.13
1.13
1.18
1.33
5.00
12.9
14.2
6.51
4.0
16.4
655
6,933
1.5
n/a
1.14
1.14
1.14
1.29
1 Figures on a pre-exceptional items basis
2 The 2019 and 2020 results have been restated for the treatment of administration costs associated with the Group’s defined benefit pension schemes.
3 2018 figures restated for accounting standards IFRS 16 ‘Leases’ and to reclassify the costs the Group incurs in relation to compensation for flight delays
and cancellations as a deduction from revenue as opposed to an operating expense
4 2017 figures restated for accounting standards IFRS 15 ‘Revenue from contracts with customers’ and IFRS 9 ‘Financial instruments.
n/a: not available
INTERNATIONAL AIRLINES GROUP | Annual Report and Accounts 2021 287
SHAREHOLDER INFORMATION
Registered office
International Consolidated Airlines Group, S.A. El Caserío, Iberia
Zona Industrial nº 2 (La Muñoza) Camino de La Muñoza, s/n,
28042 Madrid, Spain.
American Depositary Receipt program
IAG has a Sponsored Level 1 American Depositary Receipt (ADR)
facility that trades on the OTC market in the US (see www.
otcmarkets.com). Deutsche Bank is the ADR depositary bank.
Madrid Commercial Registrar tomo 27312, folio 11, hoja
M-492129C.I.F. A85845535
UK Branch registered address
International Airlines Group Waterside (HAA2), PO Box 365,
Speedbird Way Harmondsworth,
UB7 0GB
Registered in England and Wales: BR014868
UK Registrar
Computershare Investor Services PLC
For enquiries relating to shares held through the Corporate
Sponsored Nominee (UK share register):
Tel: +44 370 702 0110
Email: web.queries@computershare.co.uk
Online: www.investorcentre.co.uk/iag
IAG Investor relations team
Institutional investors: investor.relations@iairgroup.com
Private shareholders: shareholder.services@iairgroup.com
For shareholder enquiries, contact:
Deutsche Bank Trust Company Americas c/o American Stock
Transfer & Trust Co, 6201 15th Avenue, Brooklyn NY 11219, USA
Email: db@astfinancial.com
Toll free: 800 301 3517 (within the US)
International: +1 718 921 8137
Online: www.adr.db.com
Financial calendar
Financial year end: December 31, 2021
Q1 results: May 6, 2022
Half year results: July 29, 2022
Q3 results: October 28, 2022
Other key dates can be found on our website: www.iairgroup.com
ShareGift
UK shareholders with a small number of shares may like to
consider donating their shares to charity under ShareGift,
administered by Orr Mackintosh Foundation. Details are available
from the UK Registrar.
Certain statements included in this report are forward-looking. These statements can be identified by the fact that they do not relate
only to historical or current facts. By their nature, they involve risk and uncertainties because they relate to events and depend on
circumstances that will occur in the future. Actual results could differ materially from those expressed or implied by such forward-
looking statements.
Forward-looking statements often use words such as “expects”, “may”, “will”, “could”, “should”, “intends”, “plans”, “predicts”, “envisages”
or “anticipates” or other words of similar meaning. They include, without limitation, any and all projections relating to the results of
operations and financial conditions of International Consolidated Airlines Group, S.A. and its subsidiary undertakings from time to time
(the ‘Group’), as well as plans and objectives for future operations, expected future revenues, financing plans, expected expenditure
and divestments relating to the Group, discussions of the Group’s business plan, and our assumptions, expectations, objectives and
resilience with respect to climate scenarios. All forward-looking statements in this report are based upon information known to the
Group on the date of this report and speak as of the date of this report. Other than in accordance with its legal or regulatory
obligations, the Group does not undertake to update or revise any forward-looking statement to reflect any changes in events,
conditions or circumstances on which any such statement is based.
Actual results may differ from those expressed or implied in the forward-looking statements in this report as a result of any number of
known and unknown risks, uncertainties and other factors, including, but not limited to, the effects of the COVID-19 pandemic and
uncertainties about its impact and duration, many of which are difficult to predict and are generally beyond the control of the Group,
and it is not reasonably possible to itemise each item. Accordingly, readers of this report are cautioned against relying on forward-
looking statements. Further information on the primary risks of the business and the Group’s risk management process is set out in the
Risk management and principal risk factors section in this report. All forward-looking statements made on or after the date of this
report and attributable to IAG are expressly qualified in their entirety by the primary risks set out in that section. Many of these risks
are, and will be, exacerbated by the COVID-19 pandemic and any further disruption to the global airline industry and economic
environment as a result.
INTERNATIONAL
AIRLINES
GROUP
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