INTERNATIONAL
AIRLINES
GROUP
Connections
for good
Annual Report and Accounts 2023
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:
16
18
20
23
38
40
Business at a glance
Business model
Strategic imperatives
Key performance indicators
Financial overview
Financial review
54 Regulatory environment
73
Sustainability
113 Risk management and
principal risk factors
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 12 June. 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 28 December (amending the
Commercial Code, the revised Capital
Companies Law approved by Legislative
Royal Decree 1/2010, of 2 July 2010 and
Audit Law 22/2015, of 20 July 2015),
is part of this Management Report and
is available on the Company’s website
www.iairgroup.com.
Contents
Strategic Report
2
Performance highlights
Connections for good
Chairman’s letter
Chief Executive Officer’s review
3
8
10
18
19
20
14 Management Committee
Business at a glance
16
Business model
Strategy
Strategic imperatives
Key performance indicators
Stakeholder engagement
Financial overview
Financial review
40
38
23
27
54 Regulatory environment
58
British Airways
Iberia
60
68
62 Vueling
64 Aer Lingus
IAG Loyalty
66
IAG Cargo
IAG GBS
IAG Tech
LEVEL
Sustainability
70
73
72
71
113 Risk management and
principal risk factors
Corporate Governance
136 Chairman’s introduction
to Corporate Governance
138 Our Board of Directors
141 Corporate Governance
156 Report of the Nominations
Committee
160 Report of the Safety, Environment
and Corporate Responsibility
Committee
164 Report of the Audit and
Compliance Committee
175 Report of the Remuneration
Committee
Financial Statements
210 Consolidated income statement
211 Consolidated statement of other
comprehensive income
212 Consolidated balance sheet
213 Consolidated cash flow statement
214 Consolidated statement of changes
in equity
216 Notes to the consolidated
financial statements
289 Alternative performance measures
295 Group investments
Statement of Directors’
responsibilities
Independent Auditor’s Report
Additional information
308 Glossary
310 Aircraft fleet
311 Operating and financial statistics
312 Shareholder information
International Airlines Group | Annual Report and Accounts 2023
11
Financial StatementsCorporate GovernanceStrategic Report 2023 Performance highlights
Financial highlights
Non-financial highlights
Capacity
ASKs (billion) and % of 2019
Operating profit before
exceptional items1
(€ million)
NPS
18.6
+0.2 pts vly
Carbon intensity
80.5 gCO2/pkm
-3.6% vly
Tonnes CO2 saved from Sustainable
Aviation Fuel (SAF) use in 2023
157,100 tonnes
+418% vly
Senior leadership roles held by women
36%
+2 pts vly
350
300
250
200
150
100
50
0
338
95.7%
323
78.0%
264
3,253
3,507
1,247
3,500
3,000
2,500
2,000
1,500
1,000
500
2019
2022
2023
0
2019
2022
2023
Net debt
Operating profit1
€9,245 million
-€1,140 million vly
€3,507 million
+2,229 million vly
Total liquidity
€11,624 million
-€2,375 million vly
Net debt, Total liquidity and Senior leadership roles held by women are calculated as at
31 December; all other measures are for the full year.
1 The 2019 and 2022 results include a reclassification to conform with the current year
presentation for the Net gain on sale of property, plant and equipment. The 2019 results include
a restatement for the treatment of administration costs associated with the Group’s defined
benefit pension schemes.
2
International Airlines Group | Annual Report and Accounts 2023
Our purpose:
Connecting people,
businesses and countries
Connections for good
At IAG, our purpose is connecting people, businesses
and countries.
Through our extensive network, our airlines enable
people to explore new places, experience new cultures
and build lasting relationships. We also work closely
with businesses to facilitate trade and commerce, help
drive economic growth, encourage job creation and
explore new opportunities for aviation to innovate.
IAG is driving progress towards reaching net zero
carbon emissions by 2050. We strive to connect
different stakeholders from the aviation ecosystem,
to lead the industry and build a brighter future.
At IAG, we are committed to using our connections
for good, and we are proud to play a role in bringing
the world closer together.
International Airlines Group | Annual Report and Accounts 2023
3
Financial StatementsCorporate GovernanceStrategic Report Connecting
customers
with journeys
that matter
Experiences that inspire
Airlines in IAG connect people with
experiences and destinations that enrich
lives and broaden horizons. Flying supports
the journeys through life that really matter,
from family holidays and celebrations to
job moves from one country to another.
Top left: US teams Notre Dame and Navy
touchdown for the Aer Lingus College
Football Classic in Dublin.
Top right: Iberia has once again been
awarded its 4 Skytrax stars rating this year,
thanks to all the improvements implemented
to its service in 2023.
British Airways helps a former
police officer achieve his
ambition of flying again,
15 years after he suffered
life-changing injuries on duty
– accompanied by his service
dog Lily.
4
International Airlines Group | Annual Report and Accounts 2023
Connecting
communities
and countries
across the globe
Supporting our society
Aviation is not only a global bridge between
countries. It helps support local communities.
At IAG we are committed to supporting
the development of the regions in which we
operate, creating jobs, investing in infrastructure
and contributing to social and environmental
causes. Thank you to our customers and our
people – your significant efforts enabled this
to happen.
Top left: Aer Lingus employees volunteered
one day to give back to their local community.
Top right: During 2023, Vueling worked
alongside the Red Cross to deliver
humanitarian supplies to Gaziantep, a Turkish
town affected by earthquakes in the region.
International Airlines Group | Annual Report and Accounts 2023
More than one million children
vaccinated thanks to the
strategic alliance between
Iberia and UNICEF Spain.
5
Financial StatementsCorporate GovernanceStrategic Report Connecting
businesses
with new
opportunities
Transforming travel
We enable businesses to connect and grow.
By transporting goods, we support exporters
as well as businesses relying on goods and
parts for their supply chains. Through our
Hangar 51 innovation programme, we are
supporting start-ups to scale and grow.
Top left: Purchases with British Airways
American Express co-brand credit card
earn Avios to spend on holidays.
Top right: IAG Cargo officially launches a
state-of-the-art cargo handling facility, New
Premia, at London Heathrow.
Iberia Maintenance was the
host sponsor of the annual
Aero-Engines Europe
conference. This event brings
together the main players in
the engine sector.
6
International Airlines Group | Annual Report and Accounts 2023
Connecting
our people
with brighter
futures
Purposeful careers
We connect people with meaningful careers.
IAG is a diverse team of colleagues working
across more than 77 countries, speaking
dozens of languages, with different
experiences and backgrounds.
Top left: Iberia Maintenance welcomed
68 students for its vocational technical
internships.
Top right: British Airways’ Speedbird Pilot
Academy provides equal opportunities
for everyone.
Aer Lingus continued to focus
on female pilot recruitment.
The number of female
applications to its Future Pilot
Programme increased by 21%
versus 2022.
International Airlines Group | Annual Report and Accounts 2023
7
Financial StatementsCorporate GovernanceStrategic Report Chairman's letter
Javier Ferrán
Chairman
Aviation –
a force for good
Javier Ferrán, Chairman, reviews 2023,
another year of recovery for the global
aviation sector as people around the world
continued to value and prioritise travel.
In 2023, we delivered on
our purpose of connecting
people, businesses and
countries, adding more
connectivity by restoring
capacity, reopening
routes and flying to new
destinations.
This resulted in a very good financial
performance with strong operating
profits, which in turn helped us
strengthen our balance sheet and
reinvest in the business. On behalf
of the Board, I would like to thank
all our employees who helped
deliver a successful year for IAG.
8
International Airlines Group | Annual Report and Accounts 2023
Bringing economic growth
Reactivating our network has meant
more opportunities for people and
businesses to connect. This is important
for IAG’s performance but also has
a positive impact on the economies
in which we operate. Aviation boosts
economies, supports jobs and develops
supply chains globally. This year, we
commissioned a study with consultants
PwC which analysed IAG’s economic
impact across the EU and UK for the first
time. It took 2019 as the reference period,
the last full year of flying before the
pandemic. PwC found that IAG supports
more than 600,000 jobs in the region
directly and indirectly and through the
spending of travellers, contributing nearly
€70 billion of GDP to the EU and UK.
Reaffirming our strategy
In November, we welcomed investors,
shareholders and advisers to our first
Capital Markets Day since 2019. This was
an opportunity to reiterate the strength
of the Group model and to update on
our strategic priorities: strengthening
IAG’s leading positions in some of the
world’s most valuable aviation markets
and our portfolio of world-class brands;
enabling IAG Loyalty to reach its full
potential; further developing our
best-in-class strategic partnerships
portfolio and ensuring a financially
stable and sustainable business.
This will be underpinned by Group-wide
transformation of our businesses
to drive efficiencies and higher
customer satisfaction. Delivering
on these priorities will enable IAG
to maximise total shareholder returns.
a target of 40% of senior leadership
roles to be held by women by 2025;
we can report that by the end of 2023,
the figure was 36%.
I was pleased that so many of our
shareholders, investors, lenders and
sell-side analysts took the opportunity to
attend and I thank them for their
ongoing support.
Growing sustainably
As we maintain and grow IAG’s positive
impact on the global economy, we must
also ensure we are growing as
sustainably as possible. IAG led the way
for aviation when it was the first global
airline group to commit to net zero by
2050 and the first European airline group
to set the target of 10% Sustainable
Aviation Fuel (SAF) by 2030. We have a
roadmap of initiatives to enable us to
reach the net zero target including SAF,
new fleet and other technologies. We
have made significant progress against
these ambitions this year.
As of 31 December 2023, our total
investment in SAF is $1.0 billion of which
86% is future commitments1.
In February 2024, we finalised a deal with
eSAF company Twelve. This means we
have secured one third of the SAF required
to meet IAG’s 10% SAF by 2030 target.
Equally as important to our future is
ensuring we maintain a diverse and
experienced leadership team as well
as a pipeline of talent at IAG. We set
Our outlook
Looking at the external environment,
there are uncertainties in the outlook for
the year ahead. Although our industry
has so far appeared resilient to the
challenging economic environment,
2024 could bring additional headwinds.
Geopolitical instability and the closure of
foreign airspace is impacting on flight
routes and destinations. In addition, we
have faced some operational challenges,
particularly at London Heathrow and
Dublin airports. There is a risk of further
disruption caused by air traffic control
strikes in France and incidents such as
the NATS outage in August in the UK.
Despite the uncertainty, we are
confident that we will deliver both
IAG’s medium- and long-term financial
ambitions. We have the ambition and
the capability to do it, thanks to our
people who are the ones driving our
performance and transformation.
Their support gives us confidence
that we will deliver on our commitment
to sustainable growth and returns
for shareholders, while continuing
to contribute to countries,
communities and economies.
Javier Ferrán
Chairman
“Reactivating our
network has meant
more opportunities for
people and businesses
to connect. Aviation boosts
economies, supports jobs
and develops supply
chains globally.”
International Airlines Group | Annual Report and Accounts 2023
9
1 Based on an assumed jet fuel price of $800 per metric tonne and
contractual commitments for SAF production.
Financial StatementsCorporate GovernanceStrategic Report Chief Executive Officer’s review
Luis Gallego
IAG CEO
Transforming
for the future
Luis Gallego, IAG CEO, discusses 2023,
a year when IAG delivered a strong financial
performance, and shared its strategic priorities
and transformation plans for the future.
What we do in IAG has a positive
impact in the world, fulfilling our
purpose of connecting people,
businesses and countries. In 2023,
our airlines flew more than 115 million
passengers to more than 250
destinations and transported valuable
cargo across our network. IAG delivered
strong profits and returns on invested
capital last year, with all businesses
within the Group performing well.
These achievements have only been
possible because of the dedication
of our people in all IAG businesses,
and I would like to thank them all for
the commitment they have shown.
Strong financial performance
In 2023, IAG delivered an operating
profit before exceptional items of
€3,507 million, an improvement of
€2,260 million versus 2022. This allowed
us to significantly strengthen our
balance sheet, reducing gross debt by
€3.9 billion by the end of the year. The
Group also regained its S&P
investment-grade credit rating, which is
another important milestone in its
financial recovery.
10
International Airlines Group | Annual Report and Accounts 2023
markets from Europe, 31% on routes to
North America and 19% on routes to
Latin America and the Caribbean. A little
over a third of this traffic is concentrated
in the European short-haul market, with
the remaining 15% in the largest point-
to-point markets in the rest of the world.
The size and position of our hubs –
Barcelona, Dublin, London and Madrid
– on the western side of Europe give us
a major competitive advantage.
Regarding the Air Europa transaction, we
are working on a very ambitious remedy
package that we believe will be able to
fully address the European Commission’s
concerns. We remain committed to
closing this transaction as quickly as
possible in 2024 to start delivering the
deal’s benefits for consumers and the
wider Spanish economy, while increasing
Madrid’s competitiveness with other
European hubs.
Our brand portfolio is well-positioned
across a range of customer segments
from cost-conscious to premium
travellers, leisure and business
passengers, and both short and long-
haul routes. All airlines have invested
in customer experience in 2023,
including in cabin interiors, lounge
upgrades, digital capability and service.
IAG airlines will invest approximately
€2.5 billion in customer initiatives,
including IT, from 2024 to 2026, a
two-fold increase compared with the
pre-COVID-19 pandemic average.
Driving earnings growth through
asset-light businesses
In addition to strengthening our airlines’
leadership positions, we will drive earnings
through our capital-light businesses, in
particular IAG Loyalty. We will focus on
developing IAG Loyalty so it can reach its
full potential within the Group. Our loyalty
programme offers high operating margins,
capital-light growth and sustainable cash
flows with a less seasonal earnings profile
than airlines. IAG Loyalty has become an
increasingly attractive part of the IAG
portfolio, generating external revenue of
over £1 billion and profit growth of 10%
per annum. With over 8.2 million active
members, IAG Loyalty provides the
opportunity to gain greater insights into
customer needs and behaviours, in order
to drive greater loyalty for our airline
brands. It attracted a record number of
new customers in 2023 and created new
opportunities for customers to collect and
redeem Avios. A new partnership with
Qatar Airways also saw its Privilege Club
adopt Avios as its reward currency, and
Finnair will also do this from 2024. IAG
Loyalty continues to enhance its business
with new initiatives including the first
Avios-only flights.
As a Group we will also focus on
developing and leveraging our portfolio
of strategic airline partnerships, which
drive further asset-light growth for
the Group and value to our airlines
and customers. Joint Businesses play
a key role in this.
This improved financial position has
enabled us to invest on behalf of our
customers into our brands including
products, services and IT, as well as
adding 32 new fuel-efficient aircraft to
the fleet. Our airlines continued to
recover with capacity in the fourth
quarter at 98.6% of 2019 levels across the
Group. Aer Lingus, Iberia and Vueling
operated higher levels of capacity than
2019, with British Airways 9.9% lower
than in 2019, due to the later reopening
of Asia Pacific routes, with further
recovery expected in 2024.
Our strategy for delivering world-
class margins
This performance demonstrates that our
strategy is working. In November, we
gathered investors, shareholders,
sell-side analysts, lenders and advisers
to talk about the future of the Group, in
our first Capital Markets Day since 2019.
We shared our strategic imperatives
going forward. Firstly, we will strengthen
our core, driving value from the
leadership positions of our airlines in our
core markets of the US, Latin America
and domestic Spain, and from our
world-class brands. Secondly, we will
drive earnings growth through asset-
light businesses, enabling IAG Loyalty to
reach its full potential within the Group
and leveraging our strategic airline
partnerships. Thirdly, we will ensure that
IAG is a sustainable business for the long
term, with disciplined capital allocation,
a robust balance sheet and delivery of
our net zero target by 2050, enabled by
IAG’s proven structure and business
model. All of this will be underpinned by
a focus on delivering Group-wide
transformation, driving efficiencies and
innovation.
Strengthening our core
We will continue to develop our
leadership positions and hubs. IAG
operates in some of the world’s largest
and most attractive aviation markets.
The total market to and from Europe
is worth around €180 billion per annum
in revenue. The Group’s passenger traffic
is in the largest and most attractive
“We are looking for new
technologies to help us
elevate our customer
experience and operations,
such as digitised services
for friction-free travel and
new product offerings.”
International Airlines Group | Annual Report and Accounts 2023
11
Financial StatementsCorporate GovernanceStrategic Report Chief Executive Officer’s review continued
In 2023, the Atlantic Joint Business
enabled further investment in our
customer experience, with British
Airways, Iberia and American Airlines
co-locating at JFK Airport. The Group
expanded its Joint Business with Qatar
Airways too, the largest in the world
by number of countries, with the
addition of Iberia and launch of the
Madrid-Doha route.
Operating under a strengthened
financial and sustainability
framework
We always said that our unique business
model would deliver resilience in the
case of a downturn, and that was proven
during the COVID-19 pandemic. In 2023,
we have improved the financial
foundations of IAG which is evident in
our full year results. In 2024, we will
ensure that our balance sheet stays
strong and that we are disciplined with
our capital allocation. IAG is committed
to delivering world-class operating
margins and returns, and in November
we announced our medium-term
ambition to deliver 12-15% operating
margins and 13-16% returns on invested
capital. At the same time, we will retain
the focus on building resilience into our
operations. We will do this by making
targeted investments, particularly in
IT as well as by driving efficiencies.
We will also continue to invest
in sustainability.
Sustainability remains a top priority
IAG has always been a leader on the
path to net zero, being the first airline
group globally to commit to net zero
by 2050. We are further committed
to our goal of meeting 10% of our
fuel needs with Sustainable Aviation
Fuels (SAF) by 2030. We have a clear
pathway to achieving these targets
which includes more efficient aircraft,
SAF and carbon removals.
Our Group keeps working with
producers to secure our airlines’ SAF
needs as soon as possible. An example
of this is our collaboration with Nova
Pangaea. We are investing in and
working closely with the business, which
is building the UK’s first waste-to-SAF
facility in Teesside. Also, we are looking
forward to taking sustainable fuel
directly from LanzaJet in the US, the
world’s first alcohol-to-jet production
facility, which opened in 2024. In the UK
and Spain, we participate in initiatives
such as Jet Zero Council and Alianza
para la Sostenibilidad del Transporte
Aéreo which aim to develop a SAF
industry in both countries.
We are doing all we can to achieve our
targets, but we need all stakeholders in
the aviation ecosystem to work together
to enable the low-carbon transition.
In particular, the industry urgently
requires EU and UK policies to
incentivise the production of SAF
in Europe.
Underpinned by Group
transformation
Our performance in all areas of the
strategy is supported by our Group-wide
transformation programme.
Transformation is embedded in every
business in IAG. By transformation we
mean fundamental change that drives
results. We are looking at all areas of our
businesses in forensic detail, particularly
everything that impacts the customer
experience.
British Airways has a significant focus
on transformation with 600 individual
projects designed to enhance the
customer experience and increase
operational resilience and efficiency, with
a particular focus on ‘on-time
performance’. The airline is investing a
significant amount in transforming its IT
and commercial platforms, in its
customer proposition and in its
operations, particularly at London
Heathrow.
Both Iberia and Vueling have been
recognised among Europe’s most
punctual airlines and they provide
examples to peers in the Group of
how they have transformed operations
and harnessed technology to improve
‘on-time performance’. Vueling is
focusing on enhancing its digital offer,
and Iberia on updating its long-haul
economy and premium economy cabins
on its Airbus A350 fleet, to further
improve customer experience.
We are also actively exploring the new
wave of technology available to the
Group through the development of
artificial intelligence, harnessing the
specialist skills of teams in IAG Tech,
which the whole Group can benefit from.
People powering transformation
This Group-wide transformation
programme is driven by our people,
motivated by our purpose. We hold
innovation, commitment, care for people,
responsibility, pragmatism, execution,
ambition and resilience as key values that
enable us to fulfil our purpose.
Our front-line people are the ones that
deliver the differentiated customer
service that is critical to the success of
businesses.
During the year, IAG businesses have
hired over 13,000 people, which means
we are now back to the size of our
organisation in 2019. The volume and
quality of applications we have received
continues to show the strength of
not only our brands, but the career
opportunities that aviation has to offer.
We are pleased that in 2023, IAG
airlines were able to sign multi-year
pay agreements with almost all their
union groups.
Training schemes like British Airways’
Speedbird Academy, the third edition
of Iberia’s Cadet Programme, and the
Aer Lingus Future Pilot Programme are
some of the best opportunities available
for aspiring pilots, as these schemes
include covering the significant cost
of training for those who cannot afford
it. These initiatives not only provide
opportunity for those from
lower-income backgrounds, but also
allow us to ensure we are well resourced
for pilots, going into the future.
IAG also made progress towards
increasing the number of women
in senior leadership positions, and
we are on track to meet our target
of 40% of senior leadership roles to be
held by women by 2025.
Our Group model allows us to offer
senior leaders a unique chance for
progression across different businesses.
The CEOs of our airlines have all come
from other leadership positions within
the Group.
The challenges ahead
We know the year ahead could be
challenging for aviation. The world
is facing geopolitical conflict,
macroeconomic uncertainty, and of
course 2024 will be a significant year
politically with millions of people going
to the polls, including in the UK and
US as well as elections for the European
Parliament.
During 2023 we have faced persistent
issues with air traffic control strikes as
well as the NATS outage in August
which led to the cancellation of around a
quarter of flights from all UK airports in
a single day, affecting roughly 250,000
customers, across all of the aviation
sector. In 2024, we anticipate ongoing
challenges from air traffic control strikes
and restrictions which could cause
delays and disruption across Europe.
In conclusion, our strategy gives
us confidence
Despite the potential for further
headwinds, we are confident that our
strategy will ensure that IAG continues
to transform and develop in 2024.
In fact, the challenges ahead inspire us
to accelerate on our strategy. This is
all underpinned by embedding a culture
of transformation which encourages
efficiency and innovative thinking.
Transformation for IAG is about
fundamental, structural change across
all our operations delivering a measurable
impact. These outcomes will improve
the way we work and enable us to keep
delivering for our people, customers,
shareholders and in sustainability.
Luis Gallego
IAG Chief Executive Officer
12
International Airlines Group | Annual Report and Accounts 2023
Left: IAG CEO, Luis
Gallego speaking at the
2023 Capital Markets Day
Capital Markets Day 2023
Sharing
our strategy
for the future
On 21 November 2023,
we hosted a Capital
Markets Day for the first
time since 2019 at our
Waterside offices
in London.
The event was well attended, with
sell-side analysts, investors and lenders
present to learn more about our
strategic priorities and prospects.
The event also gave attendees a chance
to meet our management team in
person, who then set out how we will
transform the organisation to deliver
sustainable growth and world-class
operating margins and maximise total
shareholder returns. A wide range of
managers from across the Group were
also present to give more depth and
insight for attendees on an informal
basis during breaks from the
presentations.
IAG CEO Luis Gallego opened the event
with a presentation of IAG’s investment
case, which summarised IAG’s strategy.
In particular this will focus on three key
strategic imperatives: strengthening
our core, driving earnings growth
through asset-light businesses and
operating under a strengthened
financial and sustainability framework,
all underpinned by Group-wide
transformation.
IAG’s Management Committee also
presented the Group’s plans for the
medium term from 2024 to 2026.
Maximising total shareholder returns
The strategy will enable IAG to deliver
world-class operating margins and
returns on invested capital. The Group
has a high-quality and increasingly
diverse revenue stream, while
transformation plans will result in further
revenue enhancements and cost
efficiencies.
This will help deliver the financial targets
that we have set ourselves:
• operating profit margins of 12%-15%
• return on invested capital of 13%-16%
• accretive ASK growth of 4%-5%
between 2024 and 2026
• leverage through the cycle of less than
1.8x
There was a Q&A session after the
presentations, in which all members
of the Management Committee
participated.
The day included demonstrations of
some of the customer products available
at British Airways and Iberia, including
business cabin seats and food and
beverages, as well as proprietary
technology showing real-time IAG
aircraft movements on the ground and
in the air and a simulator from Vueling.
Cabin crew from all our airlines were
present, hosting our guests.
“IAG is transforming its
businesses to be more
efficient and resilient
and to drive sustainable
earnings. Our businesses
are sharing best
practices to deliver
transformational value.”
All information on our Capital
Markets Day is available
on our website, including a
webcast recording of the day.
International Airlines Group | Annual Report and Accounts 2023
13
Financial StatementsCorporate GovernanceStrategic Report Management Committee
Adam Daniels
Chairman and Chief
Executive Officer
of IAG Loyalty
Jorge Saco
Chief Information,
Procurement, Services
and Innovation Officer
Sean Doyle
Chairman and Chief
Executive Officer
of British Airways
Sarah Clements
General Counsel
Nicholas Cadbury
Chief Financial Officer
and Interim Non-Executive
Chairman of Cargo
Luis Gallego
IAG Chief
Executive Officer
14
International Airlines Group | Annual Report and Accounts 2023
Fernando Candela
Chairman and Chief
Executive Officer of Iberia
and LEVEL
Jonathan Sullivan
Chief Transformation
and Corporate
Development Officer
Marco Sansavini
Chairman and
Chief Executive
Officer of Vueling
Julio Rodriguez
Chief Commercial
Strategy Officer
Carolina Martinoli
Chief People, Corporate
Affairs and Sustainability Officer
Lynne Embleton
Chairman and Chief
Executive Officer
of Aer Lingus
A connected
team
The IAG Management Committee,
led by Luis Gallego, is responsible
for the overall execution and delivery
of the strategy of the Group.
International Airlines Group | Annual Report and Accounts 2023
15
Financial StatementsCorporate GovernanceStrategic Report Business at a glance
Connecting people,
businesses and countries
We have a portfolio of world-class brands
and operations
Who we are
We are International
Airlines Group (IAG).
One of the world’s largest
airline groups, made up
of our airline portfolio
brands and our non-airline
businesses. Our world-
class airline brands
have distinct identities,
customer propositions
and strategies.
INTERNATIONAL
AIRLINES
GROUP
For more information see the
operating companies’ sections
Our stakeholders
Customers
Employees
Suppliers
Shareholders,
lenders and
other financial
stakeholders
Governments
and regulators
16
International Airlines Group | Annual Report and Accounts 2023
Creating global connections
Domestic & Europe
33.8
North America
31.7
Latin America
& Caribbean
18.5
Africa, Middle
East & South Asia
12.5
Asia Pacific
3.5
Available seat kilometres
(ASK % of IAG 2023 network)
250+
destinations
across 91 countries
582
fleet
115.6 million
passengers
71,794
employees globally
4.7 billion
cargo tonne kilometres
142.8 billion
Avios issued
International Airlines Group | Annual Report and Accounts 2023
17
Financial StatementsCorporate GovernanceStrategic Report Business model
Our proven structure facilitates
transformation and innovation
Corporate parent company
Drive portfolio and
financial strategy
• Drive Group corporate strategy;
set the portfolio
Performance manage
• Performance manage
the operating companies
Facilitate value capture
and share best practices
• Set the ambition and facilitate
asset-light growth
• Allocate capital and manage
• Oversee transformation of the
• Drive top talent management
the balance sheet
operating companies
and pipeline
• Manage investor relations
and financial stakeholders
• Drive value through mergers
and acquisitions, partnerships
and joint businesses
• Drive sustainability agenda
• Facilitate capture of additional
synergies
• Drive innovation
• Provide centres of excellence to
facilitate best-practice sharing
Operating companies
• Performance accountability
• Commercial independence
• Operational independence
• Customer value proposition and relationship
• People management
• Manage relevant stakeholders
Central platform
Allow our airlines to benefit from scale and world-class expertise
IAG, as the parent company, defines
the Group ambition and drives its
long-term strategy. Its independence
from the operating companies enables
IAG to set performance targets for
these, manage their progress, oversee
their transformation initiatives, and
efficiently allocate capital within
the Group. IAG supports intra-Group
coordination, best practices sharing
and talent management, facilitating the
capture of synergies. Our model also
allows the Group to take part more
effectively in industry consolidation,
with IAG ensuring inorganic options are
aligned with the Group’s strategy
and providing a central platform to
the benefit of new operating companies
joining the Group.
The Group’s structure allows our
brands to focus their efforts on their
addressable markets, customer
proposition, cultural identity, commercial
strategy and their industrial relations,
while its scale supports innovation and
investment in new products and services
to enhance our operating companies’
customer experience.
The Group’s portfolio sits on a central
platform, which drives efficiency and
transformation. The IAG central platform
leads collective efforts for the Group
to be at the forefront of innovation
and sustainability in the airline industry,
by supporting and scaling top emerging
technologies in travel and aviation
and working towards ambitious
sustainability targets.
18
International Airlines Group | Annual Report and Accounts 2023
Strategy
Our focus is on maximising
total shareholder returns
Strengthening
our core
Driving earnings
growth through
asset-light businesses
1.
Growing our portfolio
of global leadership
positions
3.
Growing IAG Loyalty
Operating under
a strengthened
financial and
sustainability
framework
5.
Disciplined capital
allocation and balance
sheet management
2.
Strengthening our
portfolio of world-class
brands and operations
4.
Further developing and
leveraging our strategic
airline partnerships
6.
Industry leader to net zero
Transforming our business
Proven
structure and
business model
Investing in
unrivalled network
and customer
proposition
Driving efficiency
and innovation
World-class and
diverse team
Sustainable growth + Delivering world-class margins
= Maximising total shareholder returns
Our medium-term ambitions
12-15%
operating margin1
13-16%
ROIC1
+4-5%2
organic ASK
growth
<1.8x leverage1
through cycle
to support
inorganic growth
1 For further detail refer to the Alternative performance measures section of the financial statements
2 2024 to 2026
International Airlines Group | Annual Report and Accounts 2023
19
Financial StatementsCorporate GovernanceStrategic Report Strategic imperatives
Strategic imperatives expanded
Strengthening
our core
How we create value:
Growing our portfolio of global
leadership positions and
strengthening our portfolio of
world-class brands and operations
Our activity in 2023
In 2023, following a strong demand
recovery environment across the
industry, the Group has kept its focus
on continuing to strengthen its core
by maintaining and growing its global
leadership positions and strengthening
our portfolio of world-class brands.
1. Growing our portfolio of global
leadership positions
Our brands have experienced sustained
strong demand that has driven positive
unit revenues across all regions. With
a resilient leisure and premium leisure
demand environment, Aer Lingus, Iberia,
LEVEL Spain and Vueling have managed
to grow capacity ahead of 2019 levels,
whilst British Airways’ recovery remains
slower driven by a softer business travel
environment after the pandemic and
limited capacity to fly east. The Group
operating companies have capitalised
on the positive demand landscape to grow
organically in our core markets. For
example, Iberia has focused on increasing
capacity on primary cities in Latin America,
such as Bogota, Lima and Mexico City,
operating the airline’s busiest schedule to
the region thus far. British Airways also
started a new year-round service to
Cincinnati and announced the resumption
of Abu Dhabi in 2024, whilst Aer Lingus
announced the resumption of Minneapolis
and the launch of a new direct service to
Denver for 2024. Vueling put a special
emphasis on de-seasonalisation during the
2023 winter season through increased
utilisation, adding more capacity to winter
sun destinations, such as the Canary
Islands and flying almost 37 million in 2023,
a Vueling record.
2. Strengthening our portfolio of
world-class brands and operations
Throughout 2023, we have continued
to improve and transform our brands
to be able to provide our customers
with an unrivalled proposition and reach
the full potential of our businesses
in the long term. The Group is
embedding transformation across all our
business portfolio, looking at all business
areas in forensic detail, building
on our strong foundations of previous
execution to drive a step-change
in revenue, costs and operations.
Despite the air traffic control (ATC)
challenges in Europe, which have
resulted in frequent passenger
disruption, our airlines’ investments
in transformation have delivered
enhancements in operational efficiency.
For example, Iberia managed to achieve
continued global leadership in on-time
performance (OTP) by investing in
multiple efficiency initiatives, including
increasing crew resources and
coordination between scheduling
and operations, whilst Vueling attained
an improvement of more than 4.7
percentage points in OTP, ahead of its
transformation targets. British Airways
faced punctuality challenges over the
year, driven by both internal and
external factors, but started seeing
gradual improvements from the fourth
quarter after the implementation of new
initiatives such as the re-shape of
London Heathrow Terminal 5 minimum
connection times, the optimisation of
scheduled block hours and the
smoothing of the schedule to even out
handling workload.
Our brands also continued to improve
the customer experience by investing
in enhancing our product across all the
journey touchpoints. For example,
Iberia rolled out its ‘Next’ suite-style
seat with direct aisle access on its Airbus
A350 business cabins and redesigned
the catering proposition across cabins
on long-haul flights, including an
additional meal in economy and
premium economy. British Airways
implemented numerous customer
initiatives, such as trialling biometrics to
speed up the boarding process, and
continued to fit its new business cabin
seat, the Club Suite, onto existing
long-haul aircraft.
The Group also remains committed
to invest in the digitalisation of the
customer journey to provide our
customers with a more personalised
and elevated travel experience.
During the year, Aer Lingus delivered
a significant transformation in its
Customer Contact Centre by investing
in technology, redesigning its process
workflow and implementing bot
automation that have brought the
average wait time below two minutes
and increased customer satisfaction
rates by 30% compared with 2022.
British Airways initiated the
re-platforming of its website and the
British Airways app, which allow for
deeper personalisation, full online
serviceability, end-to-end trip
management and a fast product release
cycle. Vueling implemented a new social
media platform to make case
management more efficient and
partnered with industry-leading
technology organisations to digitalise
customer care and disruption
management.
Our priorities for 2024
During 2024, the Group will aim to
continue strengthening our core markets
and hubs where we have a geographical
advantage and cultural links, including
the US, Latin America and Spain, whilst
continuing to explore the potential of
future profit pools.
IAG will also continue participating
in the industry’s consolidation process
when value-accretive merger and
acquisition (M&A) opportunities arise.
We aim to complete the Air Europa
acquisition by the end of 2024, subject to
receipt of regulatory clearance, which will
enable the Group to tap into new
markets in Latin America and increase
global connectivity at the Madrid hub.
Our operating companies will remain
focused on delivering the transformation
plans for their different business
segments and accelerating digital
transformation, which will ensure the
Group remains well-positioned to
continue to create value for our
customers and all our stakeholders.
20
International Airlines Group | Annual Report and Accounts 2023
Driving earnings
growth through
asset-light businesses
How we create value:
Growing IAG Loyalty and further
developing and leveraging our
strategic airline partnerships
Our activity in 2023
Alongside strengthening our core flying
operations, in 2023 the Group has
focused on driving a larger portion
of asset-light earnings into our portfolio,
generating in turn additional value for
our airlines, our customers and building
a more robust, diversified and
resilient business.
3. Growing IAG Loyalty
In 2023, IAG Loyalty leveraged its
positive momentum and continued
to contribute greatly to the Group.
The strength of the business was
reflected in record membership growth
surpassing 8.2 million active members
with heightened levels of member
activity through increased levels
of Avios collection and spend.
This has been achieved through
continuous investment in the customer
proposition to drive deeper customer
engagement and to deliver a strong
contribution to the Group. We are
continuing to develop our global loyalty
currency, Avios. Following the adoption
by Qatar Airways in 2022, Finnair was
next to announce the adoption of Avios
in early 2024, further building Avios’
position as a global currency. We
successfully leverage our large portfolio
of air and non-air partners who provide
compelling collection opportunities for
our customers in travel, retail or financial
services. Our partnerships with
American Express, Barclays and
Santander continue to provide strong
levels of external remuneration and we
continue to expand new partnerships
with, for example, partnerships launched
with open-air retailer Bicester Village or
World Duty Free. Redemption
opportunities, meant to further enhance
the utility of Avios for our customers,
are also growing with the launch of
Avios-only flights, which started in
November 2023 with a flight to Sharm
El Sheikh and the announcement
of several more destinations in 2024.
Additionally, this year we transitioned
the Group’s loyalty programmes to a
spend-based earn model to further
support member engagement.
4. Further developing and leveraging
our strategic airline partnerships
During 2023, IAG continued to develop
and leverage our portfolio of strategic
airline partnerships, driving asset-light
growth and incremental value. Our joint
businesses provide our airlines and
partners with the ability to develop
a market-leading customer proposition
through combined networks, loyalty
reciprocity and an overall improved
flying experience.
The Atlantic Joint Business (AJB)
between IAG carriers and American
Airlines is the leader in the highly
attractive Europe-US market. In 2023,
Aer Lingus continued advancing
its integration in the AJB through
codeshare expansion with American
Airlines and improved loyalty benefits
for customers. The AJB also continued
to invest in our customer experience,
with British Airways and Iberia now
co-locating with American Airlines at
JFK Airport in New York whilst offering
a new premium check-in area, new
lounges and an overall improved
network connectivity and experience
at the airport.
The Group continued extracting value
from its unique relationship with Qatar
Airways. In addition to the joint business,
it includes the joint loyalty currency
Avios, the interline relationship between
the Cargo businesses and leveraging
of the combined size of IAG and Qatar
Airways for joint procurement of an
increasing number of categories.
The joint business with Qatar Airways
is the world’s largest in terms of
countries covered. Iberia joined in 2023
and launched a daily flight to Doha from
Madrid, adding dozens of new
destinations for Iberia customers
connecting on to Qatar in Doha, a truly
asset-light way of increasing Iberia’s
footprint in Asia, Middle East, Africa
and Oceania. We also continue to
collaborate strongly on the loyalty side
with Qatar Airways. For instance,
IAG and Qatar launched a new joint
co-brand credit card in India, further
enhancing our footprint in the world’s
most-populous country.
The reopening of Asia saw British
Airways rebuild its network to China
and reactivate its joint business with
China Southern, whilst the airline
restored its network to Tokyo, part
of the Siberian Joint Business with our
partners Japan Airlines and Finnair.
Our priorities for 2024
In 2024, IAG Loyalty will continue
to develop its capabilities and invest
in its customer experience with the
development of single Avios balances
and improved member benefits. These
will include additional Avios-only flights,
enhanced pay-with-Avios capabilities
with British Airways and improved
redemption for hotels and car hires.
We will also support Finnair’s adoption
of Avios and in parallel explore
opportunities with new partners
to expand the global reach of Avios.
In 2024, the Group will continue
to strengthen its airline partnerships
to maintain our leading customer
proposition with best-in-class product
and a seamless customer journey. In our
AJB we will enhance our joint loyalty
proposition with aligned mileage accrual,
explore further airport co-location
opportunities and increase capacity
to popular destinations. With Qatar
Airways, our first focus will be to
integrate Iberia into the Qatar Joint
Business whilst we look for further
opportunities to grow our network.
International Airlines Group | Annual Report and Accounts 2023
21
Financial StatementsCorporate GovernanceStrategic Report Strategic imperatives continued
Operating under
a strengthened
financial and
sustainability
framework
How we create value:
Disciplined capital allocation
and balance sheet management
Industry leader to net zero
Our activity in 2023
This year we continued to experience
volatility across the global economy.
Regular increases in interest rates
following record high inflation levels,
and supply chain and operations
disruptions, all aggravated by the wars
in Ukraine and the Middle East, have
impacted our businesses. Despite this,
IAG’s companies demonstrated the
ability to meet market demand, while
carrying out transformation initiatives,
resulting in a strong performance across
the Group. We managed a robust
recovery in our margins and balance
sheet, which has allowed us to reinvest
in the business, and reduce our debt.
5. Disciplined capital allocation and
balance sheet management
In 2023, we have achieved a strong
operating profit of €3,507 million for the
full year, driven by strong demand and
our teams’ efforts in revenue and cost
transformation initiatives, helping
to offset investment and inflation.
On the revenue side, we have invested
in commercial technology and skills, and
upgraded customer journey experiences.
On the cost side, we put a special focus
into OTP and resilience to minimise
disruption in a very challenging
operating environment, and end-to-end
process re-engineering, among
other initiatives.
Following the past three challenging
years, having a disciplined approach
to capital allocation has been especially
crucial. Our framework meets the needs
of all stakeholders: investors, employees,
customers and society; whilst our
targets, like maintaining a lower than
1.8x net leverage ratio through the cycle,
ensure resilience and access to more
favourable funding. This allows IAG
to pursue our strategy by investing in
the business, our customer experience,
digital infrastructure and sustainability
targets, whilst growing organically
and/or inorganically if value-accretive
opportunities exist and returning value
to the shareholders.
During 2023 we reduced our gross debt
position by €3.9 billion, including the
payment of a £2.0 billion (€2.3 billion)
loan to British Airways partially
guaranteed by the UKEF, and loans
totalling €1.0 billion to Iberia and
Vueling, partially backed by Spain’s ICO.
Efforts to deleverage and improve
operating performance contributed to
both IAG and British Airways regaining
their investment-grade credit ratings
with S&P at the end of the third quarter
of 2023.
6. Industry leader to net zero
Alongside a robust financial framework,
creating a truly sustainable business
is fundamental to our long-term growth.
While aviation is essential to our global
society, there is no denying that the
industry must undergo great efforts
to minimise its carbon footprint and
fight climate change. IAG has led
industry action on sustainability for over
a decade, having been the first airline
group worldwide to commit to net zero
emissions by 2050. SAF is a key solution
in our transition plan to net zero and we
have committed to a target of 10% SAF
use by 2030.
We are continuously working towards
our sustainability targets, having secured
c.33% of our total committed SAF
to date. This year, we have agreed deals
with several SAF producers. An example
is the UK’s Nova Pangaea Technologies,
a clean-tech company developing
advanced biofuels used to produce SAF
from non-food agricultural waste and
wood residues. IAG will support the
building of its first waste-to-fuel
commercial-scale production facility,
and the UK’s first of its kind.
Additionally, Microsoft co-funded IAG’s
purchase of 14,700 tonnes of SAF, the
largest co-funded purchase agreement
of SAF for emissions reductions globally.
Additionally, we continued to engage
with cutting-edge technology companies
such as ZeroAvia, i6 and Heirloom
through our innovation accelerator
Hangar 51, to provide multiple
decarbonisation solutions.
Our priorities for 2024
During 2024, the Group will keep
operating under a disciplined and resilient
financial framework whilst investing in
our strategy for the years to come and
delivering on our sustainability targets.
Using our financial framework, we plan
to continue re-investing in the business,
with an expected annual average capital
expenditure of c.€4.5 billion for the next
three years. This spending will further
improve our product and customer
proposition, supporting IAG in advancing
with our fuel efficiency targets,
and allowing the Group to continue
to pursue sustainable growth.
In terms of our sustainability ambition,
we will continue to work with the
industry, technology start-ups and
government institutions to further
accelerate SAF production efforts, and
explore new technologies and ways to
accelerate the industry decarbonisation
process. This includes maintaining our
efforts with the UK and EU governments
to persuade them to commit and invest
in more SAF production.
Overall, IAG is committed to ensure
sustainable growth and value creation
for all our stakeholders, investing
in our customers, people and the
broader society while we create
long-term value for our shareholders.
22
International Airlines Group | Annual Report and Accounts 2023
Key performance indicators
Tracking our performance
We use key performance indicators (KPIs) to assess and to monitor
the Group’s performance. We evaluate opportunities based
on the strategic imperatives of the Group and use the KPIs to identify
and generate sustainable value for our shareholders.
RoIC
(%)1 , 2
16
12
8
4
0
A R
Link to strategic imperatives
14.6
14.8
4.6
2019
2022
2023
Definition and purpose
Return on Invested Capital (RoIC)
is defined as EBITDA before exceptional
items, less fleet depreciation adjusted
for inflation, 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.
Medium-term ambition 13-16%
Operating margin
(%)1, 2
A
Link to strategic imperatives
15
12
9
6
3
0
12.8
11.9
5.4
2019
2022
2023
Medium-term ambition 12-15%
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 RoIC improved to 14.8%
from 4.6% in 2022 reflecting the Group’s
strong operating performance, with
EBITDA before exceptional items of
€5.6 billion. Invested capital was 8%
higher, reflecting 34 aircraft deliveries
and the investment in customer product
and IT during the period. The weighted
average age of fleet was marginally
lower at 11.0 years compared to 11.3
years in 2022, reflecting the net impact
of the ageing of the existing fleet, older
aircraft withdrawn from service and new
aircraft delivered in 2023.
Performance
The Group’s operating margin before
exceptional items recovered to 11.9%
from 5.4% in 2022. Total revenue rose by
€6.4 billion to €29.5 billion, reflecting a
22.6% increase in capacity versus 2022
together with a load factor 3.5 points
higher and yields (per revenue
passenger kilometre) 3.8% higher. Cargo
revenue was down 28.4% on 2022,
driven by lower yields with cargo
volumes 17.2% higher. Other revenue
was up €494 million from 2022
reflecting growth of IAG Loyalty and
recovery of Iberia’s third-party
maintenance business. Non-fuel costs
were down 4.4% on a unit basis and unit
fuel costs were 0.7% higher than 2022.
Key
A
R
Alternative performance measure
Measure linked to remuneration
of Management Committee
Link to our strategic imperatives
Strategic imperatives
Strengthening our core
Driving earnings growth
through asset-light businesses
Operating under a strengthened
financial and sustainability
framework
International Airlines Group | Annual Report and Accounts 2023
23
Financial StatementsCorporate GovernanceStrategic Report Key performance indicators continued
Capacity
(ASKs billion)
Link to strategic imperatives
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.
350
300
250
200
150
100
50
0
338
95.7%
323
78.0%
264
2019
2022
2023
Medium-term ambition +4-5% ASK growth
% of 2019 capacity
Performance
The Group continued to restore its
passenger capacity, following the
significant reductions due to COVID-19,
with passenger capacity now at 95.7% of
that of 2019. Passenger load factor was
85.3%, 3.5 points higher than in the
previous year and 0.7 points higher than
in 2019.
Gross CAPEX
(€ million)
Link to strategic imperatives
3,465
3,875
3,544
4,000
3,500
3,000
2,500
2,000
1,500
1,000
500
0
2019
2022
2023
Definition and purpose
Gross capex (capital expenditure) is
defined as the acquisition of property,
plant and equipment, and intangible
assets reported in the Group’s
consolidated cash flow statement and
includes fleet, customer product, IT, ETS
allowances and infrastructure, including
those assets initially purchased and then
subject to subsequent sale and
leaseback transactions and recognised
as right of use assets. 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 2023 was €3.5 billion.
Fleet and fleet-related capex
represented 77% of the total capital
expenditure and included final delivery
payments related to 27 aircraft, together
with pre-delivery payments and
maintenance spend. Other spend
includes customer product, property
and IT investments, together with ETS
allowances. In addition, the Group took
delivery of seven aircraft on direct
leases, including one that was originally
planned as a delivery from the aircraft
manufacturer. Direct leases do not result
in capital expenditure for the Group.
For the KPIs, 2019 comparatives are shown to give a benchmark against the most recent year
before the disruption brought about by the impact of COVID-19.
1 For further detail refer to the Alternative performance measures section of the
financial statements.
2 The 2019 and 2022 results include a reclassification to conform with the current year
presentation for the Net gain on sale of property, plant and equipment. The 2019 results include
a restatement for the treatment of administration costs associated with the Group’s defined
benefit pension schemes.
24
International Airlines Group | Annual Report and Accounts 2023
Free cash flow
(€ million)1
A
Link to strategic imperatives
2,000
1,500
1,000
500
537
1,320
979
0
2019
2022
2023
Definition and purpose
Free cash flow is the cash generated
in the year, defined as the net cash flows
from operating activities less the cash
flows associated with the acquisition
of property, plant and equipment and
intangible assets. It represents the
cash-generating ability of the Group to
support operations and maintain its
capital assets, and is monitored by
the Group in making both investment
and capital decisions.
Performance
The Group’s free cash flow for 2023 was
€1.3 billion, €0.3 billion up from 2022
driven by strong cash flows from
operating activities at €4.9 billion which
reflect EBITDA performance and gross
capex for the period €0.3 billion lower
than in 2022.
Performance
Adjusted earnings per share was 50.6 €
cents compared to 5.6 € cents in 2022,
driven by the strong operating
performance, with net non-operating
costs also lower by €0.4 billion
reflecting lower net interest costs and a
favourable impact of net retranslation
credits in the year driven primarily by
the weakening of the US dollar. The
number of dilutive shares fell in 2023,
reflecting the full-year impact of the
repayment of the IAG €500 million
convertible bond in 2022. From 2020
the IAG number of shares increased
from 2.0 billion to 5.0 billion as a result
of the rights issue IAG completed in
September 2020.
Adjusted EPS
(€ cents)1, 2
A R
Link to strategic imperatives
80
70
60
50
40
30
20
10
0
Key
A
R
76.4
50.6
Definition and purpose
Adjusted earnings per share (EPS)
represents the diluted earnings for
the year before exceptional items
attributable to ordinary shareholders.
2019
5.6
2022
2023
Alternative performance measure
Measure linked to remuneration
of Management Committee
Link to our strategic imperatives
Strategic imperatives
Strengthening our core
Driving earnings growth
through asset-light businesses
Operating under a strengthened
financial and sustainability
framework
International Airlines Group | Annual Report and Accounts 2023
25
Financial StatementsCorporate GovernanceStrategic Report Key performance indicators continued
Net debt to EBITDA before
exceptional items1, 2 (times)
A
Link to strategic imperatives
3.1
1.4
1.7
3.5
3
2.5
2
1.5
1
0.5
0
2019
2022
2023
Definition and purpose
Net debt to EBITDA before exceptional
items (leverage) is calculated as
long-term borrowings (both current
and non-current), less cash, cash
equivalents and other current
interest-bearing deposits at
31 December, which is divided by
EBITDA before exceptional items for the
year. IAG uses this measure to monitor
leverage, to assess financial headroom
against our target maximum leverage of
1.8 times over the cycle.
Performance
The Group’s leverage improved to 1.7
times from 3.1 times in 2022, driven
by strong EBITDA before exceptional
items of €5.6 billion on net debt lower
by €1.1 billion. During the year gross debt
reduced by €3.9 billion to €16.1 billion,
driven by the repayment of €4.0 billion
of non-aircraft borrowings partially
offset by the net increase of aircraft
lease liabilities in the period.
Net Promoter Score
(NPS)
R
Link to strategic imperatives
30
25
20
15
10
5
0
25.8
18.4
18.6
2019
2022
2023
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 2023, NPS increased by 0.2 points
compared to 2022. Positive impacts can
be attributed to substantial investment
in our cabins and cabin product, the
enhancement of food and drink offering,
the effort to digitalise the customer
journey, and the improvements in
customer care. On-time performance
(OTP) was negatively impacted by
disruptions, stemming from diverse
factors such as air traffic control failures,
strikes, adverse weather events, supply
chain challenges, and baggage issues
across key airports. Our operating
companies responded proactively to
these challenges through initiatives and
transformation plans aimed at improving
OTP and all baggage-related processes,
among others.
For the KPIs, 2019 comparatives are shown to give a benchmark against the most recent year
before the disruption brought about by the impact of COVID-19.
1 For further detail refer to the Alternative performance measures section of the
financial statements.
2 The 2019 and 2022 results include a reclassification to conform with the current year
presentation for the Net gain on sale of property, plant and equipment. The 2019 results include
a restatement for the treatment of administration costs associated with the Group’s defined
benefit pension schemes.
26
International Airlines Group | Annual Report and Accounts 2023
Stakeholder engagement
Connecting with
our stakeholders
Our key stakeholders
We believe that IAG thrives
when the interests of our
different stakeholders are
appropriately balanced
so that they all share in our
success. It is therefore
important that we fully
understand all
stakeholders’ priorities,
expectations and concerns.
Our long-term commitment to
sustainability and corporate social
responsibility is embedded in all we do
at a Group and operating company level,
from our interactions with our customers
through to employees and shareholders.
We do not identify our communities
or the environment as distinct
stakeholder groups as they are integral
to the way in which we work. Our aim is
to be a force for good in the communities
in which we operate and, in so doing,
create value for all our stakeholders.
More detailed information is provided
in the operating companies and
Sustainability sections of this report.
The nature of our business lends itself
to continuous dialogue with a wide group
of stakeholders, whilst considering
our environmental and social impact.
Set out below is an overview of our key
stakeholders, their relevance for IAG’s
business model and strategy, the manner
in which the Group has engaged, key
topics of interest, and the challenges as
well as outcomes of our engagement.
Our statement in relation to section 172(1)
of the UK Companies Act, 2006, as well
as further information on our
engagement with shareholders and our
workforce, is set out in the Corporate
Governance section of this report.
International Airlines Group | Annual Report and Accounts 2023
27
Financial StatementsCorporate GovernanceStrategic Report Stakeholder engagement continued
Customers
Our customers are central to the
success of IAG. Customers choose
us primarily for our extensive
network and schedule and because
they trust our brands. We fly to five
continents. Through our wide range
of partnerships, our customers
benefit from an even larger global
network covering most countries in
the world.
Key metrics
NPS
18.6
+0.2 pts vly
Other metrics used to track engagement include:
• Customer satisfaction (CSAT) – rates
a customer’s experience on key touch points
in their customer journey
• NPS and CSAT inform business priorities
during the business planning stage, helping
to prioritise internal initiatives to drive
satisfaction improvements
• Claims and complaints – a Group consolidated
figure provides deeper insights into customer
challenges and is used to assess the
effectiveness of efforts to address concerns
• Contact centre key performance indicators –
help assess the efficiency, effectiveness and
quality of customer interactions
Why they are important
• We aim to provide unrivalled customer
propositions and a portfolio of
world-class brands targeting specific
demand spaces and travel occasions
• Passenger revenues, including fares
and ancillaries, are the most important
source of revenue for IAG
• Delivering outstanding customer
experience at all levels of the
business and all brands will give
us a leading position
• Recognising our most loyal customers
through loyalty programmes, earning
rewards on a broad range of items
when flying with our airlines and
partners, creates value for both IAG
and our customers, and builds the
relationship
How we engaged
Key topics
• Daily “Customer Voice” survey is sent to customers who have recently flown with us,
• Self-service and self-management
capabilities, particularly when there
is disruption
• Punctuality and operational resilience
• Digitalisation of customer journey
• Sustainability
• Expansion of our partnerships
collecting feedback on their experience
• Customer feedback through a variety of channels (contact centres, social media, feedback
from customer-facing employees) and partners (crews, lounge colleagues and ground
handling agents) help us understand key pain points throughout the customers’ journeys
• Brand surveys are done to understand and meet the needs and expectations of our
customers
• Claims and complaints are raised through different channels and monitored to
accommodate our customers and enable action where necessary
• Contact Centre services and other digital channels, for example chat bots on
our websites or WhatsApp 24/7, are used so that customers can reach out when needed
• Communicating information including latest changes in service or product enhancements
through various channels, including websites, e-mails and dynamic social media accounts
• Guidance and a high standard of customer care throughout the customer journey from
both airport and on-board colleagues
British Airways –
proactive customer care
In 2023, British Airways launched a
customer care initiative to revolutionise
our service by proactively addressing
our customers' needs. Our dedicated
team focuses on identifying opportunities
for proactive interventions. Utilising
specific channels and innovative
practices, we aim to address issues
before customers are even aware or
before they feel the need to contact us.
This proactive approach has started
to become standard practice with
our team reaching out, seemingly
unexpectedly, to resolve
impending issues.
One significant improvement is our ability
to support customers while they are
in the air, a service we call 'Connected
Teams'. This addresses a previous gap
in our service and allows us to provide
assistance at 35,000 feet.
This new service has already supported
multiple onward passengers who risked
missing their connecting flights. Through
Connected Teams, cabin crew have been
able to request and obtain flight and gate
information for tight connections, passing
this on to passengers, and helping them
get to their new gate as efficiently as
possible on landing.
We are committed to identifying and
resolving issues before they impact the
customer experience.
28
International Airlines Group | Annual Report and Accounts 2023
Challenges
Outcomes
• Loss of customer loyalty – dissatisfied
customers are more likely to switch
to competitors
• Reputation and brand equity – unhappy
customers are prone to sharing negative
experiences, which can harm the airlines’
reputation and brand image
• Decreased growth – negative reviews
may make it difficult for the airline to
attract new customers, impacting growth
• Financial risks – there are costs
associated with addressing customer
complaints, providing compensation
and marketing efforts to repair the
brand image
• Employee satisfaction and productivity
– poor customer experiences may affect
employee morale and job satisfaction
leading to lower productivity
• Customer experience – although our
teams work diligently to elevate
customer experience through investment
in digitalisation and customer care, we
continue to identify opportunities for
improvement and learning, particularly in
areas such as ensuring timely and
comprehensive communication to
customers about schedule changes
Feedback is key to enhancing our customer experience. IAG’s holistic approach uses
all available data from various channels to inform product and service strategy decisions.
Data is continuously analysed, supplementing it with additional customer research when
necessary. 2023 outcomes include those set out below:
• Digitalisation of the customer journey to improve ability to self-service. All operating
companies invested to digitalise the customer journey. Examples include Iberia’s
incorporation of GenAI to its WhatsApp and voice bot channels, and smart voice
assistance to call centres; British Airways introduced a conversational AI solution to the
call centre system; Vueling implemented new digital disruption solutions, e.g. launch
of self-management and the deployment of i-coupon; Aer Lingus is investing in digital
self-service and disruption management capabilities through a mobile first approach
• Delivering best-in-class customer care included the formation of a new ‘Proactive
Customer Care’ team in British Airways (see example below), or the second iteration
of Iberia’s ‘Todo empieza conmigo’, a programme focused on the delivery of cultural
transformation and warm, customer-centric service. Aer Lingus and Vueling are
conducting training for cabin crew and other customer-facing employees. Vueling
streamlined its refund and compensation process
• Improved WiFi on long-haul flights through collaboration with providers to launch
new satellites and enhance connectivity resulting in a notable improvement in
customer satisfaction
• Food and drink propositions continue to be improved including current offerings
and introducing complimentary products
• In-flight service improvements included upgrading and significantly increasing in-flight
entertainment systems content, better quality economy headsets and a new
informative video at the start of long-haul flights to clarify the service for that flight.
The number of public announcements on early morning / late night flights ('whisper
flights') were reduced resulting in improved customer satisfaction
• Baggage-related processes were improved including customer notifications about
baggage arrival or proactive delivery assistance; retrofitting of overhead bins to
address customer and crew complaints about the lack of trolley bag space on narrow-
body aircraft; enhanced communication of baggage allowances through clearer web
and email communication, targeted push notifications, and collaborating with agencies
for accurate customer information
Iberia –
WhatsApp Holistic Strategy
Iberia uses WhatsApp to improve
engagement and communication with
customers. A chat bot developed using AI
and machine learning recognises customer
intent with 95% accuracy and is prepared
to answer the most frequently asked
questions. Usage has grown 300% in the
last three years, reaching more than
850,000 sessions in 2023. For some
requests, customers prefer human contact,
and an experienced pool of agents in the
customer centres is ready to engage when
required, and ensures a ‘fast track’ for
Business customers or anyone that has
suffered a disruption. During 2023 more
than 250,000 customers used live chat.
This year, using real-time operational data,
Iberia deployed proactive notifications to
its most loyal customers with relevant
information about their journey. Since the
launch this summer, more than 200,000
notifications were sent to customers.
Following this strategy, two new customer-
centric initiatives were introduced:
• WhatsApp Premium, a dedicated channel
and 100% human assisted for Top Tier
frequent flyers from the IB Plus loyalty
programme, and
• WhatsApp Crew, an agile channel for crew
to escalate customer issues and get
real-time responses for them, generating a
WOW effect while flying with proactive
communication for the customers.
International Airlines Group | Annual Report and Accounts 2023
29
Financial StatementsCorporate GovernanceStrategic Report Stakeholder engagement continued
Employees
The IAG model empowers each
operating company to deliver for its
customers and people. Employee
contribution is paramount to our
strategy, prompting each company
to establish effective ways to
engage, listen and act on employee
feedback. Our employees shape our
business and are representative of
our international footprint. We are
proud of the diversity within our
operating companies and the
progress made on our journey to
making IAG more diverse and
inclusive.
Key metrics
Recruited over
13,500
colleagues across
our IAG operating
companies and
platform businesses
Continued investment
in skills
74,282
employees trained, total
of 3,219,091 training
hours, and around an
average of 45.8 hours
per employee1
Why they are important
• Our colleagues are integral to the delivery of our service,
business transformation and strategic priorities
• The Group’s key values enable us to fulfil our purpose. In
addition to this, each operating company and platform
business has its own corporate culture and values which
support its unique brand, business, customer and employee
propositions. The focus is on building and embedding the
culture needed to be competitive, achieve our transformation
agenda and provide a work environment in which colleagues
can thrive
• We continue to advance our equity, diversity and inclusion
ambition to create a diverse and inclusive culture
representative of the communities we live and work in, and the
customers we serve. We continue to make good progress
towards our ambition of 40% of senior leadership roles held by
women by 2025, and have introduced an ethnic diversity
ambition of 10% for our UK senior leaders by the end of 2027
Further metrics and details on people and equity, diversity and inclusion
can be found in the People section of this annual report
How we engaged
Key topics
• Our operating companies and platform businesses use a variety
of formal and informal channels for two-way communication,
adapted to their company culture and employees’ work
environment. This includes online employee forums, internal
social networks, local cascade meetings, newsletters, workshops,
engagement surveys and social media
• A Group-wide Organisational Health Index (OHI) survey is
conducted in each of the operating companies and platform
businesses every six months, in addition to company specific
engagement surveys
• Employee-led network groups and communities provide valuable
channels for colleagues’ concerns and for collecting feedback on
plans and initiatives
• Local employee representatives and unions provide formal
channels for collective agreements as well as informal channels
for raising issues and concerns
• Fair and competitive reward, cost-of-living and pay conditions
• Ways of working including office/hybrid working
• Terms and conditions including flexible working practices
• Building capacity and resilience in operations and managing
operational challenges including maintenance and
third-party suppliers
• Growth and investments in our network and fleet
• Transformation and investments in technology
• Training, development and career opportunities
• Safety and wellbeing
• Culture and engagement
• Diversity and inclusion
• Investment in facilities and work environment
• IAG European Works Council facilitates communication and
• Sustainability
consultation between employees and management
on transnational European matters. It includes representatives
from the different European Economic Area (EEA) countries,
meeting regularly throughout the year to be informed and
where appropriate, consulted on transnational matters impacting
employees in two or more EEA countries
• Designated IAG Board members conduct workforce engagement
visits with colleagues across our operating companies, meeting a
variety of employees and leaders in their work context to better
understand first-hand the challenges and opportunities of the
different businesses, employee issues and levels of engagement.
More detail on workforce engagement can be found in the
Corporate Governance section of this report
1 Average training hours is based on the total training hours performed per average headcount, pro-rated to Full Time Equivalent.
30
International Airlines Group | Annual Report and Accounts 2023
Challenges
Outcomes
• IAG and each of the operating companies and platform
businesses have strengths, challenges and opportunities
related to their individual contexts. Themes of culture,
management practices and employee engagement are
reflected in the six-monthly OHI survey results and captured
through other employee communication channels, including
any company-specific engagement surveys. These outputs
contribute to the creation of company-specific people and
culture plans
• In the context of 2023, we continued to build capacity and
improve the resilience and flexibility of our operations, reflected
in increasing resourcing levels and flexibility to reflect
seasonality
• Challenges expressed by employees in 2023 included:
• opportunity to improve communication;
• desire to increase recognition of employees;
• need for greater clarity regarding the company's strategy;
• opportunity to support innovation by introducing effective
channels for sharing ideas;
• concerns about facilities and related matters; and
• building a more inclusive workplace.
• British Airways’ ‘Above & Beyond’ colleague recognition platform,
launched in 2022, received more than 100,000 recognitions in
2023 encompassing over 75% of all British Airways colleagues
• Vueling’s 'Make it Better' initiative encourages employee
contribution to new ideas with the goal of generating savings and
increasing engagement, collaboration and innovation in the next
year. The platform generated 288 ideas, engaging 817 employees
in transforming concepts into reality
• Aer Lingus launched a new Aer Waves communication and ideas
platform in response to colleague feedback and launched a range
of development programmes, including the Supervisor
Development, Professional Development and Leadership
Development programmes
• Iberia’s 2023 Iberia Lab encouraged innovation aligned with the
five pillars of the ’Iberia Next Chapter’ strategic plan. Over 1,200
ideas were submitted by more than 800 employees, 20 finalist
ideas were selected by expert committees, with five winning
ideas being taken forward for implementation along with the
winners of the two ‘public vote’ awards
• Iberia formed a network of more than 200 Diversity
Ambassadors reflecting the engagement and commitment
of employees in promoting diversity and inclusion
• IAG Cargo incorporated active employee listening as part
of its culture plan with over 600 participants across different
shifts, directorates and continents
• Iberia Express launched English lessons in working hours for staff,
a flexible remote working scheme once a week and a new resting
room at Madrid Airport for crews
• Vueling, LEVEL, IAG Cargo and IAG Loyalty’s new offices,
designed in collaboration with employees, had a positive impact.
Facilities include new open spaces, gym, better
canteen, operations centres and space for in-house pilot and
cabin crew training. IAG Loyalty formed a ‘colleague squad’
with representatives from across the business to engage
and lead on the move to new offices providing valuable input
for the transition
• IAG extended its suite of flexible benefits to include salary
sacrifice for gym membership and travel insurance as well
as a range of financial planning tools
International Airlines Group | Annual Report and Accounts 2023
31
Financial StatementsCorporate GovernanceStrategic Report Stakeholder engagement continued
Suppliers
IAG is dependent on the performance
of key suppliers that provide goods
and services to our customers and
the Group including aircraft, engine,
maintenance, airport operations and
catering suppliers.
IAG Procurement, a centralised
Group function, provides a supplier
management framework to manage
individual suppliers by ensuring
consistent and compliant governance
throughout the supply chain, actively
managing key suppliers.
Key metrics
Why they are important
16,000
individual suppliers
320
of the 582 aircraft in the
IAG fleet were financed
using operating leases
(at end December 2023)
3,300
supplier-associated
initiatives to reduce
supplier CASK (cost per
available seat kilometre)
• Suppliers are fundamental to ensuring we meet the high
standards expected by customers and other key stakeholders,
to avoid potential impacts on operational and financial
performance, customer disruption and reputational damage
• Supply chain integrity is critical to meet customers’ needs,
ensure the reliability of our services and support IAG’s
sustainability agenda
• Suppliers adhere to the IAG Supplier Code of Conduct
which links to our commitment to sustainable growth
• Collaboration brings strong reciprocal benefits – supporting
long-term working relationships, centred on clear and
proactive contract management, shared goals and mutual
brand association
How we engaged
Key topics
• Supplier Relationship Management principles help classify and
• Benchmarking exercises
prioritise key suppliers and build relationships, as well as monitor
and manage supplier and contract performance
• RFIs, RFPs
• Through the Hangar 51 accelerator programme we identified
start-up suppliers aligned to our sustainability strategy and
our desire to lead in innovation
• We assessed the sustainability performance of c.3,000 suppliers,
representing more than 90% of our supplier spend through our
EcoVadis partnership. Results drive change in the supply chain,
with targeted remedial plans for identified areas for improvement
(less than 15%)
• The new Watershed partnership enabled engagement through
our carbon accounting programme, providing detailed
information about carbon emissions, allowing us to monitor
and improve the supply chain’s environmental impact
• Resolution of commercial and contractual disputes
• Innovation programmes
• Contract Lifecycle Management
• Supplier Relationship Management
• ESG scoring and corrective action plans
• Access to more fuel-efficient aircraft with lower carbon
emissions, reduced community noise, improved local air
quality through reduced NOX emissions
• Importance of positioning to take advantage of new
technology
• Role of major aircraft manufacturers to support delivery
• We became members of SEDEX, a world leader in responsible
of environmental targets
• Supply chain Scope 3 emissions from suppliers’
manufacturing activities
sourcing, to support our assessment of labour, health and safety,
business ethics and environment risks across our supply chain. Its
methodology complies with EU legislation and supports UK
Modern Slavery Act compliance and will enable us to increase the
number of audits carried out to prevent anomalies in our supply
chain
• We attended a range of industry conferences across all supply
categories to collaborate with suppliers
• Engagement with aircraft and engine manufacturers occurs
at all levels. We manage technical and operational issues through
regular contact and scheduled meetings. More senior employees
manage commercial activities and overall relationship
management up to and including the Group Chief Executive
• We have relationships with air-frame manufacturers through
regular engagement
• Engagement on lease renewals, returns and the in-service fleet
are largely managed by the Fleet teams in the operating airlines
• IAG’s Fleet and Environment teams engaged in detailed discussions
with major manufacturers to understand and influence activities
to support delivery of our environmental targets
32
International Airlines Group | Annual Report and Accounts 2023
Challenges
Outcomes
• Delays in the delivery of aircraft and maintenance, repair and
overhaul (MRO) activities on existing aircraft and engines from:
• Secured access to more fuel-efficient aircraft with lower carbon
emissions, reduced community noise and improved air quality
• supply chain issues;
• One of two airline groups given ’A’ rating for supplier
• design and manufacturing capacity; and
• impact of extended regulatory certification processes
in the US and EU.
• Supply-side limits for new aircraft through inability of aircraft
and engine manufacturers to meet demand. Although IAG is
well positioned, there are potential impacts from other airlines
on lease renewals and limiting flexibility in aircraft selection
• Suppliers must adhere to the Supplier Code of Conduct which
emphasises the importance of sustainability and fair treatment
of employees
• Prior to onboarding, and at least annually thereafter, suppliers
undergo screening for relevant compliance risks, such as
anti-bribery and corruption, export controls and trade
sanctions, and key suppliers are subject to financial risk
screening. Where necessary, mitigation plans are put in place
for suppliers identified as having potentially higher levels of risk.
Issues are flagged to the relevant risk owners within the Group
to take appropriate action
• To meet the requirements of the Supplier Code of Conduct and
legislation, including the UK Modern Slavery Act, suppliers are
subject to a risk assessment supported by a third party
(SEDEX) and if necessary, an audit process. Through SEDEX
we have accessed 38 relevant audits in 2023
• Risk-based third-party due diligence including screenings,
external reports, interviews and site visits serve to identify,
manage and mitigate bribery and corruption risks
• Ongoing assessment of sustainable performance to drive
change and improvement throughout the supply chain
• Risk of achieving environmental and social targets for Scope 1,
2 and 3 targets
• Third-party risk management is key, with a particular focus on
cybersecurity, and suppliers are required to adhere to IAG’s
security requirements
• Additional maintenance requirements for fleet using Pratt &
Whitney GTF engines. Refer to the Regulatory Environment
section for further information
engagement for 2022 by the Carbon Disclosure Project (‘CDP’).
CDP stated that ‘Companies have much greater potential to
reduce global emissions when they engage with and cascade
action down their supply chains’. The shared carbon targets drive
levels of collaboration and innovation across IAG and IAG GBS,
key to delivering change to meet targets
• Engagement on long-term engine maintenance arrangements
with key engine suppliers mitigated the impact of supply chain
challenges on MRO operations of the Group’s airlines. Worked
closely with suppliers to protect deliveries, replan fleets to cope
with extended ground times or delivery delays
• Continued to secure access to new short-haul fleet with firm
orders and options addressing the inability of manufacturers to
meet demands. We acquired both new and used leased long-haul
aircraft where appropriate, and secured option delivery positions
for later this decade
• New risk-monitoring technologies will identify existing and future
supplier risks and enable a proactive, joint approach to anticipate
and mitigate risks through targeted action plans
• A Group-wide third-party risk management process was put in
place to integrate cybersecurity due diligence into procurement
sourcing and contracting processes, including ongoing
monitoring of the Group's top 200 suppliers. An inventory of
suppliers presenting cybersecurity, information or operational
risks enables tracking of different engagements with suppliers
throughout the Group
• A joint procurement partnership was created with another airline
for the purchase of the latest design aircraft tyres to optimise
costs, improve product quality and reduce carbon emissions from
longer lifespan tyres with less waste generated from replacement;
they are lighter, burning less fuel and reducing emissions; and
use fewer raw materials in production, reducing the
environmental impact
• Established a steering committee to consider issues arising from
the use of Pratt & Whitney GTF engines and oversee action to
mitigate operational disruption and offset cost impacts
Group Procurement breathes new life into
old uniforms
In 2023, Group Procurement supported the roll out of new
uniforms for British Airways and Iberia. As a result, we needed
a sustainable solution for the responsible disposal or reuse
of the old uniforms. By engaging with existing suppliers and
proactively sourcing specialists in the area of fabric recycling,
Group Procurement expects to be able to give a second life to
the unneeded garments, by exploring options to turn the fabric
into customer blankets, remove logos and repurpose items to
be donated to those in need, or to fashion aircraft seat covers
from the remnant fabrics.
International Airlines Group | Annual Report and Accounts 2023
33
Financial StatementsCorporate GovernanceStrategic Report Stakeholder engagement continued
Shareholders, lenders and other financial stakeholders
Key metrics
Why they are important
This includes equity and credit
investors, credit lenders, research
analysts, credit rating agencies
and aircraft operating lessors.
Our investors are looking for
a stable business with a strong
balance sheet and sustainable
demand for travel. This, along with
a competitive cost base which
allows our airlines to offer attractive
fares, will drive competitive margins
and Return on Invested Capital
greater than the Group’s cost of
capital, leading to positive free cash
flows and the opportunity for
regular shareholder returns as well
as further capital distributions,
alongside continued investment in
the business.
Significant shareholders
at 31 December were
Qatar Airways
25.1%
Capital Group
5.0%
Key metrics used by the
Investor Relations team
in its engagement
include:
• Number of investor and
analyst meetings held
• Consensus
management
• Share price valuation
• As the main providers of capital, this stakeholder group enables
IAG to invest in and grow the Group’s businesses. Investors,
particularly long-term shareholders, share the risk of the
business
• Strategy and business plan delivery requires:
• external funding for the substantial amount of capital
expenditure required to replace or grow our fleet; and
• efficient external capital to fund our operations and invest
in our asset base in a cost-effective manner.
• Their views are critical in supporting strategy formulation,
which drives operational and financial performance to generate
and optimise sustainable returns
• Availability and access to external capital on competitive terms
influences the financial strength and positioning of the Group
and its operating companies
How we engaged
Key topics
• Active and frequent communication through open and
• Impacts of potential economic recession and geopolitical issues
transparent dialogue to understand performance/concerns,
in person or online
on consumer demand, especially Europe
• Recovery in volume of business customers, particularly at
• Annual General Meeting and four quarterly results briefings where
British Airways
shareholders, investors and equity and credit analysts could
interact with the Board (General Meetings) and management
• Capital Markets Day (CMD) where Board members, the
Management Committee and other senior management from
across the Group engaged with investors and analysts. A wide
range of investors, credit providers and lenders were invited,
including current and previous shareholders, and sell-side equity
analysts from across Europe. For more information see the
summary of the CMD 2023 at the end of the Group Chief
Executive’s review
• Mailbox for institutional and individual shareholders
• Management attendance at investor conferences hosted
by major financial institutions
• Investor Relations (IR) organises and attends roadshows globally
to meet investors with diverse perspectives, with directors and/
or management depending on the focus. Road shows were held
in London, Madrid, Paris, the US, Tokyo and Hong Kong during
2023
• IR has ongoing dialogue with equity, credit and ESG research
analysts to understand investors’ views of the Group
• Group Treasury engages with credit analysts, global banks,
debt investors and credit rating agencies
• The Chairman and Remuneration Committee Chair met with
some of our larger investors in one-to-one meetings
• Relative competitor performance, in particular their capacity
strategies
• Performance – operating results including unit revenue and
unit costs, capacity and traffic data, gross and net debt, cash
liquidity, free cash flow generation, cash and credit facilities
• Strategic and operational issues and initiatives – Group and
operating company
• Funding – cash flows, sources, leverage, liquidity
• Capital spending and debt repayment commitments
• ESG performance, including climate change initiatives
• Long-term growth and financial targets, such as those
communicated at the CMD
• Employee negotiations on pay, cost-of-living, productivity,
competitiveness and financial performance
• M&A, industry consolidation (Air Europa)
34
International Airlines Group | Annual Report and Accounts 2023
Challenges
Outcomes
• Successfully communicating IAG's investment case to drive
wider share ownership and share price appreciation against a
backdrop of wider macroeconomic and geopolitical
uncertainty
• Building relationships with existing and new investors to
understand their priorities and to ensure support for strategy
and management proposals
• Funding mechanisms, including dividend policy decisions, may
not suit all shareholder or financial stakeholder profiles,
requiring a balancing of shareholder and financial stakeholder
views with the corporate interest
• Increased focus on climate change and diversity has potential
reputation impacts and requires consideration of shareholder
expectations
• IAG held a CMD in November and the presentations and further
details of the day are set out in CMD page. There was a question-
and-answer session with all the members of the Management
Committee participating and further interaction between external
and internal attendees during the day
• Feedback received from investors and analysts who attended the
CMD was shared with the Board. This included recognition of
IAG’s ability to generate free cash flow, its focus on the balance
sheet and its commitment to paying dividends. This feedback has
been considered in reporting and strategic discussion
• Feedback is also collated both formally and informally after
results, investor meetings and investor events which is shared
with the Board and senior leaders
• Meetings were held with investor governance and ESG
representatives, including members of the IAG Sustainability
team, in which our sustainability policies, initiatives and targets
were explained and discussed
• A customer relationship management system records
engagement, tracks meetings, notes topics, questions and
discussions with an automatic feedback collection mechanism
based on determined questions
Q&A session with IAG’s
Management Committee at the
recent IAG Capital Markets Day
in November 2023
International Airlines Group | Annual Report and Accounts 2023
35
Financial StatementsCorporate GovernanceStrategic Report Stakeholder engagement continued
Government and Regulators
Due to the nature of its business,
IAG engages with a wide range of
government and regulatory
stakeholders. This includes
members of national parliaments,
ministers and officials of national
governments across multiple
departments (including transport,
trade, finance, tourism or
international affairs), MEPs and
other representatives of the
institutions of the European Union
(including at DG MOVE, and other
relevant directorates as well as
representatives of individual
member states in Brussels). This
wide stakeholder body also
encompasses civil aviation
regulators in the countries in which
our airlines are based and the
countries of destination. We also
engage with competition
authorities, including DG-COMP in
the EU, the CMA in the UK and, for
aviation alliances, the Department
of Transportation in the US.
Key metrics
Why they are important
• We use quantitative and qualitative
metrics to monitor and adjust our
engagement plan. Quantitative metrics
include the different types of
engagement, range of policies, and
seniority of engagement. Qualitative
appraisal includes assessment of policy
outcomes and tracking the evolution of
policy dossiers to ensure that the
Government Affairs function is targeted
appropriately
• We monitor quantitative metrics, which
for 2023 included:
• more than 80 contacts held with
stakeholders in EU Institutions;
• meetings with more than 70 Members
of the UK Parliament and Peers;
• five visits organised for policymakers
to British Airways and Vueling; and
• participation in 23 government-to-
government air services negotiations.
• Government policies and decisions impact
many aspects of IAG’s business across
a wide range of areas including transport,
consumer rights, practical operational issues,
commercial practices, and the environment.
We must comply with relevant regulations
but seek to engage responsibly to influence
policy developments to benefit our
customers and achieve our business goals
• Engagement with policymakers is essential
to understand plans and encourage
proportionate outcomes to achieve our
vision to be a world-leading airline group on
sustainability and ensure we collectively
meet our global climate goals
• Our airlines are subject to regulation by civil
aviation regulators in the countries of
registration and those of destination,
requiring frequent engagement on safety,
security, consumer rights and a variety
of other policy and administrative issues
• Regular engagement around the world
is needed to manage market access issues
under international air services agreements
and secure the necessary operating permits
How we engaged
Key topics
• IAG’s head office Government Affairs team undertakes direct engagement with
• Impacts of the war in Ukraine and the Middle
stakeholders in all the countries in which our airlines are based as well as with EU
institutions in Brussels. It coordinates the efforts of the Government Affairs teams
of individual operating companies to ensure consistent and coordinated approaches
• We engage directly with policy, market and regulatory stakeholders on questions
of interest to convey IAG positions and contribute technical expertise to discussions.
This has included arranging visits to our airlines’ bases to enhance understanding of
operations and the impacts of policy proposals
East and associated sanctions regimes
• Sustainability, particularly climate and
decarbonisation and all aspects of
environmental policy affecting aviation such
as availability of and support for investment
in SAF and noise impacts
• Economic impacts of aviation, including
• As well as direct contact, we engage through various international, regional,
tax policy and economic regulation
and local trade associations as well as general business organisations
• This engagement involves senior executives including the Group Chief Executive,
Management Committee members, and senior executives from airline operating
companies where appropriate, mainly in the EU, the UK, Spain and Ireland
• IAG aims to provide a factual basis in support of its policy positions and in 2023
commissioned an extensive study on the Group’s economic impacts from PwC
and additional research on the benefits of Sustainable Aviation Fuels
• In the field of international air services, IAG representatives joined diplomatic talks
wherever possible including those of the EU-US Joint Committee on aviation
and ICAO’s Air Services Negotiation Event (ICAN) in Saudi Arabia in December
to support operating companies’ access to market
• Infrastructure regulation including airspace
modernisation, the Single European Sky,
airport charges and slot allocation policy
• Diversity and inclusion for employment
as well as development of skills
• Consumer rights
• Safety, security and immigration rules
• International relations including air service
agreements and wet leasing, and
immigration policy
36
International Airlines Group | Annual Report and Accounts 2023
Challenges
Outcomes
• External factors such as air traffic control
(ATC) strikes or geopolitical events such
as the war in Ukraine and the Middle East
can have relevant impacts on our
business
• Political upheaval presents a challenge
to consistent policymaking. Changes
in political leadership through electoral
cycles are anticipated
• With sector recovery post pandemic,
decarbonisation is a predominant area
of interest for our stakeholders, requiring
engagement with regulators on various
aspects of IAG’s industry position and
commitments in relation to new
technology
• Consumer rights and customer service
are of increasing interest to our
stakeholders, bringing additional interest
in operational performance from
stakeholders in the US, EU and UK
• IAG’s airlines regularly engage in
discussions with governments and
aviation authorities in their relevant
markets to respond to and mitigate
the risk that states use international air
service agreements to promote the
interests of their own airlines, given their
view that international air services and
national carriers are strategic interests
• Sustainability – From both direct meetings and joint efforts with industry and trade
associations on EU climate-related issues, relevant IAG requests were included in
the revision and development of different legislation on sustainability, for example:
• 20 million free allowances were allocated for SAF use for 2024-2030 (and could
be further extended until 2034); and
• the recognition of price stabilisation mechanisms (contracts for difference) in view
of the ETS Innovation Fund or the inclusion of aviation as part of the EU Taxonomy.
In the UK, direct engagement and indirect contacts through trade associations were
instrumental in securing a legal requirement to consult on the form of a price support
mechanism to encourage investment in SAF plants in the UK.
Regular IAG opinion surveys of UK Members of Parliament on reputation and policy
showed increasing support for the use of SAF and other innovations, rather than
demand management to reach net zero emissions.
Refer to the Sustainability section of this report for more information
• Customer service and resilience – The European commitment to sustainability saw
a focus on improving consumer digital access and travel options. Initiatives such as the
EU proposal for digital multi-modal services, to provide greater accessibility to other
modes of transport, were postponed in line with the sector's request not to force
intermediation that could increase ticket prices for European customers
Regular engagement with the UK Department for Transport’s Resilience team to
ensure a proper appreciation of operational disruptions. For example, understanding
the impacts of bad weather on operations at congested airports
• Airport charges – IAG made the case for strong regulation of monopoly providers of
airport services so that reasonable levels of charges are set. This engagement
contributed to Spain keeping charges flat in 2023. However, due to combination of
existing adjustment mechanisms and inflation rates, an increase of 4% is expected for
2024, lower than that initially proposed by AENA. In the UK, the regulatory authorities
recognised IAG’s and other airlines’ arguments and confirmed a downward price path
for Heathrow’s charges for the remainder of the regulatory period to 2026, and denied
an additional £2 billion that Heathrow airport requested that would have been reflected
in charges to airlines. Refer to the Regulatory Environment section of the report
• Market access – IAG supported operating companies to secure the necessary market
access through engagement in international negotiations, including British Airways’
operating permits for new destinations in the Caribbean or for BA Euroflyer in North
Africa, as well as enabling new code-share partnerships, including with Indigo in India
Proposed revision of EU Slot Regulation
The existing EU Slot Regulation system enabled the EU
to become one of the most connected regions, benefiting
EU citizens by providing more travel alternatives and allowing
competing business to develop. It allows airlines to plan
schedules with predictability, providing the essential stability
for network airlines to build efficient hubs. It has also allowed
low-cost carriers to build and grow operations, increasing the
number of routes that they serve.
In 2022/2023 the European Commission explored the possibility
of a revision of the EU Slot Regulation with the objective
of further enhancing the EU slots system and promoting
sustainability. One of the aspects under discussion was the
80% rule: if an airline operates 80% of a slot (landing and take-off
right) at a given airport in a summer or winter season, it maintains
the right to operate the slot again the corresponding next season.
This threshold builds in the flexibility airlines depend on to
reallocate resources and minimise the impact of unavoidable
disruption of passengers. This allows the maximum number
of passengers to get to their destination in a timely manner.
For example, an airline may take one aircraft from a route where
there are several daily flights, to replace a grounded aircraft for
a destination served by only one daily flight. The revision of this
rule in the EU would limit the flexibility to reallocate resources,
with a subsequent negative impact for passengers.
Through engagement, IAG demonstrated that although the
objective of an airline was to operate to its planned schedule,
in exceptional situations such as technical problems, adverse
weather, industrial actions or other unavoidable last-minute
disruption, cancellations may be necessary. During the
consultation process opened by the European Commission,
IAG shared detailed know-how and experience. IAG also
organised technical meetings between the senior experts of the
airline operating companies and the relevant decision-makers
in Brussels and Madrid. IAG also engaged directly with relevant
stakeholders at EU Institutions and at a national level in Spain and
Ireland. As it is a technically complex topic, we promoted simpler
messages through our trade associations to ensure that the
negative consequences of the revision of the slots regulation for
passengers could be easily understood by non-aviation experts.
As a result of the inputs from the airline industry, the EU halted
its policy plans in this area.
International Airlines Group | Annual Report and Accounts 2023
37
Financial StatementsCorporate GovernanceStrategic Report Financial overview
Nicholas Cadbury
Chief Financial Officer
Strengthening
our financial
performance
IAG achieved strong operating profits in
2023, as we continue to transform our
businesses to deliver world-class
operating margins and returns on
invested capital. This result led to strong
cash generation in the year, strengthening
our balance sheet, with net leverage back
within IAG’s target range and improved
credit ratings, and enabling us to invest in
improving our customer experience.
Delivering world-class operating margins and returns on
invested capital
In 2023, the Group benefited from its high-quality and
increasingly diverse revenue stream, with recovery seen in all
our businesses and with particular strength in Spain and the
North and South Atlantic. Passenger capacity operated across
the year was close to the levels operated in 2019 before the
COVID-19 pandemic and we were able to generate higher unit
revenues than in 2019, which offset higher fuel costs and
supplier cost inflation.
38
International Airlines Group | Annual Report and Accounts 2023
The result was a strong operating profit before exceptional
items of €3,507 million compared with €1,247 million in 2022.
The shape of the recovery differed across our businesses, with
the strongest recovery in Iberia and Vueling, both of which
delivered record operating profits, with Aer Lingus and British
Airways also seeing a significant improvement on the previous
year.
At a Group level we also repaid a €500 million bond on
maturity and did not seek refinancing. These actions have
resulted in a reduction in gross debt of €3,902 million in 2023.
We retain strong liquidity, with total liquidity at 31 December
2023 of €11,624 million, including cash of €6,837 million and
committed and undrawn general and aircraft facilities of €4,787
million.
Our free cash flow of €1,320 million was after capital
expenditure of €3,544 million. We continue to invest in our
strategy and are rebuilding capacity with a more modern, fuel-
efficient fleet. We also invested in our infrastructure, customer
experience and sustainability. In addition to organic growth, we
are also pursuing inorganic growth opportunities where they
offer a good strategic fit. In February 2023, we agreed with
Globalia the acquisition of the remaining 80% of equity in Air
Europa, subject to regulatory approval in 2024.
It is pleasing to finish 2023 having achieved the objective we
set down in these pages in last year’s report: to return the
Group to historical levels of profit and to continue to
strengthen the balance sheet. We are aware of the
uncertainties we face as we enter 2024, including geopolitical
events outside of our control. We will continue to strengthen
our balance sheet, transform our businesses and apply
discipline to how and where we allocate capital, in order to fulfil
our objective to deliver sustainable shareholder returns.
Nicholas Cadbury
Chief Financial Officer
The recovery has been led by leisure travel across the Group’s
networks and in all cabins, with the premium leisure segment
showing particularly strong performance. Corporate travel also
improved versus the previous year, but at a slower rate than
anticipated. We continue to grow other revenue streams,
including IAG Loyalty, which achieved an operating profit of
£280 million. Our cargo business saw increased volumes in
2023, but also reduced yields, linked to increases in global
cargo capacity, the macroeconomic conditions and the reversal
of the positive impact on yields of supply chain disruption in
2022. However, its focus on increasing its premium product
business contributed to delivering yields above 2019 levels. Fuel
costs remained volatile during the year, with the average fuel
unit cost similar to 2022, but up over 30% compared with 2019.
Non-fuel unit costs improved 4.4% compared with the previous
year, with our ongoing transformation programme partially
offsetting the impact of inflation; we also made some additional
investment in the airlines’ operations, IT and the customer
experience.
Disciplined approach to capital allocation to support
sustainable growth and margins
The Group’s financial performance and cash generation in 2023
allowed us to deliver a strengthened balance sheet, with
positive free cash flow of €1,320 million enabling a reduction in
leverage, which is now at 1.7 times net debt to EBITDA before
exceptional items, back within our target maximum of 1.8 times.
Both S&P and Moody’s increased their credit ratings of the
Group, with S&P returning IAG to investment grade. British
Airways’ separate credit ratings were also upgraded, with
British Airways’ rating now at investment grade with S&P and
Fitch.
With our strong cash generation, we took the opportunity to
rebalance our mix of gross debt and cash and in the second
half of the year we repaid €3,271 million of non-aircraft debt in
British Airways, Iberia, Vueling and Aer Lingus. These loans,
raised due to the impacts of the COVID-19 pandemic, had
floating interest rates, which had risen significantly over the last
two years, and hence were amongst the most expensive of the
Group’s debt; following the early repayment of this debt the
Group will benefit from a reduced interest expense in future
years.
International Airlines Group | Annual Report and Accounts 2023
39
Financial StatementsCorporate GovernanceStrategic Report Financial review
In the commentary below, references are made in selected
places to variances versus 2019 to aid understanding, due to the
significant reductions in capacity the Group’s airlines made due
to the impact of the COVID-19 pandemic in the period from
2020 to 2022. It is anticipated that 2023 will be the last year for
which analysis versus 2019 is required.
IAG capacity
In 2023, passenger capacity operated, measured in available seat
kilometres (ASKs), rose by 22.6% versus 2022. For the year,
capacity operated was 95.7% of 2019 levels and capacity was
almost fully restored to 2019 levels by the end of the year,
reaching 98.6% of 2019 levels in the final quarter.
Capacity operated by region
Year to 31
December 2023
Domestic
Europe
North
America
Latin America
and
Caribbean
Africa, Middle
East and
South Asia
ASKs
higher/
(lower)
v2022
ASKs
higher/
(lower)
v2019
Passenger
load factor
(%)
Higher/
(lower)
v2022
7.8 % 8.4 %
89.5 4.0pts
15.4 % (3.1) %
85.9 4.4pts
Higher/
(lower)
v2019
2.3pts
2.3pts
23.0 %
3.2 %
82.9
3.6pts
(1.2)pts
18.8 % (1.7) %
87.6
2.5pts
1.2pts
32.2 %
1.1 %
83.3
2.2pts
0.3pts
Asia Pacific
258.0 % (59.7) %
88.4 4.4pts
2.6pts
Total network 22.6 % (4.3) %
85.3
3.5pts
0.7pts
Whilst capacity was fully restored to most of IAG’s markets, the
recovery in the Asia Pacific region was slower, linked to later
easing of COVID-19 restrictions in the region.
Capacity operated by airline
Year to 31
December 2023
Aer Lingus
ASKs
higher/
(lower)
v2022
ASKs
higher/
(lower)
v2019
Passenger
load factor
(%)
Higher/
(lower)
v2022
Higher/
(lower)
v2019
20.3 % 4.4 %
80.6
3.7pts
(1.2)pts
British
Airways
Iberia
LEVEL
Vueling
Group
28.1 % (9.9) %
83.6
3.8pts
0.0pts
18.5 %
3.2 %
87.2
3.0pts
0.0pts
33.1 % (32.8) %
93.4
3.7pts
9.5pts
10.5 %
8.5 %
91.4
4.2pts
4.5pts
22.6 % (4.3) %
85.3
3.5pts
0.7pts
In 2023, British Airways had only restored 90.1% of its total 2019
capacity, as the substantial majority of the Group’s capacity to
the Asia Pacific region in 2019, for which recovery following
COVID-19 has been slower, was operated by British Airways.
Capacity for British Airways was also impacted by the
accelerated retirement of its Boeing 747-400 fleet during the
COVID-19 pandemic and further restoration of capacity is
planned for British Airways in 2024 and 2025. The reduction in
LEVEL versus 2019 relates to the discontinuation of operations
from Paris Orly in 2020, with the capacity of LEVEL’s operation
in Barcelona up 32.4% versus 2019.
Domestic and Europe
Capacity and passenger numbers in IAG’s Domestic markets,
which are predominantly within mainland Spain and to the
Canary and Balearic Islands, increased in line with strong leisure
demand, with capacity 7.8% higher than 2022, and with a higher
passenger load factor of 89.5%, which was up 4.0 points versus
the previous year. Capacity and the passenger load factor were
also higher than in 2019, up 8.4% and 2.3 points respectively.
The Group’s capacity in Europe was 15.4% higher than in 2022,
also boosted by the demand for leisure travel. Aer Lingus began
services to Brindisi, Kos and Olbia. British Airways expanded the
flying undertaken by its subsidiary launched at London Gatwick
airport in 2022, BA Euroflyer, with new routes including Corfu,
Mykonos, Innsbruck, and Fuerteventura. Vueling’s new routes
include a service from Barcelona to Rovaniemi (Finland) and the
airline added an extra aircraft at its Bilbao base, with six new
routes launched. Passenger load factor for the region was up 4.4
points versus 2022 to 85.9% and was up 2.3 points versus 2019.
North America
The Group’s airlines launched new routes and increased services
to North America, one of the Group’s core profit pools, with
capacity 23.0% higher than in 2022 and 3.2% higher than in 2019.
Aer Lingus started flights to Cleveland and resumed its route to
Hartford, Connecticut, together with additional frequencies to
Los Angeles, Seattle, Orlando, and Washington DC. The airline
will resume its service to Minneapolis and launch a new route to
Denver in 2024. British Airways launched services from London
Heathrow to Cincinnati and from London Gatwick to Vancouver,
a destination already served from its London Heathrow hub. The
airline plans further increases in 2024, including doubling its
services to San Diego in the summer. Iberia increased its
recently-launched routes to Dallas and Washington to year-
round services. LEVEL increased its capacity to North America
by 23.8% in 2023 and in 2024 will increase further, with a new
route from Barcelona to Miami and significant capacity increases
to Boston, Los Angeles and New York, JFK. Passenger load
factor for the region was up 3.6 points versus 2022 to 82.9% and
was down 1.2 points versus 2019.
40
International Airlines Group | Annual Report and Accounts 2023
Latin America and Caribbean (LACAR)
IAG’s other core international profit pool is the Latin America
and Caribbean region, including Iberia’s network of 20 daily
flights to the region and British Airways flights to the Caribbean.
British Airways launched flights from London Gatwick to Aruba
and Guyana. Iberia increased its capacity to primary cities such
as Bogotá, Lima, Mexico City, Montevideo and Quito. LEVEL
increased its route to Santiago de Chile to operate as a year-
round service, with LEVEL’s capacity to the region up 45.4%
versus 2022. IAG’s capacity in LACAR grew 18.8% versus 2022,
although was still down 1.7% on 2019, linked to the retirement of
aircraft following the COVID-19 pandemic, with further long-haul
aircraft due for delivery in 2024. Passenger load factor for the
region at 87.6% increased 2.5 points versus 2022 and was up 1.2
points versus 2019.
Africa, Middle East and South Asia (AMESA)
Capacity to this region was up 32.2% on 2022 and up by 1.1%
versus 2019. BA Euroflyer launched a service from London
Gatwick to Sharm El Sheikh. British Airways began flights from
London Gatwick to Accra and the airline will resume flights to
Abu Dhabi in 2024. Iberia started services to Cairo and launched
a new route to Doha, which will serve to develop its network
with partner Qatar Airways. Vueling’s new routes from Barcelona
included Luxor and Sharm El Sheikh. Passenger load factor for
the region was up 2.2 points versus 2022 to 83.3% and was up
0.3 points versus 2019.
Asia Pacific
During 2023, the Asia Pacific continued to be the least
recovered region from COVID-19, as restrictions linked to the
pandemic were lifted later than in other markets and industry
recovery has been slower. British Airways services to Shanghai
and Beijing resumed in the summer 2023 travel season and
during the year the airline increased frequencies to Hong Kong
and Tokyo Haneda. Iberia will re-open its route to Tokyo in
October 2024. The increases during 2023 led to capacity 258.0%
higher than 2022 but still 59.7% lower than 2019, with the
passenger load factor for the region up 4.4 points versus 2022
to 88.4% and up 2.6 points versus 2019.
Basis of preparation
In its assessment of going concern over the period of at least 12
months from the date of approval of this report (the ‘going
concern period’), the Group has prepared extensive modelling,
including considering a severe but plausible downside scenario.
Having reviewed these scenarios and sensitivities, and the
Group’s aircraft financing requirements, 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.
Summary
The Group was able to substantially restore its capacity
compared with 2019 and saw recovery in all its businesses, with
particular strength in Spain and the North and South Atlantic.
Fuel costs were substantially higher than in 2019 and the Group
also faced higher supplier cost inflation. The Group was able to
successfully offset both of these challenges through its high-
quality and increasingly diverse revenue stream, and through
continued transformation of its businesses. The net result was an
Operating profit for the year of €3,507 million, versus an Operating
profit of €1,278 million in 2022. The Profit after tax for the year
was €2,655 million, versus a profit of €431 million in 2022.
Profit for the year
Statutory results
€ million
Operating profit
Profit before tax
Profit after tax
Higher/
(lower)
vly
20221
1,278 2,229
2023
3,507
3,056
415 2,641
2,655
431 2,224
1 The 2022 results include a reclassification to conform with the current
year presentation for the Net gain on sale of property, plant and
equipment within Operating profit. Accordingly, for the year to 31
December 2022, the Group has reclassified gains of €22 million from
Other non-operating credits to Expenditure on operations. There is no
impact on the Profit before or after tax.
International Airlines Group | Annual Report and Accounts 2023
41
Financial StatementsCorporate GovernanceStrategic Report Financial review continued
Summary of exceptional items
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.
There were no exceptional items in 2023. During 2022, the
Group recorded exceptional credits relating to the partial
reversal of a fine issued to British Airways in 2010 and the
reversal of the impairment of certain aircraft returned to service
in 2022.
A summary of the exceptional items relating to 2022 is given
below, with more detail in the Alternative performance measures
section, including a breakdown of the exceptional items by
operating company.
Income statement
line
Exceptional item
description
Credit/(charge) to the
Income statement
€ million
2023
2022
Property, IT and
other costs
Reversal of fine
–
23
Depreciation,
amortisation and
impairment
Impairment reversal
of fleet and
associated assets
Tax
Tax on exceptional
items
–
–
8
(2)
The Operating profit before exceptional items for 2023 of
€3,507 million was €2,260 million better than the Operating
profit before exceptional items of €1,247 million for 2022, driven
by the increased capacity and higher revenues, net of higher
operating costs, as explained further below. The Profit after tax
and before exceptional items was €2,655 million, €2,253 million
higher than the 2022 profit of €402 million.
Alternative performance measures (before
exceptional items)
€ million
Operating profit
Profit before tax
Profit after tax
Higher/
(lower)
vly
20221
1,247 2,260
2023
3,507
3,056
384 2,672
2,655
402 2,253
1 The 2022 results include a reclassification to conform with the current
year presentation for the Net gain on sale of property, plant and
equipment within Operating profit. Accordingly, for the year to 31
December 2022, the Group has reclassified gains of €22 million from
Other non-operating credits to Expenditure on operations. There is no
impact on the Profit before or after tax.
Revenue
€ million
Passenger revenue
Cargo revenue
Other revenue
Total revenue
Higher/
(lower)
vly
25,810 6,352
2023
Higher/
(lower)
vly (%)
32.6 %
1,156
(459)
(28.4) %
2,487
494
24.8 %
29,453 6,387
27.7 %
Total revenue increased €6,387 million versus 2022, after
adverse foreign exchange rate movements of €490 million,
mainly due to the translation of British Airways’ and IAG
Loyalty’s results from pound sterling into euro, which resulted in
an adverse variance of €379 million versus 2022.
Passenger revenue
The increase in Passenger revenue of €6,352 million, or 32.6%,
was ahead of the increase in passenger capacity of 22.6%, driven
by higher yields and higher load factors than in 2022. The
growth in Passenger revenue was linked to the reopening of
markets, strong leisure demand, together with increases in ticket
prices to reflect higher fuel prices and supplier price inflation.
The recovery in corporate travel was slower than that of leisure
travel, with the Group’s premium leisure segment continuing to
perform strongly.
The passenger load factor for the year of 85.3% was 3.5 points
higher than in 2022 and 0.7 points higher than in 2019.
Passenger yields, measured as passenger revenue per revenue
passenger kilometre (RPK) were 3.8% higher than in 2022 and
up 19.0% on 2019. The resulting passenger unit revenue
(passenger revenue per ASK) for the year was 8.2% higher than
in 2022 and 20.1% higher than in 2019.
Cargo revenue
Cargo revenue, at €1,156 million, was 28.4% lower than in 2022.
Cargo volumes, measured in cargo tonne kilometres (CTKs),
were 17.2% higher than the previous year, as the Group’s airlines
further restored their operations, leading to an increase in both
passenger and cargo capacity. Cargo yields, measured as cargo
revenue per cargo tonne kilometre, were 38.9% lower than in
2022, reflecting the substantial growth in global cargo capacity
across the industry, together with softer market demand,
reflecting the macro-economic conditions. In 2022, cargo yields
had benefited from disruption to global supply chains, and
disruption to shipping, particularly in the first half of the year.
Cargo yields benefited from a growth in premium products,
enabled by the opening of a new premium cargo facility at
London Heathrow. At Madrid, IAG Cargo’s investment in a
perishable goods handling facility was completed, further
boosting cargo handling capacity.
Cargo revenue increased by €39 million, or 3.5% versus 2019.
The increase was primarily driven by a 23.8% increase in cargo
yields compared with 2019, which included the impact of
transformation initiatives. The higher cargo yields more than
compensated for a decline in volumes, which were 16.4% lower
than in 2019, mainly due to weaker market demand and reduced
cargo capacity, particularly from the Asia Pacific region.
42
International Airlines Group | Annual Report and Accounts 2023
Fuel, oil costs and emissions charges
€ million
Fuel, oil costs and emissions
charges
Higher/
(lower)
vly
Higher/
(lower)
vly (%)
2023
7,557
1,437
23.5 %
Fuel, oil costs and emissions charges were up €1,437 million
versus 2022, principally reflecting increased flying volumes. In
2022, the impact of the significant increase in commodity fuel
prices, following the Russian invasion of Ukraine in February of
that year, was mitigated by the Group’s fuel hedging
programme. In 2023, whilst average spot fuel prices linked to
fuel purchase contracts were 17% lower than in 2022, the impact
of hedging was neutral, with the result that the Group’s effective
fuel price after hedging was similar to the previous year. Foreign
exchange movements accounted for only €6 million of the
increase, with the impact of a weaker US dollar against the euro
and pound sterling offset by translation exchange between the
pound sterling and euro. Within Fuel, oil costs and emissions
charges, the cost of complying with emissions trading schemes
was €238 million, up from €134 million in 2022, reflecting both
the higher level of capacity flown, market prices under such
schemes, and the reduction in free allowances issued across the
EU and UK.
On a unit basis per ASK, Fuel, oil costs and emissions charges
were up 0.7% versus 2022.
Other revenue
One of the Group’s strategic imperatives is to drive earnings
growth through asset-light businesses, with the growth of IAG
Loyalty a particular priority. The impact of the growth in IAG
Loyalty contributes both to the airlines’ Passenger revenue and
to Other revenue, through both the issuance and redemption of
its loyalty currency, Avios. IAG Loyalty delivered another strong
year of growth in the number of members collecting Avios,
including through its partnership with American Express. IAG
Loyalty’s Other revenue was up 61% versus 2022 to €524 million.
The largest Other revenue streams for the Group are BA
Holidays and Iberia’s maintenance, repair and overhaul (MRO)
business. BA Holidays grew revenues in line with the continued
increase in flying activity and holiday and hotel services revenue
increasing by €133 million to €938 million. Iberia’s MRO business
saw increased engine maintenance activity for third-party
airlines, with revenues from maintenance and overhaul services
up €155 million to €683 million. Revenue from ground handling,
at €195 million, was flat versus 2022. After a competitive tender
process for ground handling contracts, the final resolution in
September 2023 resulted in the loss of third-party handling
contracts at eight airports for Iberia and as a result Iberia will see
a reduction in ground handling activity and revenues in 2024.
Overall for the year, Other revenue was up 24.8% versus 2022 to
€2,487 million, 29.5% higher than in 2019.
Operating costs
Total operating expenditure rose from €21,788 million in 2022 to
€25,946 million in 2023, linked to the higher volume of flights
and passenger numbers and after favourable foreign currency
movements of €408 million, of which €351 million were due to
the translation of the operating costs of British Airways and IAG
Loyalty from pound sterling into euros.
Employee costs
€ million
Employee costs
Higher/
(lower)
vly
Higher/
(lower)
vly (%)
2023
5,423
776
16.7 %
The rise in Employee costs of €776 million or 16.7% versus 2022
reflected the continued restoration of the Group’s capacity and
the related increase in employee numbers, as well as the
investment in British Airways’ London hub to improve
operational performance. Average headcount for the year was
69,762, up 9,962 or 16.7% versus 2022. The Group agreed pay
deals with the substantial majority of its bargaining groups and
employees during 2023.
On a unit basis per ASK, Employee costs were down 4.8%
versus 2022.
Jet fuel price trend ($ per metric tonne)
1,600
1,400
1,200
1,000
800
600
400
200
0
7
1
c
e
D
8
1
r
a
M
8
1
n
u
J
8
1
p
e
S
8
1
c
e
D
9
1
r
a
M
9
1
n
u
J
9
1
p
e
S
9
1
c
e
D
0
2
r
a
M
0
2
n
u
J
0
2
p
e
S
0
2
c
e
D
1
2
r
a
M
1
2
n
u
J
1
2
p
e
S
1
2
c
e
D
2
2
r
a
M
2
2
n
u
J
2
2
p
e
S
2
2
c
e
D
3
2
r
a
M
3
2
n
u
J
3
2
p
e
S
3
2
c
e
D
International Airlines Group | Annual Report and Accounts 2023
43
Financial StatementsCorporate GovernanceStrategic Report
Financial review continued
Fuel hedging
The Group seeks to reduce the impact of volatile commodity
prices by hedging prices in advance. The Group’s current fuel
hedging policy was approved by the Board in May 2021 (and has
been regularly reviewed for appropriateness by the Audit and
Compliance Committee subsequently) and 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 policy allows for
differentiation within the Group, to match the nature of each
operating company, and the use of call options for a proportion
of the hedging undertaken. The policy operates on a two-year
rolling basis, with hedging of up to 60% of anticipated
requirements in the first 12 months and up to 30% in the
following 12 months, and with flexibility for low-cost airlines
within the Group to adopt hedging up to 75% in the first 12
months. For all Group airlines, hedging between 25 and 36
months ahead is only undertaken in exceptional circumstances.
Fuel consumption
The Group continued to benefit from reduced fuel consumption,
associated with the investment in new fleet, with 35 newer-
generation and more fuel-efficient aircraft entering service in the
year. Increased passenger load factors versus 2022 also
contributed to reduced carbon intensity, measured as grammes of
CO2 per passenger kilometre, which was down 3.6% versus 2022.
Supplier costs
€ million
Handling, catering and other
operating costs
Landing fees and en-route
charges
Engineering and other aircraft
costs
Property, IT and other costs1
Selling costs
Currency differences
Total Supplier costs
Higher/
(lower)
vly
Higher/
(lower)
vly (%)
2023
3,849
878
29.6 %
2,308
418
22.1 %
2,509
1,058
1,155
408
108
235
19.4 %
11.4 %
25.5 %
26
(115)
(81.6) %
10,905
1,932
21.5 %
1 For 2022 includes an exceptional credit of €23 million related to the
partial reversal of the historical fine, plus accrued interest, initially issued
by the European Commission to British Airways for involvement in cartel
activity and recognised as an exceptional charge in 2010. Further
information is given in the Alternative performance measures section.
Total Supplier costs rose by €1,932 million, or 21.5% to €10,905
million, slightly below the increase in capacity. Supplier costs
were impacted by continued high levels of inflation and
disruption costs, although the impact was partially mitigated by
the Group’s procurement and transformation initiatives.
Supplier costs include a €26 million currency differences charge
in 2023 versus a €141 million currency differences charge in the
previous year; 2022 had been impacted by a significant
strengthening of the US dollar against both the pound sterling
and the euro versus 2021. Total foreign currency impacts on
Supplier costs, including currency differences, were €298 million
favourable versus 2022, including a favourable impact of €163
million related to translating British Airways’ and IAG Loyalty’s
supplier costs from pound sterling into euro and the €141 million
favourable currency differences charge outlined above.
On a unit basis per ASK, Supplier costs were down 1.1% versus 2022.
Ownership costs
Ownership costs include Depreciation, amortisation and
impairment of tangible and intangible assets, including right of
use assets, and the Net gain on sale of property, plant and
equipment.
€ million
Depreciation, amortisation and
impairment
Net gain on sale of property,
plant and equipment
Ownership costs1
Higher/
(lower)
vly
Higher/
(lower)
vly (%)
2023
2,063
(7)
(0.3) %
(2)
20
(90.9) %
2,061
13
0.6 %
1 For 2022, includes an exceptional credit of €8 million related to the
partial reversal of an impairment relating to fleet assets that were
previously stood down in 2020. Further information is given in the
Alternative performance measures section.
The increase in ownership costs versus 2022 is mainly driven by
the increase in the Group’s fleet of aircraft, linked to the restoration
of capacity and 34 deliveries of new aircraft in the year. The Net
gain on sale of property, plant and equipment was €2 million,
reflecting the disposal of aircraft withdrawn from service and
related spare parts. On a unit basis per ASK, Ownership costs were
down 18.2% versus 2022, mainly reflecting the restoration of
capacity and improvements in aircraft utilisation.
44
International Airlines Group | Annual Report and Accounts 2023
Aircraft fleet
In 2023, the in-service fleet increased by 24 aircraft: 37 aircraft
entered service and 13 aircraft were retired. Of the aircraft
entering service, five re-entered service having previously been
stood down and two were delivered in late 2022. In total, 34
aircraft were delivered in the year, of which four aircraft entered
service early in 2024.
Number of fleet
Number of fleet in-service
Short-haul
Long-haul
2023
389
193
582
2022
381
177
558
Higher/
(lower)
vly
2.1 %
9.0 %
4.3 %
In addition to the in-service fleet, there were a further nine
aircraft not in service, made up of five aircraft held by the Group
pending disposal or lease return and four aircraft delivered late
in 2023 and not in service by 31 December 2023.
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 pound sterling related to British Airways and IAG
Loyalty. From a transaction perspective, the Group’s
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.
Overall, in 2023 the Group operating profit before exceptional
items was reduced by €82 million due to adverse exchange rate
impacts.
Exchange rate impact before exceptional items
2023
€ million
Favourable/(adverse)
Translation
impact
Transaction
impact
Total
exchange
impact
Total exchange impact
on revenue
Total exchange impact
on operating
expenditures
Total exchange impact
on operating profit
(379)
(111)
(490)
351
57
408
(28)
(54)
(82)
2022
€ million
Favourable/(adverse)
Translation
impact
Transaction
impact
Total
exchange
impact
Total exchange impact
on revenue
Total exchange impact
on operating
expenditures
Total exchange impact
on operating profit
97
685
782
(129)
(975)
(1,104)
(32)
(290)
(322)
The exchange rates of the Group were as follows:
2023
2022
Higher/
(lower)
vly
Translation - Balance sheet
£ to €
1.16
1.14
1.8 %
Translation - Income statement
(weighted average)
£ to €
1.15
1.17
(1.7) %
Transaction (weighted average)
£ to €
€ to $
£ to $
1.15
1.09
1.26
1.17
1.05
1.23
(1.7) %
3.8 %
2.4 %
International Airlines Group | Annual Report and Accounts 2023
45
Financial StatementsCorporate GovernanceStrategic Report
Financial review continued
Total net non-operating costs
Total net non-operating costs for the year were €451 million,
versus €863 million in 2022. Finance costs of €1,113 million were
€96 million higher than in 2022, although they fell in the fourth
quarter by 16.3% or €48 million, linked to the early debt
repayments described in ‘Early repayment of debt raised in 2020
and 2021’ below and in note 3 to the Group financial statements.
Finance income was up €334 million, reflecting the Group’s
strong cash balances and the higher interest rates earned on
deposits. The other main movement was for net currency
retranslation, with a credit of €176 million in 2023 versus a
charge of €115 million in 2022, principally reflecting the
weakening of the US dollar.
The Net change in the fair value of financial instruments of €11
million reflects fair value adjustments at 31 December 2023 of
IAG’s €825 million convertible bond maturing in 2028.
Other non-operating credits of €8 million in 2023 (2022: credit
of €110 million) mainly represent net gains or losses on derivative
contracts for which hedge accounting is not applied, together
with a net gain of €10 million in 2023 on the sale of investments.
Tax
The tax charge on the Profit for the year was €401 million (2022:
tax credit of €16 million), and the effective tax rate was 13.1%
(2022: negative 3.9%).
The substantial majority of the Group’s activities are taxed where
the main operations are based: in the UK, Spain and Ireland,
which had statutory corporation tax rates of 23.5%, 25.0% and
12.5% respectively for 2023. The expected effective tax rate for
the Group is determined by applying the relevant corporation
tax rate to the profits or losses of each jurisdiction.
The geographical distribution of profits and losses in the Group
results in the expected tax rate being 23.5% for the year to 31
December 2023. The difference between the actual effective tax
rate of 13.1% and the expected tax rate of 23.5% is primarily due
to the recognition of previously unrecognised tax losses in the
Group’s Spanish companies.
The Profit after tax for the year was €2,655 million (2022:
€431 million).
On 3 March 2021, the UK Chancellor of the Exchequer
announced that legislation would be introduced in the Finance
Bill 2021 to set the main rate of corporation tax at 25% from April
2023. On 24 May 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 charge of €13 million (2022: €17 million
credit) is recorded in the Income statement and a credit of €3
million (2022: €10 million charge) is recorded in Other
comprehensive income.
The Group is monitoring the OECD’s proposed two-pillar
solution to address the tax challenges arising from the
digitalisation of the economy. This reform to the international tax
system is designed to ensure that multinational enterprises with
consolidated worldwide annual turnover exceeding €750 million
will be subject to a minimum 15% effective tax rate, and also
proposes to address the geographical allocation of profits for
the purposes of taxation. On 15 December 2022, the Council of
the European Union formally adopted the EU Pillar Two
Directive. On 22 December 2022, the EU Minimum Tax Directive
was published.
On 11 July 2023, the UK enacted Finance (No. 2) Act 2023 which
introduced the Multinational Top-up Tax and the Domestic Top-
up Tax with effect for accounting periods beginning on or after
31 December 2023. These taxes are the UK’s adoption of the
income inclusion rule and domestic minimum top-up tax rule
referenced in the OECD’s Pillar Two reform.
On 18 December 2023, Ireland enacted Finance (No. 2) Act 2023
which, pursuant to the EU Minimum Tax Directive, provided for
the introduction of a new minimum effective rate of tax for
certain businesses. These rules provide for a Qualified Domestic
Top-Up Tax where an in-scope group’s Irish operations have an
effective rate of tax of less than 15%. They come into force for
accounting periods beginning on or after 31 December 2023.
On 19 December 2023, Spain’s Council of Ministers approved a
draft law to implement the EU Minimum Tax Directive. This is to
be subject to consultation, prior to being sent to Parliament.
For 2023, the predominant jurisdiction in which the Group
operates with an effective tax rate of less than 15% is Ireland
through Aer Lingus. While the impact on the Group of the
adoption of Pillar Two is not yet reasonably possible to estimate,
for indicative purposes, in 2023 Aer Lingus recorded a current
tax expense of €24 million relating to its Irish operations,
representing an effective tax rate of 12.8%. Had the effective tax
rate applied by Aer Lingus to its Irish operations been 15%, the
current period tax expense would have increased by €4 million
to €28 million, which would have increased the overall Group
effective tax rate from 13.1% to 13.3%.
On 18 January 2024, the Tribunal Constitucional (Constitutional
Court) in Spain issued a ruling that the amendments to
corporate income tax arising from the introduction of Royal
Decree-Law 3/2016 were unconstitutional and accordingly
revoked. The Group has not adjusted the financial statements for
this revocation, but expects to recognise a tax receivable,
excluding interest arising, from the Spanish tax authorities of
approximately €191 million and an associated deferred tax
charge of approximately €58 million.
46
International Airlines Group | Annual Report and Accounts 2023
Operating profit performance of airline operating companies
Statutory
Passenger revenue
Cargo revenue
Other revenue
Total revenue
Fuel, oil costs and emissions charges
Employee costs
Supplier costs
Ownership costs1
Operating profit
Operating margin
Alternative performance measures2
Passenger revenue
Cargo revenue
Other revenue
Total revenue before exceptional items
Fuel, oil costs and emissions charges
Employee costs
Supplier costs
Ownership costs1
Aer Lingus
€ million
British Airways
£ million
Iberia
€ million
Vueling
€ million
2023
2,209
55
10
2,274
639
471
789
150
225
Higher/
(lower)
vly
2023
Higher/
(lower)
vly
2023
Higher/
(lower)
vly
2023
530
12,668
3,453
5,262
1,220
3,181
(25)
757
–
898
(303)
143
275
1,421
(72)
299
–
17
Higher/
(lower)
vly
597
–
3
505
14,323
3,293
6,958
1,447
3,198
600
100
3,825
896
1,496
78
2,577
477
1,284
183
123
907
399
143
5,475
880
2,827
543
1,240
16
1,015
(66)
411
47
256
168
1,431
1,106
940
551
396
168
29
152
50
201
9.9%
6.7 pts
10.0%
7.0 pts
13.5%
6.4 pts
12.4%
4.9 pts
2,209
530
12,668
3,453
5,262
1,220
3,181
597
55
10
2,274
639
471
789
150
(25)
757
–
898
(303)
143
275
1,421
(72)
299
–
17
505
14,323
3,293
6,958
1,447
3,198
100
3,825
896
1,496
78
2,577
477
1,284
183
123
907
399
143
5,475
861
2,827
543
1,240
16
1,015
(66)
411
47
256
–
3
600
168
29
152
42
209
Operating profit before exceptional items
225
168
1,431
1,125
940
551
396
Operating margin before exceptional items
9.9%
6.7 pts
10.0%
7.2 pts
13.5%
6.4 pts
12.4%
5.2 pts
1 Ownership costs reflects Depreciation, amortisation and impairment, and the Net (gain)/loss on the sale of property, plant and equipment.
2 Further detail is provided in the Alternative performance measures section.
The Iberia numbers in the table above are presented on the same basis as in note 5 to the consolidated financial statements and exclude LEVEL Spain.
International Airlines Group | Annual Report and Accounts 2023
47
Financial StatementsCorporate GovernanceStrategic Report
Financial review continued
Review by operating company
All of the airline operating companies saw a significant increase
in profitability in 2023, with Iberia and Vueling achieving record
levels of operating profit, reflecting strong passenger yields,
which were able to offset the impacts of higher effective fuel
prices and inflation.
British Airways operated the lowest passenger capacity relative
to 2019, with ASKs at 90.1% of 2019, partly linked to the delayed
restoration of its capacity to the Asia Pacific region, which saw
COVID-19 restrictions continue longer than the rest of IAG’s
markets. Aer Lingus operated at 104.4% of 2019 capacity,
including the impact of its new UK base at Manchester Airport
opened in October 2021. Iberia and Vueling both increased
capacity versus 2019, operating at 103.2% and 108.5% of 2019
levels respectively.
Operating profit before exceptional items
Aer Lingus (€ million)
British Airways (£ million)
Iberia (€ million)
Vueling (€ million)
IAG Loyalty (£ million)
2023
225
1,431
940
396
280
20221
20191, 2
57
276
306
1,893
389
498
187
240
241
176
1 The 2019 and 2022 results include a reclassification to conform with the
current year presentation for the Net gain on sale of property, plant and
equipment within Operating profit.
2 The 2019 results have been restated for the treatment of administration
costs associated with the Group’s defined benefit pension schemes.
IAG Loyalty showed significant growth in its non-airline partner
revenue streams, together with benefiting from the recovery in
the Group’s airlines, leading to a second successive year of
record operating profits, with operating profit before
exceptional items of £280 million (€321 million), up from £240
million (€282 million) in 2022. IAG Loyalty’s operating margin for
2023 was 21.7%, with the reduction of 6.7 points from 28.4% in
2022 due to the increased level of Avios redemption activity as
well as the mix of Avios issued between the Group’s airlines and
other partners.
Capital expenditure
In 2023, the Group continued to invest in its aircraft fleets,
customer products and services, IT infrastructure and
sustainability, as the business continued to recover and restore
capacity. Capital expenditure, measured as the Acquisition of
property, plant and equipment and intangible assets from the
Cash flow statement, was €3,544 million, compared with €3,875
million in 2022, with the reduction of €331 million due to the
profile of fleet deliveries and pre-delivery payments, with
investment in IT higher than in 2022, as the Group continues to
invest in its IT estate and transformation projects. In 2023, the
Group took delivery of 34 aircraft: ten for British Airways, 14 for
Iberia, six for Vueling, two for Aer Lingus and two for LEVEL. Of
these deliveries, 28 were aircraft acquired from Airbus and
Boeing and six were leased directly from aircraft lessors (2022:
25 aircraft acquired from Airbus and Boeing and two leased
directly from aircraft lessors). One of the aircraft acquired from
Airbus in 2023 was novated to a lessor immediately prior to the
point of delivery as part of a sale and leaseback arrangement,
which resulted in the final delivery payment for the aircraft being
made by the lessor, rather than by the Group as capital
expenditure; the Group also received a refund of the pre-delivery
payments it had made in advance of the delivery date in respect
of that aircraft.
Aircraft deliveries
Airbus A320ceo
Airbus A320neo family
Airbus A330
Airbus A350
Boeing 787-10
Total
2023
2022
2
19
2
9
2
–
12
–
12
3
34
27
48
International Airlines Group | Annual Report and Accounts 2023
Working capital
The net movement in working capital saw a cash outflow of €142
million in 2023, compared with a significant cash inflow of €1,884
million in 2022. The year 2022 had seen a significant restoration
of airline capacity by the end of the year, with significant related
increases in bookings for future travel (Deferred revenue), net of
trade receivables, together with an increase in Trade and other
payables, linked to the increase in the Group’s flying
programmes and the related increase in operating expenditure.
By contrast, in 2023, working capital had returned closer to a
steady-state position. Inventories increased by €141 million to
€494 million, partially linked to engine purchases to meet
maintenance requirements. Trade receivables were up by €229
million to €1,559 million, related to higher passenger numbers
and yields, together with some timing differences related to
certain receipts due from the Spanish government.
At 31 December 2023, total Deferred revenue, which includes the
Group’s loyalty schemes, was €8,023 million, an increase of €379
million versus €7,644 million at 31 December 2022. Deferred
revenue at 31 December 2023 includes €645 million in respect of
unredeemed vouchers, including associated taxes (2022: €911
million). The unredeemed voucher balance includes: flight
vouchers issued to customers at their election to provide the
flexibility to change their destination and/or date of travel (a
policy introduced in 2020 and still in operation) and loyalty-
related companion vouchers (referred to as ‘non-disrupted
vouchers’); vouchers issued due to COVID-19 flight cancellations
(referred to as ‘disrupted vouchers’); certain other flexible fare
options; and other gift vouchers. The outstanding balance of
disrupted vouchers at 31 December 2023 was €139 million, with
the remaining €506 million relating to ongoing commercial
policies, which the Group expects to continue to be offered in
the future.
Aircraft orders
During 2023, the Group converted ten A320neo options to firm
deliveries in 2028, as replacement aircraft for its short-haul
network. A new order was placed for British Airways for six
Boeing 787-10 aircraft, and one new Airbus A350-900 aircraft
was ordered for Iberia; the aircraft represented by these new
orders will be delivered in 2025 and 2026. In addition to these
orders from Airbus and Boeing, the Group entered into leases
directly with lessors for two Airbus A350-900 aircraft for Iberia,
two Airbus A330-200 aircraft for LEVEL and two A320ceo
aircraft for Vueling, all of which were delivered during the year.
The table below includes three further A320ceo aircraft for
Vueling, for which leases were signed prior to 31 December
2023, with the aircraft to be delivered in 2024.
The Group anticipates introducing eight further A320ceo aircraft
for Vueling in 2024 through operating leases, to cover aircraft
availability linked to additional maintenance requirements for
aircraft with Pratt & Whitney ‘GTF’ engines.
Aircraft future deliveries at 31 December
2023
2022
Airbus A320ceo
Airbus A320neo family
Airbus A321XLR
Airbus A350
Boeing 737
Boeing 777-9
Boeing 787-10
Total
3
82
14
3
50
18
11
–
91
14
12
50
18
7
181
192
In addition to those committed future deliveries shown above, at
31 December 2023, the Group held options to acquire a further
235 aircraft from Airbus and Boeing.
Capital commitments
Capital expenditure authorised and contracted for at 31
December 2023 amounted to €12,706 million (2022: €13,749
million), with the decrease attributable to the net of the aircraft
deliveries and the new orders described above. Most of these
commitments are denominated in US dollars.
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 31
December 2023.
International Airlines Group | Annual Report and Accounts 2023
49
Financial StatementsCorporate GovernanceStrategic Report
Financial review continued
Funding and debt
IAG’s long-term objectives when managing capital are: to
safeguard the Group’s ability to continue as a going concern and
its long-term viability; to maintain an optimal capital structure in
order to reduce the cost of capital; and to provide sustainable
returns to shareholders. In November 2018, S&P and Moody’s
assigned IAG long-term investment-grade credit ratings with a
stable outlook; IAG’s credit ratings remained investment-grade
up until the outbreak of COVID-19. In 2023, due to the
improvement in the Group’s profitability, cash generation and
balance sheet, both S&P and Moody’s raised their credit ratings
of IAG in the fourth quarter of the year. The Group’s current
ratings (at 28 February 2024) are: S&P: BBB- (investment
grade), Moody’s: Ba1. British Airways has separate credit ratings,
which were also increased to BBB- (investment grade) by Fitch
and S&P; Moody’s rating of British Airways is Ba1.
Debt and capital
The Group monitors leverage using net debt to EBITDA before
exceptional items, in addition to closely following measures used
by the credit ratings agencies, including those based on total
borrowings (gross debt).
In 2019, the Group set a target of net debt to EBITDA before
exceptional items below 1.8 times, which broadly corresponded
to investment grade with the credit ratings agencies. At its
Capital Markets Day in November 2023, the Group confirmed
this target remains appropriate.
As at 31 December 2023, net debt to EBITDA before exceptional
items had reduced to 1.7 times, compared with 3.1 times in 2022,
reflecting the strong recovery in profitability and the related
cash generation, with capital expenditure €331 million lower than
the previous year.
Early repayment of debt raised in 2020 and 2021
During 2020 and 2021, the Group’s airlines required additional
liquidity, due to the significant adverse impact of COVID-19, and
all entered into special COVID-19-related financing
arrangements, partially or fully guaranteed by the governments
in their home countries. This debt was based on floating rate
arrangements and agreed at margins that reflected the condition
of the financial markets and the Group’s airlines at the time; this
debt was among the most expensive of the Group’s debt to
service. As a result of the Group’s profitability and cash
generation in 2022 and 2023, and expected continued strong
cash generation over the foreseeable future, in the second half
of 2023, the Board agreed that the remainder of this debt should
be repaid ahead of its scheduled maturity, which was between
2024 and 2026. The total amount repaid early was €3,271 million:
£2,000 million (€2,312 million) for British Airways, partially
guaranteed by the UK Export Fund (UKEF); €644 million and
€223 million for Iberia and Vueling respectively, partially
guaranteed by Spain’s Instituto de Crédito Oficial (ICO); €42
million of other non-aircraft debt for Iberia; and €50 million to
the Ireland Strategic Investment Fund (ISIF) for Aer Lingus.
These early debt repayments will result in a reduction in interest
costs in future years.
Following these early repayments, and the repayment of IAG’s
€500 million bond in July 2023, the maturity profile of the
Group’s debt as of 31 December 2023, aside from aircraft
financing payments, includes two €500 million IAG bonds due in
2025 and 2027, respectively, IAG’s €825 million 2028 convertible
bond and a €700 million IAG bond due in 2029.
Net debt
€ million
Debt
Cash and cash equivalents and
interest-bearing deposits
Net debt at 1 January
Decrease/(increase) in cash net of
exchange
Movements in total borrowings
Net cash outflow repayments of
borrowings and lease liabilities
2023
2022
Higher /
(lower)
19,984 19,610
374
(9,599) (7,943) (1,656)
10,385 11,667 (1,282)
2,762 (1,656) 4,418
(5,999) (2,505) (3,494)
Net cash inflow new borrowings
1,001
1,436
(435)
Non-cash impact of new leases
1,315
1,017
298
Decrease in net debt from regular
financing
Exchange and other non-cash
movements
(3,683)
(52) (3,631)
(219)
426
(645)
Net debt at 31 December
9,245 10,385 (1,140)
Net debt reduced by €1,140 million, principally due to the
recovery in profitability and operating cash flow generation,
partially offset by the capital expenditure of €3,544 million.
Gross debt reduced by €3,902 million during the year to €16,082
million. Repayments exceeded new borrowings by €4,998
million, mainly due to the early repayments of non-aircraft debt
outlined above, the repayment on maturity of a €500 million IAG
bond, and scheduled repayments of aircraft financing exceeding
new aircraft financing raised during the year. The Group also
raised financing by way of sale and leaseback transactions and
extended existing leases, which together added €1,315 million to
gross debt. The Group’s 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
2023, the euro and pound sterling strengthened against the US
dollar leading to a decrease in gross debt of €361 million. The
remainder of the variance in gross debt versus 2022 is mainly
due to the increase in the fair value of IAG’s €825 million
convertible bond due in 2028.
50
International Airlines Group | Annual Report and Accounts 2023
Cash
Cash, cash equivalents and interest-bearing deposits
€ million
Aer Lingus1
British Airways
Iberia
Vueling
IAG Loyalty
2023
2022
Higher/
(lower)
356
375
(19)
1,361 2,877 (1,516)
1,890 2,389
(499)
452
766
(314)
1,374
993
381
IAG and other Group companies
1,404 2,199
(795)
Cash and cash equivalents and
interest-bearing deposits
6,837 9,599 (2,762)
1 At 31 December 2023 Aer Lingus held €31 million of restricted cash
(2022: €33 million) within interest-bearing deposits maturing after
more than three months to be used for employee-related obligations.
British Airways, Iberia, Vueling, Aer Lingus and IAG Loyalty all
experienced significant positive operating cash flow in the year.
The reduction in the balance of cash, cash equivalents and
interest-bearing deposits in IAG and other Group companies
principally reflects the early repayment of floating rate
unsecured debt in all the airlines, and the repayment of the IAG
€500 million 2023 bond on maturity.
Debt
Long-term aircraft financing was drawn for 31 aircraft during 2023,
including five aircraft that were delivered in 2022 to British
Airways and for which funding was committed at 31 December
2022. The Group also secured committed funding of €375 million,
to be drawn in 2024, for three British Airways aircraft, including
two delivered in 2023; this committed funding is included in
committed and undrawn aircraft financing facilities at 31 December
2023. Linked to its strong cash generation, Iberia did not seek
financing for three new A321neo aircraft delivered in 2023, with
these aircraft held unencumbered at 31 December 2023.
Equity
No equity was raised or repaid during the year, nor in 2022.
Liquidity facilities
During the year, the Group exercised a one-year extension to the
availability of its Revolving Credit Facility (RCF), which now has
committed availability until March 2026. The available amount
will remain at $1,755 million (€1,605 million) until March 2025 and
reduce to $1,655 million (€1,513 million) for the final 12 months to
March 2026. The facility was originally agreed and executed with
a syndicate of banks in 2021, with availability 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 which has a separate borrower limit within
the overall facility. Any drawings under the facility would be
secured against eligible unencumbered aircraft assets and/or
take-off and landing rights at London Heathrow or London
Gatwick airports. This facility was undrawn at 31 December 2023.
The Group also added a new £1,000 million (€1,159 million)
committed credit facility for British Airways, partially guaranteed
by the UKEF, which was agreed upon the repayment of British
Airways’ £2,000 million (€2,312 million) loan in September 2023
and which matures in September 2028. This is in addition to the
existing £1,000 million (€1,159 million) committed credit facility
for British Airways, partially guaranteed by the UKEF, which was
agreed and executed in 2021 and matures in November 2026.
Both facilities were undrawn at 31 December 2023.
Aer Lingus has a €350 million credit facility with Ireland’s ISIF,
which is available until March 2025. This facility was undrawn at
31 December 2023. At 31 December 2022 €50 million was drawn;
this €50 million was repaid in the first half of 2023.
The Group also has certain other committed and undrawn
general and overdraft facilities, bringing total committed and
undrawn general and overdraft facilities at 31 December 2023 to
€4,412 million (2022: €3,284 million).
The Group also holds €375 million of committed and undrawn
aircraft financing facilities (2022: €1,116 million). The committed
amount at 31 December 2023 represents financing for three
British Airways aircraft to be drawn in 2024. The committed and
undrawn aircraft financing facilities at 31 December 2022
included committed financing for five aircraft for British Airways
that was drawn in 2023 and certain backstop financing
arrangements, which have now expired. The Group’s aircraft
deliveries continue to be successfully financed on regular long-
term financing arrangements as required, and hence no drawing
on these backstop arrangements was necessary.
In total, the Group had €4,787 million of committed and
undrawn general and aircraft facilities as at 31 December 2023
(2022: €4,400 million).
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 or paid in 2023 (2022: nil).
Liquidity and cash flow
Total liquidity, measured as cash, cash equivalents and interest-
bearing deposits of €6,837 million and committed and undrawn
general and aircraft facilities of €4,787 million, was €11,624 million
at 31 December 2023. This represented a decrease of €2,375
million versus total liquidity of €13,999 million at the end of 2022,
linked mainly to the Group’s decision to repay certain of its debt
raised in 2020 and 2021 in advance of its scheduled maturity.
International Airlines Group | Annual Report and Accounts 2023
51
Financial StatementsCorporate GovernanceStrategic Report
Financial review continued
Cash flow
The Group saw strong cash flow generation in 2023, mainly
linked to its strong profit performance; the strong cash
generation in turn allowed the Group to rebalance the mix of
gross debt and cash by undertaking the early debt repayments
outlined above.
Free cash flow
In 2023, the Group adopted Free cash flow as an Alternative
performance measure, replacing Levered free cash flow. Free
cash flow is defined as Net cash flows from operating activities
less Acquisition of property, plant and equipment and intangible
assets. See Alternative performance measures section for further
details.
Cash flows from operating activities
€ million
Operating profit
Depreciation, amortisation and
impairment
Net gain on disposal of property,
plant and equipment
Pension contributions net of service
costs
Increase in provisions
Unrealised currency differences
Other movements
2023
20221 Variance
3,507
1,278 2,229
2,063 2,070
(7)
(2)
(22)
20
(30)
237
51
111
(5)
(25)
463
(226)
19
76
32
35
(1,005)
(817)
(188)
365
42
323
(291)
(134)
(157)
(142)
1,884 (2,026)
4,864 4,854
10
€ million
2023
2022 Variance
Interest paid
Net cash flows from operating
activities
Acquisition of property, plant and
equipment and intangible assets
Free cash flow
4,864 4,854
10
Tax paid
Interest received
(3,544) (3,875)
1,320
979
331
341
Movement in working capital
Net cash flows from operating
activities
1 The 2022 results include reclassifications to conform with the current
year presentation. Further information is given in note 2 and note 37.
In December 2022, British Airways agreed the valuation of its
main defined benefit pension scheme, the New Airways Pension
Scheme (NAPS), with the scheme’s Trustee, which resulted in a
deficit as at the valuation date of 31 March 2021 of £1,650 million
(€1,887 million). As at 31 December 2023, the scheme was over
100% funded on the 2021 valuation basis and an overfunding
protection mechanism agreed with the NAPS Trustee had the
effect that no contributions were due in 2022 or 2023. Deficit
contributions could resume should the funding level fall in the
future. The pension cash flows shown above represent payments
to various smaller schemes within the Group. The valuation of
the main British Airways pension schemes also showed a surplus
on the IAS 19 accounting basis, which does not impact
contributions due to the schemes. Total Employee benefit assets
at 31 December 2023, of which the principal element is the NAPS
accounting surplus, were €1,380 million; the reduction of €954
million versus 31 December 2022 was predominately due to the
impact of the fall in AA corporate bond yields applied in
discounting scheme liabilities, leading to higher liabilities at the
same time as the market value of assets fell, mainly due to the
increase in UK government bond yields.
In 2023, Free cash flow was €1,320 million, up €341 million versus
2022, driven by similar Net cash flows from operating activities,
but lower capital expenditure, as outlined above. In 2022, whilst
the Operating profit was significantly lower, Net cash flows from
operating activities benefited from the restoration of capacity
and the associated positive impact on working capital, mainly
from the rebuilding of advanced ticket sales.
Condensed cash flow summary
€ million
2023
20221 Variance
Net cash flows from operating
activities
Net cash flows from investing
activities
Net cash flows from financing
activities
Net (decrease)/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 other
interest-bearing deposits
4,864 4,854
10
(3,423) (3,463)
40
(5,194)
(56) (5,138)
(3,753)
1,335 (5,088)
(2)
(31)
29
9,196 7,892
1,304
5,441 9,196 (3,755)
1,396
403
993
6,837 9,599 (2,762)
1 The 2022 results include reclassifications to conform with the current
year presentation. Further information is given in note 2 and note 37.
Many of the significant cash flow items are already explained
above, including in the sections covering operating costs, non-
operating costs, capital expenditure, working capital and other
initiatives and funding. Further detail of the other main
movements is provided below.
52
International Airlines Group | Annual Report and Accounts 2023
Cash flows from financing activities
€ million
Proceeds from borrowings
Repayment of borrowings
Repayment of lease liabilities
Settlement of derivative financial
instruments
Acquisition of treasury shares and
other financing movements
Net cash flows from financing
activities
2023
2022
Variance
1,001
1,436
(435)
(4,268) (1,050) (3,218)
(1,731) (1,455)
(276)
(119)
1,036 (1,155)
(77)
(23)
(54)
(5,194)
(56) (5,138)
Proceeds from borrowings reflect the cash inflows from aircraft
financing as described in the Funding and debt section above.
Aside from the additional liquidity facilities described in
‘Liquidity facilities’ above, there was no new non-aircraft
financing raised in 2023 (2022: nil).
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 2023 relates to the weakening of the US dollar
versus the euro and pound sterling. In 2022, the significant
inflow related to the strengthening of the US dollar versus the
euro and pound sterling.
The Acquisition of treasury shares and other financing
movements includes the purchase of 27 million shares in 2023
related to the Group’s intended acquisition of the remaining
shares in Air Europa Holdings, as part of the consideration is
required to be delivered as IAG shares, together with 15 million
shares related to employee incentive schemes. In 2022, 15 million
shares were purchased related to employee incentive schemes.
Provision and other non-cash movements mainly relate to
restoration and handback provisions for leased aircraft and ETS
allowances. Provisions for ETS allowances are charged to Fuel,
oil costs and emissions charges as they are built up through the
year, with the cash payment for ETS credits acquired by the
Group’s airlines to meet the requirements of the various
emissions trading schemes accounted for as capital expenditure.
Provision and other non-cash movements also include
restructuring payments of €82 million, mainly relating to
redundancy programmes in Iberia agreed prior to 2020.
The increase in interest paid in 2023 reflects higher interest
rates, partially mitigated in the fourth quarter by the early
repayment of €3,271 million of floating rate debt outlined above.
After including the impact of hedging, 13% of the Group’s total
debt at 31 December 2023 was on floating rate arrangements.
Cash flows from investing activities
€ million
2023
2022
Variance
Acquisition of property, plant and
equipment and intangible assets
Sale of PPE, intangible assets and
investments
Increase in other current interest-
bearing deposits
Payment to Globalia for convertible
loan
Other investing movements
Net cash flows from investing
activities
(3,544) (3,875)
331
1,091
837
254
(985)
(351)
(634)
–
(100)
100
15
26
(11)
(3,423) (3,463)
40
The €1,091 million of cash inflow from the Sale of property, plant
and equipment, intangible assets and investments is mainly due
to the aircraft sale and leaseback transactions discussed in the
Funding and debt section above, together with the disposal of
assets, principally aircraft being retired from service. The
increase from 2022 reflects the number and type of aircraft
financed through sale and leaseback transactions in 2023
compared with 2022.
In March 2022, IAG entered into a convertible loan with Globalia
for €100 million, convertible into an equity stake in Air Europa
Holdings of 20%; the conversion option was exercised in August
2022, with the equity stake treated as an equity investment.
International Airlines Group | Annual Report and Accounts 2023
53
Financial StatementsCorporate GovernanceStrategic Report
Regulatory environment
Engagement for the
benefit of our industry
Engagement context
The strong recovery in demand for
travel during 2023 was accompanied by
the usual close scrutiny by regulators
and policy-makers with additional
challenges created by the geopolitical
background. Political dynamics in Spain
and forthcoming elections in the UK and
for the European Parliament mean that
policymakers have tended to focus on
shorter-term priorities which is a
challenge for an industry with long
investment cycles.
With this overall context, IAG continued
to engage with policymakers in the
institutions of the European Union and in
the countries in which its operating
airlines are based or serve, to promote
the economic and social benefits of
aviation and explain the impacts of
policy proposals on our business. We
continue to encourage aviation
regulators to adopt measured policies
that recognise the competitive nature
of international aviation (including
proposals to amend airport slot
allocation rules in the EU or the UK)
and to promote a greater balance of
the risk and reward in the regulation
of monopoly airports and Air Navigation
Service Providers (ANSPs), given
the significant cost to airlines of
their services.
In addition to direct engagement
with policymakers, IAG worked through
trade associations, notably Airlines
4 Europe (A4E) and the International
Air Transport Association (IATA), as
well as national industry and business
associations, to put its case to
governments and institutions such
as the International Civil Aviation
Organisation (ICAO) on issues of
importance to the Group and its
customers, especially in sustainability.
Geopolitical instability
The far-reaching impacts of the Russian
invasion of Ukraine in 2022 on the world
also had immediate practical effects on
airlines by preventing European and UK
airlines from operating through Russian
airspace, a situation which, along with
the war, endured throughout 2023. IAG’s
operating companies adapted by
routing aircraft to and from Asia away
from Russian airspace with the resultant
increase in flying time driving more
complex planning and a need for
additional crew.
At various times in 2023, military coups
and other conflicts in West Africa and
the Sahel region resulted in further
temporary restrictions to airspace.
Although the risks to smooth operations
from such events can usually be
managed and are isolated in their
geographical impact, they also
exacerbate industry-wide challenges.
A further impact of the war in Ukraine
was seen in 2023 with the extension of
sanctions on Russia by the EU and the
UK to prohibit, from the end of
September, the import of Russian iron
and steel products processed in a third
country. The additional requirements to
scrutinise the origins of steel and the
location of manufacture have slowed
procurement of aircraft parts adding
to pressure on the global supply chain.
“IAG continues to play a
leading role in developing
industry plans for
reaching net zero carbon
emissions.”
The conflict in Israel from 7 October
and the subsequent escalation of
military action in Israel and Gaza meant
that IAG’s airlines ceased operations to
Israel. There are immediate commercial
impacts of being unable to operate to
the country and further signs of impact
on markets in the immediate conflict
area. We continue to monitor the wider
economic impacts on the world
economy of this and other conflicts.
The global supply chain has not yet
returned to normal from the disruption
caused by the COVID-19 pandemic,
having the practical effect of putting
pressure on maintenance and
engineering resources affecting fleet
availability. Both Airbus and Boeing have
seen delivery schedules for new aircraft
slip behind their original plan and the
distribution of replacement parts
continues to take longer than it did in
2019, increasing maintenance times for
many airlines. The problems that
emerged during the year for airlines
operating Airbus aircraft with the Pratt
& Whitney PW1100G ‘GTF’ engines
meant significant additional numbers
of aircraft in the global airline fleet
required additional maintenance at the
end of 2023. While the impacts for IAG’s
own aircraft are limited and manageable,
the pressure on maintenance facilities
increased during 2023 since other
airlines took up capacity to solve this
issue and will continue to do so in the
coming years. IAG engaged with
regulators to explain the potential
difficulties for customers that this
pressure could cause.
Sustainability
Much of IAG’s advocacy and
engagement in 2023 was concerned
with the issue of sustainability. IAG
continues to play a leading role in
developing industry plans for reaching
net zero carbon emissions and the
Group’s strategic approach and practical
actions to reaching our targets
are explained in detail in the
Sustainability section.
54
International Airlines Group | Annual Report and Accounts 2023
In the UK, IAG engaged with cabinet
ministers and officials at all levels
to encourage support for a UK SAF
industry that can provide thousands
of new jobs and see plants built in the
regions of the UK. IAG advocates the
use of free allowances from future
revenues that airlines will pay into the
UK ETS (mirroring the EU approach),
to support the purchase of advanced
SAF and encourage SAF production
as seen in the US and Europe. We look
forward to providing input to the
UK’s consultation on a price support
mechanism for SAF production
which is an essential requirement
to securing investment.
Aviation policy issues
Potential changes considered by the
EU and the UK to the global system
used to allocate takeoff and landing
slots at congested airports were
an important focus of government
engagement throughout 2023.
IAG supports the use of the Worldwide
Airport Slots Guidelines (WASG) system,
formulated by IATA, since it provides
a stable, internationally accepted system
(reflected in the relevant EU Slot
Regulation and UK laws) that
encourages competition but also
supports reliable, established networks.
In 2023, the EU considered but halted
changes to this system and the UK
announced that it would consult on
potential new approaches during 2024.
We note that no system of allocation
can solve the problem of a lack of
capacity, and these should not be
conflated. We therefore continue to
impress on policymakers the benefits
of a global system that supports new
market entrants and allows network
airlines to plan their complex schedules
in advance so that they can offer
customers a wide range of destinations
and connections while also managing
operational disruption effectively.
In our ongoing activities to explain our
position, the Group and its operating
airlines continued to engage with
representatives of the institutions of
the EU and the governments of Spain,
Ireland and the UK. We have long
advocated the development of
Sustainable Aviation Fuels (SAF) which
reduces lifecycle CO2 emissions by 80%
as the solution, not just to the near-term
need to drive down industry emissions,
complementing the deployment of
more efficient aircraft, but also to enable
sustainable long-haul aviation alongside
the development of carbon capture
technology and future generation e-fuels.
In Europe, high-level engagement
continued on the most relevant of
the EU’s Fit for 55 policies including
the aviation SAF blending mandate
(ReFuel EU aviation) and the revision
of the Emissions Trading System (ETS)
Directive for Aviation. IAG welcomed
the EU’s commitment of 20 million
free SAF allowances to encourage SAF
uptake between 2024 and 2030 and the
increase to the ETS innovation fund
budget to help deploy net zero
and innovative technologies. In 2023,
aviation was also included in the
EU Taxonomy as one of the sectors
that has the potential to contribute
significantly to climate change mitigation.
While the Group continues to support
the principles and approach of the EU’s
Green Deal we maintained our
opposition, aligned with other airlines,
to the proposed removal of the jet
fuel tax exemption since it will reduce
the sector’s ability to invest in more
effective measures and to enable
a competitive European aviation sector.
IAG’s technical experts and senior
executives engaged with relevant
officials at the European Commission,
the Representations of Member
States in Brussels as well as Members
of the European Parliament, and with
complementary contacts with the
relevant authorities in the respective
EU hubs, in Madrid, Dublin and Barcelona.
International Airlines Group | Annual Report and Accounts 2023
55
Financial StatementsCorporate GovernanceStrategic Report Regulatory environment continued
Some alleviations from the elements of
slot rules that require airlines to operate
any one slot 80% of the time to retain
it in the following year have remained
in place around the world during 2023.
IAG welcomed such alleviations as they
recognise the continuing uncertainty
that global supply chain issues and
short-term uncertainty in demand in
individual markets have caused. As we
have seen in the Middle East, in the last
quarter of 2023 there are continued
pressures on airlines which are often
prevented from operating individual
flights. We continue to advocate a
pragmatic approach by airport slot
coordinators to recognise the reality of
factors outside airlines’ control and that
justify retaining slots for the longer-term
benefit of airlines and their customers.
Since around one third of flights
in Europe operate through French
airspace, the very frequent strikes
by air traffic controllers in France put
further pressure on operations. IAG
continues to make representations with
other airlines and A4E, to encourage
EU and French government action to
allow free movement of traffic flying
over France during industrial action,
a policy already adopted by several
other EU Member States.
“IAG maintained close
engagement with
regulators in key markets
around the world to
ensure positive relations
and to ensure the
benefits of its operations
are understood.”
Aviation regulators’ concern for the
consumer interest is understandable
following the disruption of 2022 and
in the light of external factors, and there
were related developments in different
jurisdictions for IAG’s operating airlines.
In the EU, national authorities responded
to the industry recovery and high
consumer demand in different ways,
ranging from proposals to cap airfares
in one EU Member State, to proposals
to establish minimum fares in another.
IAG engaged with policymakers
to explain the benefits to consumers
of the choice available to them in the
competitive aviation market in the EU.
In the UK, IAG engaged with the Civil
Aviation Authority (CAA) on plans to
introduce an accessibility framework
for airlines, to mirror its existing system
that grades airports on the quality of
their provision of wheelchairs. IAG’s
operating airlines encourage support
for passengers with additional needs
and believe that cross-industry
engagement and communication to
improve customer service will have
better results for passengers affected
than regulation. The UK also consulted
on potential rules to restrict ‘drip pricing’
during online sales to ensure customers
have all the relevant information at the
appropriate point of purchase. Canada
also introduced new requirements for
airlines to set out their accessibility
policies and consulted on proposals
to increase passenger protection.
Similarly, the US published notices
of proposed rulemaking in several
areas including to improve the provision
of refunds to customers. At the end
of 2023, the European Commission
presented a proposal on multimodal
passenger rights with a focus on
passenger rights for access to tickets
covering different transport modes.
IAG responded to relevant consultations
and engaged directly and through our
trade associations to inform regulators,
propose balanced regulation and avoid
introducing additional rules that hamper
the competitiveness of the industry.
The Spanish Presidency of the EU
in 2023 gave an additional opportunity
to engage in Madrid and Brussels.
Economic regulation of monopoly
infrastructure
Aviation infrastructure and price
regulation was another area of focus
in 2023. In Ireland, the DAA appealed
against the Irish Aviation Authority’s
December 2022 decision on the
maximum level of airport charges at
Dublin Airport for the period 2023-2026.
This decision, which takes account of the
impact that the COVID-19 pandemic had
on the aviation industry, also provides
for a capital investment allowance of
approximately €3 billion. IAG was
broadly supportive of the IAA’s final
determination of charges and has joined
the appeal proceedings as a notice party.
In Spain, IATA and Spanish airline
association ALA opposed AENA’s
proposal to increase charges for 2024
that would break the cap in the airport
regulation document (DORA II) that
sets AENA’s airport charges scheme
for 2022-2026. IAG broadly supports
the associations’ objections.
In October, the UK Competition and
Markets Authority confirmed through
its consideration of airline and airport
appeals that it was essentially satisfied
with the CAA’s economic review of
London Heathrow airport’s charges.
It is positive that charges in 2024 will be
lower in nominal terms than in 2023 and
then essentially flat for the remainder of
the regulatory period to 2026. However,
the very significant increase permitted
in 2022 and 2023 (despite not allowing
most of the London Heathrow airport
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International Airlines Group | Annual Report and Accounts 2023
to recoup revenues not earned due to
the pandemic) means that London
Heathrow airport’s charges remain
among the highest in the world and
are not competitive. IAG seeks to work
with the CAA and the Department
for Transport to improve the regulatory
framework for the future.
The importance of aviation infrastructure
to airlines and their customers was
highlighted by the failure of the UK’s
National Air Traffic Services (NATS)
on 28 August due to a software failure.
Although services recovered on the
same day, an almost complete outage
of service for several hours resulted
in considerable cost to IAG’s operating
airlines, not only in managing the outage
but also providing customers with the
necessary duty of care, accommodation,
communication and travel costs. IAG’s
airlines recognise the need to look after
their customers in this way but
encourage the reform of consumer
regulation EU261 and the UK equivalent
to recognise that ANSPs and airports
should equally be responsible for the
costs incurred where their actions are
the cause of delays and cancellations.
This unfortunate NATS incident came
during the regulator’s consideration
of its regulatory price review, the results
of which see a 25% increase in average
unit rate in nominal terms compared
with 2022. This increase is driven by the
fact that the regulatory system includes
a traffic risk-sharing system that
effectively allows NATS to recover
the lost revenue from the pandemic.
The decision does however include
reductions in NATS En Route Limited’s
underlying cost base through to 2027
and provides a balance of efficiency
and effective service provision.
Through A4E, IAG also engaged
in discussions with the European
Commission’s Performance Review
Body, aiming to encourage improved
efficiency, better value for money and
enhanced operational performance
from ANSPs in Europe. IAG supports
the implementation of the Single
European Sky to deliver environmental
and economic benefits over the
longer term.
International relations
IAG maintained close engagement
with regulators in key markets around
the world to ensure positive relations
and to ensure the benefits of its
operations are understood. This includes
monitoring developments in
international air service agreements
and contributing to government talks,
where appropriate, between the states
in which IAG’s operating airlines are
based and states representing important
markets around the world.
For example, in November this included
attending the special meeting of the
EU-US Joint Committee on air transport
that explored the US’ complaint
against the EU relating to the reduction
in capacity imposed at Amsterdam
Schiphol airport. Along with other
airlines, IAG contends that any such
questions of capacity should be resolved
with reference to the ICAO Balanced
Approach that considers the benefits
and negative aspects of aviation activity
fairly. We welcomed the Government
of the Netherlands’ decision in October
to halt its plans and continue to
advocate the continued use of all
available capacity at Amsterdam
Schiphol airport and to address
environmental concerns through
other measures.
International Airlines Group | Annual Report and Accounts 2023
57
Financial StatementsCorporate GovernanceStrategic Report British Airways
British Airways
for everyone
Business overview
In 2023 we continued to focus on
our recovery and the transformation
of our business to create a better
British Airways for our customers
and our colleagues. We delivered
a strong operating profit, continued
to strengthen our balance sheet and
materially reduce our debt, enabling
us to supercharge our transformation
through a £7 billion investment into
our customer and colleague experience
over the next three years.
While we have seen a large number of
customers flying with us this year and
demand for travel approaching pre-
pandemic levels, we recognise business
travel continues to recover at a slower
pace than anticipated, with incremental
improvements throughout the year,
offset by a continued strong leisure
performance. There is no denying
we continued to experience a number
of headwinds throughout the year,
many of which were outside our control
and caused disruption to our customers’
travel plans. This included air traffic
control constraints, the August Bank
Holiday National Air Traffic Services
(NATS) outage, an increase in adverse
weather conditions and ongoing supply
chain issues. We worked hard to
alleviate the factors within our control
and put a renewed focus on building
a more robust operation, punctuality
and investment in our customer
experience, our people and in our
sustainability commitments as part
of our BA Better World programme.
Our people
We know our people are key to our
success and we’re extremely grateful
for their continued hard work and the
outstanding contributions they make
to our business. We’re focused on
improving pride and trust with our
colleagues and creating a culture that
makes them feel valued and empowered
to do the right thing for our customers.
We completed the roll out of our
“We continue to rebuild
our airline, putting
a laser focus on
transformation across
the whole business,
to ensure we deliver
for our customers,
our investors and
our people.”
Sean Doyle
Chairman and Chief Executive
Officer of British Airways
10.0%
Operating margin before
exceptional items
+7.2 pts vly
-9.9%
ASK change
vs 2019
86.2 gCO2/pkm
Carbon intensity
-3.3% vly
new uniform, designed by Savile Row
tailoring expert Ozwald Boateng, to our
30,000 uniform-wearing colleagues and
began investment in transforming our
workspaces, unveiling new colleague
rest areas at our airports and hangars
and collaborative workspaces in our
offices. We’re taking positive action
to drive inclusion across our airline, but
we don’t shy away from the fact that
there is more work to be done. We
continue to champion and encourage
our colleague-led networks and
celebrate different perspectives,
backgrounds and experiences.
We launched an industry-leading
fully-funded cadet pilot training
programme, making the profession
accessible to everyone. Throughout the
year we recruited 7,500 new colleagues
into the business and continued to build
more constructive relationships with the
trade unions that represent our people
and enhanced our staff travel policies.
Our recent colleague survey results
show increased levels of engagement
that indicate we’re making progress in
rebuilding trust with our people.
Our customers
We continue to invest for our customers
and remain focused on improving
the customer experience and our
Net Promoter Score. In 2023 we took
delivery of 10 new fuel-efficient aircraft,
continued to fit our business cabin seat,
the Club Suite, onto our existing
long-haul fleet and are providing our
engagement centre colleagues with
more tools and new technology to
better assist our customers.
We’ve also ramped up our extensive
transformation programme, which
includes innovation across every area
of our business between 2024 and 2026.
We have more than 600 initiatives
underway which range from trialling
biometrics on selected international
flights to speed up the boarding
process, to using artificial intelligence
and situational awareness tools
to improve our operational efficiency
and enhance the customer experience.
We continue to connect Britain with
the world and the world with Britain,
and in 2023 launched new routes to
Cincinnati, Riga, Belgrade and Cologne
from Heathrow and services to Aruba,
Guyana, Accra, Fuerteventura
and Sharm El Sheikh from Gatwick.
Following a three-year period
of suspended operations due to
the COVID-19 pandemic, we resumed
operations to mainland China and
announced we will be returning
to Abu Dhabi in summer 2024.
We also continue to improve our
Executive Club loyalty programme
and, in conjunction with IAG Loyalty,
launched Avios-Only flights to a number
of short-haul destinations across our
network, where every seat is exclusively
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International Airlines Group | Annual Report and Accounts 2023
available for purchase using the loyalty
currency. As part of this proposition,
we announced we will operate our first
long-haul Avios-Only flight to Dubai
in late 2024.
Our planet
We remain fully committed to reducing
the impact flying has on our planet and
sustainability has continued to be front
and centre of our business strategy.
All flights departing from London
Heathrow now fly with a small amount
of Sustainable Aviation Fuel (SAF)
and we continue to work closely with
industry and government to scale up
development, which is urgently needed.
Through partnerships in the UK and USA,
we continue to invest in SAF. Recently
Project Speedbird, our partnership with
Nova Pangaea Technologies and
LanzaJet, secured £9 million in funding
from the Government’s Advanced Fuels
Fund. We’re also empowering our
customers to address their emissions,
via our CO2llaborate platform, where
customers can choose to purchase
carbon removal credits or SAF before,
during or after their flight.
In 2023, we celebrated raising more than
£28 million for Flying Start, our charity
partnership with Comic Relief, since our
partnership began in 2010, and 10 years of
partnership with the Disasters Emergency
Committee (DEC). Through our BA Better
World Community Fund, our customers
and colleagues helped to raise more than
£5 million in funding to support more than
170 charities across the UK.
Looking forward
We remain committed to operating
a strong and stable schedule and
delivering for our customers and
colleagues by running an airline of which
they can be proud, whilst managing our
costs and ensuring we’re operating
safely and efficiently. As we transform
our business, we continue to modernise
our fleet with the delivery in 2024 of
more than 14 next generation fuel-
efficient aircraft, invest in our customer
and colleague experience, and consider
our environmental impact at every stage
as we work together with our people
to create a better British Airways for
everyone.
British Airways unveiled its
new uniforms
British Airways
New Club Suites
New aircraft. In 2023 British Airways
took delivery of 10 new fuel-efficient
aircraft including the Airbus A320 and
A321neo, A350-1000 and Boeing
787-10 Dreamliner.
International Airlines Group | Annual Report and Accounts 2023
59
Financial StatementsCorporate GovernanceStrategic Report Iberia
Delivering on our
transformation
Business overview
In 2023, we saw a strong financial
performance that has allowed us to
make an early repayment of debt, which
was guaranteed by Spain’s Instituto de
Crédito Oficial (ICO). These results have
been possible due to a favourable
macroeconomic environment, and the
improvement of inbound tourism to
Spain, which has seen an increase in the
number of tourists and levels of
consumer spending.
Iberia has continued to be ahead of its
competitors during 2023 in terms of
capacity, which, along with the supply-
demand imbalance we are seeing in the
industry, has been a key driver of our
remarkable results.
We added six Airbus A350-900, three
A320neo and six A321neo aircraft to the
Iberia and Iberia Express fleets, which
are at the core of our transition towards
a more sustainable aviation industry. We
have expanded our network by opening
new routes such as Doha and Cairo, and
increased frequencies to important
destinations such as Bogotá and Lima.
As part of our commitment to develop the
connectivity and competitiveness of the
Madrid hub, we continue to make
progress on our proposed acquisition of
Air Europa. The acquisition remains
subject to securing the required approvals
and is expected to take place between 18
to 24 months after our announcement of
the transaction in February 2023.
In September, we lost the handling
licences at eight Spanish airports,
including Barcelona and Palma de
Mallorca; however, we have won and
maintained the licence to operate other
major airports such as Madrid Barajas.
Our people
Once again Iberia's employees have been
the company's greatest asset. Team effort
is what makes it possible to achieve the
highest standards of quality every day.
“In 2023, we achieved an
historic operating result
in terms of absolute
profit and operating
margin. We have
benefited from a positive
industry environment
and continue to deliver
on the transformation
we have been executing
for over a decade.”
Fernando Candela
Chairman and CEO of Iberia
13.5%
Operating margin
before exceptional items
+6.4 pts vly
+3.2%
ASK change
vs 2019
68.5 gCO2/pkm
Carbon intensity
-4.4% vly
In 2023 we reaffirmed our unwavering
commitment to creating and maintaining
stable and high-quality employment, and
to do so we have improved the working
conditions and salaries of our entire
workforce.
At Iberia contractual agreements are
being implemented across our
businesses as a sign of our commitment
to the wellbeing and professional
development of our team.
At Iberia Express, we reached collective
bargaining agreements with our pilots
and cabin crew until 2025.
In addition, 164 pilots, 512 cabin crew
and 222 maintenance staff joined Iberia’s
workforce.
Our customers
Operational excellence and punctuality
are key factors for our customers. Iberia
and Iberia Express have been the most
punctual airlines in Europe and Iberia
fifth globally, according to the 2023
Cirum On-Time Performance Review.
Also, we have reached historic levels in
both NPS and customer satisfaction, by
improving our engagement culture and
all customer communications.
In 2023, we continued to roll out our new
business cabin, thanks to the arrival of
four new latest-generation Airbus
A350-900s, together with two leased
A350-900s. The aircraft have
contributed not only to operational
improvements, but also provide greater
comfort in all cabins, with enhanced
privacy, increased space and new
lighting environments. These aircraft
offer state-of-the-art connectivity and
in-flight entertainment so passengers
can enjoy their experience to the fullest.
We redesigned the in-flight meals
throughout our network. We renewed
our offering in the economy and
premium economy cabins on long-haul
flights by introducing a between-meals
service, while our business cabin now
includes healthy products, such as fresh
fruit, as part of the on-board meals.
All these improvements have allowed us
to retain our 4 Skytrax stars this year.
Our planet
In 2023, we continued working on the
development of our sustainability
strategy, to drive forward the transition of
the industry. Iberia and Repsol joined
forces in March to offer the purchase of
Sustainable Aviation Fuel (SAF) to our
corporate clients, allowing them to reduce
the emissions of their business trips.
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International Airlines Group | Annual Report and Accounts 2023
In September, we presented ‘All4Zero’, a
unique industrial innovation hub formed
alongside ArcelorMittal, Holcim and
Repsol, created to promote disruptive
technologies around sustainable fuels. In
November, Iberia Express obtained
IATA’s IEnvA environmental certification
for the airline’s commitment to
sustainability and in December, Iberia
implemented the IAGOS system on an
Airbus A330-200 to record the
composition of the atmosphere for the
subsequent development of more
accurate weather and climate models.
This year we reduced our carbon
intensity by 13.0% compared to 2019,
bringing us ahead of our 2025 target.
Looking forward
During 2024 we will continue improving
our long-haul operation with the delivery
of our first A321 XLR allowing us to
address long-haul destinations with
a new and more flexible aircraft.
On handling, after the outcome of the
tender for licences, we have been
progressing to reach a solution both
from the business perspective and for
the people in affected airports.
Our operational excellence, our improved
revenue performance and our cost
model will allow Iberia to look forward to
2024 with optimism, even if the current
macroeconomic and supply-demand
imbalance tailwinds will be a challenge.
In 2023, we improved the
working and salary conditions
of our entire workforce.
International Airlines Group | Annual Report and Accounts 2023
61
Financial StatementsCorporate GovernanceStrategic Report Vueling
Connecting
people and places
Business overview
The Vueling mission statement talks
about our love of connecting people and
places, and in 2023 we did so more than
ever: we flew almost 37 million
passengers, a Vueling record.
We achieved strong operating profits,
supported by one of the best-
performing operations in Europe.
Not only are we taking advantage
of the strong recovery in demand,
but we are emerging from the pandemic
crisis stronger.
When we talk about our transformation,
there are some examples that say it all:
• our punctuality placed us among the
top European airlines: 80% of
flights departed within 15 minutes
of schedule, 4.7 points above 2019.
For our customers, we are now
at another level;
• our line maintenance allows us to have
half as many aircraft grounded for
technical reasons, compared to 2019;
• we drastically reduced our seasonality.
In 2019 we had 40% more activity in
summer than in winter. In 2023 we
reduced this difference by half,
allowing us to be much more efficient.
We operated 8.5% more available seat
kilometres in 2023 than in 2019, driven
by this successful increase in
winter capacity;
• our ancillary revenues doubled
compared to 2019; and
• our load factor reached 91.4%,
4.5 points higher than in 2019.
Like many airlines, Vueling was
impacted in 2023 by Pratt & Whitney
geared turbofan engine issues.
We mitigated these impacts by
optimising our fleet plan, re-balancing
capacity across months, wet leases,
and other measures.
“Our transformation
is positioning Vueling
among the
top-performing
European low-cost
carriers, thanks to
the great efforts of
our 4,700 colleagues.”
Marco Sansavini
Chairman and Chief Executive
Officer of Vueling
12.4%
Operating margin before
exceptional items
+5.2 pts vly
+8.5%
ASK change
vs 2019
78.9 gCO2/pkm
Carbon intensity
-5.4% vly
Our people
All this has been possible thanks to
the efforts of everyone at Vueling,
managing day-to-day operations and
supporting our transformation at the
same time.
Reflecting the responsibility and care that
we have for our people, and as part of
our transformation plan, we continued
improving our work environment.
For example, we launched a new
programme for our people’s health
and wellbeing, which we call ‘Make It
Healthy’, and we organised a number
of outside-of-work opportunities for
people to connect, including our
inaugural Vueling family and friends day.
In 2023, we achieved a critical milestone:
we signed a new collective labour
agreement with our cabin crews and
office team in Spain, which recognises
and rewards their dedication while
maintaining a sustainable cost structure.
Our aim remains to reach a sustainable
agreement with our pilots in Spain,
enabling us to unlock our growth
potential.
We set down a manifesto to make clear
our commitment to diversity, equity and
inclusion. This commitment is reflected
in the equity plan that we signed with
our unions and in the Vueling
Management Committee.
Our customers
We know that customers have a choice
when they fly, so we are fully
focused on providing an experience
that differentiates Vueling from other
low-cost carriers.
In addition to delivering one of the
most on-time operations in Europe,
we upgraded the Vueling customer
experience in other ways too.
We enhanced the use of biometric
technology at Barcelona, Madrid, Palma
de Mallorca, Ibiza and Menorca airports,
implemented a new social media
platform to make our case management
more efficient, and partnered
with industry-leading technology
organisations to digitalise our customer
care and disruption management.
In recognition of our outstanding
customer service, Sotto Tempo
Advertising gave Vueling the award
for Servicio de Atención al Cliente
del Año (Customer Service of the Year)
in the airlines category, based on
independent market research.
Our planet
Increasing Sustainable Aviation Fuel (SAF)
supply and adoption is essential for
reaching Vueling and IAG’s net zero carbon
emissions target. Vueling engaged public
institutions and potential SAF producers
through workshops and roadshows, to
communicate the benefits that SAF
production can create for the environment,
employment and the economy. We
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International Airlines Group | Annual Report and Accounts 2023
engaged our customers through a new
online CO2 calculator that allows them to
estimate their carbon footprint before
deciding whether to pay for SAF and
carbon capture. We engaged all Vueling
employees to elicit creative ideas on how
we can further promote SAF development.
We also take seriously our commitment
to society. Airlines are uniquely
positioned to facilitate humanitarian
aid after natural disasters, and Vueling
operated humanitarian missions
to Turkey after the earthquakes in
February, Tenerife after the wildfire
in August, and Morocco after the
earthquake in September. We also
collaborated with Make-A-Wish, Lovaas
Foundation and Save the Children to
support children in vulnerable situations,
and we celebrated our tenth year of
collaboration with the Spanish
Organización Nacional de Trasplantes
(National Transplant Organisation).
Looking forward
We are proud of the progress we are
making, yet we are aware that we are
still just halfway through the journey
to reaching our full potential – to be
the leading low-cost carrier in all the
markets we choose to serve. On this
journey, we will overcome industry
challenges such as geared turbofan
engine issues. We need to reach a
sustainable agreement with our pilots in
Spain as a necessary condition for
investment in Vueling’s growth and fleet.
We will continue the many other
transformation initiatives that are
delivering measurable results.
In short, the transformation continues.
It is how we are ensuring Vueling’s
long-term competitiveness, and it is what
will allow us to do even more of what we
love: connecting people and places.
Top: New generation aircraft reduce
fuel burn and CO2 emissions by 20%
with respect to their predecessors.
Bottom left: Vueling introduced a
Honeywell fuel efficiency app to all its
pilots, with the purpose of sharing
operational and best practices data to
enhance decision-making in their
day-to-day duties.
Bottom right: Vueling is the very first
commercial airline in Europe and the
first low-cost carrier to be awarded the
Top Employer certification.
International Airlines Group | Annual Report and Accounts 2023
63
Financial StatementsCorporate GovernanceStrategic Report Aer Lingus
Building
a stronger
Aer Lingus
Business overview
The year 2023 saw growth, in both
capacity and profit, supported by
investment in digital transformation
and enhanced customer experience.
Strong demand for leisure travel led
to an exceptional summer, delivering
our highest-ever third-quarter profits.
Business travel recovery continues to
lag that of leisure, which has put
pressure on profitability in the off-peak
months and exacerbated the seasonality
of Aer Lingus’ results. We built our North
Atlantic leadership position; we now
have the fourth largest number of direct
destinations from Europe into the US.
We expanded into secondary cities,
leveraging the geography and US
preclearance facility at our Dublin hub,
adding a new route to Cleveland which
performed really well in its first year.
On our European network, demand
for major sun destinations and new
Mediterranean routes was exceptionally
strong, while the resurgence in demand
for European city breaks also
contributed to a strong summer.
A focus on operational performance
led to process improvements and quick
recovery from disruption events such
as the UK’s aircraft control (NATS)
outage in August. Nevertheless,
the summer operation was challenging,
most notably due to aircraft availability
and to ongoing Air Traffic Control issues
in Dublin, the UK and France.
We started 2023 with a new brand
advert and tagline “You’re very
welcome” showcasing the warmth of our
service and our people. This was
underpinned by ‘customer first’ training
for over 2,500 colleagues. The strength
of our brand and the improvements in
customer experience were reflected in a
higher Net Promoter Score.
“Our largest summer
schedule delivered
a peak performance
underpinning
our profitability.”
Lynne Embleton
Chairman and Chief Executive
Officer of Aer Lingus
9.9%
Operating margin before
exceptional items
+6.7 pts vly
+4.4%
ASK change
vs 2019
82.6 gCO2/pkm
Carbon intensity
-3.6% vly
Our customers
We delivered a significant
transformation in our Customer Contact
Centre following the difficult post
COVID-19 restart, and we are now
providing a vastly improved service
to customers. Technology investment,
workflow change, process redesign
and bot automation collectively have
brought average wait times to
consistently below two minutes, with
90% of calls directed to the appropriate
agent. Overall customer satisfaction
rates are now 30% higher than in 2022.
Our investment in digital improvements
is also making a difference to our
customers, with additional information
and functionality on our app, resulting
in a better ‘day of travel’ experience.
Our ability to continue improving the
customer experience has been greatly
advanced with the introduction of
Salesforce, allowing us deeper insights
into our customers and enabling us
to offer a personalised and digital-led
experience throughout their travel journey.
Recognising loyalty is also important
to customers. We have continued
to work closely with IAG Loyalty
to enhance our offers and services
to AerClub members, an effective
partnership that has seen us expand
our AerClub membership to 2.4 million
customers, a 28% increase from 2022.
Our people
Our people go above and beyond every
day to deliver for our customers. They
are the people who make what we do
possible. In 2023, we continued to
improve communication and
engagement with our colleagues. Our
ambition is to create an inclusive
environment, where our people are
aligned with our strategy
and recommend Aer Lingus as a place
to work. We want everyone to feel
empowered to own the brand promise
“We are simply people who do
everything we can for the people who
fly with us.” We launched a new digital
communications platform
company-wide, AerWaves. After only
three-months, over two-thirds of our
colleagues have signed up. This enables
us to share knowledge while fostering
a sense of belonging and teamwork
in the airline. In response to feedback,
we have also created an Idea Hub,
where employees can contribute
suggestions for continuous
improvement across the company.
We have also made significant progress
in industrial relations starting with a new
pay deal with Dublin Ground Handling
staff and then with cabin crew based
in both Ireland and Manchester.
Importantly we reached a pay
agreement with our line maintenance
engineers which will help us retain
and attract talent, while providing
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International Airlines Group | Annual Report and Accounts 2023
better work coverage to support
our operations.
Following the rejection by pilots of a pay
tribunal recommendation, Aer Lingus
and the pilots’ representative
organisation (IALPA) commenced
further discussions in the Workplace
Relations Commission (Ireland’s
employment conciliation service).
As part of our mission to improve
diversity and inclusion at Aer Lingus
we have placed much focus on female
pilot recruitment. Aer Lingus ranks third
in the world in terms of the proportion
of female pilots (11% of our total) and
we are determined to increase this,
starting with the significant jump
we achieved in female applications for
our Future Pilot Programme in 2023.
Our planet
Further steps were made in our
commitment to sustainability,
and we were pleased to attain IATA's
Environmental Assessment (IEnvA)
Stage 2 certification.
In 2023, Aer Lingus became the first
airline flying into Ireland to segregate and
recycle on-board waste. We now recycle
waste from over 90% of short-haul flights
into Ireland and have completed trials
on long-haul routes, with a target to
recycle 20% of on-board waste by 2024.
Other important steps in our sustainability
journey in 2023 were the investment in
two new Airbus A320neo aircraft, and the
introduction of hydrotreated vegetable oil
(HVO) to replace diesel use in our airside
ground vehicles at Dublin Airport.
Looking forward
In 2024 we will maintain our North
Atlantic leadership from Dublin whilst
continuing to offer an attractive
schedule for European leisure travel.
Dublin Airport has lodged a planning
application to increase the passenger
cap at the hub airport from 32 million to
40 million passengers per year. Aer Lingus
has supported the application and is
engaging with relevant stakeholders on
what is required to accommodate future
growth by Aer Lingus out of Dublin. The
airline has also supported the relaxation
of night-flight restrictions at the airport.
Both issues are currently going through
the Irish planning process and the timing
and manner of resolution is uncertain.
The Aer Lingus transformation
programme is well underway, and many
more projects are in the pipeline for 2024
– encompassing hub development,
deepening partnerships, modernising IT,
increasing data and digitalisation, and
investment in our people.
We are committed to developing
Aer Lingus as a growing, profitable,
customer-centric airline, with a strong
brand and a great place to work.
Above: Celebrating Irish pride as an
Official Sponsor of the Irish Rugby
Team.
Right: In June 2023, Aer Lingus flew
our partner Special Olympics
Team Ireland to the World Games. 73
Team Ireland athletes and a 36-strong
support team travelled to Germany for
one of the biggest inclusive sports
events in the world.
International Airlines Group | Annual Report and Accounts 2023
65
Financial StatementsCorporate GovernanceStrategic Report IAG Loyalty
A record-breaking
year, with more
to come
Business overview
In 2023, we again saw record-breaking
performance as we both materially
improved our core customer proposition
and expanded our business in
new directions.
We have seen record growth in both
collection and redemption of Avios,
driven by new opportunities we are
creating for our customers. We are
also in the process of transforming
IAG Loyalty’s data capabilities, which
represents a major opportunity to drive
our business forward by unlocking
opportunities to better target potential
customers. External partners continue
to account for over 80% of our billed
revenue. With the return of collection
from flying and higher redemptions, our
operating margin continues to normalise
to pre-COVID-19 levels, and now stands
at 22%. We are developing Avios to be
a global currency, and a new partnership
with Finnair will see the airline adopting
Avios as its currency from 2024. Our
newest retail venture, The Wine Flyer,
saw strong revenue growth this year.
We remain committed to launching
another new business in 2024, under the
direction of our new Chief growth officer.
Our people
Our commitment to a compelling people
proposition continued to support IAG
Loyalty's success in 2023. Anchored
in our people plan – encompassing
talent development, people experience
and culture – we continued to focus
on attracting, growing and retaining
engaged talent to fuel our ambitious
growth plans. We remain grateful to
our colleagues for all their hard work
this year.
As part of our people-centric strategy,
we formed colleague squads, dedicated
to missions like Charity, Equity, Diversity
and Inclusion (EDI) and our recent
workspace relocation. These missions
“In 2023 our business
reached new heights
once again. More Avios
were issued and
redeemed than
ever before.”
Adam Daniels
Chairman and Chief Executive
Officer of IAG Loyalty
21.7%
Operating margin before
exceptional items
-6.7 pts vly
81.0%
External billed revenue
+1.0 pt vly
142.8 billion
Total Avios issued
+36% vly
empower colleagues to deepen their
connection to IAG Loyalty and play their
part in enhancing the overall experience.
Highlights include the selection of a new
charity partner – Winston's Wish – for
which we have raised almost £50,000
so far, and a calendar of EDI events and
moments that matter that drive a strong
sense of belonging.
Our colleague listening indicators show
that IAG Loyalty colleagues have
a strong sense of belonging and feel
empowered to contribute to the success
of the business in multiple ways. As we
look forward to 2024, the people plan will
remain integral to IAG Loyalty's growth.
Our customers
In 2023, our programme saw significant
growth in member engagement
compared to our previous highs in 2019.
For example, members are earning 29%
more Avios and redeeming 35% more
Avios on average than they did in 2019.
In 2023, we launched Avios-only flights
with British Airways, with 100% of seats
available exclusively to Executive Club
members redeeming with Avios. We also
launched Avios Balance Booster, which
allows customers to pay to multiply the
Avios they have recently collected by
one times, two times, or three times. We
have been delighted with our customers’
response to both products.
We also completed the transition of
all the IAG airlines’ loyalty programmes
to a spend-based model when earning
Avios. This system is simpler and fairer,
and we expect member engagement
to increase further as a result.
We continue to add collection partners
to our ecosystem, as well as growing
our relationship with newer partners like
Uber. We launched six new partnerships
this year, giving our customers the
ability to earn Avios with new retailers
and financial services providers across
multiple countries. Total billings on our
British Airways American Express
co-brand credit card grew more than
19% this year. Spend across our UK card
portfolio is now the equivalent value of
more than 1% of UK GDP.
Our planet
2023 has seen continued growth
of member donations to charity. Iberia
Plus members, through Avios Solidarios,
have donated generously to support
their choice of non-governmental
organisation. British Airways Executive
Club members have continued to
support causes through the BA Better
World Community Fund using Avios.
This initiative was launched in November
2022, with over £200,000 raised
through a combination of members’
Avios donations and match funding
provided by IAG Loyalty.
66
International Airlines Group | Annual Report and Accounts 2023
From November 2023, British Airways
Executive Club members can choose
to contribute to British Airways’
Sustainable Aviation Fuel fund using
their Avios onboard short-haul flights
via the High Life Café.
We will continue to expand the ways
in which loyalty can be used for good
by providing more ways to give back
and recognising and rewarding
customers who choose to do so.
Looking forward
We will continue to grow our core
business in 2024 by evolving our
customer proposition and growing
opportunities for our members to collect
and spend Avios on rewarding
experiences. We will also be investing
in expansion into new areas. We expect
this growth to bring new operational
challenges, as we work to manage a
business that is increasingly complex.
Our focus is maintaining strong margins
at the same time we seek to deliver
double-digit growth, and to be a central
part of overall Group profitability.
Top: Incentivising members with the
world’s best experiences. More
availability, more choice and easier
than ever before – the reward options
with Avios are growing in all directions
for members.
Bottom left: The Wine Flyer is an online
wine delivery business available
to loyalty programme members.
Bottom right: Chief commercial officer,
Rob McDonald, spoke on stage at
Skift's flagship event.
International Airlines Group | Annual Report and Accounts 2023
67
Financial StatementsCorporate GovernanceStrategic Report IAG Cargo
Turning vision into
transformation
“Our transformation
journey in 2023
was all about our
customers and our
team. We made
substantial progress,
continually improving
our customer
experience and
fostering a workplace
where talent thrives.”
David Shepherd
Managing Director of IAG Cargo
Business overview
Our strategy has undoubtedly been put
to the test during 2023, but increased
premium handling capacity, improved
productivity in our operations and
a strong transformation programme
have combined to deliver a robust
performance, relative to market. I would
like to thank all our colleagues around
the world for their hard work and
contribution to us achieving this result.
The anticipated supply-side growth
driven by the rebound of global
passenger capacity, combined with a
greater-than-expected decline in
demand, has resulted in the softest
global air cargo market since the 2009
global financial crisis. The resulting
decline in prices from peak pandemic
levels has been seen globally, although
they have not receded to pre-pandemic
levels.
We have delivered revenues 3.5% higher
than pre-pandemic 2019 levels on 14.4%
lower available tonne kilometres (ATKs),
despite a detrimental network mix
relative to 2019 with Asian flying
hindered by longer flying hours due to
the Ukraine conflict. We have continued
to deliver our ambitious strategy
of transformation, opening our new
premium operation at London Heathrow
which improves our pharmaceutical
offering in particular, whilst reconnecting
with customers and improving both
productivity and product quality.
Our people
Making IAG Cargo a great place to work
continues to be a top priority. In 2023,
we invested in our people in a number
of ways: refreshing facilities, improving
training delivery and continuing to build
on a culture change founded in our
core values.
We launched our new flagship
development programme, Leading
the Way, supported by a brand-new
learning hub at our headquarters.
Over 500 colleagues from 13 countries
attended the course in person in 2023.
We launched Pride in Our People, IAG
Cargo's first people awards programme
that recognises the dedication of six
individuals delivering on the themes
of our values, of determined attitudes,
collaborative actions, curious minds and
heartfelt pride, with two special awards
for rising star and leading the way.
We are making significant progress
in our commitment to Equity, Diversity,
and Inclusion (EDI) by advancing gender
parity in an industry where it has
traditionally been more difficult to do so.
This includes our supporting the 2023
everywoman in Transport and Logistics
Awards. We took second-place position
in the Lead5050 Equity Index 2022/23,
and we were finalists in two categories
at the Multicultural Apprenticeship
Awards 2023.
Our customers
During 2023, our network expanded: we
welcomed China back after almost two
years, opened Cincinnati, an important
hub for ecommerce, added a new
service between Doha and Madrid, and
increased capacity to Accra. Through
our Partner Ready programme, we
partnered with other carriers to sell
routings on a more connected interline
basis, growing our network and offering
new routings to our customers,
improving their market choice.
We invested significantly in our cargo
handling capabilities, opening a semi-
automated state-of-the-art Premium
cargo facility at London Heathrow,
over 10,000m2 which has allowed us
to double the volume of express,
pharmaceutical and specialist products
we manage every day. Sales of our
product for the transportation of
temperature-sensitive cargo, which is a
key focus area for IAG Cargo, saw an
17.9% increase versus 2022.
At our Madrid hub, a €1 million
investment for perishable goods was
completed, expanding our handling
capacity. We introduced dynamic spot
rates in 2023. This capability uses
artificial intelligence (AI) and predictive
analytical technology to ensure that our
pricing remains relevant and optimal at
all points of sale. We have grown our
distribution channels and increased
digital bookings throughout the year,
and our continued development in
this area will move us toward a more
complete digital distribution capability.
Our planet
We are proud to be a socially
responsible business with a real
commitment to having a positive impact
in the communities in which we operate.
In 2023, we initiated a humanitarian
emergency response supporting
several charities to deliver aid to Turkey
68
International Airlines Group | Annual Report and Accounts 2023
following the devastating earthquake.
Our ‘Day to Make a Difference’ initiative,
now in its second year, saw colleagues
support a range of community projects,
from revamping neglected community
gardens to supporting a children’s
NGO in India.
We collaborated with London’s Natural
History Museum to transport the cast
and fossils of one of the world’s largest
dinosaurs from Buenos Aires to London
for its educational exhibition ‘Titanosaur:
Life as the biggest dinosaur’.
We broadened our electric and hybrid
vehicle testing programmes with the goal
of replacing all existing diesel vehicles
across our campus. Additionally, we
enhanced our commitment to the
necessary infrastructure by expanding the
availability of electrical charging stations
for our customers, colleagues and visitors.
In 2023, we supported several
customers to reduce their Scope 3
carbon emissions by over 90,000
tonnes through the purchase of
Sustainable Aviation Fuel. We are
accelerating the digitalisation of all
documents across our business,
supporting customers to transition to
e-Airway Billing (eAWB) with an
ambition to get to 100% as quickly as
possible. The digitalisation of
documentation is not only positive for
the environment but offers a more
seamless end-to-end service for
customers, improving messaging and
data quality by reducing the chance of
human error.
Looking forward
Our performance in 2023 is a
demonstration of resilience amidst
challenging economic and market
conditions. We will continue to drive
forward our ambitious transformation
programme as we create a more modern,
digital and agile business. By staying
focused on these priorities, I am confident
that we can strengthen our position,
creating a workplace community that
is ideally positioned and committed to
delivering for our customers, to ensure
we are their preferred choice for air cargo
transportation.
Top: Our new warehouse at London
Heathrow improves our
pharmaceutical offering.
Bottom left: IAG Cargo launches its
internal Pride in Our People awards.
Bottom right: Making IAG Cargo a
great place to work continues to be
a top priority.
International Airlines Group | Annual Report and Accounts 2023
69
Financial StatementsCorporate GovernanceStrategic Report IAG GBS
Driving automation,
process optimisation
and sustainability
“By focusing on
improving performance
through automation
and standardisation,
we have optimised
processes to bring
greater efficiency to our
core platform and push
forward the Group’s
sustainability ambitions.”
Jorge Saco
Chief Information, Procurement,
Services and Innovation Officer
both in transactional and reporting
activities for the Group.
We have focused on maximising and
driving supplier cost savings across
the Group, implementing transparent
and granular reporting of supplier
cost performance. We continue to
digitalise procurement processes with
new end-to-end systems and more
efficient tracking systems, using data
and analytics to deliver more cost-
saving opportunities.
Our planet
IAG GBS continues to support delivery
of IAG’s Scope 3 commitment. Working
with EcoVadis, we have focused on
driving Group suppliers to improve their
sustainable performance, to ensure the
Group is on track to deliver net zero
emissions by 2050 for all products
and services provided to IAG.
We are implementing a carbon
accounting tool to provide fact-based
data that calculates our carbon
footprint and that of our supply chain.
We have been at the forefront of
sustainability innovation within the
airline industry, designing and delivering
solutions such as purchasing Sustainable
Aviation Fuel, and trialling the use
of autonomous vehicles to innovate
ground handling operations.
Looking forward
2023 has started the journey of
maturing AI and automation capabilities
to rethink and transform each area of
the business. Our platform of services,
leveraging common data, technologies
and processes will bring further
operational and financial insights
to maximise value across the Group’s
operating companies.
Business overview
In 2023, IAG GBS continued to work
inpartnership with the Group, providing
best-in-class services, solutions and
insights, driven by data, innovation
and technology.
By leveraging our unique position as
a data hub within the Group, we have
continued to generate value and provide
solutions, to enable IAG and all our
operating companies to thrive.
Our people
Our people are at the heart of
everything we do, and we are thankful
to have such a professional and
dedicated team in IAG GBS.
We have continued to attract, engage,
develop and retain experts to further
improve our high-performing team.
We enhanced our Learning Academy,
with bespoke training and development
for our people.
We introduced a Mental Health
First Aiders framework across our
locations, providing support for our
people; as well as our BeWell Programme,
sharing awareness and providing
support on emotional, physical,
financial and environmental wellbeing.
We have launched new leave policies
to provide flexibility and promote better
work-life balance.
We strive to produce agile and efficient
services to deliver an exceptional
colleague experience, underpinned
by a culture of engagement, innovation
and ambition.
Our customers
IAG GBS has moved forward with
enhancing and automating finance
systems and business processes,
to deliver further value to the Group,
providing greater transparency and
efficiency as well as improved contract
management and control. We have
continued to leverage our data and
insights to optimise our processes
and provide greater value for money,
70
International Airlines Group | Annual Report and Accounts 2023
IAG Tech
Strengthening our
operations and innovating
for the future
Business overview
During 2023, we significantly increased
the resilience and operational efficiency
of our IT systems, ensuring they were
available when our customers needed
them, which resulted in a more stable
peak summer period than in 2022,
with reduced incidents of disruption.
We invested significantly in cybersecurity
tooling and expertise to keep our data
and IT estate secure. We continued to
build for the future by further modernising
our IT estate and remediating
obsolescence, making steady progress
with our migration to the cloud, moving
toward completion in 2024. We increased
our investment in IT transformation for
our commercial platform and customer
journey, as well as operations optimisation,
and IT efficiencies and enablers.
We also invested in our Artificial
Intelligence (AI) capabilities, and data
and analytics. We brought together a new
IAG.ai team and launched a new London
Lab to promote and strengthen our
innovation and venture capital ambitions.
Our people
We continued to evolve our IT operating
model to respond to changing business
needs and new ways of working while
continuing to deliver value for the
Group. By using agile methodologies
and product-led teams we can increase
the pace of digital innovation and
delivery for our customers.
We welcomed a new intake of graduates
to our teams this year, while our cohort
from 2022 continued to gain invaluable
experience through their chosen postings.
Our 2021 graduate cohort completed
their programme, and we are proud that
13 out of 14 of them found permanent
roles within the Group. In addition, all
our apprentices from 2021 completed
their programmes and found roles in
IAG Tech.
We recruited talent to further strengthen
our teams and ensured we have the right
capabilities to support our operations
across the Group, particularly data
scientists and engineers, welcoming
114 new hires to IAG Tech.
In addition, we provided further training
and development for our people,
including support and coaching for
maintaining personal resilience during
peak operational periods.
None of the progress we made in 2023
would have been possible without the
commitment and professionalism of our
people.
Our customers
We made significant investments to
further improve our airlines and Loyalty
customer platforms with new
functionality that delivers real value.
For example:
• we continuously reviewed and
improved the cybersecurity controls
we use to protect our data and
infrastructure from cyberattack;
• we are transforming our commercial
platforms to provide better
and customised offerings and
experiences to our customers
while also investing in operations
optimisation and IT efficiencies
and enablers; and
• we continued to invest in our
infrastructure to support fast,
reliable, and secure services for
our customers.
We continued to refresh mobile devices
across front and back-office
employees to take further advantage
of digitalisation and better support
our operations and customers.
Our planet
Our innovation teams continued
to look for new ways to improve our
environmental sustainability, partnering
across the organisation on rapid
prototyping, testing and scaling up
successful solutions that can provide
the biggest impact. Our Hangar 51
Ventures team completed several
transactions with start-ups developing
new technologies for Sustainable
Aviation Fuel (SAF), hydrogen-powered
vehicles and airport operations to
reduce waste.
With the development of our Group-
wide data and analytics capabilities,
we are equipping business decision-
makers with tools and insights on flight
efficiency and maintenance optimisation
to enable emissions reduction.
We have committed to using AI in an
ethical and sustainable way, with active
governance to ensure we adhere to
these principles. Our aim is to become
an industry leader in responsible AI to
increase productivity, transform customer
experience, streamline operations and
remove manual toil. Through AI, we want
people to be valued for their curiosity
and creativity, and not for their ability
to mimic robots.
We continue to look at ways to reduce
the carbon footprint and energy costs
of our IT estate, including through the
decommissioning of legacy systems and
migration to the cloud.
Looking forward
We will continue to invest in cybersecurity
to build on the work already done and
keep pace with the evolving cyber
threats we face. As we continue to
remove obsolescence, we will increase
our investment in transformation over
the next few years. We will mature our
AI and automation capabilities and use
data and analytics to deliver insights
that will better support all areas of our
business, accelerate innovation and
improve fact-based decision making.
Powered by Venture Capital investment,
our technology and innovation will push
current boundaries in sustainability,
automation and customer experience.
International Airlines Group | Annual Report and Accounts 2023
71
Financial StatementsCorporate GovernanceStrategic Report Our customers
We listen to our customers, and we
continue to enrich and improve the
on-board experience through brand
new entertainment content such
as wellbeing, mindfulness and yoga.
In addition, we improved our WiFi
connection system, which now provides
a free messaging service to all our
passengers. In 2023 we have renewed
our menu offering which includes nods
to the local gastronomy of all the
destinations to which we operate.
In 2023, almost 45% of our passengers
used this platform and two out of three
people who had a meal included in
their flight personalised their menu.
Our planet
We deploy technology to further
our efficiency and contribute to our
sustainability objectives. Personalisation
allows us to optimise the cargo on-
board, reducing not only the weight and
waste generated, but also food waste.
We recalculate fuel needs 30 minutes
before each flight’s departure based
on the final load of the aircraft and
an updated weather forecast, which
has led to a reduction of 3% of our CO2
emissions, which represents a 9.8%
improvement compared to the target
initially planned for 2023.
Looking forward
LEVEL has initiated the procedures
to obtain its own Air Operator
Certificate (AOC) and a fleet expansion
plan that envisions reaching up to eight
aircraft by 2026. We will continue to
stimulate growth through the
strengthening and expansion of our
offering and through our number of
destinations, to consolidate our
leadership in Barcelona. And with all of
this, LEVEL will continue to give support
and to promote alliances with strategic
partnerships in Barcelona, our centre of
operations, to continue exporting the
talent of the city.
LEVEL
Growing our long-
haul proposition
in Barcelona
“We continue growing
as a company and
making Barcelona’s
intercontinental
connectivity stronger.
Our commitment has
allowed us to become
the leading long-haul
airline in Barcelona.”
Fernando Candela
Chief Executive Officer of LEVEL
Business overview
In 2023, LEVEL was the leading
long-haul airline at the Josep Tarradellas
Barcelona – El Prat Airport. This
confirms our strong commitment to
the development of Barcelona’s airport
as a hub and the strengthening of the
intercontinental connectivity through
the sustained growth of our routes,
which connect Barcelona to the
Americas without stopovers. We
increased our capacity by 33.1% versus
the previous year, which is equivalent to
an extra 183,000 seats. This increase in
capacity has also been possible thanks
to the addition of a fifth aircraft to our
fleet.
During 2023, we carried 40.5% more
customers than in 2022, with an average
punctuality within 15 minutes of 87.3%.
LEVEL provided more than a quarter of
the seats between Barcelona and the US
and almost half of the seats to South
America. We are the only operator
in the market in five of the six
destinations to which we fly.
Our people
On our sixth anniversary in June 2023,
we launched our new uniforms. The
project was a collaborative effort across
all areas, including LEVEL’s crew, in
partnership with the Barcelona School
of Design, as a sign of our commitment
to Barcelona. The uniforms are entirely
manufactured locally. The result reflects
the airline’s value proposition ‘Fly your
Way’, that provides a tailor-made
experience according to every
customer’s needs. Once again, LEVEL
demonstrates that the commitment
of its team is at the heart of all
its decisions.
72
International Airlines Group | Annual Report and Accounts 2023
Introduction to sustainability
Sustainability
supporting
our purpose
2023 has been another
very important year on our
journey to be both a
leader in the industry in
sustainability and towards
our primary ambition to
achieve net zero emissions
by 2050.
The summary below outlines key
highlights from across IAG’s
sustainability programme in 2023, which
includes emphasis on increasing our use
and forward supply of Sustainable
Aviation Fuels (SAF), building our
sustainability governance around key
initiatives and enhancing our
sustainability reporting and disclosures.
Contents of this section
A. Planet
This section includes: Performance
highlights, Task Force on Climate-related
Financial Disclosures (TCFD) summary,
transition plan, metrics and progress,
emissions reduction initiatives, scenario
analysis, risks and opportunities,
stakeholder engagement, waste, noise
and air quality initiatives.
B. People and prosperity
This section includes: Key metrics and
progress, health, safety and wellbeing,
human rights and modern slavery,
diversity, equity and inclusion,
community engagement and
charitable support.
C. Principles of governance
This section includes: Sustainability
strategy, governance frameworks,
workforce governance, supply chain
governance, ethics and integrity, ESG
risk management, reporting and data
governance and alignment with GRI and
SASB standards.
The full contents of this sustainability
report are included in the IAG
Non-Financial Information Statement
(NFIS) which is independently verified
by a third-party to limited assurance
standards in line with ISAE3000
(Revised) standards.
IAG’s most material environmental
metric – Scope 1 emissions – receives
additional verification each year as part
of the EU, Swiss and UK Emissions
Trading Schemes (ETS) and the
international Carbon Offsetting and
Reduction Scheme for International
Aviation (CORSIA), within six months of
the issuance of this report. Any material
changes are restated in future reports.
Compliance with specific frameworks
and standards is listed under relevant
section headings and summarised in
section C.8. While IAG does not align
with the Global Reporting Initiative (GRI)
Core or GRI Comprehensive standards, it
aligns with selected GRI standards based
on compliance with Spanish Law 11/2018
and chooses to voluntarily align with
other GRI standards on material issues.
SAF investments
Carbon intensity
Governance
$1 billion
total investment in SAF
as of 31 December 2023,
of which 86% is in future
commitments1
80.5 gCO2/pkm 7,500+
-3.6% vly, and on track
to exceed our 2025 target
of 80gCO2/pkm
senior executives and
managers with climate-
related annual incentives
Supply chain
100%
of suppliers screened
for sustainability risks
1 Based on an assumed jet fuel price of $800 per metric tonne and contracted margins for SAF production.
International Airlines Group | Annual Report and Accounts 2023
73
Financial StatementsCorporate GovernanceStrategic Report Sustainability at a glance
Our vision
Our strategy
is to be a world-leading
airline group on sustainability
is to pursue nine sustainability leadership
KPIs as listed in section C.1 Principles
of Sustainability Governance
Board-level oversight
• Safety, Environment and
Corporate Responsibility
Committee (SECR)
• Audit and Compliance
Committee
Our governance
IAG Management
Committee oversight
• Chief People, Corporate
Affairs and Sustainability
Officer (CPCASO)
Operating company
oversight
• Management committees
oversee tailored sustainability
programmes
Cross-Group alignment
• Group sustainability strategy
• Group sustainability
team updates
• Working groups for key
sustainability initiatives
Our material issues and initiatives
IAG takes a holistic approach to sustainability1
A. Planet
B. People and prosperity
Key material issues
C. Principles of governance
• Reducing our climate impact
• Influencing and shaping policy
• Engaging with employees
• Building a diverse and inclusive
workplace
• Investing in the future
• Planning for climate-resilient operations
• Working with suppliers
• Environmental sustainability policy
• Equity, Diversity and Inclusion (EDI)
Key policies
policy
• Modern slavery and anti-trafficking
statement
• Flightpath Net Zero strategy
• Climate-related remuneration
• Policy advocacy for low-carbon
solutions
• Leadership in trade associations
Annual initiatives
• Organisational Health Index (OHI)
surveys (every six months)
• EDI and engagement initiatives
• Community giving and fundraising
• Developing a social roadmap
Key UN Sustainable Development Goals
• Code of Conduct
• Supplier Code of Conduct
• Anti-bribery and corruption policy
• Whistleblowing policy
• Policy on disclosure of corporate
information and engagement
with shareholders
• Accelerator programme and ventures
• Supply Chain Sustainability Programme
• Task Force on Climate-related Financial
Disclosures (TCFD) scenario analysis
2019
2025
Targets
2030
Target baseline
• 11% reduction in carbon
intensity, to 80gCO2/pkm
• ‘5 by 2025’ waste targets
• 40% of senior leadership
roles held by women
• 10% SAF use
• 20% drop in net Scope 1
emissions, to 22m tonnes
• 20% drop in net Scope 3
emissions, to 6.6m tonnes
2050
• Net zero Scope 1, 2, and 3
emissions across our
full operations and
supply chain
• Carbon removals for any
residual emissions
1 The above pillars align with the World Economic Forum ‘Measuring Stakeholder Capitalism’ report in 2020. ‘Running a profitable business’ and
‘Pleasing our customers’ are material issues relevant to Prosperity which are covered in other sections of the Non-Financial Information Statement.
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International Airlines Group | Annual Report and Accounts 2023
Towards more sustainable journeys
Our sustainable products and services for customers
help them to reduce their carbon emissions and support
wider sustainability goals. We continue to trial new offers.
Pre-flight services at airports
Ground transport at airports
On-board impacts
• Renewable electricity in lounges1
• Vegan menus in lounges2,3
• Pre-ordering meal service to reduce
food waste3
• Trialling electric buses
for passengers2,4
• Electric Mototoks to pull aircraft
to runways2,3,4
• Trialling electric trucks5
• Renewable electricity to power
aircraft on the ground1
• Opportunity for customers to
contribute towards carbon removal
projects1
• Voluntary SAF for customers2,4
• Use of SAF supported by IAG
investment1
• Vegan food2,3
• Recycling on board1
Planet highlights
$1 billion
First
total investment in SAF as of
31 December 2023, of which 86% is in
future commitments
alcohol-to-jet SAF plant in the world
opens, the LanzaJet Freedom Pines
project, in a signed partnership with IAG
100%
of IAG airline senior executives
have climate-related remuneration
Based on an assumed jet fuel price of
$800 per metric tonne and contracted
margins for SAF production.
80.5 gCO2
per passenger kilometre, a 3.6% annual
improvement in carbon intensity, and on
track to achieve our 2025 target
A-
CDP rating in 2023, the fourth
consecutive year of achieving a
leadership rating for our climate action
157.1k
tonnes of CO2 saved from SAF use in
2023, an increase of 418% year-on-year
and representing 0.6% of our annual
emission reductions
People and prosperity highlights
Governance highlights
71,794
9%
4
100%
people employed across the
Group in 77 countries
increase in our workforce
versus 2022
meetings of the Board
SECR Committee
of suppliers screened
for legal and financial risks
87%
36%
of staff covered by collective
bargaining agreements
of senior leadership roles
held by women
3.2+ million
training hours completed in
2023
90%
of suppliers, by spend,
completed ESG scorecards
1 All airlines. 2 British Airways. 3 Iberia. 4 Vueling. 5 IAG Cargo.
International Airlines Group | Annual Report and Accounts 2023
75
Financial StatementsCorporate GovernanceStrategic Report Sustainability continued
A.1. Planet – climate change
Carbon intensity
80.5 gCO2/pkm
-3.6% vly
CO2 saved from SAF use in 2023
157.1k tonnes
A.1.1. TCFD summary
IAG was an early adopter of the Task Force on Climate-related Financial Disclosures (TCFD) guidance and first carried out
TCFD-aligned scenario analysis in 2018, ahead of the UK requirement – Listing Rule 9.8 – which defines the information to be
included in a company’s annual report and accounts.
Descriptions of TCFD recommendations are on the TCFD website. IAG has applied the TCFD Guidance for All Sectors to the
disclosures in this report. An internal review of compliance with the 11 core TCFD recommendations identified no material gaps or
material changes from last year.
Governance
Disclose the organisation’s
governance around climate-
related risks and
opportunities
(a, b)
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, b, c)
Relevant disclosures in this report
a. See C.2., C.6.
a. See A.1.6.
b. See A.1.5., C.2., C.6., Risk
management and principal
risk factors section
b. See A.1.6., C.6., Risk
management and principal
risk factors section
Current activities
Board oversight via SECR
Committee and Audit and
Compliance Committee;
robust governance;
2021 materiality assessment
will be updated in 2024
Planned future activities
Review assurance, double
materiality assessment to be
completed in 2024, process
and control changes to
achieve reasonable assurance
by 2026
c. See A.1.5.
Delivering against Flightpath
Net Zero strategy and nine
leadership KPIs;
sustainability-linked loans for
British Airways and Iberia;
TCFD-aligned scenario
analysis; one- and three-year
financial and business plans
integrate sustainability
aspects; new sustainability
contract clause for suppliers
Ramp up of SAF
procurement, ongoing
scenario analysis, reviewing
guidance and evidence on
pathways to support
1.5°C transition
Risk management
Disclose how the
organisation identifies,
assesses and manages
climate-related risks
(a, b, c)
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, b, c)
a. See A.1.5., A.1.6., C.6., Risk
management and principal
risk factors section
b. See above
c. See above
a. See A.1.3., A.1.5., Report
of Remuneration Committee
b. See A.1.3., A.1.6.
c. See Sustainability
at a glance, A.1.2., A.1.6.
Sustainable aviation risks are
treated as a principal risk and
regularly reviewed within
Enterprise Risk Management
(ERM) processes; risk
disclosures and risk
management processes
received an ‘A’ rating from
the Carbon Disclosure Project
Clear metrics and targets for
2025, 2030 and 2050 (see
‘At a glance’); climate-related
remuneration for senior
executives and managers
More detailed work on risk
impacts to 2030 and 2040,
actions to maximise climate
resilience, and risk
mitigation KPIs
Delivery against existing
targets, review 2030 targets
in line with latest evidence
on 1.5°C-aligned transitions
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International Airlines Group | Annual Report and Accounts 2023
Leading our industry in SAF projects
What is Sustainable Aviation Fuel?
Supporting advanced SAF pathways
Sustainable Aviation Fuels (SAF) are chemically almost
identical to kerosene.
The feedstocks for these fuels – currently waste materials such
as municipal waste or waste wood – absorb CO2 in their growth
cycle before this carbon is recycled into fuel and then emitted
during the flight.
There are eight certified pathways to making SAF based on
use of specific technologies and feedstocks. These processes
are certified to international standards to ensure the fuels are
safe to use. SAF can be used in existing aircraft and airport
fuelling infrastructure.
IAG also ensures its SAF complies with strict sustainability
certification schemes, to ensure the feedstocks come from
sustainable sources, and that the production processes
conserve water and energy and have minimal wider impacts.
IAG continues to make direct investments in new and innovative
SAF production capacity, catalysing the wider development of
the SAF market. These investments are typically coupled with
SAF purchase agreements, which are critical to the financial
viability of the new SAF production capacity.
The Group uplifts jet fuel in multiple locations, including the US
and Europe, and therefore is exploring projects in multiple regions.
IAG is working with technology developers to establish a range
of SAF supply options, including the projects listed in this section.
We aim to be a leader in supporting developed SAF production
pathways that achieve the greatest life-cycle emission reductions
and can accelerate our efforts to decarbonise.
In February 2024, IAG signed its largest-ever SAF purchase
agreement with Twelve, a SAF project based in Washington,
which produces advanced power-to-liquid SAF made from CO2,
water and renewable energy. This means we have secured
one-third of the SAF required to meet IAG’s 10% SAF by 2030
target.
For SAF produced from other pathways, the Group is also
working to support projects which remove carbon or capture
and store it.
Delivering on our commitment
Role in IAG transition plan
As of 31 December 2023, our total investment in SAF reached
$1 billion, of which 86% is future commitments.1 This is the
largest disclosed commitment to SAF by any airline globally.
In 2023, Group airlines used more than 53,000 tonnes of SAF,
an increase of 417% versus 2022, and one of the highest
volumes globally. This saved around 157.1 ktCO2, accounting
for 0.6% of emission reductions.
IAG remains on track to deliver a 100-fold increase in its SAF
volumes between 2022 and 2030, and expects to use SAF
for 70% of total fuel in 2050.
SAF is a key solution in IAG’s transition plan to net zero
(Section A.1.2.). It reduces carbon emissions on a greenhouse
gas lifecycle basis, typically by 80% or more compared with the
fossil jet fuels it replaces.
In 2021, the Group set a target of using one million tonnes
of SAF a year by 2030, dependent on appropriate government
policy support.
1 Based on an assumed jet fuel price of $800 per metric tonne and
contracted margins for SAF production.
International Airlines Group | Annual Report and Accounts 2023
77
Financial StatementsCorporate GovernanceStrategic Report Sustainability continued
A. Planet
Advocating for appropriate SAF policy
IAG recognises that policies designed to support the development of SAF globally are currently fragmented and take different
forms. The Group is therefore working closely with policymakers and industry to support the development of appropriate SAF
policies needed to provide a strong investment signal and to scale up supply to meet sector demands.
We welcome the decision made by ICAO and its Member States at the third ICAO Conference on Aviation Alternative Fuels
(CAAF/3), to strive to achieve a global aspirational vision to reduce CO2 emissions in international aviation by 5% by 2030 through
the use of SAF, low-carbon alternative fuels (LCAF) and other aviation clean energies.
In key markets, such as the US, EU and UK, our policy advocacy has focused in 2023 on the following areas below.
US
Policy overview
EU
Policy overview
UK
Policy overview
SAF supply is currently incentivised in the
US under state-level programmes, which
offer producers tax credits for their
production. These programmes currently
operate in states such as California, Illinois,
Minnesota, Washington and Oregon.
The Inflation Reduction Act, signed in
August 2022, also provides federal tax
credits for SAF producers (for SAF
dispensed in the US).
IAG 2023 activity
IAG continues to explore and sign
purchase agreements for SAF from
projects in the US which will be eligible
to claim tax credit incentives. Please
see our key SAF partnerships table
for more details.
The UK has set a SAF target of 10% by
2030, and a target to commence the
construction of five SAF plants by 2025.
In 2023, following advocacy efforts by
industry, the UK Government agreed
to develop a revenue certainty mechanism
for SAF producers, that should be in
force by 2026.
Under the UK ETS, SAF is zero-emission
rated, but there currently is no incentive
comparable with policy provided under
the EU ETS.
IAG 2023 activity
IAG responded to the UK’s consultation
on its SAF mandate in 2023. We continue
to engage with policymakers on ways
to incentivise SAF use in the UK,
including the UK ETS.
As a member of the Jet Zero Council, IAG
has engaged with the UK Government and
supported industry calls for a revenue
certainty mechanism for UK SAF
producers. We continue to engage through
the Jet Zero Council to support the
development of this mechanism as
quickly as practicable, to accelerate
SAF production in the UK.
IAG also engages with Heathrow airport
on its financial incentive scheme to support
SAF uplift.
The EU has legislated under its Fit for
55 package a new ReFuelEU policy
that will set a SAF mandate from 2025.
The mandate will require a minimum
volume of SAF in the EU, starting in 2025
at 2% and reaching 6% by 2030,
with 1.2% of the 2030 volume to be met
through use of advanced SAF pathways,
such as Power-to-Liquid (PtL) SAF.
Also within the Fit for 55 package,
the EU has agreed to amend the Emissions
Trading System (ETS) Directive, and
introduce an incentive for aircraft
operators to increase SAF uplift through
the EU ETS from 2024. This will make
it possible for aircraft operators to claim
a share of 20 million allowances set aside
by the European Commission to cover
some of the difference in the price paid for
SAF compared to jet kerosene, on EU ETS
compliant routes. SAF continues to be
zero-emission rated under the EU ETS,
which also incentivises use by aircraft
operators to reduce annual carbon cost
exposure.
IAG 2023 activity
We support the legislative changes made
by the EU to support the development
of SAF supply in Europe.
We are now engaging with policymakers
on technical details concerning the
monitoring, reporting and verification
(MRV) of SAF use, alignment of new
legislative requirements with existing EU
ETS reporting frameworks and geographic
scope. We have also responded to public
consultations on the implementation of
these policies in Member States.
SAF governance in IAG
SAF is a key solution in IAG’s transition plan to net zero emissions. In 2023, IAG enhanced its governance framework suitable
for accelerating our engagement with SAF investments and policy. This included establishing a SAF Management Group, comprised
of colleagues from IAG sustainability, Group finance and each operating company. The SAF Management Group reports to the SAF
Steering Group. Please refer to ‘Principles of sustainability governance’ for more information.
Supporting emissions reductions for our customers
IAG offers corporate customers the opportunity to purchase the emission reductions from SAF to support their own Scope 3
emission reductions. In total, Group airlines sold more than 150,000 tonnes of CO2 to customers last year. IAG also allocated around
150 tonnes CO2 towards internal activities, including emissions associated with travel to senior leadership conferences.
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International Airlines Group | Annual Report and Accounts 2023
Key SAF partnerships
LanzaJet: Freedom Pines
Supported by investment by British
Airways in 2021, on 24 January 2024,
LanzaJet opened the first production
plant dedicated to low-carbon ethanol
SAF in Georgia, USA.
Project Speedbird – Developing SAF
in the UK
In June 2023, British Airways, LanzaJet
and Nova Pangaea Technologies signed
an agreement that will accelerate Project
Speedbird, an initiative created by the
companies in 2021 to develop cost-effective
SAF for commercial use in the UK.
Twelve
In February 2024, IAG signed its largest-ever
SAF purchase agreement with Twelve,
a SAF project based in Washington which
produces advanced Power-to-Liquid SAF
made from CO2, water and renewable energy.
This means we have secured one third of the
SAF required to meet IAG’s 10% SAF by
2030 target.
Key SAF partnerships
Producer
BP
Neste
Phillips 66
Repsol
Cepsa
LanzaJet
Twelve
LanzaJet/Nova Pangaea1
Aemetis
Gevo
LanzaTech
Velocys1
Production location
Europe; China
Finland; Singapore
Humber, UK
Cartagena, Spain
Huelva, Spain
Georgia, USA
Washington, USA
North East, UK
California, USA
Minnesota, USA
South Wales, UK
Immingham, UK
Mississippi, USA
1 Includes carbon capture and storage.
Anticipated supply start
Technology
Supplying since 2021
Supplying since 2021
Supplying since 2021
Supplying since 2022
Supplying since 2023
2024
2025
2027
2027
2028
2028
2029
HEFA
HEFA
HEFA
HEFA
HEFA
Alcohol-to-jet
Power-to-Liquid
Alcohol-to-jet
HEFA
Alcohol-to-jet
Alcohol-to-jet
Fischer-Tropsch
International Airlines Group | Annual Report and Accounts 2023
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Financial StatementsCorporate GovernanceStrategic Report Sustainability continued
A. Planet
A.1.2. Transition plan
Overview
IAG is targeting net zero emissions
by 2050 across its Scope 1, 2
and 3 emissions.
‘Net zero’ means any residual emissions
from IAG operations in 2050, or by the
manufacture and transport of goods
supplied to the Group, will be mitigated
by an equivalent amount of CO2 removed
from the atmosphere via carbon removals.
IAG is on track to deliver its 2025, 2030
and 2050 climate targets (see below)
by carrying out emission-reduction
initiatives, working in collaboration
with key stakeholders and proactively
advocating for supportive government
policy and technology development.
Latest IAG roadmap to net zero
million tonnes CO2 (MT)
IAG is also driving internal action by
using climate-related annual incentives
for over 7,500 senior executives
and managers.
Key measures to reduce emissions are
fleet modernisation, SAF usage, market-
based measures, including the UK and
EU ETS and CORSIA, and carbon
removals.
Less than 10% of the emissions
reductions between 2019 and 2050
are expected to come from offsets.
Roadmap to net zero
IAG was the first airline group in the world
to commit to net zero emissions, and has
been publishing updates to its roadmap
to this goal every year since 2019.
The version below is a core Group
scenario which assumes continued
policy support for aviation
decarbonisation, an overall recovery
to 2019 levels of passenger demand
by 2024 and annual demand growth
aligned with the long-term growth
forecasts disclosed in notes 4 and 17 of
the financial statements.
Changes to our roadmap in 2023 focus
on increasing the use of SAF in our
operations in the short term, and our
investment in carbon removals before
2030. Beyond 2030, it maintains an
assumption that hydrogen aircraft will
be introduced to the fleet from 2040,
and a 5% emissions saving from airspace
modernisation will be achieved by 2050.
Pillar of carbon roadmap
New aircraft
and operations
Delivery plans
Venture investments/key innovation partners
• €12 billion investment between 2024 and 2028
ZeroAvia (hydrogen aircraft manufacturer)
for 178 new, efficient aircraft
I6 (fuel management software)
NAVflight services (flight planning services)
Honeywell Forge (fuel efficiency software)
SAF
• As of 31 December 2023, our total investment in SAF
LanzaJet (sustainable fuels producer)
reached $1 billion, of which 86% is future commitments,
based on assumed energy prices
Nova Pangaea
Carbon removals
• Refining the IAG carbon removals roadmap, and
Heirloom (carbon capture start-up)
Market-based
measures and offsets
supporting the inclusion of carbon removals in the global
CORSIA scheme, and UK and EU ETS
CUR8 (carbon removal platform)
• Support for the global CORSIA scheme to limit
CHOOOSE (customer offsetting platform)
net emissions from aviation
• Continue advocacy to strengthen CORSIA
Supply chain
• 90% of suppliers by spend have submitted scorecards
EcoVadis (business sustainability ratings)
on ESG performance
• Supplier contract clause on sustainability
Watershed (emissions reporting platform)
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International Airlines Group | Annual Report and Accounts 2023
20502045204020352030202520152020Demand growthNew aircraft and operationsETS/CORSIA and offsetsSAFCarbon removalsIAG net zero target2019 baseline emissionsPercentage CO2 reductions(SAF is 70% of fuel in 2050)41%41%42%42%Gross emissionsNet emissions17%IAG interim targets: 11% improvement in fuel efficiency 2019-2025, 20% drop in net Scope 1 and 3 emissions 2019-30, 10% SAF in 2030, net zero by 2050.83127 Future carbon intensity
Delivery of IAG’s current decarbonisation
plans, dependent on appropriate policy
support, is expected to enable the
following changes versus 2019:
Gross carbon emissions (MT CO2):
• 2030 – 15% lower
• 2050 – 73% lower
Gross carbon intensity (gCO2/pkm):
• 2025 – 12% lower
• 2030 – 27% lower
• 2035 – 39% lower
• 2050 – 83% lower
Carbon removals
Introduction
Carbon removal solutions extract CO2 already in the
atmosphere and store it in biological or geological ways.
Examples of carbon removal include:
• Nature-Based Solutions (NBS) – include creating new forests
and peatland;
• BioEnergy Carbon Capture and Storage (BECCS) – capturing
biogenic carbon from industrial facilities and storing it in, e.g.
underground aquifers;
• Carbon Capture and Storage (CCS) with SAF production – as
above and including the use of byproducts which can absorb
CO2; and
• Direct Air Capture (DAC) – absorbing CO2 directly from the
air using a catalyst.
IAG sees carbon avoidance projects as a key transitional
solution en route to full use of removals. Carbon removal
projects differ from carbon avoidance projects, which prevent
the future release of CO2.
Role in IAG transition plan
Group airlines have offered customers the opportunity to make
a financial contribution to support carbon removals projects
since 2022. British Airways customers have supported removals
projects including mangrove restoration in Pakistan and a
biochar project in Oregon, USA.
By 2050, IAG will only use carbon removals to mitigate any
residual emissions from its operations.
IAG will only work with suppliers who do the same, as part of
meeting the Group’s Scope 3 commitment. IAG is already
encouraging suppliers to transition from offsets to removals as
part of a new supplier contract clause which is being rolled out
across its supply chain.
IAG supports the inclusion of carbon
removals in industry decarbonisation
pathways, and in external assessments
of support for the 1.5°C global ambition.
IAG’s short- and long-term targets have
been independently assessed by the
Transition Pathway Initiative (TPI)
as 1.5°C-aligned and its mid-term target
assessed as well-below-2°C-aligned. The
TPI assessment compared the
milestones in the 2021 IAG roadmap
with an industry-wide pathway modelled
by the International Energy Agency
(IEA), taking removals commitments
into account.
IAG began investing in ZeroAvia in
2020, a leading developer of
hydrogen-electric, zero-emission
aviation. IAG increased its
investment in 2022, to advance
ZeroAvia's 2-5 MW hydrogen-
electric powertrain development
programme.
Advocacy for carbon removal policy
IAG expects to use carbon removals to meet an increasing share
of its CORSIA obligations between 2024 and 2035, conditional on
appropriate policy, and supports wider guidance on how
to transition to removals such as the Oxford Offsetting Principles.
The Group continues to advocate for policies that will accelerate
global uptake of carbon removals, via the Coalition for Negative
Emissions and other trade associations listed in A.1.7., and
supports the inclusion of removals in the EU, Swiss and UK ETS.
Investing in carbon removals
IAG is committed to supporting a variety of innovative carbon
removals solutions and is considering projects that are
immediately available and independently verified today, as well
as more innovative technology solutions.
Our investment in Greenhouse Gas Removal (GGR) technologies
involves a combination of forward delivery procurement and
project financial support, facilitating the scale-up of GGR
technologies alongside relevant government support.
When IAG or its 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,
Puro Standard and Verified Carbon Standard (VCS).
In 2023, British Airways worked in partnership with CUR8 (a
UK-based company dedicated to building the global market for
carbon removals), UNDO (a world-leading carbon dioxide
removal project developer specialising in enhanced rock
weathering), and Standard Chartered, representing financial
institutions, to launch a first-of-a-kind financing pilot designed
to help scale-up the carbon removals market.
The pilot aims to support the scale-up of the carbon removals
market by creating a blueprint to enable carbon removal
suppliers to access capital in the form of debt financing via
advanced purchase agreements. British Airways has committed
to purchase more than 4,000 tonnes of carbon removal credits
delivered by UNDO through enhanced rock weathering, and
Standard Chartered is looking to be the banking partner.
International Airlines Group | Annual Report and Accounts 2023
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A. Planet
Carbon removals within our 2050 roadmap
MT CO2
Based on the latest roadmap, the Group expects to use approximately 100 MT of carbon removals between 2022 and 2050
to mitigate Scope 1 emissions and could potentially be removing 2 MT annually in 2030, conditional on clear and globally
agreed verification and quality standards for removals, inclusion of removals in ETS schemes, and stable policy support.
Key carbon removal projects
Freres Biochar project
The Freres Biochar project in Oregon, USA,
involves a biomass power production plant that
produces biochar, a carbon-rich, charcoal-like
material that is created when agricultural and
wood waste is used as fuel. The process feeds
carbon into the soil and prevents it from
naturally decaying, locking carbon away and
keeping it out of the atmosphere for several
hundred years.
Blue Carbon Mangrove project
The Blue Carbon Mangrove project in the
Indus Delta area in Pakistan is a nature-based
carbon removal project (where plants absorb
carbon from the atmosphere through
photosynthesis). The project will support
greenhouse gas removal by reforestation
and revegetation of approximately
225,000 hectares of degraded tidal wetlands
with mangrove and other species to absorb
carbon dioxide, stabilise the area and protect
the coastal area and communities.
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International Airlines Group | Annual Report and Accounts 2023
2050204520402035203020202025CCS with SAF productionDACBECCS8TotalNBS A.1.3. Metrics and progress
Overview
IAG’s transition plan focuses on reducing
CO2 from jet fuel use, as this represents
over 99% of Scope 1 emissions.
The Group measures its full carbon
footprint and tracks multiple metrics
each quarter to ensure progress
on tackling climate change.
2023 saw strong progress against
the key metric of carbon efficiency.
With a 3.6% annual improvement to 80.5
gCO2/pkm, the Group is on track to
deliver our carbon efficiency target of
80.0 gCO2/pkm by 2025, accounting
for emissions reductions achieved
from SAF.
Calculation methodology
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. 2023 UK
Government conversion factors are
applied across the Group as these are
deemed to be the most robust available.
Other factors such as International
Energy Agency emissions factors are
used in specific cases as described in the
IAG statement of non-financial
information.
Our carbon intensity calculation includes
CO2 emission reductions achieved from
SAF. SAF reductions are calculated
using actual life cycle analysis (LCA)
carbon intensity values for SAF fuel
uplifted by airlines in the Group, and
subtracting the achieved emission
reductions from our total CO2 footprint.
IAG discloses methane (CH4) and nitrous
oxide (N2O) as Scope 1 non-CO2
greenhouse gases (GHGs), in line
with the UK conversion factors.
In 2023, emissions of CH4 were 18,009
tonnes and N2O were 216,542 tonnes.
A detailed Scope 3 emissions
breakdown is available in the IAG
statement of non-financial information.
2019 emissions (tonnes CO2e)1
2023 emissions (tonnes CO2e)1,2
Scope 1
30,744,000
78.77%
Scope 2
20,000
0.05%
Scope 1
25,674,000
79.70%
Scope 2
12,000
0.04%
Total
39,029,000
100%
Scope 3
8,265,000
21.18%
Total
32,212,000
100%
Scope 3
6,526,000
20.26%
Scope 1
Scope 2
Scope 3
Scope 1
Scope 2
Scope 3
Scope 3 emissions (tonnes CO2e)1,2
All other Scope 3
categories
8%
Franchises
7%
Capital goods
2%
Total
6,526,000
100%
Fuel and
energy-related
activities
83%
1 Rounded to the nearest '000 tonnes CO2e.
2 Please refer to details in this section regarding Scope 3 emissions data
collection. Data for Scope 3 emissions reported using existing
methodology, and does not include revised values for Scope 3.1
emissions as identified following a proof-of-concept trial between IAG
GBS and Watershed in 2023.
International Airlines Group | Annual Report and Accounts 2023
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A. Planet
Key emission metrics
Key carbon footprint metric
Scope 1 CO2e
Net Scope 1 CO2e
Scope 2 location-based
Scope 2 market-based
Scope 31
GRI standard
305-1
305-2
305-2
305-3
Unit
MT CO2e
MT CO2e
kt CO2e
kt CO2e
MT CO2e
vly
22%
19%
11%
6%
19%
v2019
(16%)
(15%)
(24%)
(37%)
(21%)
2023
25.67
22.82
56.5
12.4
6.53
2022
21.13*
19.10*
51.1
11.7
5.48
2021
10.92
10.50
39.2
8.4
3.32
2020
11.02
10.85
48.2
9.3
3.66*
2019
30.74*
26.95*
74.6*
19.7*
8.27*
Key emission reduction metric
GRI standard
Unit
vly
v2019
2023
2022
2021
2020
2019
305-4
gCO2/pkm
(3%)
(10%)
81.0
83.6
94.5
106.2
89.8
305-4
305-5
gCO2/pkm
ktCO2e
(4%)
(10%)
5%
12%
94.5
59.7
106.2
17.2
MT CO2e
ktCO2
ktCO2e
ktCO2e
years
(1%)
418%
45%
17%
>1%
(26%)
n/a
n/a
6%
(18%)
2,604
80.5
86.7
5.68
157.1
246
12.0
2023
0.18
1,145
8.11
53.3
217.0
100.7
81%
0.9%
83.5
82.4
5.74
30.3
1,796
229
11.9
2022
0.20
1,088
6.64
10.3
213.7
81.5
81%
0.4%
89.8
77.4
7.66
n/a
3,182
n/a
11.4
2019
0.22*
827
9.65
nr
2.32
n/a
0
168
10.6
2020
0.47
705
3.45
nr
200.1
267.7
41.9
86%
0.4%
119.7
72%
0.2%
2.71
6.5
219
196*
11.2
2021
0.34
771
3.42
2.4
189.0
42.1
86%
0.5%
Other metric
GRI standard
Unit
vly
v2019
Scope 2 carbon intensity
Revenue per tonne CO2e
Jet fuel
SAF
Electricity
Energy
Renewable electricity4
Renewable energy
305-4
301-1
302-1
302-1
gCO2/pkm
€/tonne CO2e
MT fuel
(12%)
5%
22%
kt fuel
417%
‘000 MWh
Mn MWh
%
1%
24%
0pts
(19%)
38%
(16%)
n/a
(19%)
(15%)
9pts
% 0.5pts
0.7pts
Flight-only carbon intensity
(exclusive of SAF CO2 reductions)2
Flight-only carbon intensity
(inclusive of SAF CO2 reductions)2
GHG reduction initiatives
Emissions covered by ETS
(UK, EU, Swiss)
Net reduction (SAF uplift)
Net reduction (ETS3)
Net reduction (offset projects)
Average fleet age
Descriptions and commentary on other metrics are available in the Additional Disclosures section of the IAG statement of non-financial information.
Note: ‘nr’ means ‘not reported’. * means restated using the latest data and assumptions.
1 Please refer to details below regarding Scope 3 emissions data collection. Data for Scope 3 emissions reported using existing methodology,
and does not include revised values for Scope 3.1 emissions as identified following a proof-of-concept trial between IAG GBS and Watershed in 2023.
2 pkm means ‘passenger-km’. The passenger-km used for this calculation is 273,607 million, which excludes no-show passengers. The cargo-tonne-km
used is 4,386 million, which excludes cargo carried on other airlines or trucks. The jet fuel used excludes fuel for franchises and engine testing.
3 2020 emissions were below the EU ETS sector cap for aviation so no net reductions were delivered.
4 For completeness, Scope 2 emissions cover electricity use at airports and overseas offices, which are partly outside IAG’s operational control.
As part of complying with the UK Streamlined Energy and Carbon Reporting regulation, 58% of Group energy use was UK energy use, based on Scope
1 emissions and Group electricity use in UK-based offices, up from 56% in 2022.
Scope 3 emissions calculations
IAG Scope 3 emissions accounted for approximately 20% of total emissions in 2023. Our target is to achieve a 20% drop in net
Scope 3 emissions compared to the 2019 baseline, from 8.3 MT to 6.6 MT by 2030. In 2023 IAG Scope 3 emissions were 6.5 million
tonnes CO2e.
IAG GBS operates a supply chain sustainability programme which includes ESG scorecards and supplier risk screening.
In 2023, IAG GBS ran a proof-of-concept trial with Watershed to improve Scope 3.1 emissions reporting across the Group. In
previous measurements, IAG reported Scope 3.1 emissions based on emissions calculated from water usage only. Under the trial with
Watershed, a spend-based methodology for Scope 3.1 emissions was applied, combining IAG GBS supply chain spend data with
Watershed’s emissions database. This improved reporting accuracy as emissions factors could be associated with the location and
business activities of each supplier, including supplier-specific emission factors for those with CDP disclosures. The results of this trial
are provided alongside previous emissions data captured in our Scope 3 emissions submission.
IAG is expanding this research across our Scope 3 activities in 2024, to improve our data collection across all Scope 3 emission categories.
84
International Airlines Group | Annual Report and Accounts 2023
Other metric
Fuel and energy-related
activities (Scope 3.3)
Franchises (Scope 3.14)
Capital goods (Scope 3.2)
Purchased goods/
services (Scope 3.1)
(Scope 3.1 emissions data
following Watershed
proof-of-concept trial)
All other Scope 3
categories
Total Scope 3 emissions
GRI
standard
% of Scope
3 emissions
Unit
v2019
2023
2022
2021
2020
2019
305-3 tCO2e
305-3 tCO2e
305-3 tCO2e
83% (15%)
5,424,914
4,399,985*
2,266,587*
2,284,992
6,371,621
7% (44%)
2% (77%)
449,848
128,000
475,576
369,718
235,167
810,334
232,000
424,000
912,000
568,000
305-3 tCO2e
>1% (70%)
204
268
229
525
689
(2,762,833)
(2,028,326)
(1,172,771)
(1,398,858)
(2,731,217)
305-3 tCO2e
305-3 tCO2e
8%
2%
523,501
387,579
264,457*
227,033
514,618
N/A (21%)
6,526,467
5,495,408*
3,324,992
3,659,717
8,265,262
Descriptions and commentary on other Scope 3 category metrics are available in the Additional Disclosures section of the IAG statement of non
financial information.
Note: Data from Watershed trial is not included in Total Scope 3 emissions. * means restated using the latest data and assumptions.
Carbon footprint calculation methodologies
The Group’s airlines offer passengers the ability to calculate their emissions footprint associated with their flights. This emissions
footprint is estimated using a carbon calculator, which determines a volume of CO2 emissions that an aircraft emits per passenger
over a defined flight route and cabin.
Additionally, some airlines offer customers the opportunity to offset or mitigate part of their emissions through investing in carbon
removals projects and/or SAF.
IAG continues to develop the carbon calculation methodology that underpins our passenger emission calculators used by the Group,
and advocates for an industry-wide standard that provides transparency and simplicity for customers.
Key developments in 2023 include:
• Aer Lingus continues its partnership with charity Pure Leapfrog to help passengers contribute towards mitigating some of the
emissions generated from their flights;
• British Airways continues to collaborate with the CHOOOSE platform that enables customers to understand their flight emissions
and take steps to address their climate impact before or after their journey, or directly from their seat on board. This includes
carbon removals from the ‘case study’ projects listed in section A.1.2.;
• Iberia has certified its carbon footprint calculator methodology with AENOR (third-party verification entity); and
• Vueling offers its customers the opportunity to make a contribution to the supply of SAF. Vueling matches its customers’
contributions, doubling the amount of SAF supplied. Almost 197,000 passengers have contributed 246 tonnes of SAF purchased
since the initiative started in 2022. Passengers can also mitigate flight emissions by contributing towards the purchase of carbon
removals though the collaboration with CHOOOSE.
Non-CO2 effects
IAG is supporting the ongoing research and development of mitigations for the non-CO2 effects of aviation. This includes
participating in the UK Jet Zero Council’s non-CO2 working group, and supporting research by the Rocky Mountain Institute (RMI).
The Group’s airlines already participate in several non-CO2 research projects.
• British Airways and Iberia are collaborating with Breakthrough Energy to identify which of our flights’ trajectories pass through
Ice Super-Saturated Regions (ISSR) and may contribute to non-CO2 climate effects;
• Iberia participates in the IAGOS* project, which combines the knowledge of scientific institutions with the civil aviation
operations to obtain essential data on atmosphere and air quality conditions for the subsequent development of more accurate
climate models. New IAGOS equipment has been installed in an Airbus A330-200 which mainly operates routes across the
Atlantic, providing atmospheric data from a valuable climate region;
• Vueling completed several trials with SATAVIA** that aimed to reduce the creation of contrails and measure the improvements
from adjustments made in-flight; and
• Group airlines are also preparing to monitor, report and verify non-CO2 emissions for their future obligations under the EU ETS
from 2025.
IAG advocates for further scientific research to support effective policy-making that can deliver true emission reductions.
* IAGOS - In-service Aircraft For a Global Observing System
** SATAAVIA - Company supporting airline control management
International Airlines Group | Annual Report and Accounts 2023
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A. Planet
A.1.4. Emissions reduction initiatives
Relevant standards: TR-AL-110a2. GRI 305-5.
Reducing gross and net emissions is a collective effort across the Group. Examples are provided throughout this report.
By 2030, fleet renewal and SAF programmes will have the biggest impact on reducing gross emissions, and CORSIA will have the
biggest impact on reducing net emissions. In addition, other specific initiatives are run within operating airlines.
Our savings from key initiatives in 2023, rounded to the nearest 1,000 tonnes, are shown in the table below. See section ‘Leading our
industry in SAF projects’ for more details on our emission reductions:
Fleet efficiency
SAF
Operational efficiency
Carbon markets
Supply chain
€12 billion 157,000 86,000
2.6m
investment between
2024 and 2028 for 178
new, more efficient
aircraft
tonnes of CO2 saved
from SAF used this
year, representing 0.6%
of our total annual
emission
tonnes of CO2e saved
from operational
efficiency initiatives such
as reduced use of
landing flaps, single-
engine taxi-in and
reduced weight
on-board
net tonnes of CO2e
reduced through
participation in carbon
pricing mechanisms
including the EU ETS,
UK ETS and Swiss ETS
38
supply chain audits
were completed in
2023
Examples of emission reduction initiatives across the Group:
Operating company
2023 examples
Aer Lingus
British Airways
IAG Cargo
IAG GBS
IAG Loyalty
IAG Tech
Iberia
Vueling
Aer Lingus took its first new Airbus A320 aircraft delivery flight with 50% Sustainable Aviation
Fuel onboard. 2023 also saw Aer Lingus procure SAF for the first time at London Heathrow as
part of the Group deal with Phillips 66.
More efficient alternate routings. This change means that one-third of Aer Lingus flights can
carry 160kg less fuel, reducing daily CO2 emissions by 3.2 tonnes.
British Airways was the first airline in the world to use SAF produced on a commercial scale in
the UK after signing a multi-year agreement with Phillips 66.
British Airways took delivery of 10 new aircraft into the fleet, whilst retiring some of its older
aircraft, which continues to help increase CO2 efficiency.
Sustainability is now integrated into annual pilot simulator checks with training rolled out across
all fleets and a sustainability update issued to all flight crew.
IAG Cargo allows customers to purchase Scope 3 emission reductions from SAF production to
support their own emissions reductions. In 2023, customers including Bolloré Logistics, DB
Schenker, DHL Global Forwarding and Kuehne + Nagel engaged with this programme.
Initiative type
Fleet
efficiency and
SAF
Operational
efficiency
SAF
Fleet
efficiency
Operational
efficiency
SAF and
Supply Chain
IAG Cargo delivered trials including a lease of 40 tractor units running on Hydrogenated Vegetable
Oil (HVO) biofuel, and an electric tractor.
Operational
efficiency
IAG GBS operated a proof-of-concept trial with Watershed, a digital automated solution for
carbon calculation measurement and sustainability accounting, to improve reporting of its
Scope 3, category 1 (purchased goods and services) emissions footprint. See Section A.1.3.
for more details.
IAG GBS continues to partner with other companies through the ‘Business vs Smog’ programme
to leverage its resources to help the fight against climate change. During the five years that GBS
has been involved, programme volunteers have run 2,000 free workshops for 45,000
participants in 150 towns.
British Airways Executive Club members can use their Avios to contribute towards the purchase
of SAF on short-haul flights via the High Life Café.
Migration of IT services to Amazon cloud servers, saving energy and reducing CO2.
Iberia continues to deliver efficiency initiatives across the whole flight phase including take-off,
cruise, approach and landing.
Iberia welcomed six new Airbus A350-900, which increase CO2 efficiency and reduce carbon
emissions by around 65,000 tCO2e compared to 2022.
Vueling took delivery of four Airbus A321neos, increasing carbon efficiency by 20% by saving
fuel and having a higher passenger capacity than the aircraft they replace.
Vueling is working with EUROCONTROL and ENAIRE to define a new KPI that measures the
airspace efficiency according to CO2 emissions instead of distance flown. This will support
changes within European airspace and promote optimal trajectories that reduce CO2 emissions.
Vueling was the first European LCC to partner with WheelTug, to accelerate the development of
its device that will allow minimising engine use on the ground, reducing emissions and noise.
Supply chain
Supply chain
SAF
Supply chain
Operational
efficiency
Fleet
efficiency
Fleet
efficiency
Operational
efficiency
Operational
efficiency
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International Airlines Group | Annual Report and Accounts 2023
Fuel efficiency programme
As part of the IAG sustainability
commitment, each Group airline has
a fuel efficiency programme which
supports flight planning and enables
pilots to increase fuel efficiency.
Best practices are shared across the
Group to leverage synergies and further
increase fuel efficiency.
2023 examples include:
• British Airways and Vueling deployed
NAVlink Wind Updates services in
their A320 fleets. NAVlink provides
optimised in-flight wind data updates,
allowing pilots to plan a more efficient
descent trajectory. NAVlink has
proven to reduce around 22kg of CO2
emissions per descent. This
partnership was developed with the
support of Hangar 51 – IAG’s
innovation team;
• Group airlines collaborated with
Honeywell for the use of its Forge
software. This software uses in-flight
data to improve flight planning and
increase fuel efficiency; and
• Vueling has implemented the ‘Pilot
App’ which provides transparent data
on individual pilots' contribution
towards sustainability goals. This app
tracks the CO2 emissions saved during
each flight, enhancing decision-
making in their day-to-day duties.
A.1.5. Scenario analysis
Overview
In 2023, IAG carried out multiple
and aligned forms of scenario analysis:
• the IAG Sustainability team and the
Enterprise Risk Management (ERM)
team reviewed all climate-related
risks and opportunities and potential
impacts to 2026 and 2030.
The impacts of material risks are
quantified as part of the Company-
wide ERM process which receives
Board oversight;
• operating airlines modelled
compliance-related costs, including
from the UK and EU ETS and CORSIA,
to 2050;
• TCFD-aligned scenario analysis was
repeated using a dual timeframe
of 2030 and 2050; and
• ongoing analysis was carried out
on the Flightpath Net Zero strategy
to 2050.
This scenario work informs strategy,
planning, risk management and financial
management.
IAG takes a proactive approach to
managing climate-related risks and
opportunities, and is committed to
managing their regulatory, reputational,
financial, market and technology aspects.
Applying carbon prices
IAG concurrently applies carbon prices
to financial planning and to future
scenario analysis.
The Fleet team uses updated carbon
prices and price forecasts for short-haul
and long-haul fleet purchasing decisions,
based on market values and reputable
external sources. The Group airlines use
carbon prices in financial planning, and
flight operations teams and pilots use
carbon prices in operational decisions
about fuel uptake.
Potential acquisitions include an
assessment of exposure to climate-
related issues and policy.
For the period 2024 to 2033, UK ETS
prices of £55 – £89/tonne, EU ETS
prices of €84 – €124/tonne and CORSIA
prices of $11 – $25/tonne were used for
modelling compliance costs.
EU and UK ETS prices are based on
market prices and the UK Department
for Transport (DfT) Aviation Forecast,
and CORSIA prices are based on internal
analysis and ICAO industry price forecasts.
TCFD-aligned scenario analysis
Since 2018 IAG has been incorporating
the TCFD recommended guidance on
climate risk disclosures. In 2023, IAG
repeated a TCFD-aligned scenario
analysis exercise, building on previous
years’ exercises.
This was a structured, qualitative
discussion of potential climate-related
impacts and business responses, using
the latest evidence and analysis from
reputable sources like the UN,
EUROCONTROL and Climate Action
Tracker (CAT). IAG conducted its 2023
analysis in line with the latest TCFD
guidance update published in 2021.
Temperature scenarios of 1.5°C1 were
chosen for transitional risks, in
recognition of IAG and global targets.
The 2°C and 3°C warming scenarios
were chosen for physical risks, based on
the latest UN projections.
The year 2030 was chosen as the key
timeframe, based on IAG targets and
key policy timelines, e.g. for SAF
mandates. The year 2040 was also
considered due to the possibility of the
world overshooting 1.5°C in the 2030s
leading to faster societal changes.
IAG exercises involved representatives
from multiple teams including Strategy,
Treasury, Finance, Government Affairs,
Commercial Planning, Investor Relations,
People, Enterprise Risk Management,
IAG Tech, IAG GBS, IAG Loyalty and
sustainability representatives from
all operating airlines. The Group
Sustainability team collated inputs,
which were reviewed by the IAG
Sustainability Steering Group and the
Safety, Environment and Corporate
Responsibility (SECR) Committee.
The Group remains resilient to the most
material climate-related impacts –
industry-wide policy shifts – and these
have been quantified and mitigation
plans embedded into financial and
strategic planning. Industry-wide
changes also create opportunities for
the Group to become more resilient than
its competitors.
To address significant uncertainty
around future policy, technology and
market trends, IAG is repeating this
scenario analysis annually. We will keep
implementing action plans in coming
years to further improve resilience
to wider changes.
1 ‘Orderly’ and ‘Disorderly’ scenarios were chosen as per TCFD definitions. These scenarios
compare smooth, predictable and idealised climate-related changes with abrupt, variable and
disjointed changes across regions.
International Airlines Group | Annual Report and Accounts 2023
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A. Planet
A.1.6. Risks and opportunities
Climate-related risks are assessed and
managed within the ERM framework as
described in Section C.6. and in the Risk
management and principal risks factors
section under the principal risk
‘Sustainable aviation’. Opportunities are
managed within relevant teams.
Transitional risks primarily affect airline
activity between European destinations,
which contributed to 34% of flying
activity in 2023. Physical risks could
affect IAG operations across its global
network, reflecting the global nature of
climate change.
IAG considers the relevant risk factors
that could impact each risk by region
and timescale. Such variability may arise
from fragmented policy definition, scope
and implementation, changeable market
perceptions, or unpredictable delivery of
new technology (among other causes).
IAG considers its mitigation strategy for
each risk accordingly. Please refer to the
‘Risk impacts and mitigation’ table for
more information.
The carbon-reduction targets in the
Flightpath Net Zero strategy are the key
measures for assessing the mitigation of
these risks, along with the consideration
of these risks in relevant governance
processes. The external risk
environment, materiality of risks,
mitigation actions and KPIs for these
mitigating actions are reviewed
regularly.
The table below lists risks assessed
through the ERM process. The most
material risks are policy risks. Risk
timeframes align with corporate
planning timelines.
TCFD
risk type
Physical
Market
Risk and/or opportunity combined description
Resilience to acute weather events
Resilience of routes and assets to chronic climate changes
Customer spend due to perceptions of ESG progress in IAG or the
aviation sector
Perceived quality of offset and removal projects
Supply chain readiness
SAF delivery against committed offtake agreement volumes
Policy
Litigation against claimed carbon reductions from offsetting
Demand impact of EU and UK climate policy
Resilience to changes in ETS/CORSIA pricing
Policy asymmetry across regions
Extra regulation on activity rather than emissions
Lack of supporting SAF infrastructure or policy
Regulation on non-CO2 effects
Access to and readiness for lower-emission technologies
Access to SAF supply
Technology
Risk time
frame
Risk trend1
M
L
S
M
L
M
S
L
M
M
L
M
M
L
M
Stable
Stable
Down
Up
Stable
Up
Up
Stable
Up
Up
Stable
Down
Up
Stable
Down
Scenario
dependency2
Temperature
Temperature
Transition
Transition
Transition
Transition
Transition
Transition
Transition
Transition
Transition
Transition
Transition
Transition
Transition
Key: short-term (S) is 1-3 years, medium-term (M) is up to 5 years, long-term (L) is more than 5 years.
IAG continues to analyse risk and transition scenarios to inform mitigation plans to 2030. Key parameters for defining scenarios are
below, based on UN, Climate Action Tracker (CAT), UK Climate Change Committee and internal analysis. These are kept under
review.
Physical risk parameters
Current projection
Global scenario to 2100
2.4°C
2°C scenario
RCP3 2.6
3°C scenario
RCP 4.5
Transition risk parameters – 2030
Current policies/projections
Current targets
1.5°C-aligned scenario
Global emissions vs 2019
UK emissions vs 2019
EU emissions vs 1990
US emissions vs 2005
0%
-28%
-55% (via Fit for 55)
-37%
Aviation (net) emissions vs 2019
-15% (via CORSIA)
-7%
-42%
-55%
-50%
-15%
-41% (-27%)4
-42%
-62%
-58%
-15%
1 Risks might be increasing (up), decreasing (down) or stabilising from a business perspective. IAG calculates this based on central strategy modelling
and economic forecasting, and the risk trend shown is based on an end-of-year assessment, relative to in-year review.
2 Whether the cost impacts depend more on the temperature scenario (2°C or 3°C), or type of transition (Orderly or Disorderly).
3 Representative Concentration Pathway (RCP), a globally recognised scenario for physical changes under different temperature ranges.
4 A 41% drop by 2030 represents an Orderly transition. A 27% drop represents a Disorderly transition because smaller global emissions reductions
to 2030 require rapid decarbonisation after 2030 to return to 1.5°C by 2100.
88
International Airlines Group | Annual Report and Accounts 2023
Sustainability continued
A. Planet
Risk impacts and mitigation
Description as per previous page
Potential unmitigated financial impacts
How IAG is mitigating
Physical
Resilience to acute
weather events
Days of lost revenue due to additional
flight disruption and associated mitigation
and passenger compensation costs
Existing operational resilience processes
can minimise extra disruption (for example
from more turbulence from US-UK flights)
Resilience of routes and
assets to chronic climate
changes
Changed revenue from a different route network
or a different frequency of flights to climate-
affected destinations, changes in operational
maintenance costs
Market
Customer spend due to
perceptions of ESG progress
in IAG or the aviation sector
Customers change frequency of flying, duration
of trips, or spend less relative to other carriers
or other travel modes
Scale of route network means impacts above
plan are not material so no immediate action
needed. Aircraft are mobile assets which can be
moved to different locations to account for e.g.
more hurricanes in the Caribbean
Delivering emissions reductions, developing
emissions dashboards for customers,
expanding customer communications, support
for global instruments like CORSIA, working via
trade associations to advance solutions
Perceived quality of offset
and removal projects
Supply chain readiness
SAF delivery against
committed offtake
agreements
Policy
Litigation against claimed
carbon reductions from
offsetting
Demand impact of EU
and UK climate policy
Resilience to changes in
CORSIA/ETS pricing
Policy asymmetry across
regions
Extra regulation on activity
rather than emissions
Exposure to sudden variability in prices, cost of
CORSIA credits, scale of growth in costs by 2050
due to available volume of removals to deliver
net zero
Strategy to avoid price spikes, governance
to ensure offset quality, a removals roadmap
based on external evidence, advocacy
for policy support and monitoring regimes
Sustainability compliance or technology change
causing unplanned changes in cost of goods and
services provided to IAG or associated supplier
management costs, margin erosion
Supply chain sustainability programme
which includes ESG scorecards and supplier
risk screening
SAF delivery from agreed commitments fail to
materialise from weak market supply or failed
project development, exposing IAG to market
priced SAF, buyout penalties or carbon costs
Securing SAF deals and taking equity in
early-stage projects where relevant. Monitoring
SAF project development and seeking volume
above target levels
Litigation for use of credits towards voluntary or
compliance offsetting that do not deliver claimed
emission reductions leads to legal cost
Due diligence conducted on carbon offsetting
projects, internal guidance prepared for
external communications
Pass-through of industry-wide costs affects ticket
prices and, therefore, demand
Impacts of emerging policy assessed as part
of longer-term financial planning and strategy
Exposure to long-term price increases affects
compliance costs
Strategy to reduce impact of price spikes; using
carbon prices in fleet and financial planning
Changing numbers of customers relative to other
carriers who are under more favourable or more
restrictive policy regimes
Industry-wide taxes or levies increase operating
costs and have potential demand impacts; demand
management measures equate to lost revenue.
Noise restrictions are not included in this risk but
are reviewed as a separate risk through the ERM
framework
Advocacy for global solutions such as the ICAO
Long-Term Aspirational Goal agreed in 2022
Advocacy in support of emissions-reducing
measures like SAF and against economically
inefficient measures like taxes
Lack of supporting SAF
infrastructure or policy
Higher prices of SAF in core markets due to lack of
investment in SAF production or cost of inputs
Regulation on non-CO2
effects
Potential multiplier on ETS costs, lost revenue due
to route restrictions, or operational costs due to
non-CO2 management
Advocacy for SAF policy, e.g. via UK Jet Zero
Council, and a strategy to procure SAF in
regions where supportive policy exists
External research suggests just 10% of flights
could account for 80% of impacts. Advocacy
via trade associations to support monitoring
and targeted solutions such as route
optimisation and SAF uptake
Technology
Access to and readiness for
lower-emission technologies
Higher ETS costs if technology access is restricted
or technology development is slow
Hangar 51 Ventures team aligns research and
work with the Flightpath Net Zero strategy
Access to SAF
Changing unit prices of SAF in core markets
Securing SAF deals and taking equity in early
stage projects where relevant
International Airlines Group | Annual Report and Accounts 2023
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A. Planet
Risks associated with SAF
SAF is a key solution in IAG’s
transition plan to net zero (Section
A.1.2.), but remains a developing
market, which in many regions is still
awaiting policy definition to drive
infrastructure investment. IATA
projects SAF production will meet
just 0.5% of global aviation fuel
demand in 20241. IAG separates SAF
risks into market, policy and
technological risks associated with
scaling up the global SAF industry.
IAG considers the respective
impacts on fulfilling IAG’s 2030
commitments and future regulatory
obligations, by modelling the impact
of regional differences in future SAF
supply and costs, associated with
different policies (policy risk), SAF
feedstock technologies (technology
risk) and market prices (market
risk). IAG uses this modelling to
influence SAF strategy and
investments.
1 IATA Pressroom report: SAF Volumes
Growing but Still Missing
Opportunities, published 6 December
2023.
A.1.7. Stakeholder engagement
Relevant standards: GRI 102-
13/43/44
Overview
The aviation industry will decarbonise
faster with stakeholder and policy
support.
The Group and its operating airlines
regularly engage with key stakeholders:
governments and regulators, shareholders,
lenders and other financial stakeholders,
trade associations, customers, suppliers,
employees, communities, NGOs and
academic institutions to advocate for
support for emissions reductions and to
share progress on Flightpath Net Zero.
Following our successful first IAG ESG
day for investors in 2022, IAG delivered
a sustainability update as part of its
Capital Markets Day in November 2023.
Internal governance ensures that wider
stakeholder engagement on climate
change is consistent with material issues
and environmental goals.
Key stances on climate change
IAG supports cost-effective approaches
to deliver net zero emissions by 2050,
advance low-carbon solutions, and
support global efforts to align with 1.5°C.
Actions within associations focused on
UK aviation, Spanish aviation and global
aviation policy are listed in the table
opposite. If the climate-related positions
of trade associations are deemed to be
substantially weaker or inconsistent
with these internal stances, IAG
representatives take roles on task forces
and working groups and respond
to consultations to communicate
our position and constructively move
to alignment.
IAG is proud to have consistent views on
climate change with all the organisations
of which it is a member (below). IAG has
positively influenced this outcome by
contributing expertise and time to drive
net zero commitments, and create and
support roadmaps to net zero emissions
across SA, A4E, oneworld, JZC, and
ATAG. IAG has also driven and
encouraged higher SAF ambitions
across the JZC, oneworld and WEF. IAG
and key trade associations are listed on
the EU Transparency Register.
Key principles of climate-related
engagement
Aviation is a global industry and IAG
remains committed to global
policy approaches.
IAG supports carbon pricing as a key
instrument to determine both the pace
of emissions reductions for the aviation
industry and the balance of in-sector
and out-of-sector reductions. We
advocate for the use of greenhouse gas
emission removal technologies in carbon
markets, by both natural and engineered
means. By 2050 we are committed to
using only GGRs to cover our residual
carbon emissions.
IAG prioritises policy advocacy on SAF
too, as this is a key emissions reduction
driver in the next decade, and supports
policies on operational efficiency,
zero-emission aircraft and carbon
offsets and removals.
The Group seeks to ensure that policies
delivered are effective and fair across
multiple airlines.
Luis Gallego participated
in a sustainability panel
at the Sustainability Skies
World Summit 2023.
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Member of organisation
UK focus
Sustainable Aviation (SA)
Jet Zero Council (JZC)
Royal Aeronautical Society (RAeS) –
Greener by Design group (GbD)
Spain/Europe focus
Grupo Español para el Crecimiento Verde
(Spanish Group for Green Growth)
Alianza para la Sostenibilidad del
Transporte Aéreo en España (AST)
(Spanish Alliance for Sustainable Air
Transport)
Airlines 4 Europe (A4E)
Global focus
Coalition for Negative Emissions
oneworld (represents 15 airlines)
Air Transport Action Group (ATAG)
IAG involvement in organisation and actions to ensure and move to consistent stances
One of 13 members of SA Council, which governs activities for 44 members
Drove development of SA’s net zero roadmap in 2023, which for the first time included
the demand impact of a net zero transition. IAG was also an active participant in
workstreams to advance low carbon solutions
Chairs SAF Delivery Group and supported creation of UK Jet Zero Strategy in 2022
to deliver net zero UK aviation by 2050. British Airways CEO a member
Executive Committee of GbD, attended non-CO2 conference in 2022 and 2023 to
understand how best to mitigate these effects
Formed in 2023. Iberia is one of over 50 corporate members supporting green growth
The main stakeholders of the Spanish air transport sector formed the alliance with
the objective of promoting the development of sustainable aviation. Three working
groups have been defined to respond to the main challenges that the sector now faces:
operational efficiency, SAF and policy
Founding member, drove development of net zero roadmap in 2021, supported
ReFuelEU consultation responses and other work to advance low carbon solutions
In 2023, IAG has supported the update of the A4E decarbonisation roadmap, and
participated in working groups looking to develop solutions for non-CO2 emissions
Founding member in 2020, Steering Group member, active contributor to consultation
responses to UK Government on how to scale up carbon removals
Chaired the Environment Strategy Board (ESB), coordinated net zero roadmap
and 10% SAF ambition across 2020-21, hosted two ESB meetings in London in 2023,
continues to provide support for advancing low carbon solutions
Significant airline contributor to global aviation roadmap to net zero in 2020-21,
which helps to inform industry priorities for continual advancement of low carbon
solutions
World Economic Forum (WEF) – Clean
Skies for Tomorrow Coalition
Regular contributor to reports on how to scale up SAF as a low-carbon solution,
advocated for 10% SAF ambition by 2030
IATA (represents 300 airlines worldwide)
Chaired the IATA Sustainability and Environment Advisory Council (SEAC),
representatives on IATA working groups to advance policies for low carbon solutions,
supported advocacy for net zero commitment at ICAO and strengthening of CORSIA
baseline. Moderated a panel at the inaugural IATA World Sustainability Symposium in
Madrid in October 2023
IAG are an investor in Nova
Pangea, an innovative company
producing SAF feedstock.
Jonathon Counsell, IAG Group
Head of Sustainability and Jim
Davies, IAG Programme Director
– Sustainable Flight are pictured
here with Anthony Brown MP,
UK Aviation Minister and Sarah
Ellerby, CEO Nova Pangea.
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A. Planet
Key engagement forums in the UK, Spain and Ireland
Ireland
In 2023, the Irish Government
announced plans to establish
a Government-Industry SAF forum
to inform and guide its work on SAF.
IAG welcomed this announcement and
Aer Lingus is continuing to engage at
European level, and with the Irish
Government on policy support to
incentivise SAF production in Ireland.
Spain – Alianza para la Sostenibilidad
del Transporte Aéreo en España
(Spanish Alliance for Sustainable Air
Transport)
The Spanish Alliance for Sustainable
Air Transport (AST) was launched in
April 2023. The AST is a joint initiative
comprising the air transport industry,
academia, and NGOs to promote the
development of sustainable aviation
in Spain, favouring the implementation
of new technologies and innovative
processes that make the long-term
sustainability of the sector possible,
and boost pathways towards
decarbonisation. Iberia played a key role
in creating the AST, and both the Iberia
and Vueling CEOs are members.
UK – Jet Zero Council
The UK Government’s Jet Zero Council
(JZC) launched in 2021 as the first of
its kind partnership between the aviation
industry and Government. The JZC aims
to provide advice on the Government’s
ambitions to deliver net zero aviation
and zero-emission flights. It brings
together ministers and CEO-level
stakeholders, with regular meetings
and subgroups to drive the ambitious
delivery of new technologies and
innovation to cut aviation emissions.
Through the success of the JZC, several
countries have followed its example,
including in Spain and Ireland.
In 2023 IAG supported the JZC’s
focus on SAF. This included the UK
Government’s second consultation on
SAF, participation in the SAF mandate
sub group and the commercialisation
sub group, and supporting a revenue
certainty mechanism for SAF, which
the UK Government has now committed
to through the UK Energy Bill.
The Ninth Jet Zero Council focused
on greenhouse gas removal technology,
and BA showcased its nature-based
carbon removal projects
Left: Mark Harper, Secretary of State
for Transport, UK Government
Right: Jonathon Counsell, Group Head
of Sustainability, IAG
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A.2. Planet – wider issues
A.2.1. Waste
Relevant standards: GRI 306-1/2/3
(2020).
Overview
IAG has one of the most comprehensive
waste reduction plans in the airline
industry. Our priorities include reducing
food waste, and eliminating the use of
single-use plastics, in addition to
increasing recycling across our
operations.
On-board services are the main source
of waste. Key waste outputs include
plastic packaging, leftover food waste,
drinks cans and cabin items such as
wrappers. Key inputs included on-board
meals and amenity kits supplied to
passengers.
In 2023, IAG operations generated:
• 52,699 tonnes overall (52,655 tonnes
in 2022); comprised of
• 51,749 tonnes non-hazardous waste;
and
• 950 tonnes hazardous waste.
We recovered or recycled
7,650 tonnes (19%).
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 – Barcelona, Dublin, London
and Madrid – although the Group flies to
over 200 airports worldwide.
Below is the Group’s most
comprehensive waste disclosure to date.
Waste trends are stabilising with the
return to normal operations following
the COVID-19 pandemic and IAG
remains committed towards delivering
our 2025 goals.
Metric
On-board waste per passenger
Office waste per full-time employee
Unit
2019 base
2025 target
Kg/pax
Kg/FTE
0.33 0.26 (-20%)
95.7 47.8 (-50%)
Maintenance waste per unit of activity
Kg/person-hr
0.63 0.47 (-25%)
Cargo waste per unit of cargo carried
Kg/tonne cargo
On-board waste at hubs recycled/recovered
Office waste recycled/recovered
Maintenance waste recycled/recovered
Cargo waste recycled/recovered
%
%
%
%
1.55
24%
35%
50%
63%
1.16 (-25%)
40%
60%
70%
80%
2023
0.32
81.8
0.11
1.54
20%
26%
72%
77%
0.12*
0.28*
0.38*
2022
0.41
83.0
2021
0.47
103.1
1.59
24%
26%
60%
59%
1.43
26%
13%
45%
61%
2020
vly
0.75
(22%)
124.5
1.59
(1%)
(8%)
(3%)
31% (4pts)
16%
0pts
35% 12pts
55% 18pts
Note: * means restated using the latest data and assumptions.
Commentary on key metrics
Key metrics
Description
Overall waste
Includes waste from all streams – on-board, office, cargo and
maintenance waste – and an extrapolation of waste processed
at overseas airports, where waste destinations are not always
reported by third parties.
Waste
recycling and
recovery
Includes re-use, downcycling, upcycling, composting and
anaerobic digestion. Regulations, including International
Catering Waste (ICW) regulations, limit the amount which
can be recycled.
Single-use
plastic (SUP)
Items made wholly or partly of plastic and are typically
intended to be used just once or for a short period of time
before they are thrown away. This aligns to the EU definition.
Waste/pax at
hubs
On-board 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:
Barcelona, Dublin, London Heathrow and Gatwick, and Madrid.
Commentary
Waste volumes have increased less than 1% in
2023. This is despite activity levels returning
to pre-pandemic levels. Please refer to examples of
waste reduction initiatives across the Group for
more details.
Overall recycling/recovery rates are 19%. Recycling
of maintenance and cargo waste has increased
significantly owing to initiatives implemented in
this section of the report. Onboard recycling has
fallen year-on-year as operations recover to
pre-pandemic levels. Office waste has not
increased year-on-year, but initiatives launched in
2023, such as new recycling bins at Waterside, are
expected to deliver an increase in office waste
recycling rates in 2024.
160 tonnes of SUP were reduced from initiatives
such as using birchwood cutlery and replacing
packaging on blankets. The IAG GBS Procurement
team is evaluating alternatives to plastic as part
of procurement processes.
Waste generation ratios per passenger have
improved to pre-pandemic levels, and we are
committed to meet our 2025 target (a 20%
reduction compared to 2019 levels).
Detailed descriptions of all waste metrics are available in the Consolidated Statement of non-Financial Information.
Reducing waste across our operations
IAG launched a ‘5 by 2025’ plan in 2021 that covers five waste streams and five business units, using 2019 figures as the baseline
for our targets. The plan includes waste generation and recycling targets across on-board, office, cargo and maintenance waste
and a zero-based approach to single-use plastic (SUP). IAG is committed to reducing, reusing and recycling waste and dealing with
any hazardous waste in line with relevant national and international regulations.
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A. Planet
Our action on reducing waste is increasing
Year
Targets
Action
2016
2021
2022
2023
2025
First Group-wide
waste targets
launched
EU SUP ban comes
into force
Iberia joins the EU
LIFE Zero Cabin
Waste project
Delivery of ‘5 by
2025’ waste targets
New initiatives to
recycle more
on-board waste
Aer Lingus worked
with the Irish
Department of
Climate, Action &
Environment and
Department of
Agriculture to make
it possible to recycle
and segregate
recycling on-board
• IAG launches
working group
dedicated towards
advancing waste
strategy;
• Aer Lingus
becomes the first
airline to segregate
and recycle
on-board waste
arriving on short-
haul flights into
Ireland; and
• Vueling eliminates
single-use plastics
in on-board items
and products
Examples of waste reduction initiatives across the Group:
Operating
company
Aer Lingus
2023 examples
Aer Lingus becomes the first airline to segregate and recycle on-board waste arriving on short-haul flights into
Ireland.
British Airways British Airways offers a pre-ordering service for products from the on-board SpeedBird Cafe, to give passengers
the choice of buying fresh and ambient products before departure. These services remove food waste from
unpurchased short-haul economy cabin meals while maintaining customer choice. British Airways has a target
to halve food waste volumes between 2019 and 2025.
British Airways becomes the first airline to be certified to recycle into New York as part of the IATA Transatlantic
trial. Regulated garbage restrictions in the US dictate that anything that has touched food waste on an international
flight has to be disposed.
IAG Cargo
Colleagues from IAG Cargo’s graduate programme have helped develop and launch re-usable cups for any
beverages purchased from our canteen at London Heathrow in September 2023. This has reduced single-use
plastic cups across the hub by 41%.
IAG GBS
Iberia
Vueling
The graduate programme has also developed a prototype of a new luggage tag made from waste aluminium
pallets, which will be made available for sale to customers. IAG Cargo is also exploring how this may be achieved
using other materials that are difficult to recycle or re-use.
The office at Waterside has launched new bins across all floorplates, divided into either five or seven sections
to allow for multiple waste streams to be collected and disposed of easily. The trial aims to improve waste
segregation and increase recycling levels.
Iberia offers a Buy-Before-You-Fly service on short-haul flights and runs the Zero Cabin Waste project which aims
to recycle on-board generated waste. Iberia segregated glass on-board for the first time in 2023.
Vueling replaced all on-board cabin trolleys in 2022 with lighter trolleys that allow the segregation of waste
on-board. This helps ensure waste can be processed more easily, resulting in a higher share of waste recycled and
a lower environmental impact. The lower weight of the trolleys also helps reduce CO2 emissions from aircraft
operations, by up to 400 tCO2e annually.
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A.2.2. Noise and air quality
Relevant standards: GRI 305-7.
IAG has delivered a 14% reduction in noise per take-off and landing cycle (LTO) versus 2019, driven by fleet renewal. Noise per
take-off has improved by 3% from 2022 levels owing to the use of newer, quieter aircraft and changes in the mix of short-haul and
long-haul operations following the COVID-19 pandemic. IAG remains committed to reducing the impact of aircraft noise and air
pollution on local communities near airports and supports innovation as a means of delivering this. Noise and air quality performance
are monitored using national databases and global aircraft noise standards.
Group airlines continue operational practices to minimise noise impacts, such as the use of continuous descents. They engage with
stakeholders such as community groups, regulators and industry partners to understand their concerns and participate in research
and operational trials to identify and refine solutions.
Noise reduction targets
IAG is updating noise reduction targets as flying levels return to pre-pandemic levels. Iberia is continuously improving the KPIs
related to noise levels, as the new fleet we are introducing has better noise certification levels than the previous aircraft.
Detailed descriptions on all noise metrics are available in the IAG statement of non-financial information.
Metric
Noise per cycle
NOx per cycle
ICAO Chapter 14
CAEP Chapter 8
Unit1
QC per LTO
kg per LTO
% at standard
% at standard
vly
(2%)
<1%
3pts
6pts
v2019
(14%)
(4%)
9pts
12pts
2023
0.86
8.89
62%
47%
2022
0.88
8.83
59%
41%
2021
0.88
9.22
56%
39%
2020
0.96
9.84
58%
40%
2019
1.00
9.23
53%
35%
1 % at standard is based on the fleet position at the end of 2023, including parked aircraft and excluding leased aircraft. Metrics per LTO are based on
aircraft operational during the year. Details of Chapter 6-compliant aircraft are available in the IAG statement of non-financial information.
Related risk: Operational noise restriction and charges
Risk and/or opportunity description and potential impact
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 Ireland, Spain and the UK to manage noise challenges
A.2.3. Environmental management
Relevant standards: GRI 103-2
Overview
IAG is committed to improving our environmental performance and complying with recognised standards in our sector for
environmental management on material issues identified in this report. Key priorities include working towards the IATA
Environmental Assessment (IEnvA), meeting ISO 14001 requirements and improving the EcoVadis score of Group airlines
participating in the questionnaire (British Airways and Iberia).
Additionally, IAG GBS partnered with EcoVadis in 2022 to assess suppliers using EcoVadis scorecards, which consist of a holistic
view of environmental, social and governance (ESG) issues. This gives IAG and its suppliers a baseline for improvements across
ESG issues, and suppliers can share this with customers and other stakeholders to support sustainability across the industry.
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A. Planet
Group airlines 2023 progress
In 2023, all Group airlines were fully certified under the IEnvA standard which is equivalent to ISO 14001 in all our flight operations
and corporate buildings, complying with the core scope defined by IATA.
Additionally, British Airways and Iberia have extended the certification to their maintenance activities at hub airports and, in the case
of Iberia, also to its handling services in Madrid Airport. Iberia Airport Services holds an ISO 14001 in all the airports at which it
operates, with the aim of guaranteeing that an environmentally responsible service is provided to its customers.
In line with our commitment to supporting a more responsible supply chain, British Airways and Iberia respond annually to the
EcoVadis questionnaire. EcoVadis is a market-leading provider of business ESG ratings. The response to this questionnaire is
supported by the Group’s policies and practices, such as supplier engagement policies administered by IAG GBS, which also allows
us to identify points of improvement to annually improve the score of all Group airlines.
As part of our supply chain management objectives and our partnership with EcoVadis, IAG GBS has screened 90% of IAG’s spend
using EcoVadis scorecards, which means screening more than 550 suppliers.
Airline
British Airways
Iberia
EcoVadis 2023 score
Bronze
Silver
IAG third-party ESG assessments and awards
The Group also continues to provide evidence to support third-party ESG disclosures and rating assessment frameworks.
In 2023, IAG has been awarded an A- grade by the Carbon Disclosure Project (CDP) for its climate change disclosure, which
assessed more than 21,000 companies globally on climate action. This is the fourth year IAG has achieved a ‘leadership’ rating of A-
or higher, the longest consecutive leadership rating of any airline, and places the Group in the top 25% of respondents worldwide.
IAG was also the highest ranked aviation group in the global Transition Pathway Initiative (TPI) in 2022, which assesses 600
companies across 47 countries on their readiness for the low-carbon transition. IAG is in the top 10% of airlines assessed by
Sustainalytics, which gives ESG risk ratings to around 15,000 companies worldwide based on public disclosures.
IAG was also awarded 2024 Eco-Airline of the year by Air Transport World for industry leadership and a best-in-class SAF
programme, while Aer Lingus received the Aviation Sustainability and Environment award at the Irish Aviation 2023 Awards.
Reporting requirement
Current rating
Comments
TPI
CDP
Highest-ranked airline in 2022 TPI climate ratings
(Score: 17/18)
TPI assess around 600 companies on their
readiness for a low carbon transition
A- rating in 2023 (top 25%)
Leadership rating achieved for fourth consecutive
year, longest running of any airline
Sustainalytics provide ESG ratings to around
15,000 companies
Sustainalytics
Top 10% of airlines in 2022
For IAG’s engagement with the Transition Pathway Initiative, please refer to section A.1.2. of this report. For more information
on our engagement with carbon disclosure providers, please refer to the ‘Principles of sustainability governance’ section.
Working with pathway initiatives
IAG supports the 1.5°C ambition of the Paris Agreement and continues to review evidence on aviation pathways which support this.
Where possible, IAG will work with relevant stakeholders, including the Science-Based Targets initiative (SBTi) and Transition
Pathway Initiative (TPI), to build an understanding of aviation industry pathways to net zero, how these contribute to national
and global goals, and how companies and policymakers can drive investment into a low carbon transition. IAG is supporting work
led by the Mission Possible Partnership (MPP) and the SBTI to update the 1.5oC guidance for the aviation sector.
Left: Aer Lingus received the
Aviation Sustainability and
Environment award at the Irish
Aviation 2023 Awards. The
award was received by Rebecca
Hill, Head of Sustainability,
Aer Lingus.
Right: In 2023, Group airlines
were fully certified under the
IEnvA standard in all our flight
operations and corporate
buildings
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Sustainability continued
B. People
B.1. Overview
IAG's structure is unique. Together we
work towards our common purpose of
connecting people, businesses and
countries. The IAG model empowers
each operating company and platform
business to deliver for its customers and
people – with each being responsible for
managing recruitment, pay and
conditions for their colleagues, as well as
careers and development – while
centrally we look at opportunities for
synergies across the Group.
Each operating company and platform
business has its own culture and values
which support its unique brand,
business, customer and employee
propositions. At IAG, we hold
commitment, pragmatism, execution,
ambition, resilience, challenge and
innovation, responsibility, people focus
and team players as key values that
enable us to fulfil our purpose. These are
woven throughout our ways of working,
people processes and our people
strategies.
Colleagues have consistently
demonstrated these values in
responding to the various challenges
and opportunities they have faced
across the year. We've made substantial
headway in rebuilding capacity,
enhancing resilience and flexibility, and
making transformative changes in our
business, whilst navigating operational
challenges, particularly in British Airways
and Aer Lingus.
Across the Group, our focus on culture
and values is essential to our
transformation and the execution of our
strategy. Our operating companies are
working to constantly evolve their
cultures to enable their businesses to be
more competitive and achieve our
transformation agenda and to provide a
great working environment in which all
colleagues can thrive. We measure
progress on our culture through a
six-monthly Organisational Health Index
(OHI) survey sent to all employees and
through other employee listening
channels (see the Stakeholder
Engagement section for details). Insights
from these channels feed into our
operating companies’ priorities for
improving and progressing our people
policies, ways of working and shaping
our people strategies.
In 2022, our primary focus was to build
back capacity to support our business
and operations. In 2023, we have been
able to focus on a broader range of
people initiatives including:
• investing in the skills of our workforce
and commitment to professional
development and careers – including
our award-winning apprentice
programmes and our pilot and
leadership programmes;
• building the culture within each of our
operating companies creates a
positive colleague experience and
drives customer-centricity and
operational performance. Twice-yearly
organisational health surveys enable
tracking of progress and help focus
people plans;
• continuing to make progress towards
our ambition of 40% senior leadership
roles held by women by 2025. At year
end 2023 we have 36% of senior roles
held by women, a two-point increase
in 2023 versus 2022 and an overall
increase of six points since 2020;
• building on initiatives already carried
out in some of the operating
companies, in 2023, we launched a
voluntary, anonymous and confidential
online survey to our senior leaders
across the Group to gain a deeper
understanding of the composition and
diversity of IAG’s senior leadership,
going beyond gender to include a
broad range of factors regarding
identity. The survey results will be
shared with senior leaders to inform
IAG’s people strategies and provide a
baseline of the diversity of IAG’s
senior leaders, enabling us to track
progress over time and support
discussions around equity, diversity
and inclusion. An output of the survey
feeds into the UK Parker Review,
which focuses on ethnic diversity of
Boards and senior leadership teams.
6% of our UK senior leaders self-
disclosed as ethnically diverse and our
senior leaders globally represent over
20 nationalities. To ensure continued
focus on increasing ethnic
representation, we have introduced an
ethnic diversity ambition of 10% for
the Group’s UK senior leadership
population by the end of 2027;
• continued focus on creating an inclusive
and diverse culture and organisation,
encompassing the promotion of equity,
diversity and inclusion, and upholding
Group-wide policies designed to
eradicate discrimination;
• supporting the wellbeing of our
colleagues through the provision
of a range of health, financial, and
lifestyle benefits. Each operating
company is committed to creating
a positive work environment
and to actively contributing to and
supporting the overall wellbeing of
every colleague;
• supporting colleagues through the
broader transformation of the
business including digitalisation,
artificial intelligence, modernisation
of our fleet, investments in customer
and products; and
• operating companies have actively
engaged with trade unions to secure
balanced agreements, ensuring fair
and competitive remuneration.
These negotiated agreements
provide a critical foundation to
support investment and foster growth.
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B. People
B.2. Key metrics and progress
Relevant standards: GRI 2-8, 401-1, 405-1
Headcount
71,794
+9% vly
at 31 December 2023
New hires
13,561
-22% vly
at 31 December 2023
Overall attrition
9.50%
of which 7.40% were voluntary leavers
Full year 2023
Workforce composition
Workforce composition
Headcount by professional category at 31 December 2023 vly
10%
22%
12%
23%
Airport Operations
Cabin Crew
Corporate
Maintenance, Engineering
& Logistics
33%
Pilot
Airport Operations
Cabin Crew
Corporate
Maintenance, Engineering & Logistics
Pilot
Headcount by geographical location
at 31 December 2023
16,784
15,091
15,811
14,025
24,004
22,278
6,972
6,782
8,223
7,868
2023
2022
Europe
67,748
8%
European countries
United
Kingdom
Spain
Ireland
Europe
(other)
37,500 (+11%)
23,743 (+7%)
5,159 (+10%)
1,346 (-21%)
Asia Pacific
245
-9%
Africa, Middle East
and South East Asia
2,527
24%
North America
950
3%
Latin America
and Caribbean
324
1%
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International Airlines Group | Annual Report and Accounts 2023
Gender diversity of senior
leadership
at 31 December 2023
36%
6 points increase since 2020
We are on track to achieve our
ambition of 40% of senior leadership
roles held by women by 2025.
36%
Senior
Leadership
64%
Females 82
Males 143
B.3. Equity, Diversity
and Inclusion
Relevant standards: GRI 405-1
At IAG we are proud of the diversity of
the workforce across our Group
companies and the richness of
backgrounds, experiences, cultures and
ideas that makes our businesses thrive.
Our aim is that all colleagues feel their
unique difference is recognised and
valued. IAG continues to bring positive
change and progress towards our equity,
diversity, and inclusion (EDI) ambition to
create a diverse and inclusive culture
representative of the communities we
live and work in and the customers we
serve. We also believe that a diverse
workforce performs better and is more
resilient, innovative and productive.
Progress on gender diversity
With regards to gender, our Board
comprises 45% women, the IAG
Management Committee 25% women
and we have over 44% of women across
our workforce. In 2022, we set a Group-
wide ambition to have 40% of senior
leadership roles held by women by 2025.
We have seen a significant increase in
gender diversity in senior leadership to
36% in 2023, a two-point increase since
2022 and six points since 2020 and are
on track to achieve our 40% ambition.
Going beyond gender
Our Group-wide plans go beyond
gender, and we are implementing
a range of initiatives to support our
diversity and inclusion ambition, whilst
recognising the cultural sensitivities and
legal contexts we operate in globally,
and the need to comply with evolving
reporting requirements.
In 2023, we partnered with an
independent UK-based talent and
diversity consultancy, Green Park, to
gain a deeper understanding of the
composition and diversity of our senior
leaders, going beyond gender to include
a broad range of factors regarding
identity. A voluntary, anonymous
and confidential online survey was sent
to senior leaders across the Group.
We are delighted that 88% of our senior
leaders globally responded to the survey
(193 out of 2191 leaders invited) with a
96% response rate in the UK (91 out of
95 leaders invited). While some of the
operating companies were already
capturing broader demographic data
shared by colleagues, this is the first
time we have surveyed our senior
leaders across the Group with questions
tailored to local legal and cultural
contexts.
The survey provides a baseline to better
understand the diversity of our senior
leadership population, enables us to
track progress over time and to continue
and broaden our dialogue with our
senior leaders around equity, diversity
and inclusion.
1 Number of senior leaders at the time of
sending out the survey
International Airlines Group | Annual Report and Accounts 2023
99
Financial StatementsCorporate GovernanceStrategic Report Ethnicity reporting methodology
Our data relies on senior leaders
self-disclosing their diversity status.
Individuals who have chosen not to
report their ethnicity are not included in
the calculation as minority ethnic
leaders.
We use the following methodology
to calculate:
% of ethnically diverse
senior leadership in UK
=
(Total number of UK leaders who
self-identify as minority ethnic)
(Total number of senior leaders in UK)
Aligned with the UK Parker Review
guidance:
• a leader is identified as 'minority
ethnic' if they self-disclose as one of
the following groups: Asian, Black,
Mixed/Multiple, Other (with
the option to describe the ethnicity)
or Prefer to Self-define (where the
ethnicity maps to an ethnic minority
category); and
• a leader is not included as 'minority
ethnic' if they identify as White,
Prefer not to Say, Do not Consent to
data being processed, Prefer to
Self-define (where the ethnicity does
not map to an ethnic minority
category) or did not reply to the
survey.
Three different surveys were designed
for the UK, Ireland and Spain – aligned
to each country’s legal and cultural
context – using local census questions
and classifications. In some countries
we did not include the ethnicity
question due to the legal and cultural
context. Where collected, the ethnicity
results provided to IAG have been
aggregated and mapped to the UK
ONS classification categories.
Data is held by Green Park and only
shared with IAG and its companies for
reporting at an aggregate level with
minimum thresholds to safeguard
anonymity.
We define senior leaders as IAG
grades 0, 1 and 2 or equivalent across
the Group, including Senior Executives
(direct reports to IAG's CEO).
Sustainability continued
B. People
Focusing on ethnicity and nationality
One of the areas we focused on in the 2023
survey was ethnicity. 6% of our senior
leaders based in the UK self-disclosed as
ethnically diverse. Two leaders responded
Prefer not to Say and four did not consent
to their data being processed.
We recognise that we have progress to
make and are introducing an ambition for
10% of the Group’s UK senior leadership
population to identify as ethnically diverse
by the end of 2027. This has the support
of both the Board and Management
Committee. We have decided to focus our
ethnicity ambition on the UK as ethnicity
and race are well-defined characteristics
aligned with census data. We support the
recommendations of the Parker Review in
the UK both in terms of reporting the ethnic
diversity of our Board and senior leaders,
and in setting an ambition for 2027.
Given IAG’s global focus we see great
value in having diverse ethnic, national
and cultural backgrounds represented in
the workforce: across our 71,794
colleagues, we have over 150
nationalities. The survey highlighted that
our senior leaders globally represent over
20 nationalities. In the UK, 34% of senior
leaders self-disclosed as a nationality
other than British.
The survey results are being shared with
our senior leaders and used to inform our
people strategies. We remain committed
to creating a diverse and inclusive
culture. We will continue to uphold
Group-wide policies designed to
eradicate discrimination and to focus on
open and transparent people processes,
mindful choices of search partners,
diverse recruitment shortlists and more
rigorous definitions of critical role
requirements, focusing on capabilities
rather than experience.
Right: British Airways’
celebration of Black
History Month
Left: British Airways’
Diwali celebrations
100
International Airlines Group | Annual Report and Accounts 2023
Collaborating on EDI across the
Group and supporting progress
across our industry
The IAG Diversity Panel, created in 2021,
sees representatives across all operating
companies sharing best practice and
leading on the co-design and
implementation of new EDI initiatives
that guide us towards our ambition.
We continue to partner with Women in
Hospitality, Travel and Leisure (WiHTL).
This year several operating companies
participated in WiHTL’s EDI maturity
assessment and benchmarking exercise,
in partnership with the Centre for
Diversity Policy Research and Practice at
Oxford Brookes Business School. Both
at Group and operating company level
we continue to collaborate with industry
peers and were recently awarded the
WiHTL ‘Most Engaged Member’ at its
2023 Inclusion Summit.
We actively partner with International Air
Transport Association (IATA) and are
committed to advancing gender diversity
as part of IATA’s 25 by 2025 strategy (a
global initiative to enhance EDI and
gender balance in the aviation sector).
Each airline is looking at increasing the
diversity of its pilot populations through
talent attraction and recruitment
practices and through school
engagement and outreach programmes.
British Airways, Aer Lingus and Iberia
have launched fully or semi-funded pilot
cadet programmes.
Equity, Diversity and Inclusion
examples
Aer Lingus has made strides in gender
diversity within the Future Pilot
Programme, with the first successful
cohort comprising approximately 27%
women. Aer Lingus currently has 11% of
pilot roles filled by women, the third-
highest gender representation of pilots
of all airlines globally (Source:
International Society of Women Airline
Pilots 2021).
British Airways launched the Speedbird
Pilot Academy, funding 70 spaces aimed
at removing financial barriers to entry
for pilot roles, while also introducing the
'Be an Original' inclusion and diversity
learning programme for all colleagues.
British Airways also launched a
reverse mentoring programme pairing
80 senior managers with colleagues
from under-represented ethnicities to
promote awareness and improve
inclusion. Additionally, British Airways
focused on increasing representation
through internships, apprenticeship
British Airways' newly
established Colleague
Accessibility Network
Group
programmes and work experience
placements – opening up different entry
routes to a higher proportion of ethnic
minority colleagues and those from
lower socio-economic backgrounds.
As it participates in Europe's largest event
for black entrepreneurs, British Airways
actively encourages and engages
in cultural activities that are important
to colleagues across the business.
IAG Cargo introduced a new training
hub with a flexible bank holiday policy
to promote inclusivity. Additionally, it has
revamped its prayer room and nursing
room to be fully accessible. IAG Cargo
took second place in The Equity Index
2022/23 produced by Lead 5050, a UK
cross-industry accreditation body, that
ranks firms using official data on average
salaries, bonuses, and pay at every level.
The business also supported the
'everywoman in Transport and Logistics
Awards' that promotes and inspires
women within the industry.
IAG GBS is actively fostering an inclusive
workplace through the initiatives of its
Inclusion Network/Community Groups,
including the LGBTQ+ Network and
Working Parents and Carers Network.
A strategic partnership with MyGWork,
the largest professional speciality
platform for the LGBTQ+ community,
offers a range of collaborative efforts
such as job postings, speaker events,
Pride celebrations and access to a
substantial talent community.
IAG Loyalty engaged a representative
group of colleagues focused on driving
an inclusion and belonging agenda. The
group designed and led a calendar of
EDI events and experiences based on
colleague listening and survey data.
There have been high levels of
engagement across all topics including
Pride, International Women's Day,
Menopause Day, Baby Loss Awareness,
Ramadan and other events designed by
colleagues, for colleagues.
IAG Tech proudly supports women
in the tech sector, sponsoring the
‘Outstanding Women of the Year’
award at the Women in Tech event and
maintaining job postings on platforms
such as the Diversity in Tech website.
Vueling and Iberia have refreshed their
equality plans this year. Noteworthy
progress at Vueling includes an
increased percentage of women
in management positions. Iberia’s
strategic focus through a supported
network of over 200 colleague diversity
ambassadors who help raise awareness,
identify organisational barriers and
who are consulted on company
processes. This is supplemented with
mandatory training for the entire
company.
Co-parenting responsibilities
Relevant standards: GRI 401-3
The Group's operating companies
prioritise work-life balance, especially
in the context of co-parenting
responsibilities. They have a range of
policies covering job-sharing, maternity,
adoption, paternity and shared parental
leave to support employees managing
co-parenting commitments. Online
platforms facilitate a collaborative
community for working parents and
carers, enabling the exchange of ideas
and mutual support, while also providing
access to digital resources offering
valuable information for maintaining
a healthy work-life balance.
IAG Loyalty, as one of its focus areas,
looked at parental leave with an equity
lens, emphasising support for both
parents rather than just the primary
carer or birthing parent. This initiative
applies in both the UK and Spain.
International Airlines Group | Annual Report and Accounts 2023
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B. People
Universal accessibility for people
with disabilities
Relevant standards: GRI 405-1
The Group adheres to all pertinent
legislation, guaranteeing universal access
for both employees and customers with
disabilities across our operating
companies. Our operating companies
strictly adhere to relevant accessibility
laws in our facilities and overall operations.
Each of our operating airlines is
committed to providing a seamless
customer experience, especially for
those with disabilities. Collaborating
with external organisations, including
the Business Disability Forum in the UK,
our airlines seek guidance and support
to enhance their efforts and strategies.
British Airways has developed a
comprehensive guide to provide support
for customers with disabilities, ensuring
their needs are addressed with clarity
and thoughtfulness. Furthermore, a
proactive approach to inclusivity is
evident in the neurodiversity training
offered to managers at all levels.
A new Colleague Accessibility Network
Group at British Airways has been
established, with a senior-level sponsor
to steer its initiatives.
B.4. Health, safety and wellbeing
Overview
Relevant standards: GRI 403-4, 403-6
At IAG, we are committed to the health,
safety and wellbeing of employees,
customers, and stakeholders, whether
in the sky or on the ground. Our focus
encompasses preventing accidents and
diseases, controlling existing risks, and
championing continual improvement in
health and safety conditions. The IAG
SECR Committee plays a pivotal role in
overseeing operational safety and
corporate responsibility.
We operate in compliance with laws,
regulations, company policies and
industry standards, and maintain a robust
suite of health and safety management
systems across our operating companies.
Driving this commitment are governance
processes led by committees within each
operating company.
Operating companies have made
substantial investments in initiatives that
address various aspects of employee
wellbeing, taking a holistic approach that
integrates physical, social, and financial
elements, alongside mental wellbeing.
Accident and severity rates are lower
compared to 2019, with a Lost Time
Injury (LTI) frequency rate of 3.7
instances per 200,000 hours worked.
Key initiatives
Aer Lingus ran a Health and Wellbeing
Week across three locations in Ireland,
featuring 21 different events. The week
included initiatives such as flu
vaccination vouchers for all staff,
comprehensive health checks,
reflexology treatment clinics, in-chair
massage clinics, defibrillator training and
webinars for family carers with guest
speakers. Additionally, Aer Lingus
provided an opportunity for colleagues
to try the ‘’smoothie bike’’, a unique and
engaging way to have fun, keep fit and
promote sustainable energy and healthy
living. The airline actively promotes a
comprehensive wellbeing portal
accessible to all staff. This resource
encompasses content on various
wellbeing topics, including mental and
physical health, monthly themed
informational webinars, a digital gym
offering online classes, an exercise
library and nutrition resources.
Regarding safety, Aer Lingus has a
safety engagement programme which
empowers managers and supervisors to
reduce risk of injuries by discussing safe
and unsafe actions.
Aer Lingus and British Airways have
revised their Health and Safety
e-learning induction training for new
staff, in addition to holding regular
communication through Health and
Safety action groups, promoting safe
behaviours, handling and training.
British Airways provides a leading
peer support programme for pilots,
tied to professional psychology support.
The airline is committed to ISO 45001
standards, enhancing operating
processes to prevent work-related injury
and illness. In addition, a dedicated
in-house occupational health service
has been established, providing CAA
regulatory medical examinations tailored
for pilots and cabin crew. This service
extends for all colleagues in specific
trades, all in strict accordance with
UK health and safety legislation. British
Airways has a network of 150 dedicated
wellbeing champions collaborating
closely with health services to support
new and existing initiatives. British
Airways provides all colleagues globally
with complimentary access to ‘Unmind’
– an online wellness platform developed
by experts in neuroscience, cognitive
behavioural therapy, mindfulness and
positive psychology. Additionally, British
Airways has signed the ‘working with
cancer’ pledge as well as collaborating
with Endometriosis UK, creating a
supportive workplace for colleagues
living or impacted by these conditions.
Iberia’s commitment to employee
wellbeing is an integral part of the
’Elige cuidarte’ (‘Choose to take care
of yourself’) programme within
Occupational Prevention Management. In
2023, Iberia’s efforts encompassed a
range of initiatives, including
physiotherapy services, heightened
awareness of prostate cancer, annual flu
vaccinations and the promotion of
physical fitness through the 'Use the
Stairs' campaign. Iberia has well-
established health and safety committees
in each of its relevant work centres.
IAG Cargo and British Airways
introduced new menopause guidelines
supported by a combination of online
webinars and roundtable discussions.
IAG Cargo established a cohort of circa
100 Mental Health First Aiders
throughout the organisation and has
implemented fitness classes and a
comprehensive wellbeing guide to
promote a holistic approach to health.
IAG GBS employees access valuable tips
on managing their wellbeing through
medical health webinars, resilience
training, yoga, pilates and online courses.
Additionally, the introduction of the
Headspace app for all employees and
their friends and family has seen
a remarkable 90% participation rate.
IAG Loyalty ensures colleagues have
easy access to wellbeing resources,
a central hub page allowing seamless
navigation to content at any time.
In addition, it orchestrated engaging
events and curated unique content
during Blue Monday and Mental Health
Awareness week, prioritising mental,
physical and financial wellbeing, finding
every opportunity to combine fitness
with community activities.
IAG Tech has implemented Mental
Health employee first aiders who play
a crucial role in offering support to
colleagues during challenging times.
Industry-leading standards are being
recognised across the Group and, in
2023, Vueling received the Premio
Empresa Xcellens award which
recognises all the work Vueling has done
to promote a genuinely preventive
culture and improving employees’
quality of life. Vueling also holds
quarterly meetings with its health and
safety committee, composed of Vueling
management and trade union appointed
safety representatives.
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International Airlines Group | Annual Report and Accounts 2023
B.5. Human rights and modern
slavery
IAG had no known cases of human
rights violations across the Group during
2023, the same as in 2022. IAG is taking
steps to prevent incidents of modern
slavery within the Group and across its
supply chains.
The IAG Group Slavery and Human
Trafficking Statement outlines these
actions and is available on the IAG
website. This statement is made under
section 54, part 5 of the 2015 UK Modern
Slavery Act (MSA). In terms of policies
associated with human rights, IAG asks
suppliers to comply with the Supplier
Code of Conduct, which expressly
prohibits the use of child labour and any
form of slave, bonded, forced or
involuntary prison labour, human
trafficking or exploitation. Modern
slavery clauses feature in all new
supplier contracts as well as contract
renewals, which require full compliance
with all applicable anti-slavery and
human trafficking laws, statutes,
regulations and codes.
IAG remains committed to taking swift
and robust action if any evidence
relating to slavery or human trafficking
in our business supply chain is identified.
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 trafficking and
reaffirming a commitment to tackle
this issue and the ICAO Guidelines
for Reporting Trafficking in Persons
by Flight and Cabin Crew – in addition
to actively contributing to the
ICAO Ad Hoc Working Group on
Combating Trafficking in Supply
Chain (AHWG-TSP), an international,
joint industry-regulatory group
providing advice to ICAO assisting in
the development of guidance material
on combating trafficking in persons
in an air operator’s supply chain.
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.
Related risk: Human rights
Risk description and potential impact
Mitigating actions
Not preventing potential incidents of human trafficking via IAG
routes, damaging efforts to protect human rights and associated
legal, social and reputational impacts.
• 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
Potential human rights or modern slavery violations in the supply
chain leading to fines, compliance issues, social impact, business
interruption or reputational damage.
• See C.4. Supply chain governance
IAG is working towards the creation of a formal Human Rights policy, alongside the existing Code of Conduct and Supplier Code of
Conduct to consolidate its activities in this area.
B.6. Community engagement and charitable support
Relevant standards: GRI 102-13, 201-1
In 2023, IAG raised over €7.4 million for charitable causes across the Group. Of this, 36 per cent came from customer contributions,
39 per cent from Company donations, 17 per cent from employee contributions, and 8 per cent from in-kind donations.
Metric
Total raised
GRI Standard
Unit
€ million
vly
14%
2023
7.4
2022
6.5
2021
2.7
2020
4.6
2019
5.7
Group operating companies have partnerships with a range of organisations including:
Disasters Emergency Committee (UK), Flying Start (UK), Save the Children (Spain), Lovaas Foundation (Spain), Dublin Pride
(Ireland), Special Olympics (Ireland), Business vs Smog (Poland), Noble Gift (Poland), UNICEF (global)
International Airlines Group | Annual Report and Accounts 2023
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C. Principles of sustainability governance
C.1. Sustainability strategy
IAG’s vision is to be a world-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
changes required to create a truly
sustainable aviation industry. IAG is
committed to delivering best practices
in sustainability programmes, processes
and impacts, while executing Group
strategy.
IAG aligns its environmental strategy
with the three overall strategic priorities
of the business described in the
Strategy section.
Material issues
IAG focuses its sustainability strategy
on addressing material issues: those
which are most important to key
stakeholders and which have the biggest
external impacts.
To identify these issues over a three-year
timeframe and to 2030, IAG repeated a
materiality assessment in 2021 which was
facilitated by an independent third party.
External stakeholders included investors,
corporate customers, policy makers,
trade associations, fuel suppliers, airports,
and NGOs. Internal stakeholders included
IAG Board members, all IAG Management
Committee members, and operating
company sustainability representatives.
The results inform ongoing disclosures
and strategy.
In our 2021 materiality assessment,
tackling climate change was identified as
the most material issue in the long-term.
In the short-term, as the business
recovers from the COVID-19 pandemic,
profitability and customer and employee
engagement and wellbeing remain
high priorities.
IAG does not have specific risk
provisions, targets or guarantees related
to non-material issues such as water
consumption, biodiversity, raw materials
consumption, or light pollution. More
information on water and biodiversity
is available in the Additional Disclosures
section of the IAG statement of non-
financial information.
IAG will seek a double materiality
assessment when it next repeats
this analysis in 2024.
Leading net zero by 2050 roadmaps and commitments
IAG
commitment
(first airline
group
worldwide)
IAG roadmap
launched at
Capital Markets
Day
Sustainable
Aviation
roadmap and
commitment
oneworld
commitment
A4E roadmap
and
commitment
oneworld
roadmap
IATA
commitment
ICAO
commitment
10 Oct 2019
8 Nov 2019
4 Feb 2020
11 Sept 2020
11 Feb 2021
31 Aug 2021
4 Oct 2021
3 Oct 2022
Leading 10% SAF by 2030 commitments
IAG (first European airline
group to commit)
World Economic Forum
oneworld alliance
UK Government
30+ airlines globally
(Cleaner Skies for
Tomorrow Coalition)
22 Apr 2021
22 Sept 2021
4 Oct 2021
9 Oct 2021
2023
Airline industry firsts
British Airways publishes
carbon footprint
British Airways' carbon
offset programme for
customers
British Airways proposes
CORSIA as part of
Aviation Global Deal
British Airways and Iberia
Sustainability Linked
Loans (SLL)
IAG makes net-zero
Scope 3 commitment
1992
2005
2009
2021
2021
Advanced innovation
IAG awarded CDP
A-List company for
the first time.
Sustainability
category added to
Group accelerator
programme.
Founding member
of Coalition for
Negative Emissions,
supporting carbon
removals.
Secures first aviation
sustainability-linked
loan linked to ESG
targets, via British
Airways
Invests in hydrogen
aircraft (ZeroAvia)
Offers carbon
removals to
customers
(British Airways)
British
Airways in
new carbon
removal
financing
model
Dec 2017
Sept 2019
Oct 2020
Jan 2021
2021
Nov 2022
Dec 2023
Drove/leading role
Supported
IAG-specific
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International Airlines Group | Annual Report and Accounts 2023
Sustainability leadership KPIs
9
1
8
7
6
2
3
4
Our
9
KPIs
5
4
5
6
Leadership in carbon
disclosures
2023 action
A- score received in CDP
climate ratings in 2023, fourth
consecutive year of climate
leadership status.
Accelerating progress
in low-carbon
technologies including
aircraft technology, SAF,
carbon offsets and
carbon removals
2023 action
Sustainability remains a focus
area within the IAG accelerator
programme Hangar 51.
Accelerating innovation
in low-carbon
technology
as above
2023 action
British Airways, LanzaJet and
Nova Pangaea Technologies
signed an agreement that will
accelerate Project Speedbird,
an initiative created by the
companies in 2021 to develop
cost-effective SAF for
commercial use in the UK.
IAG drives progress based on nine
strategic KPIs agreed by the Board
in 2021.
1
2
3
Clear and ambitious
targets relating to IAG’s
most material issues
2023 action
2025, 2030 and 2050 carbon
targets and published transition
plan. British Airways and Iberia
have sustainability-linked loans
related to 2025 carbon
efficiency.
Low-carbon transition
pathway embedded
in business strategy
2023 action
Sustainability aspects included
in one-year, three-year and
2030 business planning for
operating companies.
Management incentives
aligned to delivering
a low-carbon
transition plan
2023 action
Over 7,500 senior executives
and managers have 10% of their
annual incentive linked to
annual carbon intensity targets.
7
8
9
Industry leadership
in the innovation and
deployment of SAF
including power-to-
liquids
2023 action
As of 31 December 2023,
our total investment in SAF
is $1 billion, of which 86%
is future commitments.
Based on an assumed jet fuel
price of $800 per metric tonne
and contracted margins for
SAF production.
Stepping up our social
commitments including
on diversity, employee
engagement and
sustainability as a
core value
2023 action
36% of senior leadership roles
held by women, a 2 percentage
point increase on 2022.
Industry leadership in
stakeholder engagement
and advocacy
2023 action
Leadership roles across multiple
trade associations. See A.1.7.
International Airlines Group | Annual Report and Accounts 2023
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C. Principles of sustainability governance
C.2. Governance frameworks
Relevant standards: GRI 102-46/-48
Overview
IAG has robust governance in place to ensure joined-up and progressive decisions on sustainability.
This also helps to ensure that wider stakeholder engagement is consistent with material issues and environmental priorities and
goals. An annual meeting planner for the Board ensures sustainability governance processes fit within the reporting and disclosure
framework of the Group.
The Group’s unique structure means that each individual operating company has a distinct sustainability programme. These are
regularly reviewed to ensure alignment with the Group sustainability strategy and principles, which covers material issues, KPIs
and engagement plans.
Relevant forums and levels of responsibility are indicated below. Information flows between groups is covered in section C.6., Risk
Management and Principal Risk factors section, and in the Corporate Governance section.
Board/management committee
Frequency of meetings
Responsibility in relation to sustainability
Board
At least quarterly
Board Safety, Environment and
Corporate Responsibility (SECR)
Committee
At least quarterly
IAG Audit and Compliance
Committee
At least quarterly
IAG Management Committee
At least quarterly
Approval for strategy, major investments, risk management and
controls and review of progress against environment and people
plans including climate-related goals and targets
Dedicated oversight of Group sustainability programme and
alignment with strategic priorities, review of progress against
environment and people plans. Provides a link between operating
company management committees and the IAG Board
Ensures compliance with relevant regulation and reviews Annual
Report and Accounts and Non-Financial Information Statement
Reviews and challenges Group programmes, the alignment of
operating company-specific programmes with Group priorities
and strategy, and progress against plans
Operating company management
committee
At least quarterly
Reviews and challenges operating company-specific
environment and people programmes
Sustainability Governance
Forum
Frequency of meetings
Responsibility in relation to sustainability
IAG Sustainability Steering Group
(SSG)
At least quarterly
IAG Sustainability network
Monthly
Hangar 51 Governance Committee
At least bi-annually
Comprised of senior representatives from across the Group who
provide oversight of environmental and social initiatives and
reporting
Sharing sustainability updates and ideas across all business units
and over 30 sustainability representatives. In 2023, the ISN
Sustainability network met 12 times, including 4 workshops
hosted in the UK, Spain, Ireland and Poland. Reports into the IAG
Sustainability Steering Group (SSG)
Reviews new potential investments to consider emerging climate
technologies and partnerships with sustainability start-ups.
Members include the Chief Commercial Strategy Officer, Chief
Financial Officer, Chief Information, Procurement, Services and
Innovation Officer
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International Airlines Group | Annual Report and Accounts 2023
Sustainability Working Groups (launched in 2023)
Forum
Frequency of meetings
Responsibility in relation to sustainability
Reporting and Disclosures Working
Group
Monthly
Waste Working Group
Sustainability Key Performance
Indicator (KPI) Working Group
Monthly
Monthly
A cross-Group working group designed to monitor IAG
sustainability disclosures against our regulatory requirements.
Assessment framework responses also discussed.
A cross-Group meeting focusing on waste strategy, projects
and progress.
A cross-Group forum for sharing best practice and improving
KPI reporting
SAF Governance
Forum
Frequency of meetings
Responsibility in relation to sustainability
IAG SAF Steering Group
At least quarterly
IAG SAF Management Group
Monthly
Comprised of senior representatives from across the Group who
provide oversight of SAF strategic direction and approval for
new purchases and investments
A cross-Group meeting focusing on SAF strategy, projects, and
progress. Reports into IAG SAF Steering Group.
Governance responsibilities
Individual
IAG CEO
Frequency of reporting
Responsibility in relation to sustainability
At least quarterly
IAG Chief People, Corporate Affairs
and Sustainability Officer (CPCASO)
At least quarterly
Chairs the IAG Management Committee, updates the Board,
and ensures Board-level decisions are directed into action across
the Group
Reports to the IAG CEO. A member of IAG Management
Committee. Chairs the SSG and provides approval and direction
of Group programmes
IAG Group Head of Sustainability
Regularly as relevant
Reports to the IAG CPCASO. Chairs the Sustainability network
IAG Group Head of People
Regularly as relevant
Reports to the IAG CPCASO
Wider governance
Wider governance processes integrate sustainability aspects. As part of the Group-wide ERM process, sustainable aviation and
people, culture and employee relations risks are presented bi-annually to the Audit and Compliance Committee and annually to the
Board. One-year financial plans and three-year business plans are coordinated by Group Finance and include sustainability aspects.
International Airlines Group | Annual Report and Accounts 2023
107
Financial StatementsCorporate GovernanceStrategic Report Sustainability continued
C. Principles of sustainability governance
C.3. Workforce governance
Relevant standards: GRI 2-30, 404-1,
404-2.
Each operating company within IAG
is committed to creating a work
environment in which safety and
wellbeing are paramount, in which
employees are treated fairly and
rewarded appropriately, and feel
motivated and can thrive. We believe
our employees are central to the
continued success of the Group.
Working policies and rights at work
At IAG our core principles include fair
and equal treatment, non-discrimination,
fairness and respect for human rights.
These are central to our IAG Code of
Conduct which applies to all employees
and directors across the Group.
Employees have been equipped with
comprehensive training and
development opportunities, ensuring
they are well-versed in essential topics
such as the Code of Conduct and
Compliance with Competition Laws.
Operating companies are responsible
for their own supplementary employee
policies and procedures, including
appropriate reward frameworks aligned
to local markets and roles, so they
remain competitive in attracting the best
talent. We have seen a wide selection
of employee benefits and recognition
schemes introduced in the operating
companies. For senior leader
remuneration across our operating
companies, we have deliberately focused
on variable pay and long-term incentives,
aligning leadership compensation with
performance and long-term strategic
goals to drive performance. We have
taken a restrained approach to executive
pay, remaining committed to fairness
and competitiveness.
Collective bargaining arrangements
at 31 December 2023
United
Kingdom
Spain
Ireland
Europe
(other)
89%
96%
83%
49%
Collective bargaining arrangements are
in place for 87% of the workforce.
Our operating companies have focused
on securing collective bargaining
agreements with unions to ensure fair,
competitive and sustainable pay –
providing stability for our business and
colleagues in challenging times.
IAG complies with International Labour
Organization (ILO) conventions. These
conventions cover fundamental
principles and rights at work: freedom of
association, the effective recognition of
the right to collective bargaining, the
elimination of all forms of forced or
compulsory labour, the elimination of
discrimination in respect of employment
and occupation.
IAG operating companies have effective
dialogue through employee forums and
through trade unions where they are
recognised. In addition, the IAG
European Works Council (EWC)
facilitates communication and
consultation between employees and
management on transnational European
matters. The EWC includes
representatives from the different
European Economic Area (EEA)
countries. It meets regularly throughout
the year to inform and, where
appropriate, consult on transnational
matters which impact employees in two
or more EEA countries.
Each operating company continues to
focus on engagement, listening and
acting on colleague feedback. In addition
to specific initiatives to measure
employee satisfaction, IAG runs a
twice-yearly Organisational Health Index
(OHI) survey to track our transformation
and culture development, and to
benchmark management practices and
leaders against a global external
framework. Alongside leadership support,
each operating company has established
teams to identify themes and incorporate
these into broader people plans.
Finally, Board members carry out
workforce engagement visits with
colleagues across our operating
companies – meeting a variety of
employees and leaders in their work
context to better understand the
challenges and opportunities of the
different businesses, employee issues
and levels of engagement. This is shared
with the Board to provide a balanced
perspective of stakeholder views and to
support broader decision-making.
Training and development
Each operating company is responsible
for the learning, development and talent
management within its business and
ensuring its workforce has the necessary
skills to support its strategy.
While training policies and programmes
are implemented at the operating
company level, all companies are
required to run mandatory corporate
training courses on topics such as the
Code of Conduct, Compliance with
Competition Laws, Anti-bribery and
Corruption Compliance, and Data
Privacy, Security, and Protection.
74,282
Employees trained1
3,219,091
Training hours
Average Training Hours
Average training hours per employee
Female
Male
Global
population
55.2 hrs
39.3 hrs
45.8 hrs
C.4. Supply chain governance
Relevant standards: GRI 308-2,
GRI 414-2.
Overview
IAG Global Business Services (IAG GBS)
continues to engage with, support and
monitor suppliers to ensure all products
and services provided to IAG are on a
path to net zero by 2050.
The IAG GBS Group Procurement team
leads the Supply Chain Sustainability
Programme by delivering in four key areas:
• The Supplier Code of Conduct (SCoC);
• Independent risk screening and
sustainability assessments;
• Corporate Social Responsibility (CSR)
Audits; and
• Embedding sustainability as standard
in the procurement process.
1 Average training hours is based on the total training hours performed per average headcount, pro-rated to Full Time Equivalent (FTE)
108
International Airlines Group | Annual Report and Accounts 2023
Activities in 2023
The SCoC continues to be shared with
new suppliers as part of the onboarding
process. New suppliers are requested
to acknowledge their commitment
to achieving net zero emissions by 2050,
and the need for a roadmap, supported
by deliverable plans, to achieve this target.
IAG GBS is also partnering with
EcoVadis, a market-leading provider
of business sustainability ratings,
to assess supplier scorecards with a
comprehensive methodology covering
environment, labour and human rights,
ethics and sustainable procurement.
This gives IAG and its suppliers a
baseline for improvements, and suppliers
can share them with customers and
other stakeholders, which benefits wider
industry sustainability. Once a scorecard
is shared with IAG GBS, results are
reviewed to ensure the suppliers
sustainability performance is aligned
with IAG’s vision and strategy. If a
supplier's performance score is assessed
as less than 45 (out of 100), a Corrective
Action Plan (CAP) is requested for
improvement.
IAG became a SEDEX member in 2023.
SEDEX provides data insights to help
companies improve ESG performance.
As part of the SCoC adherence and
legislation requirements under the UK
Modern Slavery Act, suppliers are
subject to third-party audit under a
labour and human rights protocol such
as the SEDEX Members Ethical Trade
Audit (SMETA) methodology. In 2023,
38 of these audits were completed. By
joining SEDEX, IAG aims to understand
information about the ethical practices
of their suppliers, including audits.
All suppliers also undergo annual
compliance screening for any legal and
financial risks. The Group Procurement
and Compliance teams assess any
suppliers identified as having potentially
higher levels of risk and implement
mitigation plans where necessary. Any
issues are flagged to the risk owners
within the Group to jointly take
appropriate action.
IAG GBS has embedded sustainability
aspects into the day-to-day operation of
the organisation and included
sustainability targets in the performance
objectives of all IAG GBS employees.
IAG GBS has verified the existing, active
supplier base and IAG's airlines’ interline
relationships in Russia and Belarus in
order to determine the potential
implications of, and actions to be taken,
due to the trade sanctions issued as a
response to the war in Ukraine. IAG has
provided operating companies with
support on mitigation actions to be
taken (e.g. payment stop/blockage).
This has been performed in coordination
with Compliance Teams.
Building a sustainable future in 2024
In 2024, IAG GBS will work to have
EcoVadis scorecards in place covering
90% of IAG’s total spend. “High-risk”
suppliers based on SEDEX’s risk
assessment will also be required to
perform an independent SMETA audit.
Timeline of supply chain engagement activities
Issued Supplier Code
of Conduct
All suppliers screened
for sustainability risks
Net Zero Scope 3
commitment
EcoVadis partnership
and supplier
sustainability clause
Embedding
sustainability
into category planning
2019
2020
2021
2022
2023
Tracking metrics and progress
Total number of suppliers
Suppliers screened
GRI Standard
Suppliers with additional compliance assessments
Critical suppliers under regular risk monitoring
308-2,
414-2
Independent CRS audits
Total number of EcoVadis’ scorecards
vly
14%
14%
(28%)
(41%)
19%
12%
2023
15,998
15,998
400
19
38
568
2022
14,045
14,045
557
32
32
561
2021
13,272
13,272
1,510
34
30
228
2020
22,947
22,947
1,818
35
25
120
2019
27,033
18,369
2,912
n/a
28
nr
Related risk: Supply chain sustainability compliance
Risk and/or opportunity description
and potential financial 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 above as well as integrity, sanctions and IAG Know Your
Counterparty due diligence for higher-risk third parties
• Internal governance on supplier management to identify challenges and mitigation
• Supplier screening using external business intelligence databases which actively monitor
supplier status and flag risks including sustainability
International Airlines Group | Annual Report and Accounts 2023
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Financial StatementsCorporate GovernanceStrategic Report Sustainability continued
C. Principles of sustainability governance
C.5. Ethics and integrity
governance
Relevant standards: GRI 102-16/-17,
205-1/-2/-3
Overview
All directors and employees are
expected to act with integrity and in
accordance with the laws of the
countries in which they operate.
IAG’s Code of Conduct, last revised 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
performing their duties in their business
and professional relationships. IAG does
not use Company funds or resources to
support any political party or candidate.
Mandatory Code of Conduct 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. This document is
available on the IAG website.
In 2023, a new Group Head of Ethics and
Compliance was appointed, with the
overall responsibility for developing,
maintaining and overseeing the
implementation of the enterprise-wide
IAG compliance programme, which
includes the harmonisation of the
programme across the different operating
companies and supporting an overarching
ethics and compliance culture.
IAG has in place a Group-wide
Whistleblowing Policy and a
consolidated whistleblowing channel
provided by an independent third-party
provider, Navex, where concerns can be
raised on an anonymous and confidential
basis. This channel is available to
members of staff as well as suppliers,
with information on how to access it
published in IAG’s Code of Conduct and
Supplier Code of Conduct. 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 Resource teams.
Similarly, suppliers are encouraged to
contact their primary contact within the
business. Regardless, the whistleblowing
channel is available for everyone who
wishes to report a concern.
IAG will not tolerate any retaliation
against individuals using the
whistleblowing channel or contributing
to investigations arising from reports to
the whistleblowing channel.
Whistleblowing reports received for
each operating company are triaged by
the Compliance teams to direct to the
most appropriate area for investigation,
maintaining independence in this
investigation process.
The IAG Audit and Compliance
Committee reviews the effectiveness of
the external whistleblowing channel and
internal relevant reporting 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.
In 2023, whistleblowing reports
concerned issues relating to
employment matters (61%), dishonest
behaviour/reputation (34%), health and
safety (3%) and regulatory matters (2%).
All reports were followed up and
investigated where appropriate and
measures were implemented where
concerns were identified.
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 the
Supplier Code of Conduct.
IAG has in place a Group-wide anti-
bribery and corruption policy. This
document sets out the minimum
standards that are expected by the
Group, its directors and employees,
including definitions and guidance for
bribery, gifts and hospitality guidance,
political and charitable donations, public
officials, facilitation payments amongst
others.
Each Group operating company has a
Compliance Department, responsible for
managing the anti-bribery programme in
its business. The compliance teams from
across the Group meet regularly through
Working Groups and Steering Groups,
under the coordination of IAG’s Group
Head of Ethics and Compliance. They
conduct an annual review of bribery
risks at operating company and Group
level.
The main compliance risks identified for
2023 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
2023, as in 2022. Anti-bribery and
corruption training is mandatory for all
relevant personnel in IAG operating
companies and Group functions.
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. A Group-wide anti-bribery
e-learning module was rolled out in 2019
and is required to be completed every
three years.
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 2023, as
in 2022, 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 and other
compliance risks across the business.
Employees completing anti-bribery e-learning
Speak Up (whistleblower) reports
vly
76%
29%
2023
8,574
324
2022
4,880
252
2021
1,404
164
2020
1,984
193
2019
7,933
nr
110
International Airlines Group | Annual Report and Accounts 2023
C.6. ESG risk management
Relevant standards: GRI 102-11/-15.
Overview
Sustainable aviation risks and People,
culture and employee relations risks
are reported as principal risks to IAG.
These risks are considered and assessed
under the Group Enterprise Risk
Management (ERM) framework which
is presented bi-annually to the Audit
and Compliance Committee and
annually to the SECR Committee and
Board. More details on this framework,
risk identification and assessment, and
risk management can be found in the
Risk management and principal risk
factors section.
All principal risks are linked to the
Group strategic priorities which include
sustainability.
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, and presented to the IAG
CPCASO, IAG Management Committee
and SECR Committee. Plans to mitigate
risks are developed by relevant risk
owners in specific areas of the business,
with agreed initiatives included in
relevant operating company business
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 by stakeholders.
operating companies with guidance
from the Group as appropriate.
have uncertain but potentially negative
outcomes on the environment or people.
Impact on operations and strategy
Sustainability risk assessments have
informed specific decisions related to
business operations and strategy, and
IAG allocates significant resources to
environmental risk management.
Examples include:
• In 2019, IAG designed and adopted
the industry leading Flightpath Net
Zero strategy in response to the need
for more ambitious action on climate
change. The Group maintains its
commitment to net zero emissions
by 2050, and continues to invest
to meet that strategy;
• 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;
• In 2022, IAG expanded its
commitment to invest in SAF
development, production and supply,
to manage climate policy risks and
take advantage of energy-related
opportunities; and
• As of 31 December 2023, IAG
investment in SAF production and
supply increased further to $1 billion,
of which 86% is future commitments,
as we continue to scale up the use
of SAF in our operations. This price is
based on an assumed jet fuel price of
$800 per metric tonne and contracted
margins for SAF production.
IAG adopts precautionary measures to
mitigate these hazards, an approach
known as the precautionary principle.
For example, the precautionary principle
is applied to the planning of operations
and the development and launch of new
services IAG integrates climate
considerations into three-year business
plans and one-year financial forecasts
and aligning activities with
the Flightpath Net Zero strategy.
IAG also manages risks via the use of
ISO-14001-aligned environmental
management systems. 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).
The Group’s airlines completed the
certification process for the IEnvA
standard in 2023, except for Vueling
which achieved Stage 2 certification in
2022. Following this exercise, both
British Airways and Aer Lingus were
awarded Stage 2 certification in 2023.
Iberia was awarded Stage 2 certification
in January 2024. Please refer to section
A.2.3. ’Environmental Management’
for more details.
In terms of the amount of provisions and
warranties for environmental risks, IAG
and its operating companies does not
currently take out any specific insurance
to cover environmental risks.
People, culture and employee relations
risks are managed by the Group’s
IAG is committed to mitigating the
impacts of hazards which, if they occur,
Related risk: Environmental regulation compliance
Risk description and potential financial impacts
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
• Maintaining IEnvA accreditation to improve internal compliance processes
International Airlines Group | Annual Report and Accounts 2023
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Financial StatementsCorporate GovernanceStrategic Report Sustainability continued
C. Principles of sustainability governance
C.7.1. Reporting and data
governance
The full contents of this sustainability
report are included in the IAG Non-
Financial and Sustainability Information
Statement (NFIS), which is third-party
independently verified to limited
assurance standards in line with
ISAE3000 (Revised)1 standards. IAG is
working towards reasonable assurance
by 2026. Compliance with specific
frameworks and standards is listed
under relevant section headings.
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
regulation, the Task Force on Climate-
related Financial Disclosures (TCFD),
and the EU Taxonomy Regulation
(2020/852).
IAG aligns with selected GRI standards
based on compliance with Spanish Law
11/2018. In cases where GRI alignment
was not possible, other standards
aligned to airline industry guidance or
internal frameworks were used and
described.
Emissions data from intra-European
flights is also independently verified
within six months of the year end, for
compliance with the UK and EU ETS,
and for all flights for the UN CORSIA
scheme. Any material changes to key
metrics are highlighted in future Annual
Reports.
IAG also goes beyond compliance
requirements and voluntarily aligns
sustainability reporting with the
Sustainability Accounting Standards
Board (SASB), the IATA Airlines
Reporting Handbook, GRI Standards
for material issues, and relevant criteria
from external ESG rating agencies.
IAG supported IATA and the GRI
to develop the IATA handbook.
The scope of environment performance
data in this report includes all IAG
airlines, subsidiaries and cargo
operations over which IAG has
operational control. This is also the
scope of the net zero targets. Some
exceptions for non-material business
units have been applied for specific
metrics, and these are clearly stated
with rationale provided.
The scope of workforce and ethics and
integrity data includes all IAG operating
companies and support functions. Some
exceptions have been applied and these
are clearly stated with rationale
provided.
The scope of human rights and modern
slavery reporting is as above and
includes data from all suppliers in the
IAG supply chain.
For any specific cases where full-year
data was not available for selected
metrics, 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.
C.7.2. Alignment with GRI and SASB standards
Sustainability section
Sustainability subsection
A.1. Planet –
climate change
A.2. Planet –
wider issues
B. People and
prosperity
C. Principles of
sustainability
governance
A.1.3. Metrics and progress
A.1.4. Emissions reduction initiatives
A.1.7. Stakeholder engagement
A.2.1. Waste
A.2.2. Noise and air quality
B.2. Workforce metrics
B.6. Community engagement and charitable support
C.2. Governance frameworks
C.3. Workforce governance
C.4. Supply chain governance
C.5. Ethics and integrity
C.6. ESG risk management
GRI
SASB
305-1/2/3/4/5, 301-1, 302-1
TR-AL-110a.1.
305-5
TR-AL-110a.2.
102-13/-43/-44
306-1/-2/-3 (2020)
305-7
102-7/8, 401-1, 405-1, 102-41, 404-1, 403-9 TR-AL-310a.1.
102-13, 201-1
102-46/-48
403-4, 408-1, 409-1
308-2, 414-2
102-16, 102-17, 205-1/-2/-3
102-11, 102-15
1 ISAE3000 is the assurance standard for compliance, sustainability and outsourcing audits, issued by the International Federation of Accountants
(IFAC).
112
International Airlines Group | Annual Report and Accounts 2023
Risk management and principal risk factors
Agile risk management helping
to protect the Group as it delivers
its strategic plan
Enterprise risk policy and framework
The Group has an enterprise risk
management (ERM) framework
underpinned by an ERM policy, which
has been updated in accordance with
Spanish corporate law and governance
and UK corporate governance
requirements and has been re-approved
by the Board in 2023. This sets out a
comprehensive risk management
process and methodology to ensure a
robust identification and assessment of
the risks facing the Group, including
emerging risks. The risk management
framework is embedded across all of the
Group’s businesses. Enterprise risks are
defined as any risk that could impact the
three-year strategic business plan (“the
plan”). They are assessed and if the
impact is above a threshold, plotted on
an enterprise risk heat map, based on
probability and impact. Consideration
is given to changes in the speed of
potential impact and how principal risks
influence other principal risks to help
assess where key mitigations can have
a greater effect on reducing overall risk
to the business. Risks are also
considered in combining events where
a number of risks could occur together.
This process is led across the Group
by the IAG Management Committee
supported by the ERM function.
Although the Group considers enterprise
risks that could impact the plan (defined
as the short term), it also considers
potential risks that could impact over
the medium term of up to five years and
in the longer term, beyond five years.
Risk outcomes are quantified as the
potential cash impact to the plan over
three years. Non-cash outcomes that
could impact our customers, employees,
reputation, sustainability targets or our
regulatory obligations are considered
for every risk.
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
at the Group level and in each business.
International Airlines Group | Annual Report and Accounts 2023
113
Financial StatementsCorporate GovernanceStrategic Report Risk management and principal risk factors continued
Emerging risks
Where emerging risks and longer-term
threats that the Group or the industry
could face are identified, they are
managed 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 plan period can be made, and
appropriate mitigations can be put in
place or the risk becomes a principal
risk. Other high-impact, low-likelihood
risks are also considered.
Agility in risk management
The Group’s ERM framework continues
to adapt and evolve to the needs of the
business and our stakeholders. This
allows the Group and its businesses to
both respond to changes in the external
risk environment and support the pace
and scale of business transformation,
recognising the Board’s appetite for risk.
During the year, management across the
Group have reviewed the
macroeconomic and geopolitical
landscape to identify emerging risks and
implications for existing principal risks as
well as competition and market risk
changes, particularly those that could
impact operational resilience, our
sustainability ambitions or the Group’s
transformation, innovation and change
agenda. By continuing to develop
the Group’s assessment of the
interdependencies of risks, using
scenarios to quantify risk impact under
different combinations and assumptions,
and considering the risks within the
Group’s risk environment that have
increased or changed in their nature,
either as a result of external factors or
decisions within the Group’s businesses,
its Board and management are better
informed and can react more quickly.
New guidance from regulators and
investors is reviewed on an ongoing
basis and best practice sought from
other risk management sources.
Viability assessment
The Board’s assessment of the viability
of the Group is 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.
The IAG Board has overall
responsibility for ensuring that
the Group has an appropriate,
robust and effective risk
management framework.
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.
In the second half of 2022, the Board
assessed its appetite across a number of
critical strategic priorities to set
tolerances for the Group for 2023. This
approach allows tolerances to be set
more dynamically across the plan period
and aligns to the Group strategy as
approved by the Board, which set the
level of ambition and investment across
the plan period. The exercise allowed the
Board to discuss and consider the
trade-offs within the plan and ensure
that it was satisfied that management
had set the appropriate prioritisation
of initiatives to seek opportunities and
manage risk within its defined appetite
tolerances. This framework and
tolerances have been in place
throughout the year, with the Board
assessing its appetite across all of the
framework statements at 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 2023 as planned
to mitigate risk as set out in its
framework statements and where
further action has been required, the
Board has considered potential
mitigations and, where appropriate or
feasible, the Group has implemented or
confirmed plans that would address
those risks or retain them within the
Board’s determined Group risk appetite.
In the second half of 2023, following the
Board strategy review, the Board
re-assessed its appetite for key risk
areas, taking account of changes in the
risk landscape since the prior year
exercise, for the upcoming plan period.
Regular re-assessment and confirmation
of the risk appetite of the Board ensures
its relevance and ongoing alignment to
the Group strategic priorities and allows
the Group to take appropriate risks to
deliver the plan.
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International Airlines Group | Annual Report and Accounts 2023
Risk management roles and responsibilities
Risk owners
and management
Operating companies’
management
committees
IAG Management
Committee
IAG Board and Audit
and 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 create 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.
Risk heat maps for each
operating company and
central functions are reviewed
semi-annually by their
operating company’s
management committee or
function leadership team.
Where the Group’s operating
companies have a reliance on
other parts of the Group for
services delivery, risks are
reflected appropriately across
risk heat maps to ensure
accountability is clear.
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, where they
exist, as to the identification,
quantification and
management of risks within
their operating company at
least annually.
Local risk heat maps are in
place for subsidiary
businesses, together with
Group support platforms
including Group Procurement
and Services and IAG Tech.
The IAG Management
Committee reviews risks
during the year, including the
Group risk heat 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.
At the year end, the IAG
Management Committee
reviews the performance of
the Group during the full year
against the risk appetite
framework and reports any
near tolerance or out of
tolerance assessments to the
Audit and Compliance
Committee.
The IAG Management
Committee recommends
severe but plausible 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 IAG Audit and
Compliance Committee
discusses risk and considers
the risk environment regularly
throughout the year, as does
the IAG Board as part of wider
Board discussions, in addition
to the IAG Audit and
Compliance Committee’s
bi-annual risk heat map
review, including a review of
the assessment of the Group’s
performance against its risk
appetite for the financial year,
scenarios for assessment of
viability and the outputs from
the viability modelling. The
Audit and Compliance
Committee has early sight of
management consideration of
viability scenarios to enable it
to challenge subjectivities and
confirm rationale. It then
reviews the outputs at year
end and makes
recommendations on the
viability assessment and
statement to the Board.
The IAG Board reviews the
Group’s risk heatmap annually
and it has completed a robust
assessment of the Group’s
emerging and principal risks in
the year.
The IAG Board sets risk
appetite for the plan period.
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 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 ERM
framework remains agile and
responsive to meet the needs of the
business and its stakeholders.
The ERM function works with other
compliance and Group functions, such
as Group Finance, Government Affairs,
Investor Relations, Legal, Ethics and
Compliance, and Sustainability,
leveraging their frameworks and
assessments where appropriate.
Risk assessments form an important
input into the Internal Audit planning
and delivery process.
International Airlines Group | Annual Report and Accounts 2023
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Financial StatementsCorporate GovernanceStrategic Report Risk management and principal risk factors continued
Year in review
The highly regulated and commercially
competitive environment, together with
the businesses’ operational complexity,
expose the Group to risks, where its
influence and ability to directly manage
the risks may be limited.
Examples include aircraft and
component availability, and engine
performance and reliability; the wider
ongoing fundamental weaknesses in the
resilience of the aviation sector’s supply
chain; air traffic control (ATC) resilience
and industrial unrest in third parties
impacting operations; and policy
measures taken by governments to
address the economic environment or
policy proposals that could impact the
Group’s airlines’ ability to set capacity
and/or pricing.
Other external threats which remain
heightened include: the impact of
inflation and interest rates on demand
and customer confidence; higher costs
in the supply chain; and the impact of
escalating and ongoing geopolitical
tensions and conflict in various regions
impacting our customers and flight
operations as well as creating further
airspace restrictions.
In assessing its principal risks, the Group
has considered its operational resilience
across its businesses, the status of the
financial markets, customer mix changes,
political risk and government changes,
including upcoming elections, pace of
transformation, artificial intelligence (AI)
adoption, the Group’s industrial relations
landscape and people engagement and
securing talent and expertise to support
operations and deliver cultural change.
No new principal risks were identified
through the risk discussions in the year.
One risk has been reconsidered as part
of the reviews and has been reframed
as ‘Transformation, innovation and AI’
from ‘Transformation and change’ to
recognise how the Group’s change
agenda is underpinned by investment
which will leverage innovation and AI
tools to accelerate the delivery of
customer-centric, efficient processes
and tools to run our businesses.
The risk around ‘Critical third parties in
the supply chain’ is now assessed under
Business and Operational risk given the
nature of the potential impacts facing
the Group (having previously been
categorised as a Strategic risk).
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
Business and
operational
risks
9
8
6
7
Strategic
Business and
operational
4
6
7
3
5
8
2
1
10
9
11
Low
High
16
15
Compliance
and regulatory
12
13
14
Financial
Key for principal risk factors table
Principal
risk number
Strategic
imperatives
Stakeholder
impact
Strengthening
our core
Driving earnings
growth through
asset-light
businesses
Operating under
a strengthened
financial and
sustainability
framework
Customers
Employees
Suppliers
Governments
and regulators
Shareholder,
lenders
and other
financial
stakeholders
Risk
trend
Increase
Stable
Decrease
International Airlines Group | Annual Report and Accounts 2023
1
116
Strategic
imperatives
Stakeholder
impact
Risk trend
2023 2022
Viability
scenario
2
3
4
1
1
1
2
4
2
3
3
1
2
3
2
4
1
1
Principal risk factor table
Principal risk
Strategic
1
2
3
4
Brand and customer trust
Chief Commercial Strategy Officer/Operating
company CEOs
Competitive landscape
Chief Commercial Strategy Officer
Economic, political and regulatory environment
Chief Commercial Strategy Officer
Sustainable aviation
Chief People, Corporate Affairs and
Sustainability Officer
Business and operational
5
6
7
Critical third parties in the supply chain
Chief Information, Procurement, Services
and Innovation Officer
Cyberattack and data security
Chief Information, Procurement, Services
and Innovation Officer/Operating company CEOs
IT systems and IT infrastructure
Chief Information, Procurement, Services and
Innovation Officer/Operating company CEOs
8 Operational resilience
Chief Information, Procurement, Services and
Innovation Officer/Operating company CEOs
9
10
11
People, culture and employee relations
Chief People, Corporate Affairs and Sustainability
Officer/Operating company CEOs
Safety or security incident
Operating company CEOs
Transformation, innovation and AI
Chief Information, Procurement, Services and
Innovation Officer/Chief Transformation and
Corporate Development Officer
Financial risk including tax
12 Debt funding
Chief Financial Officer
13
14
Financial and treasury-related risk
Chief Financial Officer
Tax
Chief Financial Officer
Compliance and regulatory
15 Group governance structure
General Counsel
16 Non-compliance with key regulation and laws
General Counsel
International Airlines Group | Annual Report and Accounts 2023
117
Financial StatementsCorporate GovernanceStrategic Report Risk management and principal risk factors continued
Principal risk register
Guidance is provided below on the key
risks that may threaten the Group’s
business model, future performance,
solvency and liquidity.
circumstances are described below.
Additional key business responses
implemented by management are also
set out.
Risks are grouped into four categories:
strategic risk, business and operational
risk, financial risk including tax, and
compliance and regulatory risks.
Where there are particular
circumstances that mean that the risk
is more likely to materialise, those
The list is not intended to be exhaustive
but does reflect those risks that the
Board and IAG Management Committee
believe to be the most likely to have a
potential material impact on the Group
during the plan period.
Strategic
1
Brand and customer trust
Chief Commercial Strategy Officer
Operating company CEOs
Stakeholder
impact
Strategic
imperatives
Risk trend
2023
2022
Viability
scenarios
2 3 4
Strategic relevance
Status
• The Group’s brands are 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.
The Group’s ability to attract and secure bookings and generate revenue
depends on customers’ perception and affinity with the Group airlines’
brands and their associated reputation for customer service and value. The
Group airlines’ brands are, and will continue to be, vulnerable to adverse
publicity regarding events impacting service and operations. Operational
resilience and customer satisfaction underpin customer trust. Reliability,
including on-time performance (OTP), service and product delivery, are key
elements of brand value and of each customer’s experience. Investment in
cabin and service propositions helps ensure that our customers choose to
fly with the Group’s airlines.
The Group continues to improve its disruption management capabilities
given the extent of the external disruption due to ATC and third-party
resilience issues, particularly over engine reliability. IAG remains focused on
strengthening its customer-centricity and all of the Group’s airlines continue
to support their customers through any disruption including schedule
adaptions where required. The Group continues to ensure that its operating
companies continue to adapt and focus their business models, products and
customer propositions to meet changing customer expectations and needs
(including those with additional needs). Customer sentiment to travel and
their expectations when they travel are intrinsic to brand health. The
resilience and engagement of our people as customer service ambassadors
to deliver excellent customer service is critical to retaining brand and
customer trust.
Risk description
Mitigations
• Erosion of the brand and customer trust through
poor customer service or lack of reliability in
operations, 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.
• All IAG airlines are considered within the brand portfolio review.
• Brand initiatives for each operating company have been identified and are
aligned to the Group’s business plan.
• Product investment to enhance the customer experience supports the
brand propositions and is provided for in the plan.
• All airlines track and report to IAG on their OTP and Net Promoter Score
(NPS) to measure customer satisfaction.
• Reviews of resilience, resourcing levels and schedule operability.
• Enhanced disruption management tools within airlines to allow customers
to manage their travel preferences.
• 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.
• Additional focus on customer feedback and proactive customer care.
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International Airlines Group | Annual Report and Accounts 2023
Strategic
2 Competitive landscape
Chief Commercial Strategy Officer
Stakeholder
impact
Strategic
imperatives
Risk trend
2023
2022
Viability
scenarios
1
Strategic relevance
Status
• 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 demand environment in the year has seen the restoration of capacity
into the market, with some markets exceeding pre-pandemic capacity levels.
The distortionary effects of government policy and/or aviation-specific
taxation or other regional or country-specific measures on the competitive
landscape, continue to be assessed. The Group is investing in new fleet and
products to maintain its competitive position in the markets in which its
airlines operate.
IAG supports the use of the Worldwide Airport Slots Guidelines system,
formulated by the International Air Transport Association (IATA), that
encourages competition but also supports reliable, established networks. The
Group responded to relevant consultations to inform regulators and to
propose balanced regulation and avoid introducing additional rules that
hamper the competitiveness of the industry.
In February 2023, IAG agreed the acquisition of the remaining 80% of Air
Europa, subject to relevant regulatory approvals.
The Group continues to consult and keep different stakeholders informed
over the impacts of government policies on aviation or policy asymmetry,
such as increases in Air Passenger Duty (APD) or distortionary policies on
carbon offsets.
Risk description
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.
• Regulatory or policy changes may create
competitive distortion, impacting the Group’s
airlines and their competitiveness or business
model.
• The IAG Management Committee meets weekly and undertakes regular
operating company-specific reviews.
• The Board discusses strategy throughout the year and dedicates two days
per year to undertake a detailed review of the Group’s strategic plans.
• The Group strategy function supports the IAG 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.
• The Group maintains rigorous cost control and targeted investment to
remain competitive.
• The Group Procurement function reviews all critical contracts.
• The Group’s airlines are focused on customer-centricity and operational
resilience.
• The portfolio of brands provides flexibility as capacity can be deployed at
short notice as needed.
• The IAG Management Committee regularly reviews market share and 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 relevant
laws and regulations and responds to consultations on regulatory change
or policy that could impact the aviation industry or create competitive
distortion.
See Financial review section
International Airlines Group | Annual Report and Accounts 2023
119
Financial StatementsCorporate GovernanceStrategic Report
Risk management and principal risk factors continued
Strategic
3
Economic, political and
regulatory environment
Chief Commercial Strategy Officer
Stakeholder
impact
Strategic
imperatives
Risk trend
2023
2022
Viability
scenarios
1
Strategic relevance
Status
• IAG remains sensitive to political and economic
conditions in the markets globally, particularly in
our hub markets. All of the following can be
influenced by political and economic change:
• Business and leisure demand for travel;
• Inflation impacts on the cost base;
• Access to markets for new or existing routes;
• Increasing levels and costs of regulation;
• Supply of products;
• Availability of services and/or resource;
• Ability to fly scheduled operations; and
• Pricing and pricing over ancillaries.
The economic impact of geopolitical events coming after the energy crisis
last winter, increases in commodity and wage costs from inflation and higher
interest rates drive continued significant uncertainty over the economic
outlook. The Group is closely reviewing the impacts of wage and supplier
inflation on margins and customer demand.
The re-opening of China at the beginning 2023 and removal of remaining
restrictions in countries, post the pandemic, has simplified operations and the
customer experience at airports. However ongoing conflicts, wars and
heightened tensions across the Middle East further increase airspace
restrictions and congestion for flows to Asia.
Wider macroeconomic trends are being monitored such as a potential
economic recession and 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. The Group also considers
changes in government in key markets and the implications for trade,
respective economic health and how governments view the aviation industry,
with elections expected in the UK, Ireland and the US over the next year.
Developments in relevant international relationships, where they affect air
services agreements to which the EU or UK are party, are monitored
throughout the year and the Group’s positions advocated with the relevant
national governments. Recent government proposals to set floor or ceiling
caps on pricing, including the scope of ancillaries that airlines may be allowed
to charge their customers for, may impact the ability to freely set pricing, sell
ancillaries to meet customer needs and/or set capacity.
IAG has worked through trade associations, IATA, as well as national
governments to put its case on issues of the importance of aviation to
international trade and customer connectivity and the value that it brings.
Any further macroeconomic trends or potential requirements arising from
Brexit are monitored by the IAG Government Affairs function.
Risk description
Mitigations
• Economic deterioration or structural change in
either a domestic market, key customer
segment 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.
• Failure to adequately plan for and be able to
respond to uncertainty driven by geopolitical or
market events or health-related concerns
impacts the operations, costs and customers of
the Group.
• Changes in government may result in a change
in sentiment to aviation and access to markets.
• Government policy asymmetry impacting a
domestic market could increase the burden of
regulation and cost to our passengers.
• The IAG Board and the IAG Management Committee review the financial
outlook and business performance of the Group through the monthly
trading results, financial planning process and the quarterly reforecasting
process.
• Reviews to assess and 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 IAG Board and IAG Management Committee as part of
business performance monitoring.
• The Group’s Government Affairs function monitors government initiatives,
represents the Group’s interest and gives the Group and its operating
companies early sight of likely changes to laws and regulations.
• The Group engages with its regulators, governments and other political
representatives and trade associations to help represent the views and
contribution of the Group and aviation to society and economies.
• The Group’s airlines have increased their focus on enhanced disruption
management tools within airlines to increase operational resilience to
restrictions e.g. capacity constraints at airports or health-related measures.
See the Regulatory environment section
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International Airlines Group | Annual Report and Accounts 2023
Strategic
4
Sustainable aviation
Chief People, Corporate Affairs
and Sustainability Officer
Stakeholder
impact
Strategic
imperatives
Risk trend
2023
2022
Viability
scenarios
1 2 4
Strategic relevance
Status
• IAG is playing a leading role and working with
industry to accelerate aviation decarbonisation.
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.
• Our customers look to ensure that our airlines
allow them to minimise their carbon footprint.
IAG is committed to a target of net zero carbon emissions across its
operations and supply chain by 2050, along with 2030 targets. The
Procurement function will have a key role to play in ensuring its delivery of
the Scope 3 commitment for the Group with supplier sustainability ratings
and sustainability clauses in supplier contracts key considerations for future
contract negotiations and renewals. IAG has also committed to 10%
Sustainable Aviation Fuel (SAF) usage on average across its fleet by 2030.
Plans implemented by the EU, UK and US governments to decarbonise
aviation have resulted in fragmentation of policy measures and support
offered by governments for green initiatives across the different regions in
which the Group airlines operate. SAF infrastructure and availability lags
demand, impacting the ability to achieve the aviation industry’s carbon
reduction commitments. Mandates and other tax-based measures may
disproportionately impact the Group’s airlines versus their competitors. All of
the Group’s airlines have agreed new deals for the production of SAF to
meet the Group’s target on the path to decarbonisation. Overall aviation
industry requirements will require infrastructure investments across markets
to support the production of SAF to meet demand expectations.
The Group continues to model potential impacts and costs, which includes
the removal of aviation jet fuel tax exemption, with mitigation plans
embedded into strategic and financial planning.
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 pricing. The Group has also embedded forecasting of its climate
impacts into its strategic, business and financial planning processes and has
assessed that it is resilient to material climate-related impacts.
Risk description
Mitigations
• 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
allowances impact on price and demand.
Customers may choose to reduce the amount
they fly.
• IAG climate change strategy to meet target of net zero carbon emissions
by 2050.
• Annual incentive plans link manager bonuses to annual carbon intensity
targets.
• All of the Group’s airlines have platforms for customers to contribute
towards mitigating their flight emissions over time, including contributing
towards SAF or projects which remove carbon from the atmosphere.
• Embedded climate impacts into the financial statements, balance sheet,
financial forecasting and other relevant disclosures.
• IAG investment in SAF with operating companies continuing to secure
• The airline industry is subject to increased
mid- and long-term supply agreements.
regulatory requirements and policy asymmetry
driving costs, distortion and operational
complexity, as well as the potential for sub-
optimal outcomes for the planet.
• Demand exceeds supply to meet sustainable
fuel mandates or infrastructure and production
is not available in the markets the Group airlines
serve.
• SAF policy fragmentation results in different
in-scope allowances across markets, distorting
the competitive environment and levels of
carbon costs.
• Increasing severity of weather events results in
operational and customer disruption.
• IAG actively monitors the delivery of SAF procured.
• Fleet replacement plan is introducing aircraft into the fleet that are more
carbon efficient.
• Reporting on sustainability performance in the IAG supply chain to better
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 for potential partners and technology.
• Engagement across UK, EU and global trade associations to shape
effective climate policy and drive support for low-carbon solutions.
See the Sustainability risks and opportunities section
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Financial StatementsCorporate GovernanceStrategic Report
Risk management and principal risk factors continued
Business and operational
5 Critical third parties
in the supply chain
Chief Information, Procurement,
Services and Innovation Officer
Stakeholder
impact
Strategic
imperatives
Risk trend
2023
2022
Viability
scenarios
2
Strategic relevance
Status
• 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.
• Infrastructure decisions or changes in policy
by governments, regulators or other entities
could impact operations but are outside
the Group’s control.
• London Heathrow has no spare runway capacity.
• An uncontrolled increase in the planned cost
of expansion of a hub airport, particularly
London Heathrow, could result in increased
landing charges making the airport
uncompetitive versus other European hubs.
• 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.
The aviation sector continues to be affected by global supply chain
disruption which has impacted aircraft deliveries, engine and component
availability and reliability, resource availability and/or threat of employee
industrial action in critical third parties and airport services, the level of
resilience of airports, particularly London Heathrow, and ATC capability and
restrictions. In August, a failure of UK national ATC services impacted flight
operations across the UK.
The Group proactively assesses its schedules for operability and continues to
work with all critical suppliers to understand any potential disruption within
their supply chains from either a shortage of available resource, strike action
or production delays which could impact the availability of new fleet, engines
or critical goods or services. Delays in new aircraft and spare engines, and
technical performance issues requiring additional maintenance continue to
impact operations and turnaround times for aircraft. This has led to increased
costs to secure such services. Focus has been placed on key suppliers given
the inflationary environment impacting wages and costs of goods, to
understand any business or operational continuity impacts, and where
possible identify other suitable suppliers. The Group has been impacted by
reliability and performance of GTF engines, which is mitigated with
replacement aircraft and remedy support from the engine manufacturer.
Many elements of the supply chain remain outside of the Group’s ability to
directly manage, including aircraft deliveries and availability of components,
airport performance and ATC resilience.
The Group continues to consult stakeholders and raise awareness of the
negative impacts of ATC airspace restrictions and performance issues on the
aviation sector and economies across Europe, particularly with the capacity
recovery and continued closure of airspace driven by geopolitical events.
The Group relies on the provision of airport infrastructure and is dependent
on the timely delivery of appropriate facilities. The Group continues to
challenge unreasonable levels of increases in airport charges, especially at
London Heathrow.
Risk description
Mitigations
• The Group mitigates engine and fleet performance risks, including delays to
delivery and 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 and aircraft
lessors.
• 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.
• The Group is active at an EU policy level and in consultations with airports
covered by the EU Airport Charges Directive.
• The Group proactively works with suppliers to ensure operations are
maintained and the impact to their businesses understood, with mitigations
implemented where necessary and inflation minimised.
• The Group Procurement function has oversight of all critical contracts
across the Group’s businesses.
• Alternative suppliers are identified where feasible.
• Transformation initiatives to offset inflation.
• 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.
• 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.
122
International Airlines Group | Annual Report and Accounts 2023
Business and operational
6 Cyberattack and data security
Chief Information, Procurement,
Services and Innovation Officer
Stakeholder
impact
Operating company CEOs
Strategic relevance
Status
Strategic
imperatives
Risk trend
2023
2022
Viability
scenarios
3
• 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 risks from cyber threats continue as threat actors seek to exploit any
weaknesses in defences particularly through social engineering and human
behaviours. The threat of ransomware attacks on critical infrastructure and services
remains high and increased in the year with heightened geopolitical tensions, with
the Group exposed to threat actors targeting IAG, its operating companies and its
suppliers. The Group continues to improve its cybersecurity posture either through
major IT transformational change or additional monitoring through tools.
In the first half of the year, some of the Group’s businesses were impacted by an
attack on a third-party services provider holding employee data. The Group is
focused on improving its cybersecurity posture and better understanding the risk
presented by its suppliers.
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).
The emergence and usage of AI to bypass cybersecurity controls, produce
phishing emails and malware has also accelerated attempts to access
organisations’ systems and data and increases the threat and scale of social
engineering attacks.
Investment in cybersecurity systems and controls continues 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 the National
Institute of Standards and Technology (NIST) cybersecurity framework, 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
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
regulations and face penalties and loss
of customer trust.
• 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 IAG Cyber Governance board assesses the portfolio of projects quarterly
and each operating company reviews its own portfolio at least quarterly.
• The IAG Chief Information, Procurement, Services and Innovation Officer
(CIPSIO) provides assurance and expertise around strategy, policy, training
and security operations for the Group.
• Changes in working practices and
• Detection tools and monitoring are in place. The Group-wide security
environments for the Group’s employees
and third-party suppliers could result in new
weaknesses in the cyber and data security
control environment.
engineering and operations teams proactively seek to identify and respond to
threats and vulnerabilities, including ongoing testing of the Group’s defences.
• External attack surface monitoring and threat intelligence is used to analyse
cyber risks to the Group.
• External benchmarking on cyber posture with independent assessment in the
year by a specialist third party.
• Regular cyber awareness training run by the operating companies, including
annual mandatory training on cyber risk and data protection for all staff.
• 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 reviewed to ensure integrity of cyber and data security.
• All suppliers must adhere to IAG security requirements. A Group-wide
third-party risk management process integrates cybersecurity due diligence
into contracting processes to monitor supplier security performance.
• Security architecture team embedded into Datacentre migrations programmes.
• Desktop and simulated exercises to test business response plans.
International Airlines Group | Annual Report and Accounts 2023
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Financial StatementsCorporate GovernanceStrategic Report
Risk management and principal risk factors continued
Business and operational
7
IT systems and IT infrastructure
Chief Information, Procurement,
Services and Innovation Officer
Operating company CEOs
Stakeholder
impact
Strategic
imperatives
Risk trend
2023
2022
Viability
scenarios
3
Strategic relevance
Status
• 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, innovate or use
AI and technology more effectively and disrupt
the Group’s business model.
The Group recognises the importance of technology to business
transformation and growth. The CIPSIO works with the Group’s operating
companies to ensure appropriate prioritisation and investment in the Group’s
digital and IT transformation. Both are members of the IAG Management
Committee.
The Group continues to review its IT operating model as it progresses with
digitalisation, migration to the cloud from on-premises data centres,
remediation and transformation of its networks and addressing
obsolescence. It has moved more resources into product teams more closely
aligned to business needs. The Group is reliant upon the resilience of its
systems and networks for key customer and business processes and is
exposed to risks that relate to poor performance, vulnerability or failure of
these systems. The Group continues with major programmes and upgrades
to modernise, including new commercial capabilities and customer-centric
enhancements using agile-based models, as well as replacing core IT
infrastructure and improving network connectivity and redundancy.
Mitigating actions that prioritise operational stability and resilience have been
built into all cutover plans for the go-live of IT systems-related changes. This
has strengthened the Group’s operating companies’ focus on addressing
their legacy estates to deliver digital customer experiences. The CIPSIO
works with the operating companies to ensure that their IT investment and
requirements are appropriately prioritised and delivered, value to the Group
from IT investment is maximised and central services can support the
Group’s businesses appropriately.
Risk description
Mitigations
• The dependency on IT systems and networks
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.
• 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 governance boards are in place to review delivery
timelines.
• 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 CIPSIO and operating company management committee
members 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.
124
International Airlines Group | Annual Report and Accounts 2023
Business and operational
8 Operational resilience
Chief Information, Procurement,
Services and Innovation Officer
Operating company CEOs
Stakeholder
impact
Strategic
imperatives
Risk trend
2023
2022
Viability
scenarios
1 2 3
Strategic relevance
Status
• 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 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.
The Group is reliant on critical third parties for services and goods, many of
which have been impacted by resourcing challenges, inflation and supply
chain disruption. Ongoing labour shortages, particularly for technical licensed
staff, industrial unrest and strike action in the aviation sector combined with
goods availability shortages in the supply chain, especially engines, and
airspace and ATC restrictions can all impact the operational environment and
the customer experience of the Group’s airlines and increase the costs of
running operations to provide additional resilience, as well as impacting the
costs and operations of the businesses on which the Group relies.
The Group continues with its ambitious IT infrastructure transformation
agenda to modernise and digitalise its IT estates. The Group is focused on
minimising any unplanned outages or disruption to customers with additional
resilience built into the airlines’ networks.
The Group continues to consider and build its resilience to withstand severe
unexpected stresses. 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 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
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.
• The Group’s airlines have standby aircraft and crew in place to improve
resilience.
• Resilience to minimise the impact of ATC airspace restrictions and strike
action on the Group’s customers and operations is in place.
• All of the Group’s airlines are focused on developing customer disruption
management tools to help our customers in times of disruption.
• 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.
• Public health concerns impacting populations
at scale could see an adverse effect on the
Group where governments choose to impose
restrictions, as would any future pandemic
outbreak, or other material event impacting
operations or customers' ability to travel.
• The Group’s airlines may not be able to resource
their operations sufficiently resulting in impacts
to customers and brands.
• The Group’s airlines are reliant on critical third
parties to deliver goods and services to maintain
operations and meet customer expectations and
any failure of the level of service or reliability
and delivery of goods may impact operational
resilience and our customers.
International Airlines Group | Annual Report and Accounts 2023
125
Financial StatementsCorporate GovernanceStrategic Report
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
Stakeholder
impact
Strategic
imperatives
Risk trend
2023
2022
Viability
scenarios
2
Strategic relevance
Status
• The Group has a large unionised workforce with
around 87% of colleagues represented by one
of a number of different trade unions under
collective bargaining agreements (CBA). 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 pace.
• The Group’s airlines require specialist skillsets
to continue to operate.
Our people, their engagement, cultural appetite and mindset for change are
critical to the Group’s current performance and future success. Our
leadership recognises the efforts of our staff and their commitment through
the continued operational challenges facing our airlines. Resource shortages
in crew have been addressed and our businesses are building the knowledge
and experience of their new starters and managing the cultural impacts of
onboarding at scale to ensure they have the right capabilities to operate.
Shortages in technical licensed staff across the aviation sector and in the
Group airlines may impact maintenance delivery timelines unless resource
levels can be secured.
Across the Group, collective bargaining is in place with various unions.
Where agreements are open, our operating companies continue to engage
in discussions with unions to secure sustainable agreements and address
concerns arising within the negotiations. In September, AENA announced
the result of its competitive tender for ground handling licences at airports
across Spain, which resulted in the loss of key airports to another provider,
with unions for Iberia ground handling services taking strike action in January
2024. Iberia plans to create a new handling company, which will provide
handling services and all airport staff affected by the AENA decision will be
moved to the new company, with a new sector CBA and conditions for
existing Iberia employees.
The Group is focused on staff wellbeing and people morale and motivation,
including supporting agile and 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
transformation and future success of the Group and they are focusing on
improving organisational health and employee engagement.
Risk description
Mitigations
• 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 or cultural
behaviours.
• The Group businesses fail to attract, motivate,
retain or develop our people to deliver service
and brand experience.
• Critical skillsets are not in place to execute on
the required transformation plan or to exploit
innovation and AI opportunities and drive the
business forward.
• Technical licensed staff, including pilots
and engineers, may be impacted by Brexit
recruitment restrictions.
• Ongoing information sharing, consultation and collective bargaining with
unions across the Group take place on a regular basis led by operating
companies’ human resources specialists, who have a strong skillset in
industrial relations.
• Ensuring that remuneration is aligned to local markets in terms of
productivity and pay.
• 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.
• The Group is investing in apprentice programmes and retention initiatives to
help secure and retain engineers.
• Operating companies’ engagement and organisational health surveys have
been conducted with subsequent action plans developed to create
a positive and inclusive culture.
• Access to support individuals’ wellbeing.
• IAG Code of Conduct is supported by annual awareness programmes
and mandatory training for all of our staff.
126
International Airlines Group | Annual Report and Accounts 2023
Business and operational
10 Safety or security incident
Operating company CEOs
Stakeholder
impact
Strategic
imperatives
Risk trend
2023
2022
Strategic relevance
Status
• The safety and security of our customers
and employees are fundamental values for
the Group.
• High profile external events impacting the
aviation sector and aircraft may change
customer sentiment towards air travel.
The IAG Safety, Environment and Corporate Responsibility (SECR)
Committee of the Board and the board of each operating company continue
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
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 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, where
everyone is accountable for their actions and their performance is reflective
of the knowledge, behaviours and skills they have.
• 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.
See SECR report
International Airlines Group | Annual Report and Accounts 2023
127
Financial StatementsCorporate GovernanceStrategic Report
Risk management and principal risk factors continued
Business and operational
11
Transformation, innovation and AI
Chief Information, Procurement,
Services and Innovation Officer
Stakeholder
impact
Strategic
imperatives
Risk trend
2023
2022
Viability
scenarios
4
Chief Transformation and Corporate
Development Officer
Strategic relevance
Status
• The transformation, innovation and AI agenda
is critical to the Group’s ability to deliver strong
returns and 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 Group has an established Transformation Programme Management
Office which has oversight of an agreed portfolio of initiatives across the
Group focused on improving customer service, revenue and cost efficiency
and the transformation mindset is becoming part of our culture. Many of the
programmes are multi-year and all are subject to the ongoing review and
investment approvals of the IAG Board. In the year, the Group established an
AI governance committee and guidance for data usage in respect to AI tools
and technology.
Risk description
Mitigations
• The Chief Transformation and Corporate Development Officer has clear
oversight of all programmes across the Group’s businesses.
• Mirrored structures in the operating companies.
• Consistent core metrics and dashboard reporting used to assess
performance against plan.
• The IAG Management Committee has regular operating company-specific
meetings to assess their transformation agenda and the risks to delivery.
• The Group transformation agenda is subject to Board approval and progress
is regularly monitored by the Board.
• Group AI governance committee to assess AI initiatives to allow the Group
businesses to exploit AI capabilities.
• 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 brands are reviewed
to mitigate against reputational and brand damage.
• Failure to transform the business to effectively
deliver cost efficiency initiatives, 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
and innovate deploying digital technologies,
AI, sustainability initiatives and/or platforms
ahead of the Group.
• The levels of data capture, data storage and
security and availability of data, are not
sufficient and ready to exploit AI use cases.
128
International Airlines Group | Annual Report and Accounts 2023
Financial risk including tax
12 Debt funding
Chief Financial Officer
Stakeholder
impact
Strategic
imperatives
Risk trend
2023
2022
Viability
scenarios
1
Strategic relevance
Status
• The Group’s ability to finance ongoing
operations, committed aircraft orders, future
fleet growth plans or acquisitions 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
cash flows of the Group.
Access to the secured and unsecured debt markets may be disrupted by
geopolitical and economic uncertainty, impacting funding options and
interest rates available to the Group for new aircraft financing or where it
chooses to re-finance debt. Interest rate increases implemented by central
banks in 2023 to address inflation increase the cost for the Group of existing
floating rate debt, as well as for new financing. As at 31 December 2023
approximately 13% of the Group’s debt, including hedges, was floating rate as
the Group has paid down a substantial part of its floating debt in 2023. The
Group successfully raised financing for all aircraft deliveries it sought to
finance during 2023, using traditional long-term aircraft financing
arrangements. The Group’s credit rating with Standard & Poors was
upgraded to investment grade (BBB-) during the year, whilst its rating with
Moody’s was increased by one notch to Ba1. In December, Fitch upgraded
British Airways to BB- investment grade.
Risk description
Mitigations
• Failure to finance ongoing operations,
committed aircraft orders, future fleet growth
plans, business acquisitions and third-party
financial guarantees.
• New financial arrangements, in addition to
the repayment of existing arrangements, may
impact plans to transform the Group and will
influence the timing for IAG to resume paying
dividends to its shareholders.
• Higher interest rates in the market, or more
restrictive terms, for new finance arrangements
or re-financing may impact the Group’s cost
base.
• The IAG Board and Management Committee review the Group’s financial
position and financing strategy regularly.
• The Group has maintained its clear focus on managing liquidity and ensuring
that critical investment in the Group is maintained.
• During 2023, the Group extended the availability for $1,655 million of its
$1,755 million revolving credit facility by one year to March 2026.
• Maintain strong relationship with banks, lenders and lessors.
• Scenario planning for different financial environments.
• Continuous review of capital structure to minimise interest rate exposure
and lower cost of capital.
See Financial review section
International Airlines Group | Annual Report and Accounts 2023
129
Financial StatementsCorporate GovernanceStrategic Report
Risk management and principal risk factors continued
Financial risk including tax
13 Financial and treasury-related risk
Chief Financial Officer
Stakeholder
impact
Strategic
imperatives
Risk trend
2023
2022
Viability
scenarios
1
Strategic relevance
Status
• 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,
particularly the US dollar.
• Higher 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 cost volatility driven by geo-political events has been partly mitigated
by the Group’s fuel hedging policy. Access to fuel hedging instruments or the
ability to pass increased fuel costs on to consumers could impact the
Group’s profits. The Group continues to assess the strength of the US dollar
against the euro and pound sterling and the potential impacts on the Group’s
operating results. All airlines hedge currency risk in line with the Group
hedging policy.
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 continue to be assessed to ensure the Group responds to the
rapidly changing financial environment appropriately. Details are set out in
the Group financial statements.
Risk description
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 IAG Audit and Compliance Committee and IAG Management
Committee regularly review the Group’s fuel and currency positions and
other financial contracts.
• All airlines hedge in line with the Group’s hedging policy under the Group
Treasury oversight.
• Fuel price risk is partially hedged through the purchase of oil and oil
distillates derivatives in accordance with the Group risk appetite.
• 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 interest rate changes on floating debt positions is mitigated
through interest rate derivatives as well as structuring selected new debt
and lease deals at fixed rates throughout their term.
• 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 material position outside policy limits has to be approved by the IAG
Audit and Compliance Committee.
130
International Airlines Group | Annual Report and Accounts 2023
Financial risk including tax
14 Tax
Chief Financial Officer
Stakeholder
impact
Strategic
imperatives
Risk trend
2023
2022
Strategic relevance
Status
• 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 the Group’s positive contributions
to the economies and wider societies of the
countries in which IAG operates.
Tax is managed in accordance with the tax strategy, found in the Corporate
Policies section of the IAG website. The Group has a number of scheduled
tax audits, by local tax authorities, in progress across its businesses. In the
UK, there are ongoing discussions with HMRC on certain treatments of VAT.
Further information about taxes paid and collected by IAG is set out in note
10 of the Group financial statements.
Risk description
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 rebuild public finance.
• The Group’s stakeholders’ expectations of the
tax behaviours of large corporates may lead
to reputational risk from the Group’s
management of tax.
• 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.
• The IAG Board annually reviews and approves the Tax Strategy.
• The Group takes expert advice on tax matters as required.
International Airlines Group | Annual Report and Accounts 2023
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Financial StatementsCorporate GovernanceStrategic Report
Risk management and principal risk factors continued
Compliance and regulatory
15 Group governance structure
General Counsel
Stakeholder
impact
Strategic
imperatives
Risk trend
2023
2022
Strategic relevance
Status
• 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.
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.
Risk description
Mitigations
• IAG could face a challenge to its ownership and
control structure.
• The Group has governance structures in place that include nationality
structures to protect Aer Lingus’, British Airways’ and Iberia’s operating
licences and/or route rights. These have been approved by the relevant
national regulators.
• IAG will continue to monitor regulatory developments affecting the
ownership and control of airlines in the UK and EU.
See Corporate Governance section
16 Non-compliance with key
regulation and laws
General Counsel
Stakeholder
impact
Strategic
imperatives
Risk trend
2023
2022
Strategic relevance
Status
• Carrying out business in a compliant manner
and with integrity is fundamental to the values
of the Group, as well as the expectations of the
Group’s customers and stakeholders.
The Group has maintained its focus on compliance with key regulations and
mandatory training programmes have continued throughout the year. For
safety- and security-related regulatory risks, please refer to the ‘Safety or
security incident’ risk.
Risk description
Mitigations
• The Group is exposed to the risk of an individual
employee’s or groups of employees’
inappropriate and/or unethical behaviour
resulting in reputational damage, fines or losses
to the Group.
• Failure to meet legal or regulatory standards
may result in breach with the potential to hurt or
impact our customers, employees, or third
parties, or impact our operations, and lead to
reputational damage, fines or losses to the
Group.
• 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, human resources and legal professionals specialising in
competition law, anti-bribery and other legislation and regulations that apply
to the Group businesses support and advise the Group’s businesses.
• IAG’s Code of Conduct is supported by annual awareness programmes
and mandatory training, with additional focus for higher-risk areas.
• Compliance Officers and Data Protection Officers are in place in all
operating companies.
• Speak up and whistleblowing channels are available across the
Group’s businesses.
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International Airlines Group | Annual Report and Accounts 2023
Viability assessment
Longer-term trends
and risk considerations
Risk assessment across
the timeline of the plan
Viability scenario process
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 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 directors have assessed key threats
and trends faced by the industry,
emerging risks and opportunities, 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 and
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 IAG Management Committee and
the Board in conjunction with the
priorities of and risks faced by the
business; and
• the Board has also conducted its
annual strategy session in addition
to regular performance and strategy
delivery progress reviews during the
year. Following this process, short-,
medium- and longer-term priorities,
challenges and opportunities have
been identified and actions agreed.
The directors have assessed key threats
and trends, and emerging risks and
opportunities, to determine plausible
but severe downside scenarios that
could impact the Group’s three-year
business plan.
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, move to and
exploitation of the cloud, AI and disruptive
innovation tools. These trends may require
the business to consider strategic
responses, business model adaptions and
new skillsets ahead of any potential impact
to the Group plan.
Other considerations include:
• economic trends and shifts in the relative
strengths of global economies including
rise of emerging markets and hubs,
market shifts and interconnectivity
including partnerships and alliances, the
competitive landscape and changes in
customer mix or sentiment to travel;
• supply chains and proximity and
reliability of supply, inflationary,
resource 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;
• increasing regulatory burdens,
asymmetry in policy and/or government
intervention impacting aviation and the
Group’s business model;
• areas of risk or opportunity for the
Group, such as workforce availability,
migration, war for talent, impact of
AI on business and skillsets, outcomes
of mis- and dis-information, diversity
and inclusion ambitions, hybrid ways
of working and different career
expectations from new joiners into
workforces and the aviation industry;
• structural changes in how
customers travel;
• the potential macroeconomic
consequences of interest rates and
inflation especially where there are
labour shortages in key markets or
a shortage of technical specialists;
• the potential longer-term impacts
of Brexit and the UK’s divergence from
EU policy and laws;
• the Group’s resilience to future events
impacting aviation or global markets,
financial markets, interest rates and
exchange rates, particularly the US
dollar; and
• stakeholder expectations over
commitment to acting with integrity
to protect our planet, particularly
climate change and carbon impacts.
International Airlines Group | Annual Report and Accounts 2023
133
Financial StatementsCorporate GovernanceStrategic Report Risk management and principal risk factors continued
Scenarios modelled
The scenarios have been defined
by management and designed
to consider principal risks (or
combinations of risks) that could
materialise over the viability period and
weaken the Group’s liquidity position,
and therefore its financial sustainability.
Each scenario is regarded as severe but
also plausible and has considered the
impact on liquidity, solvency and the
ability to raise financing in an uncertain
and volatile environment.
Management has also assessed
mitigations that are available to the
business beyond operating cost
reductions including further financing,
capital expenditure plans and potential
disposals. Options are presented, as
appropriate, for the Board to assess. In
reviewing 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 revenue and margin
reverse stress tests, which demonstrated
the level of sustained passenger revenue
decline, and, separately, 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.
No. Title
1
Downside case
This scenario configures a blend of commercial and operational adverse impacts which would result in capacity
reductions, in addition to an increase in fuel prices, over and above the Group’s business plan assumptions.
Economic considerations include a combination of events reducing capacity up to a maximum of 25%,
increasing fuel prices up to 20%, reducing passenger unit revenue and increased operational costs.
The Downside case assumes that British Airways would be required to draw down, in full, its portion of the
available US dollar Revolving Credit Facility. The Downside case also builds in a downside impact in Air Europa
Holdings, which the Group plans to acquire in the plan period, subject to regulatory approval.
The period to June 2025 of this Downside case has also been applied as the Downside case in the going
concern analysis (see note 2 of the Group financial statements).
2 Operational resilience challenges
Lost revenue within some IAG airlines from pre-emptive flight cancellations in response to resourcing
challenges with resultant reputational impact.
Ongoing challenges in the global supply chain, particularly engine availability, reliability and performance leads
to an increase in grounded aircraft awaiting maintenance with further capacity reductions also impacting
revenues. Revenues from the Group’s maintenance business also impacted by the lack of available spare parts.
Further revenue impact considered from reduced capacity as a result of airport capacity and air traffic control
airspace restrictions.
Revenue impact from schedule disruption due to extreme weather events also considered within the scenario.
3 Cybersecurity and IT infrastructure
A stress to model the impact of a ransomware attack on an IAG airline. The scenario assumes a disruption
period of five days 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 impacts to other IAG airlines due to the 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 and other customer goodwill costs. Associated costs of recovery 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.
In addition, the scenario considers an unplanned outage owing to data centre migration activity resulting in
short notice flight cancellations causing further lost revenue and increased EU 261 and other customer goodwill
costs.
Link to
principal risks
2, 3, 4,
8, 12, 13
1, 4, 5,
8, 9
1, 6, 7, 8
4 Sustainability and business transformation
An increasing revenue stress on short-haul operations across the Group to reflect changes in customer
behaviours towards short-haul travel where other travel options exist.
1, 4, 11
Increased carbon costs and sustainable fuel costs to meet mandates and where supply cannot be secured. Revenues
in key markets below plan expectations also modelled to reflect a potential long-term change in mix and travel
behaviours.
Potential for lost revenue impact arising from delays in delivering and realising the benefits of business
transformation initiatives and increased costs of securing required resourcing levels.
Longer-term consideration of the impacts of climate change and carbon and regulatory initiatives to address
this within the aviation sector, such as the implementation of new regulatory policy, carbon costs and the cost
and availability of Sustainable Aviation Fuel are also subject to assessment and modelling by the Group in
addition to the viability scenario assessments.
Viability scenario includes
sustainability-related stress
134
International Airlines Group | Annual Report and Accounts 2023
Viability statement
The directors have assessed the viability
of the Group over three years to
December 2026. They have considered
the global macroeconomic environment
and geopolitical uncertainty, the health
of the aviation industry and its supply
chain, 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 timeframe for assessment
as it is aligned with the Group’s strategic
planning period (as reflected in the
plan), and as the external uncertainties
facing the aviation sector continue to be
significant and many are beyond the
Group’s ability to influence directly.
The Board recognises the pace of
change required within the Group to
further adapt, build appropriate
resilience and respond to this
environment, in addition to the rapidly
changing competitive landscape and
wider global macroeconomic conditions.
The Group has reviewed the modelling
of 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 2026. However,
this is subject to a number of significant
factors that are outside the control
of the Group. In reaching this
assessment the directors have made
assumptions when considering both the
plan and the Downside case (the most
severe and plausible of the viability
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;
• any future pandemic or other public
health-related restrictions do not
result in further prolonged and
substantial capacity reductions and
groundings as governments do not
have the appetite for the economic
impact and stress that it would place
on their respective economies and
populations;
• 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; and
• geopolitical events do not result
in significant war zones impacting
financial markets, airspace operations
and connectivity flows across our
flight schedules.
International Airlines Group | Annual Report and Accounts 2023
135
Financial StatementsCorporate GovernanceStrategic Report
Chairman's Introduction to Corporate Governance
Javier Ferrán
Chairman
Driving a culture
that ensures
alignment of our
purpose, values
and strategy
I am pleased to present
the Corporate Governance
report which provides an
overview of IAG’s
governance framework
and its application during
the past year, as well as
the work of the IAG Board
of Directors during this
period.
We remain committed to delivering
sustainable long-term value and positive
outcomes for our people, customers,
shareholders and society. As I stated in
the introduction to this annual report,
2023 has been a year in which our
recovery from the pandemic has allowed
us to reinforce our purpose of
connecting people, businesses and
countries by restoring capacity,
reopening routes and offering new
destinations.
136
International Airlines Group | Annual Report and Accounts 2023
It has been a year of hard work for our
management team, moving from
business recovery to the reset and
transformation of the business into a
new phase for IAG which we presented
to the investment community at our
Capital Markets Day in November 2023.
With a long-term vision and a focus
on the sustainability of our business,
the Board has accompanied the
management team on this journey,
primarily supporting but also challenging
them where necessary.
We are also proud of the progress made
on sustainability. Our focus is supported
by the work of the Safety, Environment
and Corporate Responsibility
Committee, which has been valuable in
providing insight into stakeholders’
interests and oversight of the important
sustainability and corporate
responsibility work being carried out by
our management team, ensuring that we
are best placed to achieve our
environmental and social ambitions.
The work of this and the other Board
committees in 2023, as set out in their
individual reports, is fundamental to
supporting the Group governance
framework that underpins our business
model.
Board composition
There were no changes to the Board
composition during the year. The Board,
through the Nominations Committee,
considers its composition and
succession planning on an ongoing
basis, including identifying those skills
where enhancements to current
composition should be a focus for future
recruitment. We are confident that our
Board brings together the range of
experience and knowledge necessary for
it to function properly, drawing on
external advice or training in areas
where specific knowledge is required or
where we need to strengthen and
supplement the board skills. Subject to
our statutory nationality requirements,
we have a fairly diverse Board, in the
broadest sense, including five different
nationalities and solid international
experience.
Management changes
There were several key Management
Committee appointments during the
year. Following a period of renewal over
the past three years, IAG’s new
management team was introduced and
took part in our Capital Markets Day.
The refreshed leadership team is well
positioned to support our Group Chief
Executive in delivering our strategic
priorities. These appointments are
detailed in the Nominations Committee
report.
Culture and diversity
Connecting with our workforce
throughout the year has supported the
Board’s ability to deliver on its key
objective of driving a culture in IAG that
ensures alignment of our purpose and
values, as well as with the Group
strategy.
In 2023, we built on the comprehensive
workforce engagement programme
previously established and continued to
meet and interact with our various
teams. We recognise the time and
commitment that this type of
programme requires, both on our part
and on the part of IAG and each
operating company, but we believe that
the value we derive from this
engagement, both for the Board and for
the management team itself, more than
compensates for it. The open exchange
and learnings provided by these sessions
will serve to accelerate the cultural and
operational transformation of the
business. The workforce engagement
section in this report provides further
detail on programme content and
positive outcomes delivered.
Creating a diverse and inclusive culture
continues to be a focus. We are proud
of our gender representation that
includes 45% female Board members,
a female Senior Independent Director
and three female Board advisory
committee chairs. We also have one
director from a ethnic minority
background. Our focus and resultant
Board composition ensured that we met
the targets for reporting set by the UK
Listings Rules and complied with the
Spanish Corporate Governance Code.
Succession planning and oversight of
developments under our Equity,
Diversity and Inclusion Policy will
continue to be a priority. At
management level, a great deal of focus
and effort is being put into making
progress in this area and the results are
beginning to show, although there is still
some way to go to achieve our ambition
of 40% senior leadership roles held by
women by 2025 and our newly reported
ethnic diversity ambition of 10% for the
Group’s UK senior leadership population
by the end of 2027. Beyond these
aspirations, the Nominations Committee
has given priority in recent years to
overseeing the detailed work on equity,
diversity and inclusion, which is
substantial, as well as the work
completed on talent development and
succession programmes.
Board evaluation
Reflecting our commitment to good
governance, the Nominations
Committee oversaw the evaluation of
the performance of the Board and all our
committees, which we conducted
internally under my leadership as
Chairman of the Board, supported by
the Board Secretariat. The outcomes
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 maintain high standards of
corporate governance and business
conduct so that we can create long-term
sustainable value for our shareholders,
taking into account the interests of all
our stakeholders.
Our people remain at the heart and
centre of our business. On behalf of the
Board, I would like to express my
ongoing appreciation for their efforts
and commitment during this
transformative year. I would also like to
thank my Board colleagues for their
continued support and dedication.
Javier Ferrán
Chairman
International Airlines Group | Annual Report and Accounts 2023
137
Financial StatementsCorporate GovernanceStrategic Report 5
9
6
7
8
4
3
2
1
11
10
138
International Airlines Group | Annual Report and Accounts 2023
Our Board of Directors
5. 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.
6. Eva Castillo A R
Key areas of experience:
Financial sector, telecoms sector
Current external appointments:
Non-executive director, Caixabank.
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, Zardoya Otis
2019-2022. 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.
3. Nicola Shaw R
S
Key areas of experience:
Transport sector, public policy and
regulatory affairs, consumer, safety and
environment operational management
Current external appointments:
Chief Executive, Yorkshire Water.
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 Strategic Rail Authority
2002–2005. Deputy Director and
Deputy Chief Economist, Office of
the Rail Regulator (ORR) 1999–2002.
4. Maurice Lam A S
Key areas of experience:
Professional services, financial
accounting, audit and compliance
in the banking industry
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.
1. 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.
2. 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.
Key
Committee Chair
A Audit and Compliance Committee
N Nominations Committee
R Remuneration Committee
S
Safety, Environment and Corporate
Responsibility Committee
International Airlines Group | Annual Report and Accounts 2023
139
Financial StatementsCorporate GovernanceStrategic Report 11. 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.
Board Leadership continued
7. 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.
8. Emilio Saracho R
Key areas of experience:
Banking, corporate finance, investment
management
S
Current external appointments:
Senior Advisor, Altamar Capital Partners.
Previous relevant experience:
Non-executive director, Inditex 2010-
2023. 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.
Key
Committee Chair
A Audit and Compliance Committee
N Nominations Committee
R Remuneration Committee
S
Safety, Environment and Corporate
Responsibility Committee
9. 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.
10. Peggy Bruzelius A N
Key areas of experience:
Financial services, corporate finance
Current external appointments:
Non-executive director, Orrön Energy
AB. Chair, Lancelot Holding AB. Member,
the Royal Academy of Engineering
Sciences.
Previous relevant experience:
Non-executive director, Skandia Mutual
Life Insurance 2012-2022. Non-executive
director, Lundin Energy AB 2012-2022.
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.
140
International Airlines Group | Annual Report and Accounts 2023
Corporate Governance
Statement of compliance
with applicable corporate
governance codes
IAG is incorporated and listed in Spain
and is subject to Spanish legislation and
corporate governance requirements. The
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).
IAG is also listed on the London Stock
Exchange, and is 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). A copy of the current
version of the UK Corporate Governance
Code, updated and published in July
2018, is available on 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 2023.
In addition, and as required by the UK
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
are provided below.
During 2023, IAG fully complied with
all applicable recommendations of the
Spanish Corporate Governance Code;
even though 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.
The Company confirms that it applied
the principles and complied with all
the provisions of the UK Corporate
Governance Code in the reporting
period.
Applying the principles of the UK Corporate Governance Code
Board leadership and company purpose
Chair’s introductory statement
Board leadership and company purpose
Corporate culture
Investment in the workforce
Board activities
How the Board considers stakeholders’ interests
Board decisions, corporate interest and
stakeholders
Section 172 statement
Whistleblowing
Conflicts of interest
Division of responsibilities
Governance framework and Group structure
Board of Directors: division of responsibilities
Board and Committee meetings
Directors’ independence
Board and Committee attendance during 2023
136-137
146
146
146
152
147-151
148-151
147
110, 167, 170
153
142-143
142-143
151
144, 158
151
Composition, succession and evaluation
Board biographies
Board composition
Nominations Committee report
Appointment, re-election, resignation
and removal of directors
Board evaluation
Audit, risk and internal controls
Audit and Compliance Committee report
Fair, balanced and understandable confirmation
Confirmation re assessment of emerging and
principal risks
Risk management and internal control
Principal risks and uncertainties
Remuneration
Remuneration Committee Chair Statement
Directors’ Remuneration Report
Alignment with Provision 40
139-140
144-145
156-159
144,158
153
164-174
166-168
115
113-115
116-132
175-177
178-207
180
International Airlines Group | Annual Report and Accounts 2023
141
Financial StatementsCorporate GovernanceStrategic Report
Corporate Governance continued
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
Heather Ann McSharry
n
o
i
t
a
g
e
e
D
l
Board Advisory Committees
Audit and
Compliance
Nominations
Remuneration
Safety,
Environment
and Corporate
Responsibility
y
t
i
l
i
b
a
t
n
u
o
c
c
A
IAG Management Committee
Led by the Group 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
The corporate governance framework was last
approved by the Board on 25 February 2021
Key matters reserved to the Board
are:
• Submission of proposals to the
shareholders’ meetings
• Preparation of the annual statutory
disclosures
• 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, setting risk appetite
• Ensuring effectiveness of the
corporate governance system
Further detail is set out in the section on
Decision-making, reserved matters and
delegation.
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 leads the evaluation
of his performance
• Serves as intermediary for other
directors when necessary
• Available to shareholders if concerns
are 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
• Develops an effective management
strategy
• Oversees the preparation of
operational and commercial plans
• Puts in place effective controls
• Coordinates Group activities
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International Airlines Group | Annual Report and Accounts 2023
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. IAG’s light central structure
drives portfolio and financial strategy,
oversees intragroup coordination to
maximise value creation, manages
central functions, including the
development of its common integrated
platform, and facilitates the sharing
of best practice, innovation and
synergies of scale.
Each operating company has an
individual brand and cultural identity,
and customised business model. Each is
responsible for executing its strategy,
accountable for its results and has its
own board of directors and
management committee, led by the top
executive of each company. Matters are
only executed centrally where it
provides additional value and where
centres of excellence have been created.
While each of our airlines possess its
own distinctive proposition, IAG enables
them to work together towards a
common goal.
Further details on the Group structure
can be found in the Business Model
section within the Strategic report.
Board of Directors: division of
responsibilities
The IAG Board is 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 the Board Regulations, which are
available on the Company’s corporate
website (www.iairgroup.com), the Board
endeavours to reconcile the corporate
interest with the legitimate interests of
the employees, suppliers, customers,
and other affected stakeholders, 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 in this report and
in the stakeholder engagement section.
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.
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 independent
non-executive 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. The Board has
also approved separate regulations for
each of the Board committees. These
regulations are also available on the
corporate website. The roles,
membership and activities of these
committees during 2023 are described
in the individual reports within this
Corporate Governance report.
There is a clear separation of the roles
of the Chairman and the Group Chief
Executive, 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 his 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.
International Airlines Group | Annual Report and Accounts 2023
143
Financial StatementsCorporate GovernanceStrategic Report Corporate Governance continued
Board composition
The IAG Board comprises eight independent non-executive directors, one of which is the Chairman, two proprietary non-executive
directors (as described below), and one executive director, IAG’s Group Chief Executive. The biographies of each member of the
Board are set out in the Board of Directors section.
There were no changes to the Board composition during 2023.
As set out in the Company’s Bylaws, the Board shall comprise a minimum of nine and a maximum of 14 members. As of 31 December
2023, the Board composition was:
Name of Board Member
Javier Ferrán
Luis Gallego
Heather Ann McSharry
Giles Agutter
Peggy Bruzelius
Eva Castillo
Margaret Ewing
Maurice Lam
Robin Phillips
Emilio Saracho
Nicola Shaw
Position/Category
Chairman
Group Chief Executive
Senior Independent Director
Director (proprietary)
Director (independent)
Director (independent)
Director (independent)
Director (independent)
Director (proprietary)
Director (independent)
Director (independent)
First appointed
20 June 2019
8 September 2020
31 December 2020
8 September 2020
31 December 2020
31 December 2020
20 June 2019
17 June 2021
8 September 2020
16 June 2016
1 January 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, Nicholas Cadbury, and the Group General Counsel, Sarah Clements, also attend Board
meetings.
Directors’ independence
The Board, as reported by the
Nominations Committee, reviewed
directors' independence at its meeting
held on 18 January 2024. 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 interest and independence of
directors later in this report and in the
Nominations Committee report.
The Chairman was considered
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. The longest serving director,
Emilio Saracho, has served on the Board
since 2016.
Appointment, re-election,
resignation, and removal of directors
The selection and appointment process
is described 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 a Nominations
Committee proposal in the case of
independent directors, or its
recommendation for all other categories
of directors. This proposal or
recommendation 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 this, a director must
resign under article 17.2 of the Board
Regulations, when, amongst other
matters, 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 several
disclosure obligations, including the duty
to inform the Company of any situation
in which they are involved which 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, following a report by the
Nominations Committee and taking into
account the corporate interest.
144
International Airlines Group | Annual Report and Accounts 2023
The Board may only propose the removal
of a non-executive director before the
end of a term if, after receiving a report
from the Nominations Committee, it
considers there is just cause. For these
purposes, just cause is deemed to exist
when the director takes up new positions
or enters into new obligations that
prevent the director from dedicating the
necessary time to the performance of
their duties as a director, otherwise
breaches their duties as a director or
unexpectedly becomes subject to any of
the circumstances set out in article 17.2 of
the Board Regulations.
The removal may also be proposed as a
result of a takeover bid, merger or other
similar corporate transactions that
results in a material change of control.
The rules on the actions and
communication required from a director
who stands down before the end of the
term in office, are set out in the Board
Regulations.
Diversity
The Board has a balance of members with
more than 40% being women, with a
woman as the Senior Independent
Director and women chairing Board
advisory committees. At least one
member of the Board is from an ethnic
minority background.
The Board supports diversity in a
broader context, considering several
factors to optimise board composition.
In addition to skills, gender and
experience, the Board ensures
compliance with regulatory
requirements including the need to have
more than half the Board comprised
of independent EU nationals.
Further details on the Equity, Diversity
and Inclusion Policy, can be found in the
Nominations Committee report.
Nationality
Gender
Tenure1
Spain
UK
Ireland
Sweden
Luxembourg
Board experience2
Related industry
General management
Consumer Brands B2C
Corporate transactions
ESG/Sustainability
6
5
Female
Male
1
1
6
0-3 years
4-6 years
7-9 years
40%
60%
20%
20%
20%
70%
80%
CEO/Chair experience in a listed company
Accounting, financial and related
Technology
10%
1 Tenure, which is as at the 2024 Annual General Meeting, comprises solely of independent non-executive directors, including the Chairman
(eight directors). The three remaining directors' tenure is less than four years
2 Non-executive directors only
International Airlines Group | Annual Report and Accounts 2023
145
Financial StatementsCorporate GovernanceStrategic Report Investment in the workforce
Group companies invest in their
employees through training and
development programmes, as well
as through healthcare and wellbeing
programmes. Specific conditions are
set and managed within each operating
company, enabling them to put in place
appropriate programmes 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. Collective
bargaining arrangements are in place for
87% of the workforce. We work closely
with employee representatives to
consult on reward matters. For those
outside collective agreements, we
benchmark roles and rewards against
local markets to ensure they remain
attractive and competitive.
Further information on workforce
remuneration can be found in the
Directors Remuneration Report.
Corporate Governance continued
Board leadership and
company purpose
IAG’s purpose – ‘To connect people,
businesses and countries’ – underpins
the Group’s vision to be a world-leading
airline group on sustainability,
maximising sustainable value creation
for its shareholders. IAG continues to
use its unique business model to pursue
this purpose and vision, whilst delivering
sustainable value for customers,
its people, its shareholders and the
communities it serves.
By connecting people, businesses and
countries, the Group can provide the
jobs, prosperity and cultural benefits
that travel has always created.
The Board believes that IAG can achieve
its purpose and vision by promoting the
Group’s common values of commitment,
pragmatism, execution, ambition,
resilience, and being a challenger and
innovator, a team player, responsible
and people-focused. The focus on
corporate culture and values is an
essential element in the continued
transformation and execution of the
Group's strategy.
Further detail on IAG’s purpose and
values can be found throughout this
annual report, including in the People
section.
Corporate culture
As a Board, we have continued to focus
on culture and ways of working within
the Group as we invest in both our
people and the business.
Complementing the Group’s common
values, each operating company and
platform business has its own corporate
culture and values which support its
unique brand, business, customer, and
employee propositions. All our operating
companies and platform businesses
remain focused on building and
embedding the culture needed to enable
our businesses to be competitive,
achieve our transformation agenda and
provide a great working environment in
which all colleagues can thrive.
In 2023, the Board continued to review
progress on culture, supporting
management’s focus on transforming
IAG’s culture and continuing to focus on
building an inclusive, supportive, and
healthy working environment. During
2023, the Board considered the
outcome of the latest Organisational
Health Index (OHI) survey completed by
all employees in May and the follow-up
pulse survey undertaken in November,
including the insights from operating
companies and the agreed priorities for
improving culture, ways of working and
shaping people strategies.
Further, through the enhanced
workforce engagement activity
highlighted in this report,
representatives of the Board have heard
first hand from employees across the
Group on their experience of working
within IAG, the prevailing culture and
areas where improvements to current
practices have been suggested.
At the Board strategy meeting held in
September 2023, specific focus was
placed on people and culture. Individual
operating company plans were also
reviewed to understand the extent to
which their people transformation
priorities and plans supported the
delivery of the operating company
strategy.
The Nominations, the Remuneration and
the Safety Environment and Corporate
Responsibility Committees received
updates on a range of workforce and
people topics including talent and
succession planning, inclusion and
diversity, and workforce remuneration.
146
International Airlines Group | Annual Report and Accounts 2023
Decision making and
stakeholder interests
Section 172 Statement
(and compliance with article
3.6 of IAG’s Board of Directors’
Regulations)
Section 172 of the UK Companies Act
2006 requires directors of a company to
promote the long-term success of the
company for the benefit of its members
and to consider the interests of other
stakeholders in their decision making.
This is in line with Recommendation 12
of the Spanish Corporate Governance
Code, which is reflected in article 3.6 of
our Board of Directors' Regulations.
Given the nature of our business,
we understand the importance of
stakeholder engagement to inform
our strategy and the way in which
we operate. This section describes how
the directors in their deliberations and
decision-making, consider the interests
of stakeholders to create value and
promote the long-term success of the
Company. As these interests can
conflict, the directors need to balance
stakeholder interests with the corporate
interest, including consideration of the
impact of activities on the environment
and communities in which we operate.
During the reporting period, the
directors acted in good faith, with unity
of purpose and independent judgement,
upholding high standards of business
conduct and treating shareholders fairly.
Feedback from stakeholders received by
various parts of the business helps to
inform decisions overseen by the Board.
Where relevant, the views of
stakeholders are embedded in the
proposals presented to the Board for
consideration or decision. In addition,
the diverse set of skills, knowledge and
experience of the Board members
enables them to apply the appropriate
level of rigorous challenge and
evaluation to decisions.
Further details on how the provisions of
Section 172 were considered can also be
found throughout the Strategic and
Corporate Governance reports. The
Board of Directors’ Regulations as well
as the Group policy on delegation and
decision making ensures that relevant
matters are escalated to the Board for
consideration and that information is
provided to directors with sufficient time
for their analysis and consideration.
Directors also participate in the design
of the Board plan of activities for the
year, setting the priorities for the Board
and including any areas of interest
requested by directors. Further
information is provided in the
Information and training section in this
report.
International Airlines Group | Annual Report and Accounts 2023
147
Financial StatementsCorporate GovernanceStrategic Report Corporate Governance continued
Board decisions, corporate interest and stakeholders
The table below outlines how the provisions of section 172 (1) of the UK Companies Act and article 3.6 of the IAG Board of Directors
Regulations are considered by the Board.
Section 172 (1)
provision
a Decisions
for the long
term
Description of Board activity supporting decisions
• Strategy meeting considered current strategic priorities taking account of
market and industry trends and their medium to longer-term implications
• Monitored progress against strategic priorities through updates on the key
transformation projects
Further information in the Annual
Report and the Company’s website
• Business model
• Strategic priorities
• Sustainability
• Operating company annual
• Reviews the allocation of capital and the capital structure of the company at
reports
least once per year
• Specific session at Strategy meeting on sustainability and environmental matters
considered throughout the year, including in relation to investment decisions
• Considered risk and risk appetite, business plans and viability statement over
a three-year period to 2026
• Examples of relevant
decisions taken during
the year
b Employee
interests
• Results and regular updates on Group-wide OHI surveys covering culture,
management practices as well as how feedback would be used to strengthen,
progress and embed organisational transformation, people and culture strategies
• Designated non-executive directors carried out structured workforce engagement
• Stakeholder engagement
• Corporate Governance
report (workforce
engagement)
visits, reporting back to the Board on key emerging themes
• Regular updates on relevant discussions with unions and works councils
• Updates on organisational transformations and major change programmes
• Review of management succession planning
c Business
• Regular reports from the operating companies on customer engagement as
relationships
with
suppliers,
customers
and others
part of business reports
• Regular updates on corporate affairs, including regulatory challenges and
engagement with governments and regulatory bodies, as well as any relevant
matters regarding suppliers
• Updates from operating company CEOs on customer initiatives
• Briefing on suppliers to Safety, Environment and Corporate Responsibility
(SECR) Committee in relation to modern slavery and generally in relation to
suppliers’ environmental matters.
• Updates from the Head of Fleet Investments on aircraft and engine
manufacturer engagement when considering aircraft purchases and specific
briefings relating to quality or supply issues
d Community
• Regular reports from operating company CEOs, the Chief People, Corporate
and
environment
impact
Affairs and Sustainability Officer, the Group Head of Sustainability and
management responsible for sustainability matters
• Ongoing work of the SECR Committee to oversee and monitor progress on
the sustainability agenda
• Investment decisions all take account of impact on environment and other
sustainability matters, as applicable
• Group Chief Executive reports highlighting key market issues, including
regulatory or operational matters
e Reputation
for high
standards
of business
conduct
• Business model
• Stakeholder engagement
• Business model
• Stakeholder Engagement
• Strategic report
• SECR Committee report
• Group consolidated
statement of non-financial
information
• Stakeholder engagement
• Audit and Compliance
• Appropriate escalation from operating companies of key metrics tracking
Committee report
feedback from customers and employees
• SECR Committee report
• Regular feedback from Investor Relations on the status of shareholder
relations, monitoring movements in the shareholder base, and discussions
with key shareholders
• Remit and work of the Audit and Compliance and SECR Committees supports
standards of business conduct
f Fairness
between
shareholders
• Related party transactions involving key shareholders follow a review process,
detailed further in the Corporate Governance report
• Chairman and chair of the Remuneration Committee met with shareholders
during the year
• Hybrid Annual General Meeting format to encourage and enable wider retail
and institutional shareholder participation given that many are in the UK or US
• Regular Investor Relations updates as under (e) above
• Business model
• Stakeholder engagement
• Strategy
• Remuneration Committee
report
• Corporate Governance report
(Directors’ duties, conflicts of
interest and related party
transactions)
148
International Airlines Group | Annual Report and Accounts 2023
Examples of relevant decisions taken during the year
In each instance, the Board was provided with a detailed analysis of the proposal, including potential alternatives, feasibility and risk
assessment, as well as synergies across the Group.
Acquisition of aircraft
The Board approved several proposals
to purchase aircraft including 10 A320
neos, with no designated airline
beneficiary, six Boeing 787-10s for
British Airways and one Airbus
A350-900 for Iberia
Section 172(1) provisions
(a), (c), (d)
Considerations
• Alignment to each airline’s strategic
objectives
• Securing commercially attractive and
competitively priced terms
• Alignment with IAG’s environmental
commitments, including zero
emissions by 2050
• Replacing older generation aircraft
with more fuel-efficient aircraft
generates significant fuel and
maintenance costs savings, and
improved reliability
• Improved utilisation of on-board
space provides increased revenues
and decreased costs and emissions
per seat
• Improved customer experience both
in airline and service levels, and
responding to environmental
concerns expressed by customers
• Sources of financing to meet the
substantial payment obligations, with
a potential consequential impact on
existing debt providers. Related
capital expenditure will mostly align
to delivery of aircraft
• For Iberia, the A350-900 is an
efficient aircraft in terms of cabin
layout and fuel consumption, and the
backbone of Iberia’s transformation
through fleet renewal to meet its
medium-term objectives
• For British Airways, the B787-10
provides improved efficiency and
carbon intensity. Overall emissions
are impacted by the high premium
seat configuration, with decisions
based on customer market segment
drivers at the time
Lounge investments
The Board approved a move of the
Aer Lingus lounge terminal at John F.
Kennedy International Airport (JFK)
and an investment in British Airways’
lounge facilities at Miami International
Airport
Section 172(1) provisions
(a), (b), (c), (d), (e)
Considerations
Aer Lingus lounge move at JFK
• JFK is the flagship North American
route for Aer Lingus, with ambition
for further growth
• Supports long-term stability and
future growth for Aer Lingus in JFK
with potential for other Group airlines
• Attractive alternative from a cost/
revenue perspective
• Provides ability to maintain current
customer proposition
accommodating current schedule
and enables growth of future
additional services
• Facilitates excellent customer
experience through continued
provision of a dedicated lounge
• Incorporates sustainability goals and
requirements into the design and
future operational planning
British Airways Lounge in Miami
• Alignment with British Airways’
strategy to operate a lounge in its
most important locations
• Improves customer experience as
current offering was an inconvenient
distance to British Airways’ gates,
and the new lounge will be within
one minute walking distance
• Enables British Airways to control
and enhance the entire customer
proposition
• Increases customer satisfaction and
strengthens market position
• Benefit to other Group operating
companies from lounge access
• Lease, construction and operating
costs in line with overall Group
strategy and business plan
Acquisition of Air Europa
The Board approved the acquisition of
the remaining 80% of Air Europa, and
the agreement was signed on
23 February 2023. Completion is
subject to regulatory approval
Section 172(1) provisions
(a), (b) (c), (d), (e)
Considerations
• The addition of Air Europa aligns to
the Group’s strategic objectives. It is
a good strategic fit and we have a
strong record of successful
acquisitions
• Transforms IAG’s Madrid hub into a
true rival to Europe’s four largest
hubs, benefiting consumers and the
wider Spanish market
• Re-establishes IAG as a leader in the
highly competitive Europe to Latin
America and Caribbean markets
providing increased access for
customers, unleashing further
network growth
• Significant customer benefits through
increased choice and schedule
flexibility and greater opportunities
to earn and redeem miles
• Financial impact of transaction on
current and future objectives,
including deferral of the purchase
price until approval together with
staggered payment terms
• Significant synergy potential across
the Group including the addition of
reciprocal intra-Group codeshares
across all connecting gateways
• Remedy package still under
discussion to address regulatory
concerns
International Airlines Group | Annual Report and Accounts 2023
149
Financial StatementsCorporate GovernanceStrategic Report Corporate Governance continued
Decision-making, reserved matters
and delegation
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 authority for itself on
several matters, including three key
areas as set out below:
• 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 the 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;
and
• according to certain quantitative
thresholds, the approval of contractual
commitments, asset acquisition or
disposals, capital expenditures,
borrowings, or equity investments.
The Group’s decision-making process is
regulated by an internal policy covering
the IAG Board, the IAG Management
Committee as well as the boards of the
main subsidiaries. In addition, another
policy regulates the Group’s investment
process. This authority framework and the
support provided by the Board advisory
committees underpin the effective
operation of the governance system.
As indicated above, there are occasions
where the Board may have to make
decisions balancing the competing
priorities of stakeholders. The principles set
out in article 3.6 of our Board Regulations,
which align with those reflected in section
172 of the UK Companies Act, are
embedded throughout the Group’s
decision-making processes.
Stakeholders’ interests
Day-to-day stewardship of 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.
Information on the Board’s engagement
with the workforce is provided in the
workforce engagement section of this
Corporate Governance report.
More information on our stakeholders
and our engagement with them can be
found in the Stakeholder engagement
section of this annual report.
Shareholders and investors
Shareholder interests are key in the
Board’s considerations. The Board
maintains a direct and active dialogue
with shareholders and investors mainly
through the Group Chief Executive and
the Group CFO, who meet with
shareholders and investors on a regular
basis, as well as through the Chairman,
the SID or the committee chairs as
appropriate. The Board is regularly
apprised of shareholders’ feedback and
the main issues discussed with
shareholders and investors.
In addition, the Chair of the
Remuneration Committee held meetings
with investors as detailed in the
Directors’ Remuneration Report.
Non-executive directors had the
opportunity to meet shareholders at the
shareholders’ meeting held in June, as
well as during the Capital Markets Day
held in November.
This was the first time since the
pandemic that IAG had hosted a Capital
Markets Day. Presentations and a
recording from the day are available to
view on our website. Discussions were
led by the Group Chief Executive,
highlighting our focus on maximising
shareholder returns underpinned by the
four near-term strategic priorities and
capital discipline together with a strong
balance sheet. The event provided an
opportunity for our institutional
shareholders to connect with
management and to obtain a deeper
understanding of how our stated
priorities translate to the operating
companies’ activities to achieve both
transformation, innovation, and growth.
Shareholders were able to hear from and
ask questions of the Group Chief
Executive, Group Chief Financial Officer,
and other members of the IAG
Management Committee, including the
Chief Executives of the operating
companies.
Positive feedback was received that
focused on the new strategic insights, in
particular around the Group’s markets
and networks, the increasing value of
the Spanish businesses, as well as the
attractiveness of IAG Loyalty. The
information provided on financial targets
was also well-received. On the other
hand, analysts and investors noted that
the higher level of investment would
have a detrimental short-term impact on
margins and free cash flow.
Additional information can be found
in the Stakeholder engagement section
of this annual report.
Workforce engagement
The designated directors visited our
operating companies and platform
businesses across IAG, to meet a variety
of employees and leaders in their work
context with the goal of better
understanding first-hand the challenges
and opportunities of the different
businesses, employee issues and levels
of engagement. These visits continue to
be valuable in understanding what
matters to colleagues across the
business, from ground and flight
operations to our customer support and
corporate teams, and with a mix of new
recruits and colleagues with long tenure
reflecting the changing composition of
the Group’s workforce.
Eva Castillo is the director responsible
for coordinating the workforce
engagement. She has been supported
during 2023 by Heather Ann McSharry,
Maurice Lam, Emilio Saracho and
Nicola Shaw.
In 2023, the designated directors
conducted eight engagement visits,
meeting colleagues across all operating
companies and across our four main
hubs (London, Madrid, Dublin and
Barcelona).
Board members noted the progress
made on transformation across all areas
and the increased focus on the people
agenda and in improving organisational
health and culture. The Board was
impressed with the high levels of pride
and commitment across all sites.
Whilst each visit highlighted some
specific local challenges, several key
themes emerged. These included:
communication, investment in facilities
and IT, flexible work arrangements, and
supply chain challenges. Each visit
included a debrief with senior teams on
emerging issues to ensure appropriate
actions are taken forward.
For further detail on the outcomes of
broader employee engagement
activities, refer to the Stakeholder
engagement section of this report.
150
International Airlines Group | Annual Report and Accounts 2023
The Board considered the results from
the 2023 workforce engagement
programme at its December meeting.
This feedback serves as valuable input
for decision-making processes related to
people and culture strategies and
organisational transformation.
In addition to the direct engagement
with employees, the Board has been
regularly informed about initiatives
at each operating company with respect
to its workforce. A session at the annual
Board strategy meeting was devoted to
the Group people strategy including
updates on talent, culture and diversity
and inclusion.
The Remuneration Committee was
updated on workforce remuneration and
how the operating companies were
supporting colleagues with cost-of-living
challenges, ensuring reward remained
fair and competitive, and how the
experience of IAG’s workforce compared
to senior leaders. The Nominations
Committee was updated on succession
planning for senior leadership including
an overview of recruitment, mobility and
attrition of senior leaders across the
Group.
Board and committee meetings
The Board met eight times during the
year, including its annual two-day
strategy meeting held in September
2023. Details of attendance at Board
and committee meetings are shown
below.
The Board Secretariat together with the
Group 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 Group
Chief Executive, with support from the
Group General Counsel and the Board
Secretariat. During 2023, the Board’s
main focus was to create sustainable
value over the long term, supporting
management and exercising oversight
over the Group’s businesses and
stakeholders’ interests. The key activities
of the Board in 2023 are detailed in the
Board activities table further on in this
report.
At each Board meeting, the Board
receives a report from each of the Chairs
of the committee meetings held prior to
that Board meeting. 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 and to ensure that all
Board members remain apprised of
committee activities. In addition, the
Group Chief Executive and the Chief
Financial Officer report to the Board
on key matters in the Group.
All scheduled Board meetings include
a private session for non-executive
directors to meet with the Chairman
to discuss any matters arising. 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 meets with the non-executive
directors, without the Chairman,
as part of the Chairman’s 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 non-executive director
specifically for that 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.
Board and committee attendance during 2023
Board member
Javier Ferrán
Luis Gallego
Giles Agutter
Peggy Bruzelius
Eva Castillo
Margaret Ewing
Maurice Lam
Heather Ann McSharry
Robin Phillips
Emilio Saracho
Nicola Shaw
Board
Audit and Compliance
Committee
Nominations
Committee
Remuneration
Committee
Safety, Environment and Corporate
Responsibility Committee
8/8
8/8
7/8
8/8
8/8
8/8
7/8
8/8
8/8
8/8
8/8
6/6
6/6
5/6
6/6
6/6
7/7
7/7
7/7
6/7
5/5
5/5
5/5
5/5
4/4
3/4
4/4
3/4
4/4
International Airlines Group | Annual Report and Accounts 2023
151
Financial StatementsCorporate GovernanceStrategic Report Corporate Governance continued
Board activities
The key areas of Board activities during
2023 are outlined below:
Strategy and planning
Joint Board/Management Committee
two-day strategy session in September,
including:
• External view on airline industry
• Market analysis – the Americas, Spain
and intra-Europe, Asia and India
• People and culture
• Sustainability
Performance and monitoring
• Operating companies’ regular
reporting, including transformation
updates
• Quarterly and full-year financial
reporting
• Monthly financial report (reviewed
at the relevant meeting or distributed
to all Board members)
• Review of different joint business
arrangements
Significant transactions, investments
and expenditures
• Financing arrangements
• Aircraft leases and lease agreements
for airport terminals and lounges
• Treasury shares buyback programmes
• Sustainable fuel provision agreements
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’s yearly report
to the Board
• Datacentre to Cloud migration update
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 and Directors’
Remuneration Policy review
• Shareholders’ meetings call notices
and proposed resolutions
• Review of the Board committees’
composition
• Board and committees’ evaluation and
improvement priorities
• Update on the Directors’ and Officers’
insurance programme
• Corporate governance updates
• Organisational Health Index – culture
review
• Regular reporting from matters
discussed by the Audit and
Compliance Committee, the
Nominations Committee, the
Remuneration Committee and the
Safety, Environment and Corporate
Responsibility Committee
Board information and training
In general, all Board and committee
meeting documents are available to all
directors ahead of meetings, 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 2023 financial year.
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 this as part of the
Board annual performance evaluation.
During 2023, directors’ training needs
were met by a combination of internal
presentations and updates as part of
Board and committee meetings and
specific sessions or deep dives on topics,
where required. Sessions which took
place included an update on competition
law provided by management to all
Board members; a session on safety
presented by an external expert to the
Safety, Environment and Corporate
Responsibility Committee; and a
presentation to the Audit and
Compliance Committee on corporate
governance reform proposals by the
external auditor, KPMG. A session was
also provided to the Board by an
external speaker on geopolitics and
macroeconomic developments. Training
for 2024 includes sustainability and
technology topics such as artificial
intelligence.
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 details 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 new directors to the IAG
Management Committee as well as to
the different operating companies’ teams.
In prior years, the programme was
considered thorough in its coverage
of the Group and the industry.
No new directors were appointed during
the year and therefore no induction
programme was required.
152
International Airlines Group | Annual Report and Accounts 2023
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. An internal evaluation was
completed this year as an external
review was undertaken in 2022.
The evaluation was led by the Chairman,
supported by the Board Secretariat,
using a self-assessment questionnaire
complemented by an individual
interview conducted by the Chairman
with each non-executive director. The
results were presented in a report to all
Board members, and an action plan to
address matters raised was agreed.
The overall conclusions of the review
were positive, confirming that the Board
and the committees continued to
adequately fulfil their responsibilities
and operated effectively during the
reporting period.
In relation to the agreed actions for
2023, the Board considered that good
progress had been made during the
year. Regular updates on shareholder
and investor engagement would
continue and be enhanced. Ensuring that
the Board continues to have the relevant
skills and expertise remains an ongoing
area of attention for the Nominations
Committee. The focus on customer
experience would also continue.
In addition to reviewing progress against
the agreed action plan for 2023, the
Board evaluation highlighted the strong
working relationship between the Board
and management, the progress made on
operating company transformation, as
well as the enhanced focus on culture
and people.
Actions agreed for 2024 include:
• broadening the Board’s visibility
on engagement with stakeholders,
with a focus on customers, suppliers
and investors;
• prioritising the focus on management
succession planning and talent
development, as well as on the
diversity and inclusion agenda; and
• continuing to oversee the cultural
transformation of the Group.
Other statutory information
Directors’ disclosure duties, conflicts
of interest, 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 2023 Annual General Meeting held
on 15 June 2023 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 Group airlines.
This close relationship of commercial
cooperation, which has always been
undertaken on an arm’s length basis and
on market terms, 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 UK 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. IAG’s internal regulations
on related party transactions establish
that 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. Where
appropriate, 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.
International Airlines Group | Annual Report and Accounts 2023
153
Financial StatementsCorporate GovernanceStrategic Report Corporate Governance continued
Share issues, buybacks, treasury
shares and dealings in IAG listed
securities
The Annual General Meeting held on
15 June 2023 provided authority for the
Board, with the express power of
substitution, for a term ending at the
2024 Annual General Meeting (or if
earlier, 15 months from 15 June 2023), to:
• increase the share capital pursuant to
Article 297.1.b) of the Spanish
Companies Law, by up to 50% of the
aggregate nominal amount of the
Company’s issued share capital as at
15 June 2023 (such amount to be
reduced by the maximum amount that
the share capital may be increased by
on the conversion or exchange of any
securities issued as authorised below),
through the issue and placement of
new shares (with or without a
premium) for cash consideration;
• 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 be
increased on the conversion or
exchange of all such securities may
not be higher than 50% of the
aggregate nominal amount of the
Company’s issued share capital as at
15 June 2023 (such amount to be
reduced by the amount that the share
capital has been increased 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 allotted on conversion or exchange
of such securities of:
• 10% of the aggregate nominal
amount of the Company’s issued
share capital to be issued on an
unrestricted basis; and
• an additional 10% of the aggregate
nominal amount of the Company’s
share capital to be used for either
an acquisition or a specified capital
investment;
in each case, without the shares or
convertible or exchangeable securities
first being offered to existing
shareholders in proportion to their
holdings;
• carry out the acquisition of its own
shares directly or indirectly through its
subsidiaries, subject to the following
conditions:
• the maximum aggregate number of
ordinary shares authorised to be
purchased shall be the lower of the
maximum amount permitted by the
law and 10% of the aggregate
nominal amount of the Company’s
issued share capital on 15 June, 2023;
• the minimum price per share which
may be paid is zero;
• the maximum price per share which
may be paid is the highest of:
• an amount equal to 5% above the
average of the middle market
quotations for the shares taken
from the relevant stock exchange
for the five business days
immediately preceding the day of
purchase; 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; 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
31 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 at 31 December 2023, the share
capital of the Company amounted to
497,147,601 euros (2022: 497,147,601
euros), divided into 4,971,476,010 shares
(2022: 4,971,476,010 shares) of the same
class and series and with a nominal value
of €0.10 each (2022: €0.10 each), fully
subscribed and paid for.
As at 31 December 2023, the Company
owned 55,844,755 shares as treasury
shares.
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
31 December 2023 the equivalent of
40,547,684 shares were held in ADR
form (2022: 48,799,780 shares).
Company’s share capital
During the year there were no changes to the share capital.
The significant shareholders of the Company as at 31 December 2023, 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
Number of direct
shares
Number of
indirect shares
Qatar Airways (Q.C.S.C.)
1,249,999,997
–
Capital Research and
Management Company
248,648,015
Collective investment institutions
managed by Capital Research
and Management Company
Name of direct holder
Total shares
1,249,999,997
248,648,015
Percentage
of capital
25.14%
5.001%
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International Airlines Group | Annual Report and Accounts 2023
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.
The Annual General Meeting was held on
15 June 2023 in Madrid. This was again
held in person as in 2022, with the
option for shareholders to attend and
participate in the meeting remotely.
The Shareholders’ Meeting Regulations,
which establish 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% 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 associated
with the breach represent at least 0.25%
of the Company’s share capital in
nominal value, the Board may also direct
that the transfer of any such shares is
not 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 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% 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 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. The Board receives an
annual update on the Group’s Directors’
and Officers’ liability insurance.
International Airlines Group | Annual Report and Accounts 2023
155
Financial StatementsCorporate GovernanceStrategic Report Report of the
Nominations Committee
Javier Ferrán
Nominations Committee Chair
Committee members
Javier Ferrán (Chair)
Giles Agutter
Peggy Bruzelius
Margaret Ewing
Heather Ann McSharry
Date appointed
8 September 2020
24 September 2020
16 June 2022
28 January 2021
31 December 2020
Dear Shareholder
I am pleased to present the Nominations
Committee Report for the year ended
31 December 2023. This report provides
an overview of the work of the
Committee and its activities during the
year.
The contribution of this Committee is
key to ensuring that we have in place
both a Board with the right combination
of relevant skills and capabilities as well
as an executive team capable of
delivering our strategy. As in previous
years, in 2023 the Committee focused
on succession planning and oversight of
the work being done on diversity and
inclusion for both the Board and senior
leaders.
Board succession planning remains an
area of work to ensure collective board
ability to oversee the implementation of
the Group’s strategy and effectively
support management to drive
transformation. Building on the findings
of the external Board evaluation
conducted in 2022, which are in line with
this year’s internal exercise, we have a
clear understanding of the skills and
expertise required and the aspects that
we could strengthen, so that we
continue to ensure the necessary
expertise and experience on our Board
and its committees.
Executive succession planning and
talent development has been an
important area of focus. The ongoing
monitoring of management’s plans and
programmes to improve the bench-
strength and diversity of the Group’s
senior leadership through active
succession planning and talent
management is a priority for the
Committee. We also continue to review
succession planning for the leadership
teams at our operating companies. This
year the Committee considered several
new appointments to the IAG
Management Committee and to the
boards and leadership teams of some of
our operating companies, including the
appointment of Fernando Candela as
Chairman and CEO of Iberia; Julio
Rodriguez as Chief Commercial Strategy
Officer; Jorge Saco as Chief Information,
Procurement, Services and Innovation
Officer; and Jonathan Sullivan as Chief
Transformation and Corporate
Development Officer.
Following the refresh of both our Board
Directors Selection and Diversity Policy
and our Equity, Diversity and Inclusion
Policy in 2022, we continue to build on
the diversity strategy and framework.
We are satisfied that the Board
composition continues to meet the
targets for the proportion of women on
boards and ethnic diversity as set out in
either the European and Spanish
standards and the UK Listings Rules, the
latter informed by the UK FTSE Women
Leaders Review and the UK Parker
Review.
The Committee also supports
management's efforts to strengthen the
presence of women in the senior
leadership of the Company and across
the Group. Despite progress made in
2023, we still have a way to go to reach
our target of 40% of senior leadership
roles being held by women by 2025. IAG
leadership is committed to this ambition
and more generally to promoting an
environment that ensures inclusion and
equal opportunities. The clear gender
targets are being supplemented with
broader diversity ambitions, including
ethnicity. Current initiatives underway
are both supported and closely
monitored by the Committee.
In line with the expectations of the UK
and Spanish Corporate Governance
Codes, we undertook an internal Board
and Committee effectiveness review.
More information on the results of this
evaluation, and how it was carried out,
can be found elsewhere in this report.
The evaluation was very positive, and it
remains the case that we are satisfied
that the Board and its Committees are
effective and provide the highest
standards of leadership and oversight of
the Group’s strategy. The Nominations
Committee will continue to provide a
special focus to management succession
planning and talent development, as well
as to the work on diversity and inclusion.
Javier Ferrán
Nominations Committee Chair
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International Airlines Group | Annual Report and Accounts 2023
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 25 February
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 and IAG appointments to
Group company boards. 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.
There were no changes to the
Committee’s membership during 2023.
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 of the
IAG Management Committee)
• 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 2023
The Committee met six times during
2023, with three scheduled and three
ad-hoc meetings called to discuss
management changes or appointments
to the Group company boards. Directors’
attendance at these meetings can
be found in the Corporate Governance
section. The Group Chief Executive
was 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
• review of the Board committees’
membership
• Board succession planning
• review of the directors’ independence
• review of compliance with the Directors
Selection and Diversity Policy
• review of diversity and inclusion
• management succession plans
• format of the annual Board evaluation
process, as well as that of the
Nominations Committee
• changes to Group company boards
• review of investor feedback from
the Annual General Meeting
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
relating to any areas that could require
strengthening from a skills and
succession perspective.
In September 2023, the Committee
considered Board succession planning,
including the Board refreshment
timeline, the Board skills matrix, as well
as the consideration and identification
of those skills and characteristics
relevant for future appointments
to align with strategic objectives and
policies. The Committee also noted that
in terms of Spanish company law, the
chairmanship of the Audit and
Compliance Committee would need to
be refreshed during 2024, and discussed
planning for this succession.
International Airlines Group | Annual Report and Accounts 2023
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Financial StatementsCorporate GovernanceStrategic Report Report of the Nominations Committee continued
Gender diversity principles are followed
throughout the director appointment
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. When conducting
a search, the Company will only engage
search firms that have signed up to the
latest UK Voluntary Code of Conduct
for Executive Search Firms (or its
international equivalent). Additionally,
the Nominations Committee ensures
that the Board appointment ‘long’ and
‘short’ lists provided in the search
process are inclusive according to the
widest definition of diversity.
Female directors currently represent
45% of the Board, ahead of the target of
at least 40%, and 63% of the
independent non-executive directors
(including the Chairman). In addition to
this, three of the four Board advisory
committees are chaired by women: the
Audit and Compliance, the
Remuneration and the Safety,
Environment and Corporate
Responsibility Committees. Lastly, the
Senior Independent Director is a woman.
From an ethnic minority perspective, the
IAG Board has met its target to have one
director from an ethnic minority group.
Directors’ independence,
performance and re-election
The Nominations Committee, having
considered the matter carefully,
is of the opinion that all 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.
In May 2023 the Nominations Committee
considered the proposal for the re-
election of directors ahead of the Annual
General Meeting.
In accordance with the Board
Regulations, all proposals for the
appointment or re-election of directors
presented to the 2023 Annual General
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. As part of its
assessment, the Committee also reviews
the time commitment and availability
of each non-executive director.
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 and that each was making a
valuable contribution to the leadership
of the Company.
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 of the Company.
Management appointments and
succession planning
During 2023, the Committee considered
and presented to the Board the
following appointments to the IAG
Management Committee: Fernando
Candela as Chairman and CEO of Iberia;
Julio Rodriguez as Chief Commercial
Strategy Officer; Jorge Saco as Chief
Information, Procurement, Services and
Innovation Officer; and Jonathan Sullivan
as Chief Transformation and Corporate
Development Officer.
Diversity
The procedure for the appointment
of directors follows the principles
established in the Directors Selection
and Diversity Policy which has as its
objective, the recognition of the
importance of board diversity in a
broader sense. As recommended by the
Spanish Good Governance Code, the
Nominations Committee reviews
compliance with this Policy on an annual
basis. The review for the 2023 reporting
period was completed in January 2024.
The diversity targets included in the
Policy are to have:
• at least 40% female board
membership;
• at least one of the Chair, Senior
Independent Director, Chief Executive
Officer or Chief Financial Officer roles
be filled by a woman; and
• at least one member of the Board
being from an ethnic minority.
When considering director
appointments, the Committee follows
a formal, rigorous, and transparent
procedure, designed to capture the
value of diversity in its broader sense,
including a mix of skills, experience,
professional and industry backgrounds,
age, and ethnicity, while ensuring that
any appointment is made on merit.
Diversity considerations also include
ensuring that more than half of the
Board are independent EU nationals
to meet regulatory obligations.
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International Airlines Group | Annual Report and Accounts 2023
As at 31 December 2023 the Board met the UK Listing Rules and FTSE Women Leaders Review targets. Our gender identity and
ethnicity data reported in accordance with Listing Rule 9.8.6R(10) is set out below. Disclosure is based on self-identification through
information gathering where individuals were provided with the requirements and categories for confirmation of classification. The
information is reported at 31 December 2023, and remains unchanged at the date of this report.
Gender identity
Men
Women
Not specified/prefer not to say
Ethnic background
Number of
Board
members
Percentage
of the Board
Number of senior
positions on the Board
(CEO, CFO, SID and Chair)
Number in
executive
management
Percentage
of executive
management
6
5
-
55%
45%
-
2
1
-
9
3
-
75%
25%
-
Number of
Board
members
Percentage
of the Board
Number of senior
positions on the Board
(CEO, CFO, SID and Chair)
Number in
executive
management
Percentage
of executive
management
White British or other White
(including minority-white groups)
Mixed/Multiple Ethnic Groups
Asian/Asian British
Black/African/Caribbean/Black British
Other ethnic group, including Arab
Not specified/ prefer not to say
10
-
1
-
-
-
91%
-
9%
-
-
-
3
-
-
-
-
-
12
-
-
-
-
-
100%
-
-
-
-
-
Diversity and inclusion remained a priority during 2023. IAG’s aim is for both senior leaders and our businesses to reflect the diverse
communities we work in and to create an environment where individuals feel their unique differences are valued. Beyond gender and
ethnicity, the Management Committee is comprised of individuals with multiple nationalities (including Spanish, British, American,
dual Brazilian/Argentinian, Irish and Italian). In addition, most of the executives have multi-jurisdictional backgrounds and/or careers
which serve to enhance the value that they bring to the Group, its customers and employees. Further information on Board diversity
is included in the Corporate Governance section of this report.
The Board and the Nominations Committee are committed to improving diversity, including gender diversity, across the Group,
encouraging and supporting management actions in this regard. IAG has a target of 40% of senior leadership roles to be held by
women by 2025. At the end of 2023, IAG had 36% of women in those roles, up from 34% at year end 2022, and on track to achieve
the 2025 target. In line with the Group’s diversity and inclusion framework and strategy, the Group’s operating companies and
platform businesses have implemented a range of initiatives to support equity, diversity, and inclusion.
In 2023, IAG partnered with Green Park, an independent UK-based talent and diversity consultancy, to conduct a survey to better
understand the composition and diversity of IAG’s senior leadership, going beyond gender to include a broad range of factors
regarding identity. The survey was voluntary, anonymous and confidential, designed to take into account the legal and cultural
contexts and regulatory requirements of our key countries of operation. The results are based only on those individuals who
self-disclosed their data and will provide a baseline of the diversity of IAG’s senior leaders, enabling IAG to track progress over time.
6% of IAG’s UK senior leaders self-disclosed as ethnically diverse and IAG’s senior leaders globally represent over twenty
nationalities. To ensure the continued focus on increasing representation, IAG has introduced an ethnic diversity ambition of 10% for
our UK senior leaders by the end of 2027. Results will be shared with our senior leaders to inform our people strategies and support
discussions around equity, diversity and inclusion and responses feed into the UK Parker review.
Further details and explanations of the steps that IAG is taking to promote diversity and inclusion across the Group is set out in the
People section and the Equity, diversity and inclusion subsection of Sustainability in the Strategic report.
The Committee annual evaluation
The annual performance evaluation of the Board and its committees was internally facilitated in 2023, following an external
evaluation in 2022, and as set out in the Corporate Governance Report.
The evaluation concluded that the Committee operated effectively during the year. The Committee continues to maintain as a
priority its focus on board and management succession planning, including talent retention and development, as well as diversity
and inclusion, as these are two complex matters where changes are generated over the medium and long term.
International Airlines Group | Annual Report and Accounts 2023
159
Financial StatementsCorporate GovernanceStrategic Report Report of the Safety,
Environment and
Corporate Responsibility
Committee
principal sustainability ratings followed
by the Company. For the fourth year
running, we are pleased to have been
awarded a CDP leadership grade (A-).
This is the longest leadership performance
of any airline and recognises the
continued commitment of IAG in
addressing its climate change impacts.
The Committee has been regularly
updated on the numerous regulatory
initiatives affecting sustainability.
In particular, and with the support from
the Audit and Compliance Committee,
we also continue to put focus on
improving our reporting, both internally
and externally. We are pleased
with progress being made towards
a reasonable assurance report being
provided for our statement of
non-financial information before 2027.
Regulatory developments and the
impact on IAG were a key focus for
the Committee again this year together
with consideration of relevant industry
developments. An external
benchmarking report provided a good
base to identify focus areas for future
management attention, and was well
received by the Committee.
In addition to the core work on tracking
progress against our overall
sustainability strategy and objectives,
the Committee had a specific update
on sustainability matters focused on
the Group’s suppliers, including modern
slavery and human trafficking, as
well as considerations regarding
payment terms.
The Committee continued its work
monitoring the safety performance of
IAG’s airline companies. This included
the systems and resources dedicated
to safety activities across the Group.
In line with the Group’s business model,
responsibility for safety and security lies
with each Group airline and is applied in
accordance with the company’s
applicable standards, culture and the
circumstances and characteristics of
each business. This Committee exercises
a high-level oversight of safety activities
to ensure a minimum Group standard,
supporting the Group homogenisation
effort in safety reporting, the discussion
of common issues and the sharing of
best practices between Group airlines.
Nicola Shaw
Safety, Environment and Corporate
Responsibility Committee Chair
Committee members
Nicola Shaw (Chair)
Giles Agutter
Maurice Lam
Robin Phillips
Emilio Saracho
Date appointed
25 February 2021
25 February 2021
17 June 2021
25 February 2021
25 February 2021
Dear Shareholder
I am pleased to present the Safety,
Environment and Corporate
Responsibility (‘SECR’) Committee
report for the year ended 31 December
2023. This report highlights some of our
work and activities during the year.
This Committee assists the Board in a
dual role. Firstly, by providing high-level
oversight of the Group's safety activities
and resources, and promoting the
sharing of knowledge and best practices
within the Group. Secondly, the
Committee provides guidance and
direction on IAG’s sustainability
programmes and corporate
responsibility ambitions, ensuring
alignment to the Group’s sustainability
strategic priorities.
Based on the conclusions of the
evaluation of the Committee's
performance in 2022, we decided
to restructure the Committee's work
so that it is more focused, devoting
two of its four ordinary meetings mainly
to safety issues and the other two
to environmental and corporate
responsibility matters.
As we did last year, the Committee
reviewed the information on the
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International Airlines Group | Annual Report and Accounts 2023
The Safety, Environment, and
Corporate Responsibility Committee
The Committee’s composition,
competencies and operating rules are
regulated by article 33 of the Board
Regulations as well as by the
Regulations of the SECR Committee.
A copy of the Board and the SECR
Committee Regulations can be found
on the Company’s website.
The Committee shall be made up of
no less than three directors appointed
by the Board, with the necessary
dedication, capacity and experience.
All the members of the Committee are
non-executive directors with the
majority being 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.
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 a world’s
leading airline group on sustainability.
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
At the July 2023 meeting, the Committee
invited a representative of the Spanish
agency "Servicios y Estudios para la
Navegación Aérea y la Seguridad
Aeronáutica" (SENASA) to provide the
Committee with an overview of the
aviation safety framework from a
regulatory perspective. Also in the
regulatory context, the Committee has
decided to consider on an annual basis,
in a specific way, the communications
received from the various regulators
on the safety performance of each
of the Group's airlines.
This year, the Committee looked closely
at the safety issues associated with the
transport of lithium batteries and the
approaches taken by the Group's various
airlines. The Committee was also briefed
on the operations of the Group in areas
of conflict.
Fundamental to our ambition is doing
business in the right way. This is why
sustainability is at the heart of our
strategy as highlighted in November
at the Capital Markets Day, with a
dedicated presentation focusing on
sustainability and the leading position
that IAG is taking in the industry.
Attendees were provided with an
update on IAG’s progress and how
we are using multiple decarbonisation
solutions to achieve our net zero
ambitions by 2050. The support
of our other stakeholders, including
policymakers, will be key for the industry.
The Committee’s performance was
evaluated as part of an internal
evaluation process. We used this
opportunity to spend some time
discussing the work programme and
adapting it to ensure we continued
to prioritise the right matters. We also
agreed to continue to engage with
external parties including those with
expertise in the various components
of our remit to enhance our work.
I am delighted with the continued
progress that has been made in the
past year and look forward to furthering
our ambitions in 2024.
Nicola Shaw
Safety, Environment and Corporate
Responsibility Committee Chair
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Financial StatementsCorporate GovernanceStrategic Report Report of the Safety, Environment and Corporate Responsibility Committee continued
Safety
Key topics discussed for each airline
under their regular safety review include
information on safety risk management,
safety culture, operational risks,
occupational injury risks, as well as
reported data on aircraft damage. This
year, the safety managers of each of the
Group's airlines completed the revision
of their reporting framework to this
Committee, in order to homogenise and
simplify the issues reported by the
different airlines and to enhance
comparability and sharing of best
practices within the Group. In addition to
this, the Committee considered some
specific topics, including the Group
airlines’ preparatory work for the
transition to new rules regarding
Continuing Airworthiness Management
Organisation (CAMO).
A representative from the Spanish
agency Servicios y Estudios para la
Navegación Aérea y la Seguridad
Aeronáutica (SENASA) joined the July
Committee meeting to make a
presentation on the aviation general
safety framework. The Committee also
devoted part of the same meeting to
review practices and safety
considerations for the transport of
lithium batteries.
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 updates
on the European Union ‘Fit for 55’
package, the UK Jet Zero Council, as
well as the first meeting of the Spanish
Alliance for Air Transport Sustainability.
Benchmarking
At its meeting in May, the Committee
considered a sustainability benchmarking
exercise across all ESG factors conducted
by an international sustainability and
technology consultancy. The report
provided an overview of IAG’s position in
relation to the industry on a range of
sustainability factors and provided a
good roadmap for future management
and Committee focus.
Waste strategy, performance
indicators and benchmarking
The Committee considered an update
on performance against its waste
strategy plan adopted in 2021, with
objectives due to be met by 2025. In
addition to noting its current
performance and endorsing the strategic
objectives in this area, the Committee
also considered industry developments,
noting IAG’s performance was positive
on a relative basis.
• 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
• to review the principal environmental,
social and reputational risks
• to review the general diversity
and inclusion policies
The Committee’s activities during
the year
During 2023, the Committee held four
meetings. Directors’ attendance at these
meetings is detailed in the Corporate
Governance report.
The Committee’s activities during the
year included:
• Group airline safety and security
reviews;
• review of significant safety and
security issues;
• lithium batteries update;
• review of sustainability and non-
financial information reporting;
• overview of sustainability trends;
• Group sustainability strategy,
including benchmarking;
• review of sustainability compliance
and key metrics;
• IAG waste strategy, performance
indicators and benchmarking;
• regulatory updates;
• review of the annual update to the
Group Modern Slavery Statement;
• sustainability risk review; and
• Modern Slavery and Human
Rights review.
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International Airlines Group | Annual Report and Accounts 2023
The Committee annual evaluation
and priorities for 2024
The annual performance evaluation of
the Committee was internally facilitated,
following the external review completed
in 2022. The evaluation concluded that
the Committee operated effectively
during the year. Notwithstanding this,
the Committee agreed on several
improvements for the coming year. In
the area of safety, the Committee will
analyse the safety corporate governance
structures both in the different operating
companies and in other airline groups
with a view to improving coordination
with the Group airlines and facilitating
the exercise by this Committee of its
general supervisory function. In the area
of sustainability, the Committee will
strengthen the focus on sustainable fuels
and organise a knowledge update
session in coordination with the Audit
and Compliance Committee, as was
done a few years ago.
Stakeholder Engagement review
At its May meeting, the Committee
considered a report on engagement
with sustainability-specific stakeholders,
industry associations, government
and regulators, customers, investors,
workforce and suppliers; going through
the main objective of this dialogue and
its impacts. More detail is included in the
Stakeholder engagement section of the
annual report.
Modern slavery review
A session was devoted to updating the
Committee on modern slavery and
human trafficking matters within the
Group, including supplier risks, training
and information, compliance framework
as well as the main external
collaborations on this matter. More
generally, the Committee was also
updated on IAG GBS sustainability
initiatives.
Sustainability risk
As in previous years, the Committee
reviewed the Group sustainability risk
assessments for the business plan period
2024 to 2026 and to 2030, which helped
the Committee understand the physical,
policy, market and technology risks that
the Group has considered could impact
its sustainability ambitions. Further
information regarding risks are set out in
the Risk section of this annual report.
International Airlines Group | Annual Report and Accounts 2023
163
Financial StatementsCorporate GovernanceStrategic Report Report of the Audit and
Compliance Committee
Margaret Ewing
Audit and Compliance Committee Chair
Committee members
Margaret Ewing (Chair since September 2020)
Peggy Bruzelius
Eva Castillo
Maurice Lam
Date appointed
20 June 2019
31 December 2020
31 December 2020
17 June 2021
Dear Shareholder
On behalf of the Board, I am pleased to
present the report of the Audit and
Compliance Committee for 2023. The
Committee continues to play an
important role in IAG’s governance
framework, overseeing risk
management, internal controls, financial
and non-financial reporting, compliance,
internal and external audit while also
closely monitoring the macroeconomic
and political environment and its impact
on the business and its risks. This report
provides an overview of the key matters
considered in 2023, as well as insight
into how the Committee has discharged
its responsibilities and provided
assurance on the integrity and reporting
compliance of the 2023 Annual Report
and Accounts.
The Committee held five planned
meetings and two brief ad hoc meetings
(to discuss specific matters such as
auditor effectiveness) during 2023. 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 Group has focused during 2023 on
reconnecting the world, transformation,
returning the operations to pre-
COVID-19 capacity and improving
resilience. As a result the Committee has
increased its focus on the risk
management, internal controls and
financial implications of the strategy
implementation. The rapidly evolving
political and economic uncertainty
arising from the wars in Ukraine and
Middle East, along with continuing
inflationary and recessionary pressures,
has resulted in the need to constantly
ensure these have been reflected
by management in risk management,
financial forecasts, strategic plan, going
concern and viability assessments. In
addition, digital security is fundamental
to the Group’s operational resilience, and
during 2023 management’s actions to
improve digital and IT processes and
systems have remained key areas of
focus of the Committee.
Throughout 2023, I have maintained
a dialogue with all members of the
Committee, management and the
internal auditors. I have met with
‘agenda topic owners’ along with other
Committee members prior to Committee
meetings, ensuring the Committee
would be provided with the necessary
information to enable it to guide,
challenge, advise and, when required,
make informed decisions. I also met
regularly with the lead partners of our
external auditor, KPMG, and the Head of
Group Audit.
The Committee ensures the reliability
of the Group’s financial reporting, and
compliance with laws and regulations,
through the internal control framework,
including the mature Group-wide
Internal Control over Financial Reporting
(ICFR) and risk management
frameworks. During the year,
the Committee closely monitored
developments in and management’s
response to the UK Government's
proposed UK Corporate Governance
Reform agenda, the FRC’s review
of the UK Corporate Governance Code
and the passing of the UK Economic
Crime and Corporate Transparency
Act 2023. While the UK Government's
proposed reforms and elements of the
proposed Code changes are not being
taken forward, the Committee noted
that key learnings in management’s
preparation for adoption have
strengthened the Group’s governance
and controls.
In 2023, the Committee obtained
external independent assessments of the
Group’s whistleblower/speaking up
programme and ethics and compliance
maturity, drawing management and the
Committee’s attention to a number of
improvement opportunities.
Management is preparing a programme
to address the priority findings
highlighted. This will be a key area of
focus for the Committee in 2024,
including monitoring the execution of
management’s programme supported
by Internal Audit.
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International Airlines Group | Annual Report and Accounts 2023
I am confident that, throughout 2023,
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;
changes in the drivers of our principal
and emerging risks were identified and
effectively managed; ongoing
compliance with all regulatory and legal
obligations; and sound financial
judgements and estimates continued to
be made.
I would like to express my sincere
appreciation to all relevant Group and
external and internal audit teams for
their support of the Committee in
delivering its remit.
The Spanish Code permits a Director to
Chair the Audit and Compliance
Committee for a maximum of four years.
This report, relating to 2023, is therefore
my last report before I step down as
Chair of the Committee in September
2024.
Margaret Ewing
Audit and Compliance Committee Chair
The Audit and Compliance Committee
A private session of the Committee
members was held at the end of each
Committee meeting and during the
year the Committee met privately on
a number of occasions with each of
the external and internal auditor and
the Chief Financial Officer.
The Committee’s responsibilities
and activities
The Committee’s principal
responsibilities are 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 and fraud prevention and
detection. 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 2023
and until the date of this report
is detailed below.
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, both
reviewed and approved in February
2021. A copy of these Regulations can
be found on IAG’s website. Following
the recent publication of the updated
UK Corporate Governance Code and
related guidance, the Committee will
review its regulations in the second
half of 2024 and update them
accordingly to reflect the updated
Code and other relevant
developments expected to be
published in Spain.
The Committee’s composition,
competencies and attendance
Detailed biographies of all Committee
members are included in this Annual
Report. The Board is satisfied that the
Committee has retained competence
relevant to its overall responsibilities,
including possessing 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 and 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.
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 Committee, including
the Chief Executive Officer, the Chief
Financial Officer, the Group General
Counsel and the Group Financial
Controller were invited to attend
specific agenda items as required and
when relevant.
International Airlines Group | Annual Report and Accounts 2023
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Financial StatementsCorporate GovernanceStrategic Report Report of the Audit and Compliance Committee continued
Audit and Compliance Committee activities
Area of Committee focus
Activities
Financial reporting
• reviewing, challenging and considering the external auditor’s views on significant accounting
estimates, judgements and accounting policies applied in the financial statements of the Group
and related reporting and disclosures;
• reviewing the financial statements and announcements of the Group to ensure integrity; and
• consideration of the process for confirming and recommending to the Board that the 2023 Annual
Report and Accounts is fair, balanced and understandable.
External auditor
• 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, monitoring implementation of audit
recommendations 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;
• monitoring the internal controls procedures adopted by the Company, to oversee compliance with
Enterprise Risk
Management (ERM)
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 the Group has operated within (or agreed) risk appetite throughout
the period;
• reviewing the approach adopted by the Board in defining the enhancement of the Group’s risk
appetite in light of the changing environment in which the Group operates;
• reviewed and recommended to the Board approval of the updated ERM risk policy (to reflect
guidance and changes to the CNMV and UK Corporate Governance Codes). The Committee will
review the policy every five years, unless it requires earlier update for changes in regulations;
• reviewing annual compliance with the ERM risk policy;
• 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 recovery in demand and significant volatility in fuel prices,
and ensuring its continued appropriateness in managing these risks. Approving changes to the
treasury policies in respect of carbon emissions risk and inflations risk; and
• overseeing tax risk management, in an environment of increased challenge, investigation and audit
by tax authorities across the globe, including HMRC’s ongoing audit of IAG Loyalty’s treatment of
VAT on the issuance and redemption of Avios (which has been in accordance with previous HMRC
rulings), and considering the tax strategy before recommending to the Board for approval and
publishing on the IAG website.
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International Airlines Group | Annual Report and Accounts 2023
Area of Committee focus
Activities
Legal and compliance
• reviewing the Group’s anti-bribery, sanctions, competition, privacy and Spanish Criminal Code
compliance programmes including the latest related risk heat maps, regulatory developments, issues
identified during the year or still live from previous years, the key programme activities during 2023
and priorities for 2024;
• 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: communication and
awareness (plus trust in) the Group’s whistleblowing facilities; incidents reported via the external
whistleblowing and relevant internal 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 reports from the General Counsel including the status of remaining and
potential civil litigation actions (see note 28 to the financial statements).
IT, cybercrime and GDPR
• reviewing and monitoring key cyber security and data privacy management improvement projects
including improvements to the Group’s cyber governance model, lessons learned from recent
third-party supplier data breaches, third-party risk management review (and subsequent
enhancement of approach to TPRM), visibility of trend analysis and benchmarking external data
to better understand the Group’s progress in implementing its improvement plans. The Committee
advised the development of a protocol for action against data blocking and sequestration
in compliance with applicable legislation.
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 limited assurance report and conclusions;
• 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
Group’s strategy, financial statements and financial and cash flow forecasts; and
• understanding the phased programme towards readiness for reasonable assurance for non-financial
information in respect of key and required sustainability and people/workforce measures and
monitoring the significant progress achieved, leveraging the Group’s established methodology for
implementing internal controls frameworks, defining the controls, accountability and governance
essential to achieve effective reasonable assurance.
• 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). Following the Committee’s recommendation in 2022, a Group
Insurance Governance Steering Committee was established during 2023, to improve oversight
of insurance cover across the Group and to provide the Committee with assurance that the
insurances across the Group are both adequate and appropriate for the risks faced by the Group
and to identify further opportunities for leveraging policies across the Group and identify new areas
of risk and insurance.
Insurance
Investor relations
• reviewing management’s summary and analysis of the Group’s investor/analyst views, including
those received after the Capital Markets Day in November, regarding accounting policies, risks and
disclosures to ensure that investor views are taken into account where required; and
• considering investors’ and analysts’ views (plus those of other external informed commentators)
on the future outlook for the Group to ensure the scenarios and assumptions applied in the Group’s
viability review are not misaligned with external projections.
Governance and other
matters
• reviewing and recommending to the Board the adoption of amendments to relevant policies; and
• considering and planning for the implications of any changes in European, Spanish or UK corporate
governance requirements, within the remit of the Committee including the passing of the UK
Economic Crime and Corporate Transparency Act 2023.
International Airlines Group | Annual Report and Accounts 2023
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Financial StatementsCorporate GovernanceStrategic Report Report of the Audit and Compliance Committee continued
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 2023
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 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 31 December 2023
(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
further consideration, 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.
Matter
Action taken by the Committee and outcome/future actions
VAT assessment
on the issuance of
Avios
The Committee received multiple updates throughout 2023 on the progress of HMRC’s substantive review into
whether VAT should have been payable on the issuance of Avios contrary to a previous ruling issued in 1997
and reconfirmed in 2011. Discussions with HMRC are ongoing and will continue in 2024.
Based on the facts presented, the Committee agrees with management’s assertion, confirmed by external
Counsel and tax advisers, that it is possible, but not probable, that HMRC’s initial assessments will be upheld.
As a result the Committee also agrees with management’s approach in the 2023 Group Financial statements in
that the matter is disclosed as a contingent liability and no provision is recorded for this exposure.
The Committee also challenged management on the disclosure made in the 2023 Annual Report and Accounts
and whether the disclosure enabled users to sufficiently understand the status of HMRC’s substantive review.
Given the number of possible scenarios that could eventuate from the substantive review, the Committee
concurred with management and the conclusions reached by the external auditor not to give a range of
potential exposures as it could prejudice seriously the position of the Group.
Loyalty revenue
recognition
The Committee focused on the impact of IAG Loyalty’s change in actuarial modelling provider, including
a change in the external actuarial specialist, on the breakage and assumptions driving loyalty revenue
recognition. The Committee was reassured that the migration reconfirmed the appropriateness of the loyalty
scheme liabilities with no material adjustments as a result of the transition.
Voucher revenue
recognition
Group accounting
policy on major
maintenance
events for leased
aircraft
The Committee is satisfied that the 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 received quarterly updates throughout 2023 on management’s assumptions in relation
to revenue recognition relating to vouchers issued in relation to conditions during and immediately after the
COVID-19 pandemic, including issuances, redemptions, refunds and the amounts recognised as breakage.
For the years to 31 December 2022, 2021 and 2020 the Group recognised no breakage on vouchers but given
the recovery from COVID-19, coupled with the availability of sufficient historical redemption and expiry data,
the Group has commenced recognising breakage on a limited population of the voucher liability during 2023.
The Committee agrees with management’s assessment that breakage can now be reliably estimated and that
there will not be a significant reversal of revenue in future periods as a result of having recorded breakage
during 2023. The Committee also recognised that as vouchers began to contractually expire in 2023 and
management has been taking action to encourage voucher holders to utilise their vouchers before they expire,
the Group has more data upon which to estimate and recognise breakage on unredeemed vouchers
during 2024.
During the course of 2023, management presented to the Committee a detailed analysis of the Company’s
accounting policies, in response to the enquiries from the CNMV, with regard to major maintenance events on
owned and leased aircraft, including peer benchmarking, industry guidance and analysis of alternative
accounting policies. In particular, for leased aircraft, IFRS does not provide specific guidance on how to account
for major maintenance events and whether to adopt a provisions approach, whereby provisions for such
maintenance events are built up over time through the usage of the asset, or to apply the components
approach, whereby each major maintenance event is capitalised and depreciated to the sooner of the next
event or the end of the lease. The Committee concurred with the continued application of the existing
accounting policy of applying the provisions approach.
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International Airlines Group | Annual Report and Accounts 2023
Other significant matters considered
Highlights of other key matters that the Committee considered are explained below.
Matter
Viability and going
concern
assessments
Action taken by the Committee and outcome/future actions
Throughout the year and in finalising the 2023 Annual Report and Accounts the Committee has continued
to consider and robustly challenge management’s going concern review and viability assessment, including
the supporting analysis.
Fraud procedures
CNMV Letters
and enquiries
The Committee was reassured by management’s assessment in 2023 and update of its three-year forecasts, as
part of the financial plan through to 31 December 2026. The Committee’s reassurance was gained by a review
of critical estimation assumptions and judgements applied in relation to cash flow forecasts over the short,
medium and long term, including the implications of climate change where they impacted the reference period.
Many of the assumptions and judgements are based on events outside the Group’s control including the
political and economic influences such as the wars in the Ukraine and the Middle East, volatile fuel prices and
high inflation and interest rates.
The Viability statement section of this Annual Report provides details of the Base Case and Downside Case
applied in assessing the appropriateness of the Board’s viability statement and assessment of the going
concern basis of accounting. The Committee provided robust challenge of the assumptions applied in
management’s Base case and Downside case projections (ensuring that the Downside case reflected
appropriately severe but plausible assumptions) and reviewed the external auditor’s findings and conclusions
on this matter. Alternative negative scenarios were also considered by the Committee but the Downside case
presented the most severe but plausible scenario.
The Committee recommended the going concern statement and related disclosures to the Board for inclusion
in the 2023 half-year interim results announcement and the 2023 Annual Report and Accounts and the viability
statement for inclusion in the 2023 Annual Report and Accounts.
The Committee reviewed management’s report on the Group’s fraud prevention framework, including the
annual fraud risk assessment and the key controls and lines of defence in place to prevent and detect fraud.
The Committee noted good alignment between the risk assessment and the assurance map, including lines
of defence, and was satisfied that the approved internal audit plan covered the key financial reporting anti-
fraud controls as well as audits targeted at specific fraud risk across the Group during this period.
Following Royal Assent of the UK Economic Crime and Corporate Transparency Act 2023, the Committee will
closely monitor the implementation guidance, much of which will require further secondary legislation expected
over the next 12-24 months. The Committee will also monitor management’s response to the guidance
specifically concerning reasonable procedures in place to prevent fraud and any enhancements required to the
Group’s fraud prevention framework.
On behalf of the Board, the Committee will continue to monitor fraud and internal controls carefully, including
consideration of the enhanced audit review of fraud controls and 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.
In April 2023, the Company received a comment letter from the CNMV requesting that for each quarterly
earnings release and associated results presentations, the Company include a definition of each Alternative
Performance Measure (APM) and to ensure that such APMs are not given undue prominence to IFRS reported
measures. No changes were proposed or sought in relation to the Annual Report and Accounts. The
Committee reviewed and concurred with the enhancements to the quarterly earnings releases and associated
results presentations, as a result of the comment letter and, having sought the views of the external auditor,
with management’s responses to the letter, which was submitted in May 2023. The CNMV has accepted IAG’s
response and enhancements.
In May 2023 the Company received a second comment letter from the CNMV, requesting certain information
and clarifications relating to accounting matters and disclosures in the Group’s 2022 Annual Report and
Accounts, none of which were considered material. The Committee reviewed and concurred the enhancements
to the Annual Report and Accounts as a result of the comment letter and, having sought the views of the
external auditor, with management’s responses to the letter, which were submitted in July 2023. The CNMV has
accepted IAG’s response and proposed enhancements reflected in the 2023 Annual Report and Accounts.
During the course of 2023, the Company has received a number of enquiries from the CNMV, requesting
information and clarifications relating to the Company’s accounting policies for major maintenance events for
both owned and leased aircraft. In forming its responses, management incorporated: (i) detailed analysis of its
current accounting policies; (ii) benchmarking of peer accounting policies; (iii) consideration of industry
guidance; and (iv) consideration of alternative accounting policies. The Committee reviewed and concurred
with management’s responses to the aforementioned enquiries. As at 31 December 2023 and through to the
date of this report, correspondence with the CNMV is ongoing and the Group continues to engage on this
complex area of accounting.
International Airlines Group | Annual Report and Accounts 2023
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Financial StatementsCorporate GovernanceStrategic Report Report of the Audit and Compliance Committee continued
Matter
Action taken by the Committee and outcome/future actions
Corporate
governance and
audit reform
Non-financial
information and
environment
Throughout 2023, the Committee closely monitored developments in and ongoing consultations in respect
of the UK's Corporate Governance Reform agenda, the FRC’s review of the UK Corporate Governance Code
and the passing of the UK Economic Crime and Corporate Transparency Act 2023. In May, the Committee
received a detailed briefing (from the external auditor) of the UK Government’s and FRC’s corporate
governance and Code reform proposals and management presented its plans and proposed timelines to adopt
the various governance initiatives as well as a view of those initiatives already in place under the Group’s
Spanish governance framework.
While the UK Government's proposed Corporate Governance Reform and elements of the proposed Code
changes will not be taken forward, the Committee’s focus has remained on maintaining robust internal control
and governance frameworks. Management’s key learnings in preparing for adoption are leading to control
improvements, greater assurance transparency and strengthening the Group’s governance frameworks.
The Committee believes management is well placed to adopt the new provisions outlined in the revised UK
Corporate Governance Code and, where appropriate, the associated guidance and awaits the implementation
legislation to be made available in relation to the “failure to prevent fraud” expected in 2024. Throughout 2024,
the Committee will be reviewing the status of these reforms and management’s and the Committee’s plans to
ensure full compliance in accordance with the relevant regulatory and legal timetable.
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. This Committee
is pleased with management’s significant progress in designing and documenting internal controls over
non-financial reporting (ICNFR) across the Group to ensure there are robust processes and controls in place
to obtain reliable data.
At the request of the Committee, additional non-financial information process and control internal audits were
undertaken in 2023 to inform management’s drive to improve the ICNFR framework. The focus of ICNFR audits
will continue in 2024 to provide the Committee with assurance that the newly implemented controls are
operating effectively.
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 also
considered the limited assurance reports from KPMG on the Group’s non-financial information, including TCFD
compliance and EU taxonomy.
Risk appetite
framework
In early 2023, the Board (supported by management) introduced a new risk appetite framework which set
tolerances across the business plan period and enabled consideration of trade-offs to facilitate prioritisation
of initiatives to manage opportunities and risk within the defined appetite tolerances.
Compliance
The Committee received an update from management in December on the Group’s performance against the
appetite tolerances set at the beginning of 2023. The Committee is satisfied that the new framework is aligned
to the Group strategy reviewed and approved by the Board in September 2023 and that the Group continued
to perform and deliver initiatives throughout 2023 as planned to mitigate risk as set out in its framework
statements.
Appetite discussions following the Strategy Board meeting in September 2023 were held with each of the
Board members in November to re-assess their appetite in light of the current risk environment, updated Group
strategy and Group performance in 2023, to be applied during 2024 and discussed and agreed at the
December Board meeting.
The Committee recognises the critical role of compliance in upholding the highest ethical standards across
the Group. A Group Head of Compliance and Ethics was appointed in June 2023. The Committee requested an
independent review be undertaken of both the Group’s whistleblowing provisions and culture as well as the
maturity of the overall ethics and compliance capabilities. In addition to receiving the annual compliance update
from management, in December Deloitte presented the conclusions of its independent assessment including
the areas it believes are opportunities for improvement across the Group. Management is preparing its
response and plans for addressing the recommendations and this will be a key area of focus for the Committee
during 2024 and 2025.
The Committee will continue to receive regular updates on all the above matters in 2024.
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International Airlines Group | Annual Report and Accounts 2023
• holding regular meetings during the
year between the Committee, the
Head of Group Audit and the external
audit partners as well as ensuring the
Head of Group Audit feels able to
raise any concerns informally and
directly with the Chair of the
Committee;
• 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; and
• performing an effectiveness review
with key stakeholders in December
2023.
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
aspects of the Group’s relevant principal
risks (i.e. those that are capable of being
subject to an audit review).
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 Group 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 is mature and well embedded
across the Group, covering processes
applied by the Company, Aer Lingus,
British Airways, IAG GBS, IAG Loyalty,
Iberia and Vueling, and processes
performed by IAG GBS and IAG Cargo
on behalf of the operating companies.
This enables the Committee to evaluate
and oversee IAG’s management of
financial reporting risk and to validate
the Group’s approach to complying with
the CNMV’s ICFR recommendations.
In 2023, the Committee reviewed the
results of the internal audits and external
audit of ICFR (which included IT general
controls). Despite the return to pre-
COVID-19 pandemic operating
conditions in 2023, no unremediated
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 2023
in relation to the Internal Audit function
included:
• reviewing and agreeing the internal
audit 2023 plan and 2024 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). This
included ensuring the 2023 plan
continued to focus on fraud risk while
also ensuring coverage of specific
risks, including cyber security, IT
transformation programmes, non-
financial information and satisfying
ICFR and Spanish Criminal Code
requirements;
• 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. Where an internal audit
finding was rated seriously deficient,
relevant responsible management
were requested to, in person, present
their plans and progress in addressing
the audit recommendations and
required actions, reflecting the
importance the Committee attributes
to the internal audits and their
conclusions;
International Airlines Group | Annual Report and Accounts 2023
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Financial StatementsCorporate GovernanceStrategic Report Report of the Audit and Compliance Committee continued
External audit
External auditor key information
Last tender
Transition year
AGM Approval of current auditor (for three years to 31 December)
First audited Annual Report
Next audit tender required by regulations
2019 – January 2020
2020
September 2020
Year to 31 December 2021
For appointment effective for year to 31 December 2031
The Committee engaged throughout the
year with KPMG, with the engagement
partners attending all Committee
meetings. Following completion of the
2022 audit, the UK lead audit partner
retired and Paul Nichols was appointed
as KPMG’s UK lead audit partner,
following his shadowing and
transitioning activities during 2022.
The Committee Chair met frequently
with the Group and lead audit partners
throughout the year to review Group
developments, audit progress, their
planned reporting and audit findings.
The Committee’s key activities in relation
to its interaction with KPMG included:
• review of KPMG’s third-year audit
arrangements and plan, and
overseeing progress throughout 2023;
• approval of the 2023 external audit
plan and strategy including
consideration of scope, approach and
methodology, emerging industry and
Group-specific audit risks and
materiality. Monitoring the audit plan’s
implementation, including receiving
regular reports from KPMG, progress
against plan in consideration of 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 voucher
revenue recognition discussed in
significant financial reporting matters.
• performing an assessment of the
effectiveness and independence of
KPMG, including the quality of the
2023 audit (throughout the year),
implementation of improvement
opportunities identified in the 2022
effectiveness assessment and
reviewing and approving the fees and
terms of reference; and
• reviewing and approving 2023
non-audit services expenditure against
policy and previously determined limit
guidance. Reviewing and approving
non-audit services limit guidance and
expectations for 2024.
External audit scope, materiality and
execution
The Committee discussed and agreed
the scope of the audit with KPMG in May
including the interim review plan
(comprising audit testing, risk assurance
procedures, process walkthroughs,
control testing and data and analysis
routines) and ensuring that the audit
strategy was robust and informed by the
auditor’s assessment of the Group’s key
risks, particularly those that are
significant to the audit. KPMG explained
to the Committee the key tests that it
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. The auditor and the
Committee confirmed a shared
understanding of these risks and key
audit matters, including passenger
revenue recognition, the carrying value
of tangible and intangible assets and
how these were to be considered in the
audit approach. During the fourth
quarter, KPMG confirmed that, as a
result of the forecast Group trading
results and the headroom on the annual
impairment assessment, the risk of asset
impairment was no longer considered to
be a significant risk.
The auditor confirmed that 100%
(2022: 99%) of the Group’s forecast
revenue and 95% (2022: 95%) of the
Group’s forecast total assets would be
subject to a full scope audit. The
Committee agreed, after challenging the
external auditor as to whether such a
high level of coverage was required, 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
agreed with the planning materiality
based on the forecast results for 2023,
which the Committee and the auditor
kept under review during the final
quarter of 2023 and the final stages of
the 2023 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. The
Committee received updates from
KPMG at five 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, including discussion
and challenge during Committee
meetings, 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 the 2023 external
audit was deemed to be effective,
robust and of good quality. The
Committee’s independent assessment
considered the overall quality of the
audit, including whether the auditor
exhibited an appropriate level of
challenge and scepticism in its work
and dealings with management and the
independence of KPMG.
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The Committee also 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. The Committee felt that
KPMG challenged management robustly
on key judgements and estimates,
accounting treatments and disclosures,
for example in relation to loyalty
programme revenue recognition where
KPMG’s challenge included an evaluation
of the effectiveness of management’s
expert, the transition to a new expert
and modelling. 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 observations and
feedback on 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,
after significant challenge by
management as to the composition
and quantum of the proposed fee
increase, agreed the audit fee. KPMG
assured the Committee that despite
a significant increase compared
with the 2020, 2021 and 2022 fee,
the approved 2023 fee was at a level
that was appropriate for the scope
of the audit, to enable a quality audit
to be undertaken;
• reports from the external auditor
were reviewed during all Committee
meetings in 2023 and again in the
February 2024 Committee meeting,
covering: the conclusions of the
review of the Group’s results for the
half year; audit planning 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 five of the planned
Committee meetings during the year
to answer any questions the
Committee had outside these formal
updates; and
• consideration of the FRC’s most
recent Audit Quality Review
conclusions relating to KPMG as a firm
and any specific findings relating
to audits led by the lead audit
partners to IAG.
Taking all aspects of the assessment
throughout the year into consideration,
the Committee concluded that it is
satisfied that 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
2021
KPMG first year of audit
following the appointment
approved by shareholders
in 2020 for the 2021, 2022
and 2023 financial years
2024
KPMG reappointment to be
considered and approved
by shareholders for year
to 31 December 2024 and
annually thereafter
2025
Mandatory appointment of
new external (KPMG) audit
Spanish lead partner to sign
off on the 2026 financial year
2030
To comply with the Spanish
Act 22/2015, a competitive
tender will be required for
auditor appointment effective
for the year to 31 December
2031 unless carried out earlier
To comply with the Spanish Act 22/2015, the Committee conducted an audit tender process that concluded in January 2020.
Following KPMG’s appointment (by shareholders) as the external auditor of the Company in 2020 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 2023. The Committee considered and recommended to the Board the reappointment of KPMG for 2024.
International Airlines Group | Annual Report and Accounts 2023
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Financial StatementsCorporate GovernanceStrategic Report Report of the Audit and Compliance Committee continued
External auditor non-audit services and independence
Non-audit service spend in 2023 is within the total target maximum and was €1,807,000. The Committee concluded that KPMG
is independent, taking into account the level and nature of non-audit services provided.
IAG non-audit services policy, key features
Pre-approval
All non-audit services require pre-approval in accordance with the table below to ensure services approved are
consistent with the IAG non-audit services policy for permitted services. This process ensures all services fall
within the scope of services permitted and pre-approved by the Committee and does not represent a delegation
of authority for pre-approval.
Value
More than €100,000
Pre-approver
Audit and Compliance Committee Chair and Chief
Financial Officer
Between €30,000 and €100,000
Chief Financial Officer and Head of Group Audit
Less than €30,000
Head of Group Audit
Fee cap
The guideline amount is set to ensure the total fee payable for non-audit services should not exceed 70% of the
annual audit fee.
The overall value of fees for work is addressed by a target annual maximum for 2023 of €2.4 million with an
additional allowance of up to €1.5 million for large projects where the external auditor is uniquely placed to carry
out the work.
The Committee reviews the nature and volume of the non-audit services undertaken by the external auditor
on a quarterly basis.
Prohibitions
IAG’s policy includes a list of permitted non-audit services in line with the list of permitted services in the FRC’s
Revised Ethical Standard 2019. Any service not on this list is prohibited.
All non-audit services over €100,000 are put to competitive tender with other providers, in line with the Group’s
procurement policy, unless the skills and experience of the external auditor make it the only suitable supplier.
Details of the fees paid to the external auditor during the year can be found in note 7 to the Group financial statements.
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International Airlines Group | Annual Report and Accounts 2023
Report of the
Remuneration Committee
Heather Ann McSharry
Remuneration Committee Chair
Committee members
Heather Ann McSharry (Chair)
Eva Castillo
Emilio Saracho
Nicola Shaw
Date appointed
31 December 2020
31 December 2020
20 June 2019
1 January 2018
Dear Shareholder
On behalf of the Board, I am pleased to
present our 2023 Directors’
Remuneration Report. This report
includes both: (i) our 2023 Annual Report
on Remuneration, detailing how our
current Directors’ Remuneration Policy
was implemented during 2023 and our
proposed approach for 2024; and (ii) our
proposed Directors’ Remuneration Policy
that is intended to apply from the date of
our 2024 Annual General Meeting, in line
with the three-year cycle in UK and
Spanish remuneration regulations.
It has been an important year for IAG, in
which the Group has continued its strong
recovery after a very difficult period,
delivering strong financial performance
and having communicated our updated
strategic and transformation plans to the
market. In this context, the Committee
continued to oversee the implementation
of the Remuneration Policy during the
period, focusing in particular on our
existing remuneration framework and its
possible evolution in the short and
medium term. In discharging its
responsibilities, the Committee has
remained mindful of the need to
continue to attract, retain and incentivise
our senior executives, in what has
continued to be a dynamic and tight
labour market, while consistently taking
into account the wider experience of the
workforce, our shareholders and all
other stakeholders.
Performance delivered in 2023
IAG achieved strong operating profits as
we continue to transform our businesses
to deliver world-class operating margins
and returns on invested capital. This
result led to strong cash generation in
the year, strengthening our balance
sheet, with net leverage back within
IAG’s target range and improved credit
ratings, and enabling us to invest in
improving our customer experience.
The Group's performance has been
against a background of continued
uncertainty driven by the macroeconomic
and geopolitical environment.
• Operating profit before exceptional
items €3,507 million;
• Capacity recovered to 95.7% of 2019
levels and more than 115 million
passengers flown;
• Significantly strengthened our balance
sheet, reducing gross debt by
€3.9 billion by the end of the year;
• This improved financial position has
enabled us to invest in our customers
and brands, in products, services, and
IT, as well as adding 32 new fuel-
efficient aircraft to the fleet; and
• Significant progress towards 2025
carbon efficiency target as IAG
continues to lead the industry on
sustainability
Workforce experience
Our workforce is at the heart of what we
do, and their hard work has again been
key to the strong performance we have
delivered this year. On behalf of the
Committee, I would like to take this
opportunity to thank our employees
across the Group for their ongoing
effort, flexibility, and commitment.
Our financial performance has enabled
us to invest more in our people, and we
have continued to focus on making IAG
a fair and rewarding place, where our
people can develop and succeed. In
2023, our operating companies have
made investments to improve colleague
experience and our employee benefit
packages. This includes enhanced
flexible benefits offerings, mental and
physical health offerings and financial
wellbeing support.
With respect to workforce remuneration,
across our operating companies, almost
90% of our employees are covered by
collective bargaining agreements, many
of which have been under review during
2023. Each operating company has
sought to reach collective agreements
which best support colleagues, whilst
ensuring the business and pay remains
competitive and sustainable.
The Committee has received regular
updates on workforce experience and, in
particular, on the steps the operating
companies have taken to support
colleagues both in terms of cost-of-living
challenges, and their overall wellbeing. All
of the members of the Committee
participate in the Board workforce
engagement programme and have also
used this opportunity to engage with
employees on remuneration matters.
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Financial StatementsCorporate GovernanceStrategic Report Report of the Remuneration Committee continued
The Committee has used these insights
to ensure our decisions regarding
executive remuneration take into
account the approach taken across our
workforce and reflect the expectations
of all our stakeholders.
2023 annual incentive outcome
There was no change to our annual
incentive framework for 2023. 60% of
the annual incentive was based on
operating profit before exceptional
items, 20% on customer NPS, 10% on
carbon efficiency and 10% on strategic
and personal objectives.
These measures were chosen to reflect
the most important priorities of the
Group for the year, with a focus on
strong financial performance, delivering
the best experience for our customers
and the strategic importance of ESG and
sustainability to the Group.
The Annual Incentive Plan operated in
line with our Remuneration Policy and
reflects the strong execution of our
strategy in the year. Under the
scorecard measures, the annual
incentive outcome was 82.9% of the
maximum opportunity. Whilst the
outcome of our customer measure is
below target, we performed well against
our financial and carbon measures with
both paying out at stretch performance.
Customer continues to remain a key
area of focus for both the management
team and the Board. IAG is committed
to provide a best-in-class customer
experience and the Group will keep
investing to further improve it. Full
details of achievement against targets
are provided in the variable pay
outcomes section of this report.
50% of the CEO’s award will be deferred
into shares for three years.
Vesting of the 2021 restricted share
plan (RSP)
The first restricted share award was
made in June 2021 and is due to vest in
June 2024. In advance of this vesting,
the Committee assessed the
performance underpin which applies to
the restricted share awards, taking into
consideration IAG’s overall financial and
non-financial performance.
As part of this process, the Committee
was presented with a framework for it to
use in order to assess whether the
performance underpin had been
satisfied, taking into account the
performance for the financial years 2021,
2022 and 2023. This incorporated detail
on: IAG's financial performance
(including revenue, profitability,
operating margin, cash generation,
return on capital, as well as performance
relative to sector peers) and IAG's key
non-financial and operational
performance measures (including
progress towards IAG's sustainability
ambitions and its broader social
agenda). The purpose of the framework
was to ensure that the RSP vesting
outcome can be justified and to guard
against payment for failure.
The Committee agreed that, based on
this assessment, the conditions set out in
the underpin had been satisfied. As a
result, it is expected that the 2021 RSP
award for the IAG CEO will vest in full in
June 2024. The estimated value of the
award is included in the single total
figure of remuneration in this year’s
report. The award is subject to a
two-year holding period.
Remuneration Policy review
In line with the three-year policy cycle,
our Directors’ Remuneration Policy is
due for renewal at our next Annual
General Meeting in 2024.
Our current Policy was developed at a
time when the Group was significantly
impacted by the biggest crisis the airline
industry has ever faced. A key challenge
for us at that time was to ensure that
our remuneration framework remained
effective in attracting and, crucially,
retaining the executive talent necessary
to drive the recovery of our business. In
this context, and mindful of the
challenge of setting long-term
performance targets, we determined
that the right approach for IAG was to
introduce a restricted share plan, which
would also allow our management team
to focus on overcoming the crisis, while
making the right decisions to ensure the
long-term sustainability of the business.
The Committee has undertaken a
thorough review of our existing
Remuneration Policy during the year,
considering the Group’s strategic
priorities, the macroeconomic
environment, alternative remuneration
frameworks and the effectiveness of the
current Remuneration Policy; and
concluded that the existing Policy
continues to provide the most
appropriate framework for aligning
executive and shareholder interests at
this time.
We believe that the current
macroeconomic and geopolitical
environment, as the industry continues
to stabilise post COVID-19, creates a
level of uncertainty and volatility that
makes it very challenging to design and
set appropriate long-term performance
targets, while effectively incentivising
and retaining our senior executives. In
addition, the Committee is mindful of the
fact that none of the awards under the
Company’s RSP have yet vested, with
the first awards vesting in June 2024. As
we continue to drive the recovery, we
consider IAG’s RSP will continue to
ensure focus on the long-term health of
our business and our strategic
transformation agenda.
While we propose to retain the current
Directors’ Remuneration Policy structure
and framework, we are recommending
some minor amendments to ensure that
we remain competitive over the short
term, the key change being the
reduction of the annual incentive
deferral from 50% to 20%, to apply only
when the executive has met the
shareholding guidelines (350% of salary
for the IAG CEO). In this way, any
reduction in deferral would only apply
where an executive already has a
substantial shareholding, therefore
maintaining alignment with shareholder
interests. The Committee also considers
this change is more closely aligned with
practice amongst our sector and
Spanish peers, for whom bonus deferral
is uncommon.
Our proposed 2024 Directors'
Remuneration Policy can be found at the
end of this report.
Shareholder engagement
In developing our approach to our
Directors’ Remuneration Policy review,
we consulted with our major
shareholders and main proxy advisory
bodies. No concerns were raised with
our Policy proposal, and we received
valuable questions and feedback which
will help shape our future discussions. I
would like to thank all those
shareholders who engaged with us
during this process.
Implementation of the Policy in 2024
Base salary
The Committee seeks to ensure that the
salary level for the IAG CEO is
competitive in the context of a dynamic
talent market in the geographies in
which the Group operates and competes
for talent. At the same time, the
Committee is mindful of the current
economic environment, the wider
stakeholder experience, as well as
investor and proxy advisor views.
Following a detailed review, the
Committee approved a salary increase
of 4% for the IAG CEO for 2024. This is
below the average increase for the wider
workforce, which is more than 5%.
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International Airlines Group | Annual Report and Accounts 2023
This year the Remuneration Committee
has again sought to take a responsible
and considered approach to executive
pay, taking into account the experience
of our employees, shareholders and key
stakeholders in the period. The
Committee considers that the Directors’
Remuneration Policy operated as
intended during 2023, and the
remuneration outcomes are fair and
appropriate, considering the strong
performance delivered in the year. I
hope to receive your support for both
our Remuneration Report and the
renewal of our Remuneration Policy at
our 2024 Annual General Meeting.
Approved by the Board and signed
on its behalf by
Heather Ann McSharry
Remuneration Committee Chair
Annual incentive
In 2024, IAG continues to face
significant uncertainty and volatility
driven by external factors. In this
context, we have sought to ensure that
the annual incentive plan continues to
align with business priorities and reflect
the underlying performance of the
business.
The Committee has decided that the
maximum annual incentive opportunity
will remain at 200% of salary for the IAG
CEO in line with the Policy, and that
there will be no change to the
performance measures for 2024, as the
Committee believes the current
measures continue to reflect the most
important priorities of the Group for the
year ahead. The targets for 2024 will be
fully disclosed in next year’s report.
Restricted share plan
The Group CEO will receive a restricted
share award of 150% of salary in March
2024 under the existing Remuneration
Policy. The award will vest after three
years subject to the satisfaction of the
discretionary performance underpin and
will also be subject to a holding period
until five years from grant.
Looking forward
The Committee will continue to review
the economic and business context and
consider any changes that might be
appropriate to the Directors’
Remuneration Policy in the coming
years. We will consult with our major
shareholders and the main proxy
advisory bodies (and seek approvals as
required) in the next three years, to the
extent that changes are proposed. As
the Group returns to strong sustainable
performance, there may come a time
when it becomes appropriate to
incentivise IAG’s management team to
deliver our long-term financial and
sustainability ambitions through robust
long-term incentive targets. It is
therefore our intention to keep our
long-term incentive model under review
to ensure that it remains effective.
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177
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Remuneration at a glance
IAG Chief Executive Officer
Outcomes for 2023
Implementation in 2024
Proposed changes to Directors’
Remuneration Policy
Purpose and link to strategy
features
Fixed remuneration
Base salary
To attract and retain
talent to help achieve
our strategic objectives.
Takes account of factors
such as role, skills and
contribution.
From 1 January 2023: £852,800
(€979,526) (an increase of 4%
from 2022).
Below the average increase for the
majority of the wider workforce.
Taxable benefits and Pension-related benefits
Provides basic
retirement and benefits
which reflect local
market practice.
Pension at 12.5% of salary,
comparable to the rate applicable to
the majority of the UK workforce.
Benefits provided as per policy.
Variable remuneration
Annual Incentive Plan
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.
For our 2023 bonus, our scorecard
was weighted to the following
measures: 60% Operating profit
(before exceptional items), 20%
customer NPS, 10% carbon efficiency
and 10% personal objectives.
Under those scorecard measures, the
bonus outcome was 82.9% of
maximum, and thus the 2023 bonus
amount of £1,414,000.
50% deferred into shares for three
years.
Long-Term Incentive (RSP)
Incentivises long-term
shareholder value
creation, and retention.
The first restricted share award was
made in June 2021 and is due to vest
in June 2024. Based on the
Committee's assessment of the
performance underpin, the
Committee expects that the RSP
award will vest in full. The award will
be subject to a two-year holding
period post vesting.
More detail on the Committee's
assessment can be found later in the
report.
Shareholding requirement
Provides long-term
alignment with
shareholders.
The CEO of IAG is required to build
up and maintain a shareholding of
350% of base salary.
No change.
If a broad-based employee
share plan is implemented,
Executive Directors will be
able to participate on the
same basis as other
employees.
Proposal to amend the
approach to deferral of the
annual incentive. Currently
executives have to defer 50%
of any bonus earned into
shares for three years. We are
proposing that, if the
executive has met the
shareholding guidelines (350%
of salary for the IAG CEO),
then the amount deferred
will be reduced to 20%.
No change.
Following a review, an increase
of 4% has been awarded. From
1 January 2024: £886,912
(€1,018,707).
Below the average increase for
the wider workforce, which is
more than 5%.
Benefits to be provided as per
policy and pension will remain
unchanged.
Maximum opportunity
unchanged at 200% of base
salary.
No change to the scorecard
measures and weightings for
2024.
In line with IAG’s remuneration
policy, a restricted share award
of 150% of salary will be granted
to the IAG CEO in 2024. In line
with previous years, the award
will vest after three years
subject to the satisfaction of the
discretionary performance
underpin and will also be
subject to a holding period of
two years post vesting.
No change to shareholding
requirements. As at
31 December 2023 the IAG CEO
had a shareholding of 518% of
base salary.
No change.
Malus and clawback provisions apply to Annual Incentive and Long-Term Incentive awards and
the Committee has discretion to adjust formulaic outcomes to reflect corporate performance and
broader stakeholders experience.
No change.
The Committee considers that the Directors’ Remuneration Policy operated as intended during 2023.
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International Airlines Group | Annual Report and Accounts 2023
2023 performance and pay outcomes summary
Business performance
Key strategic highlights
• Strong operating profit and financial performance
• Strengthen our balance sheet and reinvested in the business
• Capacity in the fourth quarter at 98.6% of 2019 levels across
the Group
• Continued to build a sustainable business (as we continue to
renew our fleet and to invest in SAF)
Threshold
Target
Stretch
Performance outcomes
Annual Incentive Plan
Financial (60%)
Customer (20%)
Carbon (10%)
Strategic and personal
(10%)
Key statistics
How we performed in 2023
• Operating profit before exceptional items €3,507 million
(+€2,260 million vly)
• Net debt €9,245 million and Total liquidity €11,624 million
(-€1,140 million and -€2,375 million vly)
• Net Promoter Score (NPS) 16.6 (+0.9 vly)
• Carbon intensity 80.5 gCO2/pkm (-3.6% vly)
• SAF use (tonnes CO2 saved) 157,100 tonnes
Long-Term Incentive Plan
In 2021 the existing performance share plan was replaced with a
Restricted Share Plan (RSP).
Awards vest after three years subject to the satisfaction of the
discretionary performance underpin and are also subject to a
holding period of two years post vesting.
The first restricted share award was made in June 2021 and is
due to vest in June 2024.
82.9%
Formulaic outcome
(% of maximum)
-
Committee
judgement – no
adjustments
82.9%
Final outcome
(% of maximum)
The Committee undertook an assessment of the performance
underpin attached to the restricted share awards made in 2021
and agreed that, based on this assessment, the conditions set
out in the underpin had been satisfied. As a result it is expected
that the award will vest in full in June 2024.
IAG Chief Executive Officer remuneration history (£’000)
2019
£1,093 (€1,243)
£883 (€1,005)
£1,222 (€1,390)
£3,198 (€3,638)
2020
£963 (€1,085)
£963 (€1,085)
2021
£1,110 (€1,286)
£1,110 (€1,286)
2022
£1,208 (€1,419)
£1,369 (€1,608)
£2,577 (€3,026)
2023
£1,024 (€1,176)
£1,414 (€1,624)
£632 (€726)
£3,070 (€3,526)
Fixed remuneration
Annual incentive
Long-term incentive
2020: current IAG CEO appointed in September 2020.
2023: the value shown for Long-term incentive represents the estimated value of the 2021 RSP award. The estimate is based on the award
vesting in full in June 2024 and on a three-month average share price from 1 October 2023 to 31 December 2023.
International Airlines Group | Annual Report and Accounts 2023
179
Financial StatementsCorporate GovernanceStrategic Report Report of the Remuneration Committee continued
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
Alignment to culture
Our policy is that Executive Directors only participate in an annual bonus
and a single restricted share plan, to ensure this simplicity. Incentive
awards are capped so that the maximum potential award under each plan
is transparent.
Our policy 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.
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
corporate governance structure provides for a crossover in Board
Committee membership between the Remuneration Committee and the
Audit and Compliance Committee. This ensures a joined-up view between
emerging or crystallised risks and remuneration outcomes.
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 and targets 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 supports proportionate remuneration outcomes relative to
company and individual performance measures, as well as the wider
performance environment.
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 RSP, and overall proportion of deferred
executive pay, enable a focus on transformation and long-term success.
180
International Airlines Group | Annual Report and Accounts 2023
Remuneration Report
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 held on
17 June 2021, and amended at the 2022 Shareholders’ Meeting,
following close consultation with major shareholders.
In line with the three-year cycle in UK and Spanish
remuneration regulations we will be submitting a new Directors’
Remuneration Policy which will be put forward for shareholder
approval at the 2024 Annual Shareholders’ Meeting. The
proposed policy can be found later in this report.
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 welcomed the opportunity provided by the
Spanish CNMV allowing companies to prepare free-format
reports. Therefore IAG is presenting a consolidated report
responding to Spanish and UK disclosure requirements. This
report will be accompanied by a duly completed document
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 UK standards of best practice.
In addition to the Remuneration Committee Chair’s statement,
this Directors’ Remuneration Report contains the Annual
Report on Remuneration, which covers the information on
Directors’ remuneration paid in the reported year.
Annual Remuneration Report
The Annual Remuneration Report sets out how the Directors’
Remuneration Policy (as approved by shareholders at the
Shareholders’ Meeting on 17 June 2021 and amended at the
Shareholders’ Meeting held on 16 June 2022) was implemented
in 2023 and how our proposed 2024 Directors' Remuneration
Policy will be implemented in 2024.
The Remuneration Committee
The Remuneration Committee is regulated by article 32 of the
IAG Board Regulations and by its own Regulations approved on
25 February 2021. A copy of these Regulations is available on
the Company’s website.
Beyond executive directors, the Committee oversees the
general application of the Remuneration Policy for the
members of the IAG Management Committee (and considers
remuneration matters related to other senior managers and the
broader workforce 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.
Heather Ann McSharry chairs the Committee and also 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 Corporate Governance Code,
the Remuneration Committee also has responsibility to review
workforce remuneration and related policies and the alignment
of incentives and rewards with culture.
Statement of voting
The table below shows the consultative vote on the 2022 Annual Directors’ Remuneration Report at the 2023 Shareholders’ Meeting,
the binding vote on the Directors’ Remuneration Policy Amendments at the 2022 Shareholders’ Meeting and the Directors'
Remuneration Policy approval at the 2021 Shareholders' Meeting:
2022 Annual Directors’
Remuneration Report
Number of votes cast
For
2,287,118,202
2,060,520,717
(100%)
(90.09%)
Against
99,190,323
(4.34%)
2021 Directors’ Remuneration Policy
2,574,695,497
2,407,953,176
149,433,203
(100%)
(93.53%)
(5.80%)
Abstentions
127,407,162
(5.57%)
17,309,118
(0.67%)
2021 Directors’ Remuneration Policy
Amendments
2,048,314,538
1,525,324,299
364,183,944
158,806,295
(100%)
(74.47%)
(17.78%)
(7.75%)
International Airlines Group | Annual Report and Accounts 2023
181
Financial StatementsCorporate GovernanceStrategic Report 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 2023 were £111,574 (€128,154),
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
advisory services to other parts of the Group in 2023. 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 Committee also
received market data and insights from other specialist
consultants such as Aon, PwC and Willis Towers Watson
in 2023.
Report of the Remuneration Committee continued
The Committee’s activities during the year
In 2023, the Committee met five times (four scheduled
meetings and an extraordinary meeting held in early July
focused on reviewing the Remuneration Policy) and discussed,
amongst others, the following matters:
Meeting
Agenda items discussed
January
• Review of the feedback from the investors’
engagement process
• 2022 Directors’ Remuneration Report and
Non-Financial Information Statements
• 2022 Annual Incentive Plan update
• Management Committee pay benchmarking
review
• IAG CEO 2023 base salary review
• Approval of grants under the Restricted Share
Plan (RSP)
• Share ownership update: Review of executive
holdings, share awards authority and dilution
limits
February
• Review of the 2022 Annual incentive outturn
• Vesting outcome of the 2020 Performance
Share Plan (PSP) award
• Approval of the 2022 Directors’ Remuneration
Report
• Approval of the 2023 Annual Incentive Plan
• 2023 Management Committee role-specific
objectives
• Approval of share awards for senior executives
and delegation of authority for future awards
May
• 2023 Annual Incentive Plan update
• Approval of remuneration for a new
Management Committee member
• Authorisation for the allotment of shares for IAG
share plans
July
• Review of market trends and feedback from
investors after the 2023 AGM
• Initial review of IAG executive directors’
Remuneration Policy
• IAG CEO compensation benchmarking review
• Approval of remuneration for new IAG
Management Committee members
October
• Market update on executive remuneration
trends
• 2023 Annual Incentive Plan update
• Workforce remuneration update
• Remuneration strategy for 2024
• IAG executive directors’ Remuneration Policy
proposal for consultation
• Review of non-executive director fees
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International Airlines Group | Annual Report and Accounts 2023
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 2023. An explanation of how the figures are calculated follows the table.
Base salary
Benefits
Pension
Total fixed
Annual incentive
Cash
Deferred into shares for three years
Long-term incentive2
Total variable
Single figure
CEO: Luis Gallego
£’0001
€’0001
2023
853
64
107
1,024
1,414
707
707
632
2,046
3,070
2022
820
285
103
1,208
1,369
685
685
-
1,369
2,577
2023
980
74
122
1,176
1,624
812
812
726
2,350
3,526
2022
963
334
121
1,418
1,608
804
804
-
1,608
3,026
1 Remuneration is paid to the Executive Director in pound sterling and expressed in euro for information purposes only.
2 2023 Long-term incentive: the value shown in this table represents the estimated value of the 2021 RSP award granted in June 2021, which is
expected to vest in full in June 2024. The estimate is based on a three-month average share price from 1 October 2023 to 31 December 2023 of 152
pence. Note that the value shown in this table differs from the value shown in the CNMV Statistical Annex accompanied to this report, as the
reporting criteria established by the CNMV differ from those used in this table.
Additional explanations in respect of the single total figure table for 2023
Only the current IAG CEO, Luis Gallego, served as an executive director in 2023. 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 for each performance year.
January 2022 marked the first point at which the IAG CEO received full contractual salary of £820,000 since appointment, following
COVID-19 pandemic related salary reductions made since he assumed the CEO role, demonstrating the significant length of time pay
reductions were in place.
For 2023, an increase of 4% was awarded, the first increase since appointment in 2020 and below the average increase for the wider
workforce, which was more than 6%.
Taxable benefits
Taxable benefits include the provision of a company car, a fuel allowance, executive support services and private health insurances.
As disclosed in our 2022 Directors’ remuneration report, from January 2021 until December 2022 the IAG CEO was eligible for a
transitionary allowance of £250,000 p.a. (gross), to reflect that as a result of his role he and his family now live in the UK. This
allowance provided a two-year fixed period of transitionary support and considered that the IAG CEO continued to personally
maintain a base in Madrid given the Company’s significant operations and business in Spain. The value of the transitionary allowance
was not included in the calculation of any pension, incentive or other benefit values. Payment of the transitionary allowance ceased
in December 2022.
Pension-related benefits
Employer’s contribution to pension scheme and/or cash in lieu of pension contribution.
Annual Incentive Plan
For our 2023 bonus, our scorecard was weighted to the following measures: 60% Operating profit (before exceptional items), 20%
customer NPS, 10% carbon efficiency and 10% personal and strategic objectives.
Under those scorecard measures, the bonus outcome was 82.9% of maximum. The outcomes of the performance conditions which
determined the award are described in detail later in the report.
Under the current policy, 50% of any Annual Incentive award for executive directors is made in deferred shares under the Executive
Share Plan. Under this plan, shares are deferred for three years from date of grant.
For 2022, the bonus outcome was 83.5% of maximum. Half of the annual incentive was deferred into shares for three years; these will
vest in March 2026.
International Airlines Group | Annual Report and Accounts 2023
183
Financial StatementsCorporate GovernanceStrategic Report Report of the Remuneration Committee continued
Long-term incentive vesting
In 2021 the existing performance share plan was replaced with a Restricted Share Plan (RSP). The first award was made to the IAG
CEO in June 2021 and is due to vest in June 2024.
The Committee undertook an assessment of the performance underpin attached to the restricted share awards made in 2021 and
agreed that, based on this assessment, the conditions set out in the underpin had been satisfied. As a result it is expected that the
award will vest in full in June 2024.
More detail on the Committee's assessment can be found later on in the report.
Share price appreciation and depreciation
There is no value attributable to share price appreciation.
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 executive directors. For the year ended 31 December 2023 the
Company paid life insurance premium contributions of €17,050 (2022: €14,493).
Exchange rate for 2023
For the year to 31 December 2023, £:€ exchange rate applied is 1.1486 (2022: 1.1744).
Variable pay outcomes
2023 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 reflects the most important priorities for the Group for the year to deliver
long-term sustainable returns. For 2023, the Board at the beginning of the year, following a recommendation by the Committee, set
the following measures:
Weighting
60% Financial
20% Customer
KPI
Description
IAG Operating profit (before
exceptional items)
Group Net Promoter Score by
relevance (NPS)
For 2023 it was considered that Operating profit continued to
be the most appropriate financial KPI in aligning shareholder
interest with the Company
NPS is used to gauge the loyalty and experience of the Group’s
customer relationships. It is calculated based on survey
responses to the likelihood to recommend, by subtracting the
percentage of customers who are ‘Detractors’ from the
percentage of customers who are ‘Promoters’
The weighting of each airline towards the overall NPS score
reflects the Group's areas of focus for 2023
This measure reflects our progress towards our Flightpath Net
Zero 2050 commitment; it measures the fuel efficiency of our
flight operations, taking account of our network, aircraft mix
and passenger load factors
10% IAG-specific carbon
efficiency measure
Group grammes of CO2 per
passenger kilometre (gCO2/
pKm)
10% Strategic and personal
Recover capacity
Ensure IAG is able to operate closer to 2019 capacity
Recover profitability
Transform IAG
Growth in shareholder value
Procurement
People
Sustainability
Government affairs
Ensure IAG delivers improved profitability and drives operating
margin improvements
Define and implement key projects that transform cost,
customer experience and culture
Define medium-term strategic plan that creates shareholder
value, strengthen’s IAG’s position in key markets and improves
IAG’s capital position
Leverage Group’s scale to drive right long-term strategic
partnerships and supplier value
Build culture and capability to underpin the Group’s long-term
success, ensuring IAG can attract, retain and engage diverse
talent
Enable IAG to lead the aviation industry on sustainability, and
secure access to alternative fuels to support our net zero
ambitions
Work with governments, industry associations, and other
stakeholders to ensure the right foundations are in place to
enable IAG to deliver its strategic goals
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International Airlines Group | Annual Report and Accounts 2023
IAG CEO annual incentive plan – performance against targets
Under the policy, the IAG CEO has a maximum annual incentive opportunity of 200% of contractual salary. The below table details
the approved 2023 performance measures and the Board's assessment of both company and individual IAG CEO performance:
Threshold
Target
At which
payments
begin (20%
pay-out)
(50%
pay-out)
Stretch
Max
pay-out
(100%
pay-out)
1,469
2,098
2,727
Performance
delivered
Payout % of
maximum
for each
measure
Weighted
Payout %
CEO
incentive
outcome
(£’000)
Category
Measure
type Weighting
Operating
profit before
exceptional
items
(€m)
Financial
measures 2023
60%
3,507
100%
60%
£1,023
Description of performance
In 2023, the Group benefited from its high-quality and increasingly diverse revenue stream, with recovery seen in all our businesses
and with particular strength in Spain and the North and South Atlantic. Passenger capacity operated across the year was close to
the levels operated in 2019 before the COVID-19 pandemic and we were able to generate higher unit revenues than in 2019, which
offset higher fuel costs and supplier cost inflation. The results was a strong operating profit before exceptional items for the year of
€3,507 million, versus a target of €2,098 million.
16.0
24.0
30.0
Customer
2023
NPS1
20%
16.57
22%
4.4%
£75
Description of performance
The outcome for 2023 was 16.57 vs a target of 24.0. Disruptions, stemming from diverse factors such as air traffic control failures, strikes,
adverse weather events, supply chain challenges, and baggage issues across key airports impacted negatively our NPS. To mitigate this
impact our airlines responded proactively to these challenges through initiatives and transformation plans aimed at improving on-time
performance and all baggage-related processes, among others. Positive impacts to our NPS can be attributed to substantial investment
in our cabins and cabin product, the enhancement of food and drink offering, the effort to digitalise the customer journey, and the
improvements in customer care. NPS continues to be a key area of focus for both management team and the Board.
1 For the purpose of the annual incentive award, the weighting of each airline towards the overall NPS score reflects the Group's areas of focus for 2023.
83.5
82.0
80.5
Carbon
2023
gCO2/pKm
10%
80.5
100%
10%
£171
Description of performance
The outcome for 2023 was 80.5 vs a target of 82.0. IAG is targeting net zero emissions by 2050 across its Scope 1, 2, and 3
emissions. IAG’s interim targets are an 11% improvement in fuel efficiency 2019-2025, a 20% drop in net Scope 1 and 3 emissions
2019-30, and 10% SAF in 2030.
IAG is on track to deliver its 2025, 2030 and 2050 climate targets by carrying out emission reduction initiatives, working in
collaboration with key stakeholders and proactively advocating for supportive government policy and technology development.
Key measures to reduce emissions are fleet modernisation, sustainable aviation fuel (SAF), market-based measures including the
UK and EU ETS and CORSIA, and carbon removals.
Strategic
and
personal
objectives
As described in
the table in the
previous page
10%
Low
(0% to
40%)
Good
to high
(45% to
65%)
Exceptional
(70% to
100%)
Exceptional
85%
8.5%
£145
Description of performance
The Committee and the Board considered the CEO’s performance against the KPIs set out on the previous page and assessed his
performance against each of those indicators. The IAG CEO has led the group’s recovery with passenger capacity close to pre-
pandemic levels and with strong operating profits. He has led the transformation of IAG, strengthening IAG’s position in core
markets, delivering world-class operating margins and returns on invested capital. This result led to strong cash generation in the
year, strengthening our balance sheet and with a clear plan and delivery against key transformation initiatives. This is a significant
achievement particularly given the continued economic uncertainty and challenges faced across the year. The IAG CEO has also
driven progress across the ESG agenda, increasing diversity and bench-strength of IAG’s senior leadership, and making significant
progress towards its 2025 carbon efficiency target.
Total
100%
82.9%
£1,414
International Airlines Group | Annual Report and Accounts 2023
185
Financial StatementsCorporate GovernanceStrategic Report
Report of the Remuneration Committee continued
Half of the overall outcome of the annual incentive detailed above is payable in deferred shares in the Company vesting after three
years (under the Executive Share Plan).
For all measures, there was a straight-line sliding scale between the threshold level and the on-target level, and between the
on-target level and the stretch target level.
2023 CEO performance annual incentive award outcome
Formulaic scorecard
outcome
82.9%
% of Maximum
Remuneration
Committee judgement
–
No adjustment
Final scorecard outcome
as % of maximum
Maximum bonus opportunity
(% of base pay)
Base pay (£’000)
82.9%
X
200%
X
£853
=
2023 Annual Incentive Award
(£’000 shown in single
figure table)
£1,414
€1,624
IAG Restricted Share Plan (RSP) awards
The RSP was introduced from 2021 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.
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.
186
International Airlines Group | Annual Report and Accounts 2023
2021 Restricted Share Plan (RSP) award vesting
The first restricted share award was made in June 2021 and is due to vest in June 2024. In advance of the award vesting, the
Committee undertook an assessment of the performance underpin which applies to the restricted share award and considers IAG’s
overall financial and non-financial performance.
As part of this process, the Committee was presented with a framework to assess whether the underpin had been satisfied, taking
into account the overall performance for the financial years 2021, 2022, and 2023. The different elements considered included:
• The overall financial results for the period including IAG’s recovery from the pandemic. The Committee’s assessment took into
account overall profitability, operating margins (including against comparable airlines), revenue, cash generation, return on capital
and the Company’s investment in fleet, customer and transformation. The Committee was satisfied that the conditions of the
underpin in this regard had been satisfied.
• The Group's performance against key non-financial and operational performance measures, including progress towards IAG's
sustainability ambitions and its broader social agenda (including diversity and inclusion). The Committee was satisfied that the
conditions of the underpin in this regard had been satisfied.
• IAG’s risk context, where the Group’s overall performance has been fundamentally in line with its approved risk appetite and
internal control framework and no material issues have been identified.
• The Group’s wider stakeholder experience in the period, which does not give rise to any material concerns.
The purpose of the framework was to ensure that the RSP outcome can be justified and to guard against payment for failure.
The Committee agreed that, based on this assessment, the conditions set out in the underpin had been satisfied. As a result,
it is expected that the 2021 RSP award will vest in full in June 2024. The award is subject to a two-year holding period.
2021 RSP (number of shares awarded)
Estimated share price1
Award shown in the single figure table (£’000)
414,954
x
£1.5223
=
£632
€726
1 Value shown represents the estimated value of the 2021 RSP award. The estimate is based on the award vesting in full in June 2024 and on a
three-month average share price from 1 October 2023 to 31 December 2023.
Scheme interests awarded during the financial year 2023 Restricted Share Plan (RSP)
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
Date of grant
Grant price
Vesting period
Holding period
Discretionary underpin
description
IAG CEO (Luis Gallego) – 150% of base salary
13 March 2023
£1.53
Three years: 13 March 2023 to 13 March 2026
Two years: 13 March 2026 to 13 March 2028
No performance measures are associated with the awards. Vesting will be contingent on the satisfaction of
a discretionary underpin, normally assessed over three financial years commencing from the financial year
in which the award was granted. In assessing the underpin, the Committee will consider the Company’s
overall performance, including financial and non-financial performance measures, 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.
International Airlines Group | Annual Report and Accounts 2023
187
Financial StatementsCorporate GovernanceStrategic Report Report of the Remuneration Committee continued
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 (1 January 2023 to 31 December 2023). He received cash in lieu of
contributions of £106,600. This value is equivalent to 12.5% of base salary paid during the financial year and is comparable to the rate
for the majority of the UK workforce.
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% of salary and
other executive directors are required to build up and maintain a shareholding of 200% of basic salary.
In addition, executive directors are required to retain all shares received via incentive plans until 100% 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.
CEO, Luis Gallego
Policy requirement
3.5 times salary
Actual
5.18 times salary (1,475,751 shares)
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 chart and table below summarise current executive directors’ interests as of 31 December 2023:
Shareholding %
of Base Salary
85%
293%
97%
43%
518%
Shareholding requirement
Shares owned
Shares already vested, or in the holding period, from performance share plans
Shares already vested from deferred annual incentive plans
Vested shares from restricted share plan
Unvested shares from deferred annual incentive plans
Executive
Director
Shareholding
requirement
Shares
owned
Shares already
vested, or in the
holding period,
from performance
share plans
Shares already
vested from
deferred annual
incentive plans
Vested
shares from
restricted
share plan
Unvested shares
from deferred
annual incentive
plans
Luis
Gallego
350%
of salary
403,834
557,207
277,619
0
237,091
Total
qualifying
shares held1
1,475,751
(518% of
salary)
Consequence
of a +/- €0.5
share price
change (€)
737,875
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.
188
International Airlines Group | Annual Report and Accounts 2023
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.
IAG CEO remuneration history
The table below shows the IAG CEO single total figure of remuneration for the latest ten-year rolling period:
2014 Willie Walsh
2015
2016
2017
2018
2019
2020 Willie Walsh
Luis Gallego
Luis Gallego
2021
2022
2023
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
£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
£2,577,000
£3,070,000
97.78% of maximum
80.00% of maximum
33.33% of maximum
92.92% of maximum
61.85% of maximum
51.97% of maximum
85.00% of maximum
100.00% of maximum
50.00% of maximum
66.67% of maximum
46.19% of maximum
72.11% 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
83.5% of maximum
82.9% of maximum
Zero vesting of long–term incentives
-1
1 2023 Long-Term incentive: from 2021, restricted share awards were granted to the IAG CEO which have no performance conditions and vest subject
to the satisfaction of performance underpins. The value of the restricted share awards are included in the single total figure table in the relevant year
Single total figure of remuneration includes basic salary, taxable benefits, pension-related benefits, Annual Incentive Award and
Long-Term incentive vesting.
IAG’s total shareholder return (TSR) performance compared to the FTSE 100
The chart below shows the value by 31 December 2023 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.
300
250
200
150
100
50
0
Jan 2014
Dec 2014
Dec 2015
Dec 2016
Dec 2017
Dec 2018
Dec 2019
Dec 2020
Dec 2021
Dec 2022
Dec 2023
IAG
FTSE 100
International Airlines Group | Annual Report and Accounts 2023
189
Financial StatementsCorporate GovernanceStrategic Report Report of the Remuneration Committee continued
Non-executive directors
Non-executive directors are paid a flat fee each year, as per the following table.
Role
Non-executive Chairman
Non-executive directors
2023 Fee
2024 Fee
€645,000
€645,000
€120,000
€120,000
Additional fee for holding the Chair of the Audit and Compliance Committee and of the Remuneration
Committee
€20,000
€30,000
Additional fee for holding the Chair of the Nominations Committee and of the Safety, Environment
and Corporate Responsibility Committee
Additional fee for Senior Independent Director
€20,000
€30,000
€20,000
€30,000
The fees for non-executive directors were reviewed in October 2023. The fees for the position of non-executive director will remain
unchanged for 2024, as they have been since 2011.
However, the Board, with the favourable report from the Remuneration Committee, agreed that the additional fee for holding the
Chair of a Committee would increase to €30,000, with effect from 1 January 2024, for the Chair of the Audit and Compliance
Committee and of the Remuneration Committee. This more closely reflects the complexity and time commitment of these roles.
Single total figure of remuneration for each non-executive director
The total remuneration of each of the non-executive directors for the years ended 31 December 2023 and 31 December 2022 is set
out in the table below.
Director (€'000)
Javier Ferrán1
Heather Ann McSharry1
Giles Agutter
Peggy Bruzelius
Eva Castillo
Margaret Ewing
Maurice Lam
Robin Phillips
Emilio Saracho
Nicola Shaw
Alberto Terol
Total (€’000)
2023
Taxable
benefits
8
3
0
4
2
4
9
18
11
4
-
63
Fees
645
170
120
120
120
140
120
120
120
140
-
1,815
Total
653
173
120
124
122
144
129
138
131
144
-
2022
Taxable
benefits
5
6
0
0
2
3
12
4
11
12
17
Fees
645
147
120
120
120
140
120
120
120
140
79
Total
650
153
120
120
122
143
132
124
131
152
96
1,878
1,871
72
1,943
1 Heather Ann McSharry was appointed Senior Independent Director and Remuneration Committee Chair in June 2022.
2 Alberto Terol stepped down from the Board in June 2022 and his fees reflect a part year of service. Received no fees in 2023.
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 31 December 2023, £:€ exchange rate applied is 1.1486 (2022: 1.1744).
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International Airlines Group | Annual Report and Accounts 2023
Directors’ interests in shares
Javier Ferrán
Luis Gallego
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
937,618
625
0
0
18,750
0
55,000
0
0
4,285
1,791,028
0.016
0.019
0.000
0.000
0.000
0.000
0.000
0.001
0.000
0.000
0.000
0.036
Value
€6,000
€11,000
€27,000
€15,000
€3,000
€7,000
€11,000
€19,000
€10,000
There have been no changes to the shareholdings set out above between 31 December 2023 and the date of this report.
Payments to past directors
Travel benefits were received during 2023 by the following former non-executive directors:
Former non-executive directors
Antonio Vázquez
Alberto Terol
Patrick Cescau
Maria Fernanda Mejía
Deborah Kerr
Baroness Kingsmill
Kieran Poynter
Dame Marjorie Scardino
James Lawrence
International Airlines Group | Annual Report and Accounts 2023
191
Financial StatementsCorporate GovernanceStrategic Report Report of the Remuneration Committee continued
Wider workforce in 2023
A key area of focus for the Committee over 2023 has been understanding the broader workforce experience in light of the current
economic environment and cost-of-living pressure and the actions taken to support our wider workforce.
Workforce experience highlights
• Within IAG’s unique operating model, employee reward is owned and managed within each operating company, to enable them
to deliver the right customer and employee experience.
• Our employees have been central to our recovery and key to delivering for our customers. Operating companies continue to
support our people through these challenging times and ensure our pay models are sustainable, fair and aligned to the
operating company’s competitiveness.
• Almost 90% of employees are subject to collective bargaining agreements with more than 30 collective bargaining agreements
across the Group, many of them reviewed in 2023.
• The Committee has received regular updates on workforce experience and in particular the steps the operating companies have
taken to support colleagues both in terms of support with cost of living challenges, and their overall wellbeing.
• This includes regular updates on the investments our operating companies have made in improving the colleague experience
and our employee benefit schemes. This includes enhanced flexible benefits offerings (e.g. enhanced British Airways staff
travel), mental health and physical health offerings (e.g. implementation of EAPs (employee assistance programmes) and free
menopause support) and financial wellbeing support.
• The Committee’s insight into the experience of our colleagues helps to ensure that our decisions regarding executive
remuneration take into account the approach taken across our workforce and reflect the expectations of all our stakeholders.
Engaging with employees
All members of the
Remuneration Committee
participate as designated
directors in the Board
workforce engagement plan.
This engagement also includes
remuneration and other
workforce experience matters
relevant to the Committee.
The key themes from the
engagement were shared with
the Board in order to
understand colleague
experiences and to identify any
areas for improvement. Further
explanations of the Board
engagement with employees is
set out in the Stakeholders
engagement section of the
Corporate Governance report.
Gender pay
Operating companies have implemented a
range of initiatives to support gender equality
including reviewing recruitment processes to
ensure diverse shortlists and interview panels,
setting up mentoring and networking
opportunities to women and providing
educational programmes for girls and young
women considering career paths in aviation.
As the Group built back resources during 2023,
in particular in airport operations, customer
and IT roles, the composition of the workforce
has changed, with the resultant median pay
point for both men and women changing
compared to 2022. The result is that at Group
level, there has been a year-on-year reduction
in the median salary gap from 12.9% in 2022
to 8.4% in 2023.
Workforce remuneration
Each operating company has sought to reach
collective agreements that best support
colleagues whilst ensuring the business and
pay remains competitive. This has included
changes in allowances, one-off payments and
contractual pay increases throughout the
Group.
Each operating company is committed to
creating a positive working environment but
also to actively contribute to and support the
overall wellbeing of every colleague through
the provision of a comprehensive range of
health, financial, and lifestyle benefits.
Remuneration decisions made by the Committee align with our strategy, our stakeholders’ interest in our delivery of long-term
sustainable value and with the wider workforce in line with the principles set out in our policy.
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International Airlines Group | Annual Report and Accounts 2023
Alignment of Executive Director and workforce remuneration
The Committee has oversight of workforce remuneration and related policies across the Group and takes this into account when
setting remuneration for the IAG CEO and senior management. The table below summarises the remuneration structure for the
wider workforce.
IAG CEO
Below Board level
Base Salary 2023 was the first year since appointment in 2020 that
the CEO received an increase. The 4% awarded was
below the average increase for the majority of the wider
workforce.
Salary increases as a percentage of salary are normally
aligned with, or lower than, those of the wider workforce.
Taxable
Benefits
Pension
Annual
Incentive
Awards
Benefit packages are broadly aligned with those of other
employees who joined in the same country at the same
time.
Pension contribution of 12.5% of salary in line with the rate
applicable to the majority of the workforce in the country
in which the individual is based.
The maximum opportunity in the annual incentive plan is
200% of salary.
The majority of the annual incentive is based on financial
measures. In 2023, 60% was based on operating profit
before exceptional items, 20% on customer NPS, 10% on
IAG-specific carbon efficiency measure, to further drive
progress towards our Flightpath Net Zero 2050
commitment, and 10% on strategic and personal
objectives.
For 2023 50% of any bonus earned is deferred into shares
for three years.
Almost 90% of our employees are subject to collective
bargaining agreements (CBA). Many of them were
reviewed over the course of 2023, with the aim to create
a stronger link to market alignment and to ensure that
pay is both competitive and sustainable.
Salary increase budgets for employees are determined
by each operating company for each country.
Salary increases reflect position against market,
performance, skills, contribution and development in role.
If we compare the 2023 base salary increases of the IAG
CEO against the UK workforce in 2023, of the circa
31,600 employees present in both 2022 and 2023, the
median salary increase awarded was 10.3% of contractual
base salary.
Benefits are set by operating companies at a competitive
level and are appropriate given local market practice.
Pension arrangements reflect local market practices and
requirements.
For eligible employees incentive plans were in place
against objectives designed to focus on financial,
customers, carbon efficiency and personal. Opportunities
vary by role and outturns and payments against these
plans were managed at a local level.
Long-term
Incentives
Maximum restricted share plan opportunity of 150% of
base salary and subject to the satisfaction of performance
underpins.
Restricted share awards granted to senior managers
across the Group to incentivise long-term shareholder
value creation.
Awards are subject to a three-year vesting period
followed by a two-year holding period.
Also by exception, other identified employees may
participate where an award of long-term incentives is
deemed critical to retention.
International Airlines Group | Annual Report and Accounts 2023
193
Financial StatementsCorporate GovernanceStrategic Report Report of the Remuneration Committee continued
CEO pay ratio
The following table sets out IAG’s CEO pay ratio figures from 2019 to 2023.
Year
2023
2022
2021
2020
2019
CEO single figure (£‘000)
Method1
25th percentile pay ratio
Median pay ratio
75th percentile pay ratio
3,070
2,577
1,110
963
3,198
Option A
Option A
Option A
Option A
Option A
62:1
59:1
29:1
34:1
109:1
50:1
45:1
21:1
23:1
72:1
32:1
29:1
14:1
15:1
49:1
The pay ratio figures in the above table are calculated using the following UK employee remuneration information:
Year
UK employee pay
25th percentile pay
Median pay
75th percentile pay
20232
2022
20213
Basic salary (£‘000)
Total remuneration (£‘000)
Basic salary (£‘000)
Total remuneration (£‘000)
Basic salary (£‘000)
Total remuneration (£‘000)
Basic salary (£‘000)
20204
Total remuneration (£‘000)
Basic salary (£‘000)
2019
Total remuneration (£‘000)
30.2
49.2
27.7
43.4
26.9
38.6
17.2
28.4
20.1
29.4
43.5
61.4
40.9
57.1
39.7
53.4
28.6
42.8
32.3
44.2
66.8
95.3
62.4
90.5
60.6
80.7
45.2
63.9
46.5
64.7
1 The ratio continues to be calculated on the most statistically accurate basis, Option A. UK employee pay is based on the payroll records of 40,248
employees who were in the Group for the whole of or some of 2023.
2 To ensure the accuracy of these calculations, earnings data were collected directly from the UK payroll on a month-by-month basis. Any variable
incentive elements in respect of 2023, payable to employees later in 2024, are modelled on an employee-by-employee basis against agreed
frameworks. This approach enables fair and accurate comparison to the IAG CEO 2023 single total figure of remuneration.
3 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. With the UK furlough scheme having ended in September 2021, this consideration is not relevant
for 2022 or 2023.
4 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.
The comparison in the ratio versus 2019 demonstrates the continuing impact of the pandemic and is an accurate reflection of the
contraction in IAG CEO’s pay, with the IAG CEO’s remuneration currently being around 96% of 2019 levels.
The increase in the UK employee remuneration in 2023 reflects:
• Across our operating companies we have put in place a number of programmes to support our people through the current
economic uncertainty.
• Payments made to managers under the 2023 annual incentive plan.
• Changes to the size and composition of the UK workforce between years, with pay for 36,474 employees being reported for 2022
and 40,248 for 2023.
The change in the IAG CEO’s remuneration between 2022 and 2023, is due to:
• An increase of 4% in basic salary for 2023, first increase since appointment in 2020 and below the average increase of the wider
workforce (with no increase in 2021 and 2022, 10% reduction in 2021 and 20% reduction in 2020).
• The inclusion of an estimated value of the 2021 RSP award, that is estimated to vest in full in June 2024.
• As disclosed in our 2022 Director’s Remuneration Report, from January 2021 until December 2022 the Executive Director was
eligible for a transitionary allowance of £250,000 p.a., to reflect that as a result of his role as IAG CEO, he and his family moved to
live in the UK. This allowance provided a two-year fixed period of transitionary support. Payment of the transitionary allowance
ceased in December 2022.
The Committee recognises that the current ratio continues to reflect recovery from the pandemic, and will continue to increase to a
more representative level.
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International Airlines Group | Annual Report and Accounts 2023
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 2021 to 2023.
Director (€'000)
Luis Gallego2
Javier Ferrán3
Heather Ann McSharry4,6
Giles Agutter5
Peggy Bruzelius6
Eva Castillo6
Margaret Ewing
Maurice Lam7
Robin Phillips5
Emilio Saracho
Nicola Shaw
All UK employees8,9
2022 to 2023
2021 to 2022
2020 to 2021
Salary or
fees
Taxable
benefits
Annual
incentive
Salary or
fees1
Taxable
benefits
Annual
incentive
Salary or
fees1
Taxable
benefits
Annual
incentive
2%
0%
16%
0%
0%
0%
0%
0%
0%
0%
0%
6%
(78%)
60%
(50%)
0%
100%
0%
33%
(25%)
350%
0%
(67%)
0%
1%
93%
13%
13%
36%
11%
11%
11%
11%
107%
11%
11%
14%
3%
3%
25%
100%
(100%)
0%
100%
100%
500%
100%
57%
100%
0%
100%
0%
269%
436%
–
315%
0%
–
260%
100%
–
–
18%
–
260%
6%
21%
39%
–
–
(100%)
–
0%
17%
(100%)
0%
131%
(37%)
1 The comparison of fees for all directors in respect of 2020 and 2021, reflects a 20% COVID-19 related reduction operated between 1 April 2020 and
31 December 2020 and a 10% reduction operated for the full year in 2021.
2 Luis Gallego: An increase of 4% in basic salary for 2023 (below the average increase for the wider workforce) and no transitionary allowance. The
comparison of 2021 vs 2022 reflects the first year since appointment in 2020 receiving full contractual salary and the first Annual Incentive Award
since 2019. The comparison of 2020 vs 2021 reflects a part year of remuneration in 2020 versus a full year 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 role of the
Chairman from 7 January 2021, for the remainder of the reporting period.
4 The uplift in fees for Heather Ann McSharry between reflect her appointment as Senior Independent Director and Remuneration Committee Chair
since June 2022.
5 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.
6 Eva Castillo, Heather Ann McSharry, and Peggy Bruzelius were appointed as directors on 31 December 2020, but received no remuneration for 2020.
7 The comparison of 2021 vs 2022 reflects a part year of director service in 2021 versus a full year in 2022.
8 The All UK Employee 2022 and 2023 salary medians underlying the 6% uplift in median salary are taken from UK employee earnings published in the
2023 CEO pay ratio section.
9 The reported change in the median value of all UK employee annual incentives from 2022 to 2023 (93%) reflects the strong financial performance of
the Group in the year.
Relative importance of spend on pay
The table below shows, for 2023 and 2022, 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 before exceptional items
Dividend declared
Dividend proposed
1 Total employee costs are before exceptional items.
2023
2022
€5,423,000,000
€4,647,000,000
€4,678,000
€4,969,000
€3,507,000,000
€1,225,000,000
–
–
–
–
International Airlines Group | Annual Report and Accounts 2023
195
Financial StatementsCorporate GovernanceStrategic Report Report of the Remuneration Committee continued
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 31 December 2023:
Director
Date of grant
28 May 2015
7 March 2016
6 March 2017
Luis Gallego
6 March 2020
Total nil-cost options
over ordinary shares
Number of
options at
1 January
2023
131,242
98,001
174,504
538,805
942,552
Options
exercised
during
the year
Options
lapsed
during
the year
Options
granted
during
the year
Exercise
price
–
–
–
–
–
–
–
–
–
–
–
-
538,805
– 538,805
–
–
–
–
–
Exercisable
from
Expiry date
1/1/2020 31/12/2024
1/1/2021
31/12/2025
1/1/2022
31/12/2026
lapsed
Number of
options at
31 December
2023
131,242
98,001
174,504
–
403,747
The award granted on 6 March 2020 was tested at the end of the performance period. Threshold performance was not achieved for
any measure and therefore the award lapsed in full (one third of the award was subject to TSR performance measured against a
comparator index, one third was subject to adjusted EPS performance, and one third was subject to RoIC performance).
The value attributed to the Company’s ordinary shares in accordance with the plan rules on the date of the PSP awards was
2020: 459 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 Restricted Share Plan (RSP) to
Executive Directors:
Director
Date of grant
Number of
conditional
shares
granted
Shares lapsed
at vesting
due to
underpin
Vesting date
23 June 2021
414,954
23 June 2024
21 March 2022
581,907
21 March 2025
28 October 2022
290,953
21 March 2025
Luis Gallego
13 March 2023
835,751
13 March 2026
Total conditional
share awards (RSP)
2,123,565
–
–
-
-
Holding period
expiry date
23 June 2026
21 March 2027
21 March 2027
13 March 2028
Number of
unvested
conditional
shares at
31 December
2023
Number of
vested
conditional
shares at
31 December
2023
414,954
581,907
290,953
835,751
2,123,565
–
–
-
-
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, 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.
The value attributed to the Company’s ordinary shares in accordance with the plan rules on the date of the RSP awards was
2023: 153 pence (both awards in 2022: 141 pence and 2021: 198 pence).
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International Airlines Group | Annual Report and Accounts 2023
Incentive Award Deferral Plan (IADP)
Under the current policy, 50% of any Annual Incentive Award for executive directors is made in deferred shares under the Executive
Share 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 31 December 2019 and 31 December 2022.
No award was made in respect of 2020 (in March 2021) following the decision to cancel the 2020 IAG Annual Incentive Plan.
Additionally, no award was made for 2021 (March 2022), as the IAG’s CEO confirmed to the Board that he did not wish to be
considered for a 2021 Annual Incentive Award, waiving any 2021 incentive opportunity.
Executive Director
Luis Gallego
Total
Performance
year award
relates to1
Date of award
2019
6 March 2020
2022
13 March 2023
Number of
Shares at
1 January
2023
81,520
447,341
528,861
Awards
released
during
the year
Date of vesting
81,520
6 March 2023
–
13 March 2026
81,520
Awards
lapsing
during
the year
Awards
made
during
the year
–
–
–
–
–
–
Number of
unvested
shares at
31 December
2023
–
447,341
447,341
1 For the performance period ended 31 December 2023 the award is expected to be made March 2024.
Under the Executive Share Plan rules an IADP will not lapse on leaving employment before the vesting date unless exceptional
circumstances occur, such as gross misconduct, in which case the award would lapse in full. 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; and 2023 award: 153 pence.
The share price on the date of the vesting of the 2020 IADP award (6 March 2023) was 155 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.
International Airlines Group | Annual Report and Accounts 2023
197
Financial StatementsCorporate GovernanceStrategic Report
Report of the Remuneration Committee continued
2024 Directors’ Remuneration Policy
Introduction
Our current Directors’ Remuneration Policy was approved by
shareholders at the 2021 Annual General Meeting (and partially
amended in 2022). In line with the three-year cycle in UK and
Spanish remuneration regulations we will be submitting a new
Directors’ Remuneration Policy which will be put forward for
shareholder approval at the 2024 Annual Shareholders’
Meeting. The proposed policy can be found below.
2024 Directors’ Remuneration Policy
This section sets out the Directors’ Remuneration Policy of
International Consolidated Airlines Group which will be put to
shareholder approval at the 2024 Shareholders’ Meeting.
This Directors' Remuneration Policy is adapted to the 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 2024
Shareholders' Meeting and during the following three financial
years. 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.
Although IAG, as a Spanish-incorporated company, is not
subject to the remuneration reporting regulations that apply to
UK-incorporated companies, it is firmly committed to UK best
practice and will continue to operate in accordance with the UK
remuneration reporting regulations.
In developing the proposed Directors’ Remuneration Policy,
input was received from the Remuneration Committee and
management while ensuring that conflicts of interest were
suitably mitigated. Input was also provided by the
Remuneration Committee’s appointed independent advisers
throughout the process.
IAG Remuneration Principles
Alignment
Simplicity and clarity
Competitiveness
Pay for performance
Judgement
Sustainability
Wider workforce
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.
We are committed to understanding the experience of all our colleagues. When setting senior
executive pay we will use this insight to ensure all decisions regarding executive remuneration
reflect the experience and expectations of all stakeholders.
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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.
In developing our approach to our Director’s Remuneration
Policy review, we consulted with our major shareholders and
main proxy advisory bodies. No concerns were raised with our
Policy proposal, and we received valuable questions and
feedback which will help shape our future discussions.
The Committee discusses each year the issues and outcomes
from the annual Shareholders’ Meeting, and determines any
appropriate action required as a result.
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 Board is
committed to understanding the experience of all our
employees and uses its insight to ensure all decisions regarding
executive remuneration reflect the experience and expectations
of all stakeholders.
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 normally 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 includes 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.
The IAG European Works Council (EWC) facilitates
communication and consultation between employees and
management on transnational European matters. It includes
representatives from the different European Economic Area
(EEA) countries, meeting regularly throughout the year to be
informed and where appropriate, consulted on transnational
matters impacting employees in two or more EEA countries.
Proposed changes to Directors’ Remuneration Policy
After a detailed review of the current Directors’ Remuneration
Policy the Committee has concluded that the existing policy
continues to provide the most appropriate framework for
aligning executive and shareholder interests at this current
time. As IAG returns to strong sustainable performance, the
Committee believes there will be a time when it is appropriate
to incentivise our CEO and his team to deliver our long-term
financial and sustainability ambitions through robust long-term
incentive targets. It is therefore our intention to keep our
long-term incentive model under review to ensure that it
continues to remain effective. We will consult with shareholders
(and seek approvals as required) in the next three years to the
extent that any changes are proposed.
While we propose to retain the current Directors’ Remuneration
Policy structure and framework, the Committee is proposing
some minor Policy amendments to ensure that we remain
competitive over the short term, as outlined below:
• Approach to annual bonus deferral: under our 2021
remuneration policy, any annual bonus earned is paid 50% in
cash, with 50% deferred into shares for three years. This
deferral has been an important way of increasing personal
shareholdings and satisfying the Group’s minimum
shareholding requirements of 350% of salary for the CEO.
Recognising that our control mechanism for ensuring
alignment with shareholder interests is the minimum
shareholding requirement itself, and that the minimum
shareholding requirement can be fully met without the
reliance on annual bonus deferral, under our 2024
remuneration policy the Committee is proposing that the
bonus deferral is rebalanced from 50% to 20% of any annual
bonus earned deferred into shares, subject to the executive
meeting their minimum shareholding requirement. The
remaining 80% of the annual bonus earned will be paid in
cash. The deferral rate will remain at 50% until the minimum
shareholding requirement is met; and
• If a broad-based employee share plan is implemented,
Executive Directors will be able to participate on the same
basis as other employees.
The Policy as shown on the following pages is intended to
apply for three years, until 2027, taking effect from the date of
approval.
International Airlines Group | Annual Report and Accounts 2023
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Financial StatementsCorporate GovernanceStrategic Report Report of the Remuneration Committee continued
Key elements of pay
Executive directors
The Company’s Policy remains to attract, retain and motivate its leaders and to ensure they are focused on delivering business
priorities within a framework designed to promote the long-term success of IAG, aligned with stakeholder interests. The table below
illustrates the components of pay and time period of each element of the Policy for Executive Directors.
Total pay over 5 years
Fixed Remuneration
Annual Incentive
(Malus and clawback
provisions apply)
Long-term Incentive
(Malus and clawback
provisions apply)
Shareholder requirements
Year 1
Year 2
Year 3
Year 4
Year 5
Salary, benefits
and pension
50% in cash1
50% in shares1 – Three-year deferral period.
No further performance conditions
1 Where the IAG CEO has met the 350% shareholding guideline then 80% of the award will be paid out in cash with
20% deferred into shares for three years
Up to 150% of salary
Three-year vesting period
Two-year holding period
No further performance conditions
Executive Directors’ minimum shareholding requirement (including post-cessation requirements)
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
Y1 Y2 Y3 Y4 Y5
Benefits
Ensures total
package is
competitive
Y1 Y2 Y3 Y4 Y5
Pension
Provides post-
retirement
remuneration and
ensures total
package is
competitive
Y1 Y2 Y3 Y4 Y5
Operation of element of policy
Maximum opportunity
Performance metrics
Individual and business
performance are
considered in reviewing
and setting base salary.
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.
Base salaries are normally reviewed annually, and
normally take effect on 1 January each year.
Benefits include, but are not limited to, life
insurance, personal travel and, where applicable, a
company car, fuel, and private health insurance.
Executive directors may also participate in any
broad-based employee share plans that may be
operated by the Company on the same basis as
other eligible employees.
Where appropriate, benefits may include
relocation, international assignment costs and tax
advisory services. 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 (in full or in part).
Base salaries are normally
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 wider workforce.
There is no formal
maximum. In general, the
Company expects to
maintain benefits at the
current level. The
maximum value for any
broad-based employee
plans will be in line with
the maximum value for
eligible employees.
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% of basic
salary.
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International Airlines Group | Annual Report and Accounts 2023
Purpose and
link to strategy
Annual incentive
award
Incentivises the
delivery of annual
KPIs and strategic
objectives
Up to 200%
of salary
Y1 Y2 Y3 Y4 Y5
Paid in cash
Y1 Y2 Y3 Y4 Y5
Deferred
Y1 Y2 Y3 Y4 Y5
Operation of element of policy
Maximum opportunity
Performance metrics
The majority of the
annual incentive is
subject to financial
measures. Measurable
non-financial measures
may include, but are not
limited to, strategic,
personal, customer and
ESG objectives.
For the bonus deferral
award, no other
performance conditions
apply because it is based
on performance already
delivered.
The maximum
opportunity in the
incentive plan is 200% of
salary. Each performance
metric in the incentive
plan is independent. For
each performance metric
in the incentive plan,
there will normally be no
payment at all until
performance for that
particular metric has
reached the threshold
level of the target range.
50% 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.
The Board, on a recommendation from the
Remuneration Committee, sets the measures
and targets that apply to the annual incentive
award which are normally measured over a
single financial year. 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.
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 the ‘Information supporting the
policy tables’ section.
Once the minimum shareholding requirement is
met, 20% of the annual incentive award is
normally deferred into shares which will normally
be released after a period of three years.
Where the executive has not met their minimum
shareholding requirement, 50% of the annual
incentive award is normally deferred into shares
which will normally be released after a period of
three years.
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 the
‘Information supporting the policy tables’
section.
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Financial StatementsCorporate GovernanceStrategic Report Report of the Remuneration Committee continued
Purpose and
link to strategy
Restricted Share
Plan (RSP)
Incentivises
long-term
shareholder value
creation, and
retention.
Up to 150%
of salary
Y1 Y2 Y3 Y4 Y5
5-year vesting +
holding period
Y1 Y2 Y3 Y4 Y5
Operation of element of policy
Maximum opportunity
Performance metrics
The face value of the
award(s) will not exceed
150% of salary in respect of
any financial year.
The RSP consists of an award of the
Company’s shares which normally
vests as long as the executive
remains employed by the Company
at the time of vesting and subject to
the assessment of the underpin.
Malus and clawback provisions
apply – see the ‘Information
supporting the policy tables’
section.
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,
normally assessed over three financial
years commencing from the financial
year in which the award was granted. In
assessing the underpin, the Committee
will consider the Company’s overall
performance, including financial and
non-financial performance, 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.
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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% of
shares (net of tax) which vest from share plans until their
respective shareholding requirement is attained. The IAG CEO
is required to build up and maintain a shareholding of 350% of
basic salary, and other executive directors (to the extent they
are appointed to the Board) are required to build up and
maintain a shareholding of 200% 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 the date they step down
from the Board. Shares will normally be retained in the nominee
account administered by the Company to ensure this.
Choice of performance measures
The performance measures selected for the annual bonus are
ordinarily set on an annual basis by the Committee, to ensure
that they remain appropriate to reflect the priorities for the
Company in the year ahead. The targets for the performance
measures are set taking into account a number of factors,
including the Company’s annual operating plan, strategic
priorities, the economic environment and market conditions
and expectations. Non-financial annual bonus measures may
include strategic, personal, customer and ESG objectives.
Malus and clawback provisions
Malus and
clawback
provisions
Circumstances
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; and
• Any other circumstances in which the Board considers it to be in the interests of
shareholders for the award to lapse or be adjusted.
Period
• For the cash element of the annual incentive plan, clawback provisions apply for three years
from the date of payment;
• 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 RSP, clawback provisions apply for two years post vesting; and
• 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.
International Airlines Group | Annual Report and Accounts 2023
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Financial StatementsCorporate GovernanceStrategic Report Report of the Remuneration Committee continued
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 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 at grant
and/or the vesting outcomes for the RSP where the Company
has experienced a significant fall in share price, as a result of
which it considers that participants have unduly benefited 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.
Non-executive directors
The table below summarises the main elements of remuneration for non-executive directors:
Purpose and
link to strategy
Basic fees
Fees take into
account the level of
responsibility,
experience, abilities
and dedication
required.
Benefits
Operation of element of policy
Fees are normally set with reference to factors such as market
positioning.
To acknowledge the key role of the Chair of the Board of Directors, fees
are set separately for this role. Additional fees may be paid for
undertaking additional Board responsibilities such as undertaking the role
of Senior Independent Director or for holding a Committee chair position.
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.
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, from time to time, in
the Personal Travel Policy for IAG Non-Executive Directors approved by
the Board.
As provided for under article 37.8 of the Company’s Bylaws and by way of
development of that article, this benefit may also be provided to non-
executive directors after they have ceased to hold office if the Board
considers it appropriate and in accordance with the terms and conditions
set out from time to time in the Personal Travel Policy for IAG Non-
Executive Directors approved by the Board. The terms and conditions
applicable to former non-executive directors may differ from those
applicable to current directors and may be subject to additional conditions
or restrictions (such as a minimum period of service or a maximum period
of entitlement, fixed or variable, after leaving office) as determined by the
Board from time to time.
Maximum opportunity
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 19 October
2010, in accordance with
article 37.3 of the
Company’s Bylaws.
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 be entitled
to this benefit at any given
time).
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Remuneration scenarios
The chart below shows the potential total remuneration for the Executive Director in respect of the application of our Remuneration
Policy. 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% share price growth. With the exception of the illustration showing 50% share price growth, no share price variation is taken into
consideration in these scenarios.
IAG CEO – 2024 remuneration scenario assumptions
The assumptions underlying each scenario are described below.
Minimum (fixed
only)
Consists of basic salary, taxable benefits and pension-related benefits
Basic salary is at 1 January 2024
Benefits are valued using the figures in the single figure table
Pensions are valued by applying cash allowance rate of 12.5% of basic salary at 1 January 2024
Basic Salary
(£’000)
IAG CEO
887
Benefits
(£’000)
65
Pension
(£’000)
111
Total fixed
(£’000)
1,063
On-target
If the director performs in line with the Company’s expectations.
The opportunity for the annual incentive is 100% of basic salary under this scenario.
The opportunity for the long-term incentive (RSP) is 150% of basic salary.
Maximum
The maximum award opportunity for annual incentive is 200% of basic salary under this scenario.
The opportunity for the long-term incentive (RSP) is 150% of basic salary.
Maximum plus share
price growth
The same assumptions apply as for ‘Maximum’ but with a 50% share price appreciation, solely for the
purpose of illustrating a wider range of potential remuneration outcomes.
All scenarios
Euro amounts are shown at the 2023 exchange rate £:€ 1.1486.
Long-term incentives consist of share awards only which are measured at face value, i.e. no assumption is
made for dividend equivalents which may be payable.
Remuneration scenarios
(£’000)
5,000
4,000
3,000
2,000
1,000
0
£4,832
(€5,550)
41%
£4,167
(€4,786)
32%
42%
37%
£3,280
(€3,767)
41%
27%
£1,063
(€1,221)
100%
32%
26%
22%
Minimum
(fixed only)
On-target Maximum Maximum,
plus share
price growth
Fixed remuneration
Annual incentive
Long-term incentive
1 The percentages shown in the chart represent the weight of each
element vs the total in each scenario.
International Airlines Group | Annual Report and Accounts 2023
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Financial StatementsCorporate GovernanceStrategic Report Report of the Remuneration Committee continued
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 service contracts are available for inspection, on request, at
the Company’s registered office.
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 Date of contract
Notice period
Luis Gallego
8 September 2020
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
payment becomes payable only if, in the Company’s opinion,
the executive has taken reasonable steps to find alternative
paid work and then only in monthly instalments. The payments
will comprise base salary only. 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 (for example, as a result of alternative paid
work referred to above).
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).
The Committee reserves the right to make any other payments
(including, for example, appropriate legal or outplacement fees)
in connection with an executive director’s cessation of office or
employment where the payments are made in good faith in
discharge of an existing legal obligation (or by way of damages
for breach of such an obligation) or by way of settlement of
any claim arising in connection with the cessation of an
executive director’s office or employment.
Under any of the Company’s share plans, save in respect of
bonus deferral 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 normally receive a
pro-rata amount of their RSP shares, subject to the underpin
being met, in accordance with the plan rules. The pro-ration is
normally calculated according to what proportion of the
vesting 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 normally
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 normally paid in the normal manner following
the 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 Chair) 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 non-executive directors’ letters of appointment are
available for inspection, on request, at the Company’s
registered office.
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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 of a share
award, the terms of the payment are agreed at the time the
award is granted. 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.
Common award terms
Awards granted under the share plans may be adjusted in the
event of any variation of the Company’s share capital or any
demerger, special dividend or other event that may affect the
current or future value of the awards.
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 factors such as 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 a candidate’s remuneration arrangements that are
forfeited as a result of joining the Company. 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 the maxima shown in the remuneration policy table.
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 recruited will be remunerated in line
with the Company’s remuneration policy principles outlined
before.
International Airlines Group | Annual Report and Accounts 2023
207
Financial StatementsCorporate GovernanceStrategic Report Financial
statements
208
International Airlines Group | Annual Report and Accounts 2023
Contents
Financial Statements
210 Consolidated income statement
211 Consolidated statement of other
comprehensive income
212 Consolidated balance sheet
213 Consolidated cash flow statement
214 Consolidated statement of changes
in equity
216 Notes to the consolidated
financial statements
289 Alternative performance measures
295 Group investments
Statement of Directors’
responsibilities
Independent Auditor’s Report
Additional Information
308 Glossary
310 Aircraft fleet
311 Operating and financial statistics
312 Shareholder information
International Airlines Group | Annual Report and Accounts 2023
209
Corporate GovernanceStrategic ReportFinancial Statements 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
Net gain on sale of property, plant and equipment1
Currency differences
Total expenditure on operations
Operating profit
Finance costs
Finance income
Net change in fair value of financial instruments
Net financing credit relating to pensions
Net currency retranslation credits/(charges)
Other non-operating credits1
Total net non-operating costs
Profit before tax
Tax
Profit after tax for the year
Attributable to:
Equity holders of the parent
Non-controlling interest
Note
5
5
8
6
Year to 31 December
2023
25,810
1,156
2,487
20221
19,458
1,615
1,993
29,453
23,066
5,423
7,557
3,849
2,308
2,509
1,058
1,155
4,647
6,120
2,971
1,890
2,101
950
920
6
2,063
2,070
(2)
26
(22)
141
25,946
3,507
21,788
1,278
(1,113)
(1,017)
9
9
9
9
9
10
386
(11)
103
176
8
(451)
3,056
(401)
2,655
2,655
–
2,655
52
81
26
(115)
110
(863)
415
16
431
431
–
431
8.7
6.1
Basic earnings per share (€ cents)
Diluted earnings per share (€ cents)
11
11
53.8
50.6
1 The 2022 results include a reclassification to conform with the current year presentation for the Net gain on sale of property, plant and equipment.
There is no impact on the Profit after tax. Further information is given in note 2.
210
International Airlines Group | Annual Report and Accounts 2023
Consolidated statement of other comprehensive income
€ million
Items that may be reclassified subsequently to net profit
Cash flow hedges:
Fair value movements in equity1
Reclassified and reported in net profit
Fair value movements on cost of hedging1
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 liabilities attributable to credit risk changes
Remeasurements of post-employment benefit obligations
Remeasurements of long-term employee-related provisions
Total other comprehensive (loss)/income for the year, net of tax
Profit after tax for the year
Total comprehensive income for the year
Total comprehensive income is attributable to:
Equity holders of the parent
Non-controlling interest
Year to 31 December
Note
2023
20221
30d
30d
33
19
(195)
(142)
(120)
82
18
1,472
(1,233)
(115)
38
(53)
127
(119)
(1,076)
(18)
(1,443)
2,655
2
(6)
662
52
819
431
1,212
1,250
1,212
1,250
33
–
–
1,212
1,250
1 The 2022 results include a reclassification of losses and gains associated with the fair value movements on cash flow hedges and fair value
movements on cost of hedging, respectively. There is no impact on Total other comprehensive (loss)/income for the year, net of tax. Further
information is given in note 2.
Items in the consolidated Statement of other comprehensive income above are disclosed net of tax.
International Airlines Group | Annual Report and Accounts 2023
211
Corporate GovernanceStrategic ReportFinancial Statements
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
Derivative financial instruments
Other long-term liabilities
Current liabilities
Borrowings
Trade and other payables
Deferred revenue
Derivative financial instruments
Current tax payable
Provisions
Total liabilities
Total equity and liabilities
Note
31 December
2023
31 December
2022
13
17
18
19
34
30
10
20
16
21
20
20
10
30
22
22
31
31
19,776
3,909
47
188
1,380
42
1,202
432
18,346
3,556
43
55
2,334
81
1,282
362
26,976
26,059
–
494
1,559
1,574
159
81
1,396
5,441
10,704
19
353
1,330
1,226
72
645
403
9,196
13,244
37,680
39,303
497
7,770
(100)
497
7,770
(28)
(4,895)
(6,223)
3,272
2,016
33
6
6
3,278
2,022
26
34
10
27
24
30
25
26
23
24
30
10
27
13,831
17,141
175
4
217
–
2,831
2,652
257
106
219
326
84
200
17,423
20,620
2,251
5,590
7,766
461
2
909
16,979
34,402
2,843
5,209
7,318
387
8
896
16,661
37,281
37,680
39,303
212
International Airlines Group | Annual Report and Accounts 2023
Consolidated cash flow statement
€ million
Cash flows from operating activities
Operating profit
Depreciation, amortisation and impairment
Net gain on disposal of property, plant and equipment
Employer contributions to pension schemes
Pension scheme service costs
Increase in provisions
Unrealised currency differences
Other movements
Interest paid
Interest received
Tax paid
Year to 31 December
Note
2023
20221
6
34
35
35
3,507
2,063
1,278
2,070
(2)
(48)
18
237
51
111
(1,005)
365
(291)
(22)
(22)
17
463
19
76
(817)
42
(134)
Net cash flows from operating activities before movements in working capital
5,006
2,970
Increase in trade receivables
Increase in inventories
Increase in other receivables and current assets
Increase in trade payables
Increase in deferred revenue
Increase in other payables and current liabilities
Net movement in working capital
Net cash flows from operating activities
Cash flows from investing activities
(272)
(140)
(388)
258
212
188
(142)
(660)
(21)
(233)
886
1,236
676
1,884
4,864
4,854
Acquisition of property, plant and equipment and intangible assets
35
(3,544)
(3,875)
Sale of property, plant and equipment and intangible assets
Proceeds from sale of investments
Increase in other current interest-bearing deposits
Payment to Globalia for convertible loan
Other investing movements
Net cash flows from investing activities
Cash flows from financing activities
Proceeds from borrowings
Repayment of borrowings
Repayment of lease liabilities
Settlement of derivative financial instruments
Acquisition of treasury shares
Net cash flows from financing activities
Net (decrease)/increase in cash and cash equivalents
Net foreign exchange differences
Cash and cash equivalents at 1 January
Cash and cash equivalents at year end
Reconciliation to Total cash, cash equivalents and other interest-bearing deposits
Cash and cash equivalents at year end
Interest-bearing deposits maturing after more than three months
Cash, cash equivalents and other interest-bearing deposits
1,080
11
(985)
–
15
837
–
(351)
(100)
26
(3,423)
(3,463)
1,001
1,436
(4,268)
(1,731)
(119)
(77)
(5,194)
(1,050)
(1,455)
1,036
(23)
(56)
(3,753)
1,335
(2)
9,196
5,441
(31)
7,892
9,196
2023
5,441
1,396
6,837
2022
9,196
403
9,599
35
35
35
35
22
22
22
22
1 The 2022 results include reclassifications to conform with the current year presentation. Further information is given in note 2 and note 37.
For details on restricted cash balances see note 22 Cash, cash equivalents and other current interest-bearing deposits.
International Airlines Group | Annual Report and Accounts 2023
213
Corporate GovernanceStrategic ReportFinancial Statements
Consolidated statement of changes in equity
For the year to 31 December 2023
€ million
1 January 2023
Issued
share
capital
(note 31)
Share
premium
(note 31)
Treasury
shares
(note 31)
Other
reserves
(note 33)
Retained
earnings
Total
shareholders’
equity
Non-
controlling
interest
(note 33)
Total
equity
497
7,770
(28)
(1,717) (4,506)
2,016
6 2,022
Profit for the year
–
–
–
–
2,655
2,655
– 2,655
–
–
–
–
–
–
–
–
–
–
(81)
(20)
(35)
(6)
(195)
127
(120)
–
–
–
–
–
–
–
(81)
(20)
(35)
(6)
(195)
127
(120)
82
–
82
(119)
18
–
–
(119)
18
Other comprehensive income for the year
Cash flow hedges reclassified and reported
in net profit:
Fuel and oil costs
Currency differences
Finance costs
Ineffectiveness recognised in other non-
operating costs
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
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 income for the year
Hedges transferred and reported in
property, plant and equipment
Hedges transferred and reported in sales in
advance of carriage
Hedges transferred and reported in
inventory
Cost of share-based payments
Vesting of share-based payment schemes
Acquisition of treasury shares
31 December 2023
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(81)
(20)
(35)
(6)
(195)
127
(120)
–
82
(119)
18
–
–
–
–
–
–
–
(1,076)
(1,076)
– (1,076)
–
(18)
(349)
1,561
(18)
1,212
–
–
(18)
1,212
(6)
–
85
–
–
5
(77)
(9)
–
–
–
–
–
–
52
(6)
–
(6)
–
(6)
85
–
85
(9)
52
(1)
(77)
–
–
–
–
(9)
52
(1)
(77)
497
7,770
(100)
(1,996) (2,899)
3,272
6 3,278
214
International Airlines Group | Annual Report and Accounts 2023
Consolidated statement of changes in equity
For the year to 31 December 2022
€ million
1 January 2022
Issued
share
capital
(note 31)
Share
premium
(note 31)
Treasury
shares
(note 31)
Other
reserves
(note 33)
Retained
earnings
Total
shareholders’
equity
Non-
controlling
interest
(note 33)
497
7,770
(24)
(1,673)
(5,730)
840
6
Total
equity
846
Profit for the year
–
–
–
–
431
431
–
431
Other comprehensive income for the year
Cash flow hedges reclassified and
reported in net profit:
Fuel and oil costs
Currency differences
Finance costs
Discontinuance of hedge accounting
Ineffectiveness recognised in other
non-operating costs
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
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 income for the year
Hedges transferred and reported in
property, plant and equipment
Hedges transferred and reported in sales
in advance of carriage
Hedges transferred and reported in
inventory
Cost of share-based payments
Vesting of share-based payment
schemes
Acquisition of treasury shares
Redemption of convertible bond
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(1,115)
(90)
10
(22)
–
–
–
–
(1,115)
(90)
10
(22)
(16)
–
(16)
1,472
–
1,472
2
–
2
(115)
–
(115)
38
(6)
(53)
–
–
–
38
(6)
(53)
–
–
–
–
(1,115)
(90)
10
(22)
–
(16)
–
1,472
–
2
–
(115)
38
(6)
(53)
–
–
–
–
–
–
–
662
662
–
662
–
52
52
105
1,145
1,250
–
–
52
1,250
–
(65)
–
–
–
19
(23)
36
(58)
–
–
–
–
(62)
–
–
–
39
(22)
–
62
(65)
–
(65)
36
(58)
39
(3)
(23)
–
–
–
–
–
–
–
36
(58)
39
(3)
(23)
–
31 December 2022
497
7,770
(28)
(1,717)
(4,506)
2,016
6
2,022
International Airlines Group | Annual Report and Accounts 2023
215
Corporate GovernanceStrategic ReportFinancial Statements
Notes to the accounts
For the year to 31 December 2023
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 (hereinafter the ‘Company’) is a Spanish company
registered in Madrid and was incorporated on 17 December 2009. The registered address of IAG is El Caserío, Zona industrial 2,
Camino de La Muñoza s/n, 28042, Madrid, Spain. On 21 January 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 26 April 2013, and Aer Lingus Group Plc (‘Aer Lingus’) on 18 August
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 employee benefit assets and liabilities, the €825 million convertible bond due 2028,
derivative financial instruments and other equity investments that are measured at fair value. The notes to 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 31 December 2023 were authorised for issue, and approved by the Board of
Directors on 28 February 2024.
Change in presentation of results
Income statement – Net gain on sale of property, plant and equipment
The prior year Income statement includes a reclassification to conform with the current year presentation for the Net gain on sale of
property, plant and equipment within Operating profit. Accordingly, for the year to 31 December 2022, the Group has reclassified
€22 million of gains from Other non-operating credits to Net gain on sale of property, plant and equipment within Expenditure on
operations. There is no impact on the Profit after tax. The segmental operating profit/(loss) has been updated to reflect the
reclassification.
Statement of other comprehensive income
The prior year Statement of other comprehensive income includes a reclassification of €173 million of gains associated with the fair
value movements on cash flow hedges and €9 million of losses associated with the fair value movements on cost of hedging, which
had been previously presented under the sub-heading Items that will not be reclassified to net profit, to the sub-heading Items that
may be reclassified subsequently to net profit, as these may recycle to net profit in future periods. There is no impact on Total other
comprehensive (loss)/income for the year, net of tax.
Cash flow statement
The prior year Cash flow statement has been represented and further detailed in note 37. Accordingly, the Group has reclassified the
results for the year to 31 December 2022.
Going concern
At 31 December 2023, the Group had total liquidity of €11,624 million (31 December 2022: total liquidity of €13,999 million),
comprising cash, cash equivalents and interest-bearing deposits of €6,837 million, €4,412 million of committed and undrawn general
facilities and a further €375 million of committed and undrawn aircraft specific facilities. At 31 December 2023, the Group has no
financial covenants associated with its loans and borrowings.
The decrease in liquidity during the year to 31 December 2023 was attributable to, amongst other actions: (i) the repayment of
borrowings of €4,268 million, which consisted of, amongst others, the €2,330 million (£2.0 billion) early repayment of the UK Export
Finance (UKEF) Credit Facility, the €867 million of early repayment of the syndicated financing agreement, partially guaranteed by
Instituto de Crédito Oficial (ICO) in Spain and the €500 million redemption of the senior unsecured bond at maturity; (ii) securing an
additional five-year Export Development Guarantee Facility of €1,159 million (£1.0 billion), offset by a reduction in aircraft specific
facilities of €741 million; and (iii) offset by strong operational cash flow generation.
In its assessment of going concern, the Group has modelled two scenarios referred to below as the Base Case and the Downside
Case over the period of at least 12 months from the date of the approval of these consolidated financial statements (the ‘going
concern period’). The Group’s three-year business plan, used in the creation of the Base Case, was prepared for and approved by the
Board in December 2023. The business plan takes into account the Board’s and management’s views on capacity, based on the
potential impact of the wider economic and geopolitical environments on the Group’s businesses across the going concern period.
The key inputs and assumptions underlying the Base Case through to 31 March 2025, include:
• capacity recovery modelled by geographical region with total capacity to remain above the levels obtained in 2023 throughout
the going concern period;
• passenger unit revenue per ASK is forecast to remain above the levels obtained in 2023 throughout the going concern period;
216
International Airlines Group | Annual Report and Accounts 2023
• the Group has assumed that the committed and undrawn general facilities of €4,412 million will not be drawn over the going
concern period. The availability of certain of these facilities reduces over time, with €3,843 million being available to the Group at
31 March 2025;
• the Group has assumed that the undrawn aircraft facilities of €375 million, relating to specific financing structures, will be utilised
over the going concern period;
• the Group has assumed that the €500 million bond that matures in March 2025 will not be refinanced;
• of the capital commitments detailed in note 15, €3,207 million is due to be paid over the period to 31 March 2025;
• while the Group does not expect to finance all expected deliveries over the going concern period, for those it does expect to
finance, it has forecast securing between 90 and 100 per cent depending on aircraft type, or €2,235 million, of the aircraft
financing that is currently uncommitted, to align with the timing and payments for those aircraft deliveries it expects to finance,
including aircraft delivered in 2023 that had not had their financing secured at the reporting date; and
• the Group has assumed that the relevant approvals required in relation to the acquisition of the remaining 80 per cent of the share
capital of Air Europa Holdings that it does not currently own are obtained by the end of the going concern period, and that cash
outflows of €149 million will be incurred, comprising €100 million of the cash consideration and €49 million for the purchase of
ordinary shares in the Company that have not already been purchased at the balance sheet date. The deferred consideration of
€100 million to be paid on the first anniversary and the €100 million to be paid on the second anniversary of the completion of the
acquisition are assumed to occur outside of the going concern period and accordingly not included in these forecasts.
The Downside Case applies stress to the Base Case to model adverse commercial and operational impacts over the going concern
period, represented by: reduced levels of capacity operated in each month, including reductions of 25 per cent for three months
over the going concern period; reduced passenger unit revenue per available seat kilometre (ASK); increases in the price of jet fuel
by 20 per cent above that assumed in the Base Case; and increased operational costs. In the Downside Case, over the going concern
period capacity would be 10 per cent down when compared to the Base Case. The Downside Case assumes that British Airways
would be required to draw down, in full, its portion of the available US dollar Revolving Credit Facility (further information given in
notes 3 and 29f). The Downside Case also assumes that upon completion of the Air Europa Holdings acquisition, a further €200
million of working capital needs are funded by the Group. The Directors consider the Downside Case to be a severe but plausible
scenario.
Having reviewed the Base Case and the Downside Case, the Directors have a reasonable expectation that the Group has sufficient
liquidity to continue in operational existence for a period of at least 12 months from the date of approval of these consolidated
financial statements and hence continue to adopt the going concern basis in preparing the consolidated financial statements at 31
December 2023.
Consolidation
The Group financial statements include the financial statements of the Company and its subsidiaries, each made up to 31 December
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, as at the acquisition date 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 fixed rate 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.
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Corporate GovernanceStrategic ReportFinancial Statements 2 Significant accounting policies continued
In addition to the above, such financial transactions expose the Group to no further significant financial or economic risks, such as no
variability over time in interest rates.
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.
Further information as to the financial impact of these financial transactions is given in note 26.
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 IAG Loyalty 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 credits/(charges) 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 are 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 Fleet
All aircraft are stated at the fair value of the consideration given after taking account of manufacturers’ credits and pre-delivery
instalment payments (referred to as progress payments). 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 short-haul aircraft and between 23 and 29 years (depending on aircraft) and up to 5 per cent residual
value for long-haul aircraft.
Right of use assets are depreciated over the shorter of the lease term and the aforementioned depreciation rates. Where the lease
includes a purchase option, at the discretion of the Group, where it is expected that the purchase option will be exercised, the
associated right of use asset is depreciated using the aforementioned depreciation rates to reflect the reasonably certain life of the
aircraft, irrespective of the lease term.
Cabin interior modifications, including those required for brand changes and relaunches, are depreciated over the lower of 12 years
and the remaining economic life of the aircraft, whether owned or leased.
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.
b 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 four to 20 years.
c Capitalisation of interest on progress payments
Interest costs 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.
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Notes to the accounts continued d Liquidated damages
Certain of the Group’s contractual arrangements with aircraft and engine manufacturers contain liquidated damage clauses, whereby
if the supplier breaches one or more contractual clauses (such as delays in the timing of delivery of an aircraft or engine) then
damages are payable to the Group. Liquidated damages are recognised in the Income statement only to the extent that they relate
to compensation for loss of income and/or incremental operating costs, when a contractual entitlement exists, the amounts can be
reliably measured and the receipt is virtually certain. When liquidated damages do not relate to compensation for loss of income
and/or incremental operating costs, the amounts are recorded as a reduction in the cost of the associated aircraft in the Balance
sheet and depreciated over the life of the aircraft.
When compensation, not related to the loss of income and/or incremental operating costs, is received in advance of the associated
delivery of the aircraft and/or engine, the Group recognises the amount within Other creditors until such time as the aircraft and/or
engine is delivered, at which time the amounts are transferred and recorded as a reduction in the cost of the associated asset. Such
compensation is recorded in the Cash flow statement within cash flows from investing activities under the caption of Acquisition of
property, plant and equipment and intangible assets.
e 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 in exchange for consideration. The Group
has elected not to apply such consideration where the contract relates to an intangible asset, such as for landing rights or IT
software, 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, such as
the removal of airline-specific branding and configuration, 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.
Aircraft 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.
Amounts excluded from recognition as lease liabilities
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. Such variable lease payments are expensed to the Income statement as incurred.
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Corporate GovernanceStrategic ReportFinancial Statements 2 Significant accounting policies continued
Sale and leaseback transactions
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. The principal criterion 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. The following defines the
accounting for such transactions:
• if a sale is determined to have 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 counterparty to the
transaction; and
• where a sale is determined to have 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.
Cash flow presentation – lease liabilities
Lease payments are presented as follows in the Consolidated cash flow statement:
• where the proceeds received from sale and leaseback transactions represent the fair value of the asset being transferred, the total
proceeds are presented within cash flows from investing activities. Where the proceeds received from sale and leaseback
transactions exceed the fair value of the asset being transferred, the element of the proceeds equivalent to the fair value of the
asset being transferred is presented within investing activities and the amount of proceeds in excess of the fair value is presented
within financing 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.
Cash flow presentation – asset financed liabilities
Payments associated with asset financed liabilities are presented as follows in the Consolidated cash flow statement:
• the proceeds received from asset financed liabilities are presented within cash flows from financing activities;
• the repayments of the principal element of asset financed liabilities are presented within cash flows from financing activities; and
• the payments of the interest element of asset financed liabilities are included within cash flows from operating activities.
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.
f Maintenance, repairs and overhaul
Owned aircraft
Major overhaul expenditure, including replacement spares and labour costs for airframes and engines, is capitalised and amortised
over the expected life between major overhauls or to the end of the useful life of the asset.
All other replacement spares and other costs relating to maintenance of owned fleet assets (including maintenance provided under
‘pay-as-you-go’ contracts) are charged to the Income statement on consumption or as incurred respectively.
Leased aircraft
The Group records a provision for major maintenance and overhaul events, including for airframes and engines, that occur through
usage or through the passage of time that is recognised as such activity occurs through to the next maintenance event, with a
corresponding expense recorded in the Income statement. Any subsequent changes in estimation are recognised in the Income
statement. When the maintenance and/or overhaul event occurs, the associated provision is de-recognised.
Restoration and handback obligations that arise on the 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.
All other replacement spares and other costs relating to maintenance of leased fleet assets (including maintenance provided under
‘pay-as-you-go’ contracts) are charged to the Income statement on consumption or as incurred respectively.
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Notes to the accounts continued 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 UK and the EU are amortised on a straight-line basis over a period not exceeding 20
years. Capitalised landing rights based within the UK and the EU are not amortised, as regulations provide that these landing rights
are perpetual.
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.
In certain instances, the Group enters into cloud computing arrangements with third-party providers, such as software as a service
(SaaS), where the Group is provided the right to access and use the application software over the contract term. At inception of the
contract, the Group will assess whether such an arrangement gives rise to the recognition of a software intangible asset.
Where the Group determines that no software intangible asset should be recognised, the cloud computing arrangement is
determined to be a service contract and the associated fees paid are expensed as incurred. In addition, the costs incurred for both
the customisation and configuration of the application software are generally expensed as incurred.
g Emissions allowances
Where an operating company purchases emissions allowances these amounts are recognised at cost and recorded within Intangible
assets. As an operating company emits CO2 equivalent and builds up an obligation to the relevant authorities, a provision is
recognised.
Emissions allowances recorded within Intangible assets are not revalued or amortised but are tested for impairment whenever
indicators exist that the carrying value may not be recoverable. For those obligations arising for which the operating company has
purchased emission allowances to offset the emissions, the provision is recognised at the weighted average cost of the intangible
asset. For those obligations arising for which the operating company has not yet purchased emission allowances to offset the
emissions, the provision is recognised at the market price of the allowances required at the reporting date. As the provision is
recognised, a corresponding amount is recorded in the Income statement within Fuel, oil costs and emission charges.
The Group’s emissions obligation, recognised as a separate liability, is extinguished when the associated emission certificates are
surrendered, which is typically within 12 months of 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.
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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 associate 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 Financial assets and liabilities
Financial assets and financial liabilities are classified, upon initial recognition, as measured at amortised cost, at fair value through
other comprehensive income (OCI), or fair value through profit or loss. Financial assets and financial liabilities are not reclassified
subsequent to their initial recognition unless the Group changes its business model for managing financial assets.
The classification of financial assets and financial liabilities at initial recognition depends on the financial assets’ and financial
liabilities’ contractual cash flow characteristics and the Group’s business model for managing them. In order for a financial asset or
financial liability to be classified and measured at amortised cost or fair value through OCI, it needs to give rise to cash flows that are
‘solely payments of principal and interest’ (SPPI) on the principal amount outstanding. A financial asset or financial liability that is not
SPPI is classified and measured at fair value through profit or loss. This assessment is performed on an instrument by instrument
basis.
The Group’s business model for managing financial assets and financial liabilities establishes how it manages its financial assets and
financial liabilities in order to generate cash flows. The business model determines whether cash flows will result from collecting
contractual cash flows, selling the financial assets, or both. Financial assets and financial liabilities classified and measured at
amortised cost are held within a business model with the objective to hold financial assets in order to collect contractual cash flows
while financial assets and financial liabilities classified and measured at fair value through OCI are held within a business model with
the objective of both holding to collect contractual cash flows and selling.
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.
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 on an amortised cost basis using the effective interest method until extinguished on conversion
or maturity of the bonds, and is recognised within 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.
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Notes to the accounts continued Convertible bonds that are classified as hybrid financial instruments consist only of a liability component recognised within
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 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.
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 or a change
in the structure of transaction changes its classification as an Other equity instrument. 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.
Financial instruments held for trading
Financial instruments are classified as held for trading if they are incurred for the purpose of selling the associated asset in the near
term and not having been purchased for operational purposes.
By entering into short-term forward sales contracts, the Group seeks to optimise capital allocation while minimising the associated
economic risk.
Interest-bearing deposits
Interest-bearing deposits, principally comprising funds held with banks and other financial institutions with contractual cash flows
that are SPPI, and held in order to collect contractual cash flows, are carried at amortised cost using the effective interest method.
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 either 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.
b Cash and cash equivalents
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.
c Derivative and non-derivative financial instruments and hedging activities
Derivative financial instruments, comprising interest rate swap derivatives, foreign exchange derivatives and fuel 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. The effective portion of 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 customer cash inflows (denominated in US dollars, euros and
Japanese yen), certain non-derivative repayment instalments on foreign currency-denominated interest-bearing liabilities are
designated as hedging instruments within a hedge relationship. The effective portion of gains or losses arising from movements in
foreign exchange rates are recognised within Other comprehensive income in the Cash flow hedge reserve within equity.
Accumulated gains or losses within the cash flow hedge reserve are transferred to Sales in advance of carriage 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, at which point amounts are immediately reclassified to the Income statement.
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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.
Each operating company 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
each operating company, 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.
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 cash flow 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.
The Group assesses whether the derivative designated as the hedging instrument in a hedge relationship is expected to be on
inception and at each reporting date effective in offsetting the changes in cash flows of the hedged item using the hypothetical
derivative model.
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;
• 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; and
• in all hedges, ineffectiveness may arise if there are differences between the critical terms of the hedging instrument and the
hypothetical derivative, such as where on inception of the hedge relationship the fair value of the hedging instrument is not zero.
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 credits.
Reclassification and transfer adjustments
Gains and losses accumulated in the Cash flow hedge reserve within equity are either reclassified from the Cash flow hedge reserve
when the hedged item affects the Income statement, or transferred from the Cash flow hedge reserve when the hedged item gives
rise to recognition in the Balance sheet as follows:
• where the forecast hedged item results in the recognition of 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 in the Income statement;
• 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 or where the purchase of jet fuel gives rise to the
recognition of fuel inventory in storage facilities), or a non-financial liability (such as the sales in advance of carriage for which both
foreign currency derivatives and non-financial derivative instruments 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 transferred and included
in the initial cost of the asset and liability, respectively. These gains or losses are recorded in the Income statement as the non-
financial asset and the non-financial liability affects the Income statement (which for aircraft is through Depreciation, amortisation
and impairment over the expected life of the aircraft, for fuel inventory through Fuel, oil costs and emission charges when it is
consumed and for sales in advance of carriage through Passenger revenue when the flight is flown); and
• where the forecast hedged item 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 the Income statement to Interest expense within Finance costs at the same time as the interest
income or expense arises on the hedged item.
Further information on the risk management activities of the Group is given in note 29.
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Notes to the accounts continued e Fair value hedges
Changes in the fair value of derivative financial instruments designated in a fair value hedge relationship are recorded within the
Income statement as Net change in the fair value associated with fair value hedges within Other non-operating credits. The change
in the fair value of the hedged item attributable to the risk being hedged is recorded as part of the overall carrying amount of the
hedged item and is recorded within the Income statement as Net change in the fair value associated with fair value hedges within
Other non-operating credits.
For fair value hedges associated with financial liabilities measured at amortised cost, any adjustment to the carrying value is
amortised to the Income statement from the date of the cessation of the hedge relationship through to the maturity of the hedged
item using the effective interest rate method.
If the hedged item is de-recognised, the unamortised fair value is recognised immediately in the Income statement.
Ineffectiveness included in fair value hedges of interest rate payments 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.
f 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 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 Interbank Offered Rates (‘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
During the course of 2023, the Group ceased to apply the Phase 1 amendments, as the last of the associated IBORs transitioned to
alternative benchmarks. Prior to these transitions and where the Group applied the Phase 1 amendments, the following reliefs were
applied:
• when considering the highly probable requirement, the Group assumed that those benchmark rates that needed to be transitioned
to an alternative benchmark rate, on which the Group’s hedged long-term borrowings were based, did not change as a result of
IBOR reform;
• in assessing whether the hedge was expected to be highly effective on a forward-looking basis the Group assumed that those
benchmark rates that needed 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 were based, were not altered by IBOR reform; and
• the Group has not reclassified the Cash flow hedge reserve relating to the period after the IBOR reform is expected to take effect.
When the Group ceased to apply the Phase 1 amendments, the Group amended 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 was updated to reflect these changes in designation by the end of the reporting period in
which the changes were made. Such amendments did not give rise to the hedge relationship being discontinued.
When the Group transitioned to alternative benchmark rates, the accumulated amounts within the cash flow hedge reserve were
determined to be based on the alternative benchmark rates and no reclassification adjustments were made from the cash flow
hedge reserve to the Income statement.
Long-term borrowings and lease liabilities
Phase 2 of the amendments required 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 was recognised upon transition to the new benchmark. The expedient was only applicable
to direct changes that are required by interest rate benchmark reform.
For lease liabilities where there was a change to the basis for determining the contractual cash flows, as a practical expedient the
lease liability was remeasured by discounting the revised lease payments using a discount rate that reflected the change in the
interest rate where the change was required by IBOR reform.
No amounts have been recorded in the current or prior periods as a result of these amendments.
International Airlines Group | Annual Report and Accounts 2023
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Corporate GovernanceStrategic ReportFinancial Statements 2 Significant accounting policies continued
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 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.
c Flight crew provisions
The Group’s obligations in respect of flight crew provisions are calculated separately for each collective bargaining agreement. In
estimating these obligations, the Group makes assumptions regarding the number of employees that will elect to take early
retirement under these agreements, and the age at which they make this election (where relevant), using the probability weighted
methodology. The Group recognises a provision for service costs from the date of employment of the relevant individual, with the
corresponding amount recorded within the Income statement. The provisions recognised are discounted, at the reporting date and
the effect of unwinding of these discount rates are recognised as a finance cost in the Income statement.
Remeasurements of the provisions are made for changes in financial assumptions and recorded in Other comprehensive income. The
Group records changes through Other comprehensive income, where assumptions regarding the elections to be made by individuals
differs to actual elections. These calculations are performed by a qualified actuary using the projected unit credit method.
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
• 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.
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Notes to the accounts continued 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 held in storage facilities.
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.
Treasury shares
When the share capital of the Company is repurchased, the amount of the consideration paid, including directly attributable
transaction costs, is recognised as a deduction from equity within the treasury share reserve. When treasury shares are sold or
reissued, the amount received is recognised as an increase in equity and the resulting gain or loss on the transaction is presented as
an adjustment to Retained earnings with no gain or loss recorded in the Income statement.
Provisions
Provisions are made when all of the following criteria have been met: (i) an obligation exists for a present liability in respect of a past
event; (ii) where the amount of the obligation can be reliably estimated; and (iii) 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 qualified 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.
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 and
presented within current liabilities until either: (i) the customer has flown; or (ii) where the customer does not fly on the intended
date and has purchased a non-flexible fare.
For flexible and semi-flexible tickets, when the customer does not travel on the intended date, a term referred to as ‘unused tickets’,
the customer has a number of options they can elect to apply, depending on the fare type: (i) reschedule the date of intended travel;
(ii) request a refund; or (iii) request a voucher.
The Group estimates the amount of these unused tickets for which customers are not expected to exercise their remaining rights
prior to expiry based on the terms and conditions of the ticket and analysis of historical experience, a term referred to as ‘unused
ticket breakage’. This revenue is recognised based on the terms and conditions of the ticket and analysis of historical experience. For
unused ticket breakage, revenue is recognised only when the risk of a significant reversal of revenue is remote. The estimation
regarding historical experience is updated at each reporting date.
Where a flight is cancelled, the customer has a number of options they can elect to apply to their unused tickets: (i) compensation;
(ii) a refund; (iii) changing to an alternative flight; or (iv) the receipt of a voucher.
International Airlines Group | Annual Report and Accounts 2023
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Corporate GovernanceStrategic ReportFinancial Statements 2 Significant accounting policies continued
The presentation in the financial statements of these customer options, to the extent they differ to the recognition criteria stated
above, are as follows:
• Compensation for flight cancellation - such payments are presented net within Passenger revenue against the original ticket
purchased;
• Refund - deferred revenue is reduced and no amount is recorded within revenue;
• Changing to an alternative flight – amounts are retained within Deferred revenue until such time as the flight is flown, at which
time it is recorded within Passenger revenue; and
• Voucher - retained within Deferred revenue until such time as it is redeemed for a flight or it expires, at which time it is recorded
within Passenger revenue.
In relation to vouchers, the Group also recognises revenue by estimating the amount of vouchers that customers are not expected to
exercise their remaining rights 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 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;
• the provision of holiday and hotel services, where the performance obligations are satisfied over time as the customer receives the
benefit of the service; and
• brand and marketing activities, where the performance obligations are satisfied as the associated activities occur.
Customer loyalty programmes
The Group operates four principal 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 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 and expected future trends in customer
behaviour, 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 on 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:
Companion vouchers
Certain non-air partners issue their card holders with companion vouchers, which forms part of the variable consideration of the
overall contract, depending on the level of expenditure by the card holders, for redemption on the airlines of the Group for the same
flight and class of cabin as the underlying fare being purchased. The Group estimates the standalone selling price of the companion
voucher performance obligation, using valuation techniques, by reference to the amount that a third party would be prepared to pay
in an arm’s length transaction.
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Notes to the accounts continued 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 the provision of both 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 within the
Income statement as Other finance costs within Finance costs.
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 the interline partner are presented net against the associated release of the Deferred revenue.
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 defined a 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
accounting policy in respect of exceptional items and 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, and 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; individually
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. Certain exceptional items
may cover more than a single reporting period, such as significant restructuring events, but not more than two reporting periods.
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.
International Airlines Group | Annual Report and Accounts 2023
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Corporate GovernanceStrategic ReportFinancial Statements 2 Significant accounting policies continued
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 31 December 2023 the Group recognised €1,380 million in respect of employee benefit assets (2022: €2,334 million) and €175
million in respect of employee benefit obligations (2022: €217 million). Further information on employee benefit obligations is
disclosed in note 34.
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, 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 34. 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 34.
Under the Group’s Airways Pension Scheme (APS) and New Airways Pension Scheme (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.
In November 2020, the UK Government and UK Statistics Authority (UKSA) confirmed alignment of RPI with CPIH (a variant of CPI)
from February 2030. In assessing RPI and CPI inflation from investment market data, allowance has been made for alignment of RPI
with CPIH from 2030 and, therefore, effectively no gap between RPI and CPI inflation from that date. CPI inflation before 2030 is
assumed to be 1 per cent per annum below RPI inflation.
b Revenue recognition
At 31 December 2023 the Group recognised €8,023 million (2022: €7,644 million) in respect of deferred revenue of which €2,712
million (2022: €2,630 million) related to customer loyalty programmes. Further information on deferred revenue is included in note
24.
Passenger revenue
Passenger revenue is recognised when the transportation service is provided. At the time of intended transportation, revenue is also
recognised in respect of estimated unused tickets breakage 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. A 2 percentage point increase in the level of unused ticket
breakage of the sales in advance of carriage balance (excluding vouchers) at 31 December 2023 would result in an adjustment to
Deferred revenue of €93 million, with an offsetting adjustment to increase revenue and operating profit recognised in the year.
For details regarding the voucher liability at 31 December 2023 and the associated sensitivity, see note 24.
Customer loyalty schemes
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 an Avios is
determined as the price of the rewards against which they can be redeemed and is reduced to take account of the proportion of
Avios that are not expected to be redeemed by customers.
During 2022, 2021 and 2020, due to the significant restrictions imposed on the ability of customers to redeem Avios, as a result of
the COVID-19 pandemic, coupled with the disruption in the patterns of redemption caused by the COVID-19 pandemic, the Group
considered that the trends experienced since the start of the COVID-19 pandemic were not reflective of the long-term expected
patterns of redemption and accordingly, the Group was unable to determine with a high degree of probability that there would not
be a significant reversal of revenue in the future had it applied the redemption trends that were experienced over the period of the
pandemic. Accordingly, for the years to 31 December 2022, 31 December 2021 and 31 December 2020, the Group estimated the level
of redemption activity based on pre-COVID-19 pandemic customer behaviour.
During 2023, the Group considers historical redemption activity, including customers’ more recent behaviours following the
COVID-19 pandemic, representative of long-term behavioural trends, such that the Group considers that the risk of a significant
reversal of revenue to be sufficiently low. Accordingly, the Group has updated its estimated level of redemption activity to
incorporate current customer behaviour.
The Group estimates the number of Avios not expected to be redeemed using statistical modelling based on historical experience
and expected future trends in customer behaviour. A 5 percentage point increase in the assumption of Avios not expected to be
redeemed would result in an adjustment to Deferred revenue of €94 million, with an offsetting adjustment to increase revenue and
operating profit recognised in the year.
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International Airlines Group | Annual Report and Accounts 2023
Notes to the accounts continued Unredeemed vouchers liability
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. During
2020 and 2021, due to the significant level of flight cancellations arising from the COVID-19 pandemic, the Group issued a greater
volume of vouchers than it would have otherwise done. In addition, given the uncertainty as to the timing of customers redeeming
these vouchers, the Group was unable to estimate with a high degree of probability that there would not be a significant reversal of
revenue in the future had it applied the historical expiry trends over the period of the pandemic. Accordingly, for the years to 31
December 2022, 31 December 2021 and 31 December 2020, the Group did not recognise revenue arising from those vouchers issued
due to COVID-19 pandemic-related cancellations until either the voucher was redeemed or it expired.
During 2023, the Group considers historical redemption activity, including customers’ more recent behaviours following the
COVID-19 pandemic, representative of the redemption trends expected through to expiry of the vouchers, such that the Group
considers that the risk of a significant reversal of revenue to be sufficiently low. Accordingly, the Group has updated its estimated
level of redemption activity to incorporate current customer behaviour.
c Income taxes
At 31 December 2023, the Group recognised €1,202 million in respect of deferred tax assets (2022: €1,282 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 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 31 December 2023, the Group had unrecognised deferred tax assets of €1,584 million relating to tax losses and other temporary
differences 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 tax losses would have reduced by €575 million.
Conversely, if the forecast profit before tax for each operating company was reduced by 2 percentage points over the forecast
period, the amount of the unrecognised tax losses would increase by €12 million.
d Impairment of non-financial assets
At 31 December 2023 the Group recognised €2,428 million (2022: €2,423 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 (CGU), 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 notes 4 and 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.
International Airlines Group | Annual Report and Accounts 2023
231
Corporate GovernanceStrategic ReportFinancial Statements 2 Significant accounting policies continued
e Engineering and other aircraft costs
At 31 December 2023 the Group recognised €2,529 million in respect of maintenance, restoration and handback provisions,
principally in respect of leased aircraft (2022: €2,400 million). Information on movements on the provision is disclosed in note 27.
IFRS 16 does not address the accounting for maintenance, restoration and handback provisions that arise through the usage of the
underlying asset and accordingly, the Group has applied judgement in applying an accounting policy with regard to the recognition
and subsequent measurement of such provisions for leased aircraft. The Group’s accounting policy for provisions that arise through
usage or through the passage of time, is to recognise the associated estimated costs in the Income statement as the underlying
asset is used or through the passage of time. The approach applied by the Group is consistent with the majority of major airlines that
prepare their financial statements under IFRS. Were the Group to apply an alternative accounting policy, the financial impact would
be materially different at the reporting date. An alternative accounting policy that the Group could have applied was the
components approach, where the Group would capitalise the estimated costs of major maintenance events and depreciating them
until the subsequent maintenance event (or to the end of lease term) and providing over the lease term for any expected cash
compensation for maintenance obligations at the end of the lease. The Group considers that the current accounting policy for
maintenance, restoration and handback activities reflects the obligations under its lease arrangements.
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 major maintenance event occurs. Other
assumptions not considered to be significant include aircraft utilisation, expected maintenance intervals and the aircraft’s condition.
The associated forecast costs are discounted to their present value. While the Group considers that there are no reasonably possible
change to any of the individual assumptions that would have a material impact on the provisions, a combination of changes in
several assumptions may. The Group considers that a reasonably possible change in the inflation rate and discount rate assumptions
of a 100 basis points increase would give rise to an increase of €53 million (2022: €51 million) and a decrease of €59 million (2022:
€68 million), respectively, when applied in isolation to one another.
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.
b Determining whether the Group has significant influence over Air Europa Holdings
The Group applies judgement in the determination as to whether it has the power with which to participate in the decision-making
of, and as a result significant influence over, Air Europa Holdings, S.L. (Air Europa Holdings). Such judgement includes the
consideration as to the ability of the Group to: have representation on the board of Air Europa Holdings; participate in the policy-
making processes, including participation in decisions regarding dividends and other distributions; the existence of material
transactions between Air Europa Holdings and the Group; and enable the interchange of management personnel and provide
essential technical information.
In forming its judgement, the Group notes that: it does not have the ability to have representation on the board of Air Europa
Holdings; it does not have the ability to participate in the policy-making processes; has not entered into material transactions outside
of the normal course of business, with those transactions arising in the normal course of business being immaterial in nature; it does
not have the ability to enable the interchange of management personnel; and it does not have the ability to provide essential
technical information. The Group has therefore concluded that it does not have significant influence over Air Europa Holdings.
Accordingly, the Group accounts for its shareholding in Air Europa Holdings as an Other equity investment and measures it at fair
value through Other comprehensive income. Had the Group concluded that it does have significant influence over Air Europa
Holdings, then the shareholding would have been classified as an associate, measured at cost on inception and subsequently
measured using the equity method.
At 31 December 2023, the fair value of its shareholding in Air Europa Holdings was €129 million. Further information is given in note 19.
c Determining whether the HMRC enquiries into the IAG Loyalty VAT accounting gives rise to a provision or a contingent liability
The Group applies judgement in the determination as to whether it considers the outcome of the enquiries between IAG Loyalty and
His Majesty’s Revenue and Customs (HMRC), in the UK, on the IAG Loyalty VAT accounting, is more probable than not to result in an
adverse outcome to the Group, and accordingly whether to record the matter as a provision or as a contingent liability.
In forming its judgement, the Group, with its legal and tax advisors, have reviewed the emerging view issued by HMRC, as well has
having considered the historic tax ruling issued by HMRC to the Group on this matter. As a result, the Group does not consider it
probable that an adverse outcome will eventuate and accordingly no provision has been recorded at 31 December 2023 and the
matter has been disclosed as a contingent liability.
Had the Group, with its legal and tax advisors, considered that it was more probable than not that an adverse outcome would
eventuate, then the Group would have recognised a provision for the best estimate of the potential outflow of economic benefit to
the Group, with a corresponding charge recorded within the Income statement. Further information is given in note 10g.
232
International Airlines Group | Annual Report and Accounts 2023
Notes to the accounts continued New standards, amendments and interpretations
The following amendments and interpretations apply for the first time in 2023, but do not have a material impact on the
consolidated financial statements of the Group:
• IFRS 17 Insurance contracts – effective for periods beginning on or after 1 January 2023;
• definition of accounting estimate – amendments to IAS 8 effective for periods beginning on or after 1 January 2023;
• disclosure of accounting policies – amendments to IAS 1 and IFRS Practice statement 2 effective for periods beginning on or after 1
January 2023;
• deferred tax related to assets and liabilities arising from a single transaction – amendments to IAS 12 effective for periods
beginning on or after 1 January 2023; and
• international tax reform: Pillar Two model reforms – amendments to IAS 12 effective for periods beginning on or after 1 January
2023.
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 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:
• disclosures: Supplier Finance Arrangements – amendments to IAS 7 and IFRS 7 effective for periods beginning on or after 1
January 2024;
• lease liability in a sale and leaseback – amendments to IFRS 16 effective for periods beginning on or after 1 January 2024; and
• on 31 October 2022, the IASB issued the amendments to IAS 1 – classification of liabilities as current or non-current (the
‘Amendments’), effective for periods beginning on or after 1 January 2024. The Amendments will require the €825 million
convertible bond that matures in 2028, which as at 31 December 2023, had a carrying value of €735 million, to be reclassified from
a non-current liability to a current liability with the comparative presentation as at 31 December 2022 also reclassified. The
Amendments require that where the conversion feature of a convertible instrument does not meet the recognition criteria for
separate presentation within equity and where the associated bond holders have the irrevocable right to exercise the conversion
feature within 12 months of the balance sheet date, that such convertible instruments be presented as current. Other than this
reclassification, the Amendments will not have a material effect on the reported results or net assets of the Group.
3 Significant changes and transactions in the current reporting period
The financial performance and position of the Group was affected by the following significant events and transactions in the year to
31 December 2023 as detailed below:
• on 23 February 2023, the Group entered into an agreement to acquire the remaining 80 per cent of the share capital of Air Europa
Holdings that it had not previously owned. On successful completion of the transaction, 54,064,575 ordinary shares of the
Company (which represented €100 million at the date of the agreement) will be transferred to and €100 million in cash will be paid
to Globalia, with a further €100 million paid on both the first and second anniversary of completion.
In addition, the Group has agreed to pay a break-fee to Globalia of €50 million should: (i) the relevant approvals, detailed below,
not be forthcoming within 24 months of entering into the agreement; or (ii) the Group terminates the agreement at any time prior
to completion. Under the agreement, this 24-month period can be extended, by mutual consent. The acquisition is conditional on
Globalia receiving approval from the syndicated banks that provide the loan agreements that are partially guaranteed by the
Instituto de Crédito Oficial (ICO) and Sociedad Estatal de Participaciones Industriales (SEPI) in Spain. The acquisition is also subject
to approval by relevant competition authorities. Until the completion of these approvals, the acquisition does not meet the
recognition criteria under IFRS 3 Business combinations, and no accounting has been made for the transaction in these
consolidated financial statements;
• on 4 March 2023, Aer Lingus repaid in full the €50 million of the financial arrangement with the Ireland Strategic Investment Fund
(ISIF). At 31 December 2023, €350 million of undrawn facilities remain available for draw down;
• in May 2023, the Group announced its intention to carry out a share purchase programme in order to acquire approximately 50
per cent of the aforementioned ordinary shares required as part of the acquisition of Air Europa Holdings. The programme
completed during the year to 31 December 2023, with the Group having purchased 27 million treasury shares amounting to €49
million;
• on 30 June 2023, the Group converted 10 Airbus A320neo options into firm orders. The aircraft will be delivered in 2028 and will
be used by any of the Group's airlines to replace A320ceo family aircraft;
• on 4 July 2023, the Group redeemed upon maturity the senior unsecured €500 million fixed rate bond;
• on 27 July 2023, the Group announced that it had converted six Boeing 787-10 options held by British Airways into firm orders and
at the same time is adding a further six 787-10 options to its long-haul order book. The Group also converted one Airbus
A350-900 option held by Iberia into a firm order. These aircraft will be delivered in 2025 and 2026 and will be used by British
Airways and Iberia to restore capacity in the airlines’ long-haul fleets;
• on 23 August 2023, the Group extended the terms of $1.655 billion of the $1.755 billion Revolving Credit Facility available to British
Airways, Iberia and Aer Lingus by an additional 12 months through to March 2026 with the remaining $100 million available
through to March 2025. At 31 December 2023, the Revolving Credit Facility remains undrawn;
• on 28 September 2023, British Airways repaid its syndicated loan of £2.0 billion (€2.3 billion), which was partially guaranteed by
the UK Export Finance (UKEF). At the same time, British Airways entered into a new five-year Export Development Guarantee
Facility of £1.0 billion (€1.2 billion), with commitments from a syndicate of banks, partially guaranteed by the UKEF, and available
through to September 2028. The new facility is in addition to the £1.0 billion Export Development Guarantee Facility, which was
entered into in 2021 and which is available through to November 2026. Both facilities were undrawn at 31 December 2023;
• on 31 October 2023 Iberia repaid the remaining outstanding €644 million of the €750 million floating rate syndicated financing
agreement, partially guaranteed by the Instituto de Crédito Oficial (ICO) in Spain;
• on 15 November 2023, Iberia early repaid other loans and borrowings of €42 million; and
• on 30 November 2023, Vueling repaid the remaining outstanding €223 million of the €260 million floating rate syndicated
financing agreement, partially guaranteed by ICO.
International Airlines Group | Annual Report and Accounts 2023
233
Corporate GovernanceStrategic ReportFinancial Statements 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 (SAF) to 10 per cent by 2030
and to 70 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 SAF production facilities;
• investment and improvements in air traffic management; and
• the price of carbon through the EU, Swiss and UK Emissions Trading Schemes (ETS) and the UN Carbon Offsetting and Reduction
Scheme for International Aviation (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.
As a result of the impact of the COVID-19 pandemic, the Group retired 72 aircraft, their associated engines and rotable inventories.
These retired aircraft were older generation aircraft, that were less fuel-efficient, more carbon-intensive and more expensive to
operate than more modern models.
Subsequent to the retirement of these aircraft, coupled with the future committed delivery of 178 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 climate
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, nor have the useful lives and residual values
of aircraft been amended, 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 (being the third year) of these probability-weighted cash flows to incorporate the impacts of
climate change from the Group’s Flightpath Net Zero climate strategy that are expected to occur over the medium term, being to
2030. These adjustments are limited to those that: (i) the Group can reliably estimate at the reporting date, with those costs
subsequent to 2030 having such a high degree of uncertainty that they cannot be reliably estimated; (ii) only relate to the Group’s
existing asset base in its current condition; and (iii) incorporate legislation and regulation that is expected to be required to achieve
the Group’s Flightpath Net Zero climate strategy, and which is sufficiently progressed at the reporting date.
As a result, the Group’s impairment modelling incorporates the following aspects of the Group’s Flightpath Net Zero climate strategy
through to 2030, after which time the level of uncertainty regarding timing and costing becomes insufficiently reliable to estimate:
(i) an increase in the level of SAF consumption to 10 per cent of the overall fuel mix; (ii) forecast cost of carbon, including SAF, ETS
allowances and CORSIA allowances (all derived from externally sourced or derived information); (iii) the removal of existing free ETS
allowances issued by the EU member states, Switzerland and the UK; (iv) forecast kerosene taxes applied to jet fuel for all intra EU
flight activity; and (v) assumptions regarding the ability of the Group to recover these incremental costs through increased ticket
pricing.
234
International Airlines Group | Annual Report and Accounts 2023
Notes to the accounts continued 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 unless already
committed and assets not currently in use by the Group. In addition, for the avoidance of doubt, the Group’s impairment modelling
excludes the following aspects of the Group’s Flightpath Net Zero climate strategy: (i) the expected transition to electric and
hydrogen aircraft, as well as future technological developments to jet engines and airframes; (ii) any savings from the transition to
more fuel-efficient aircraft other than those either in the Group’s fleet or those committed orders due to be delivered over the
business plan period; (iii) the benefit of the development of carbon capture technologies and enhanced carbon offsetting
mechanisms; (iv) the required beneficial reforms to air traffic management regulation and legislation; and (v) the required
government incentives and/or support across the supply chain.
As detailed in note 17, the Group applies a long-term growth rate to these adjusted probability weighted cash flows, 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 and elasticity impact arising from climate change. These impacts are derived with reference to external market
data, industry publications and internal analysis.
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 and operating margins and the increased fuel price sensitivity.
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 Trustee 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
assumed impacts on both revenue and costs to the Group.
e The price of carbon through the EU, Swiss and UK Emissions Trading Schemes
The EU, Swiss and the UK’s ETS were established to reduce greenhouse gas emissions cost effectively. Under these schemes,
companies, including the Group’s companies, are required to buy emission allowances, or are issued them under existing quotas. The
Group is required to surrender these allowances to the relevant authorities annually dependent on the level of CO2 equivalent
emitted within a 12-month period. Over time, the level of available emission allowances decreases in order to reduce total emissions,
which has the effect of increasing the price of such allowances. The Group expects that the future price of such allowances will
continue to increase and that the free allocation of emission allowances will cease. Given the relative illiquid nature of the emission
allowance market there is uncertainty as to the future pricing of such allowances.
As detailed in note 2, the Group accounts for the purchase of allowances as an addition to Intangible assets, which are measured at
amortised cost. In addition, as the Group emits CO2 equivalent as part of its flight operations, a provision is recorded to settle the
obligation. As the provision is recognised, a corresponding amount is recorded in the Income statement within Fuel, oil costs and
emission charges. For emissions for which the Group has already purchased allowances, the provision is valued at the weighted cost
of those allowances. Where the level of emissions exceeds the amounts of allowances held, this deficit is measured at the market
price of such allowances at the reporting date.
For the year to, and as at, 31 December 2023, the Group has recorded the following within the financial statements:
• additions to the ETS allowance provision and accordingly an expense within Fuel, oil costs and emission charges, of €238 million
(see note 27);
• purchases of ETS allowances recorded as additions to intangible assets of €264 million (see note 17);
• total ETS allowances at the reporting date recorded within intangible assets of €577 million (see note 17); and
• commitments for forward purchase agreements for ETS allowances of €216 million (see note 15).
At 31 December 2023, the Group has acquired and committed to acquire at fixed prices, the following percentages of its total
emissions allowances forecast to be purchased over the business plan period to 31 December 2026:
Percentage of forecast emission allowances required
Within 12 months
1-2 years
2-3 years
100 %
62 %
24 %
International Airlines Group | Annual Report and Accounts 2023
235
Corporate GovernanceStrategic ReportFinancial Statements 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, loyalty and platform
functions. Each operating company 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 operating companies based on
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, Aer Lingus and IAG Loyalty have been identified for financial reporting
purposes as reportable operating segments. LEVEL is also an operating segment but does not exceed the quantitative thresholds to
be reportable and management has concluded that there are currently no other reasons why LEVEL should be separately disclosed.
There are varying levels of transactions between operating segments, which principally relate to the provision of maintenance
services from the Iberia operating segment to the other operating segments, the provision of flight services by the airlines to the IAG
Loyalty segment and the provision of loyalty services from IAG Loyalty to the airline operating segments.
The platform functions of the business primarily support the airline and loyalty 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.
For the year to 31 December 2023
€ million
Revenue
Passenger revenue
Cargo revenue
Other revenue
External revenue
Inter-segment revenue
Segment revenue
British
Airways
Iberia
Vueling
2023
Aer
Lingus
IAG
Loyalty
Other Group
companies1
Total
14,204
5,215
3,180
2,194
679
338
25,810
862
962
233
986
–
17
55
10
16,028
6,434
3,197
2,259
431
524
1
15
–
512
1,191
294
16,459
6,958
3,198
2,274
1,485
6
–
1,156
2,487
344 29,453
392
736
1,657
31,110
Depreciation and amortisation charge
(1,168)
(409)
(259)
(150)
(11)
(66)
(2,063)
Operating profit/(loss)
1,650
940
396
225
321
(25)
3,507
Net non-operating costs
Profit before tax
Total assets
Total liabilities
22,255
9,454
3,049
1,999
3,786
(2,863) 37,680
(19,295)
(8,390)
(3,461)
(1,856)
(3,115)
1,715 (34,402)
(451)
3,056
1
Includes eliminations on total assets of €16,268 million and total liabilities of €5,417 million.
236
International Airlines Group | Annual Report and Accounts 2023
Notes to the accounts continued
For the year to 31 December 2022
€ million
Revenue
Passenger revenue
Cargo revenue
Other revenue
External revenue
Inter-segment revenue
Segment revenue
British
Airways
Iberia
Vueling
Aer Lingus
IAG
Loyalty
Other Group
companies2
Total
2022
10,523
4,002
2,584
1,665
1,239
848
284
799
–
14
80
10
12,610
5,085
2,598
1,755
311
426
–
14
451
–
322
773
228
233
19,458
12
–
1,615
1,993
245 23,066
378
1,357
12,921
5,511
2,598
1,769
1,001
623
24,423
Depreciation and amortisation charge
(1,272)
(371)
(222)
(146)
Impairment reversal
–
–
8
–
(8)
–
(59)
(2,078)
–
8
Operating profit/(loss)1
366
389
195
57
282
(11)
1,278
Exceptional items3
23
–
8
–
–
–
31
Operating profit/(loss) before exceptional items
343
389
187
57
282
(11)
1,247
Net non-operating costs1
Profit before tax
Total assets
Total liabilities
23,788
9,200
3,177
1,946
3,303
(2,111) 39,303
(20,975)
(9,005)
(3,774)
(1,942)
(2,914)
1,329
(37,281)
(863)
415
1 Segment information for 2022 has been restated for the reclassification to conform with the current year presentation for the Net gain on sale of
property, plant and equipment. Further information is given in note 2.
2 Includes eliminations on total assets of €16,159 million and total liabilities of €5,755 million.
3 For details on exceptional items refer to the Alternative performance measures section.
b Other revenue
€ million
Holiday and hotel services
Maintenance and overhaul services
Brand and marketing
Ground handling services
Other
Year to 31 December
2023
938
683
347
195
324
2,487
20221
805
528
267
193
200
1,993
1 For the year to 31 December 2023, the Group has elected to provide a disaggregated breakdown of the Income statement caption ‘Other revenue’
and has accordingly provided figures for the comparative year to 31 December 2022.
International Airlines Group | Annual Report and Accounts 2023
237
Corporate GovernanceStrategic ReportFinancial Statements
5 Segment information continued
c Geographical analysis
Revenue by area of original sale
€ million
UK
Spain
USA
Rest of world
Assets by area
31 December 2023
€ million
UK
Spain
USA
Rest of world
31 December 2022
€ million
UK
Spain
USA
Rest of world
6 Operating expenses
a 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
Gain arising on de-designation of foreign exchange hedges recorded in Depreciation1
Amortisation and impairment of intangible assets
Impairment reversal on right of use assets
Depreciation charge on other leasehold assets
Year to 31 December
2023
10,177
5,234
5,069
8,973
29,453
2022
7,923
4,313
3,735
7,095
23,066
Property,
plant and
equipment
Intangible
assets
12,764
5,644
100
1,268
1,685
1,569
18
637
19,776
3,909
Property,
plant and
equipment
Intangible
assets
12,026
5,082
47
1,191
1,490
1,462
9
595
18,346
3,556
2023
1,077
768
–
193
–
25
2022
1,092
748
(29)
218
(8)
49
2,063
2,070
1
Included in the depreciation charge for 2022, not included within note 13 is a credit of €29 million relating to the de-designation of hedge accounting
that had been applied to mitigate the foreign currency exposure on aircraft purchases.
Cost of inventories:
€ million
Cost of inventories recognised as an expense
2023
1,165
1,165
2022
749
749
238
International Airlines Group | Annual Report and Accounts 2023
Notes to the accounts continued
b Property, IT and other costs
€ million
IT costs
Property costs
Insurance costs, professional fees and other costs
2023
365
296
397
1,058
20221
340
293
317
950
1 For the year to 31 December 2023, the Group has elected to provide a disaggregated breakdown of the Income statement caption ‘Property, IT and
other costs’ and has accordingly provided figures for the comparative year to 31 December 2022.
7 Auditor’s remuneration
The fees for the years to 31 December 2023 and 31 December 2022, 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
Auditores S.L., and by companies belonging to KPMG’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 audit and assurance services
Services relating to working capital review
2023
6,929
2022
6,378
1,284
218
1,589
–
985
195
1,644
1,022
10,020
10,224
Fees payable to the Group’s auditor for the audit of the Group’s pension scheme during the year total €251 thousand (2022: €236
thousand).
8 Employee costs and numbers
€ million
Wages and salaries
Social security costs
Costs related to pension scheme benefits
Share-based payment charge
Other employee costs1
Total employee costs
1 Other employee costs include allowances and accommodation for crew.
The number of employees during the year and at 31 December was as follows:
2023
3,711
604
297
52
759
2022
3,207
519
272
39
610
5,423
4,647
In the air:
Cabin crew
Pilots
On the ground:
Airports
Corporate
Maintenance
Senior leaders
2023
31 December 2023
2022
31 December 2022
Average
number of
employees
Number of
employees2
Percentage
of women
Average
number of
employees1
Number of
employees2
Percentage
of women
23,473 24,004
8,085
8,223
16,395
16,784
14,774
15,586
6,813
6,972
222
225
69,762
71,794
70 %
7 %
37 %
48 %
8 %
36 %
44 %
19,801
22,278
7,340
7,864
13,798
15,087
11,741
6,908
212
13,819
6,775
221
59,800 66,044
70 %
7 %
38 %
49 %
8 %
34 %
44 %
1
In 2022, the average number of employees excludes those employees who were on furlough, wage support and equivalent schemes, including the
Temporary Redundancy Plan arrangements in Spain; the total average number of employees including these schemes was 61,192.
2 The number of employees is based on actual headcount at 31 December.
International Airlines Group | Annual Report and Accounts 2023
239
Corporate GovernanceStrategic ReportFinancial Statements
9 Finance costs, income and other non-operating credits
a Finance costs
€ million
Interest expense on:
Bank borrowings
Asset financed liabilities
Lease liabilities
Bonds
Provisions unwinding of discount
Other borrowings
Capitalised interest on progress payments
Other finance costs
b Finance income
€ million
Interest on other interest-bearing deposits, cash and cash equivalents
Other finance income
c Net change in fair value of financial instruments
€ million
Net change in the fair value of convertible bond (note 26b)
Net fair value losses on financial assets at fair value through profit or loss
Net fair value losses on de-recognition of financial assets and recognition of other equity investment
d Net financing credit relating to pensions
€ million
Net financing credit relating to pensions
e Other non-operating credits
€ million
Gain on sale of investments
Credit/(charge) related to equity investments (note 19)
Share of profits in investments accounted for using the equity method (note 18)
Realised (losses)/gains on derivatives not qualifying for hedge accounting
Unrealised gains/(losses) on derivatives not qualifying for hedge accounting
Net change in the fair value associated with fair value hedges (note 30)
2023
2022
(237)
(170)
(508)
(63)
(103)
(42)
28
(18)
(191)
(107)
(464)
(83)
(43)
(102)
11
(38)
(1,113)
(1,017)
2023
386
–
386
2022
51
1
52
2023
2022
(11)
–
–
(11)
159
(35)
(43)
81
2023
103
2022
26
2023
20221
10
3
6
(23)
13
(1)
8
–
(3)
5
190
(82)
–
110
1 The 2022 Other non-operating credits include a reclassification to conform with the current year presentation of the Income statement. See note 2
for further details.
240
International Airlines Group | Annual Report and Accounts 2023
Notes to the accounts continued
10 Tax
a Tax (charges)/credits
Tax (charges)/credits recognised in the Income statement, Other comprehensive income and directly in equity:
2023
2022
Income
statement
Other
comprehensive
income
Recognised
directly in
equity
Total
Income
statement
Other
comprehensive
income
Recognised
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
(1)
(206)
(207)
(10)
(171)
(13)
(194)
–
8
8
–
–
–
(1)
(6)
(198)
(199)
(64)
(70)
–
3
3
–
–
–
Total
(6)
(61)
(67)
(2)
12
–
(36)
(2)
–
(38)
106
(17)
(82)
105
(60)
3
107
–
(5)
(10)
(92)
17
86
(10)
(72)
5
–
5
50
7
19
Total tax
(401)
115
(5)
(291)
16
(69)
5
(48)
The current tax credit in Other comprehensive income relates to movements relating to employee benefit plans of €8 million (2022:
€1 million) and to the fair value movements on the IAG €825 million convertible bond maturing in 2028 of €nil (2022: €2 million).
Tax recognised directly in equity of a €5 million charge (2022: €5 million credit) relates to cash flow hedges.
Within tax in Other comprehensive income is a tax credit of €114 million (2022: tax credit of €8 million) that may be reclassified to
the Income statement and a tax credit of €1 million (2022: tax charge of €77 million) that will not.
b Current tax asset
€ million
Balance at 1 January
Income statement
Other comprehensive income
Cash
Exchange movements and other
Balance at 31 December
Current tax asset
Current tax liability
Balance at 31 December
2023
64
(207)
8
291
1
157
159
(2)
157
2022
(5)
(70)
3
134
2
64
72
(8)
64
International Airlines Group | Annual Report and Accounts 2023
241
Corporate GovernanceStrategic ReportFinancial Statements
10 Tax continued
c Deferred tax (liability)/asset
€ million
Fixed
assets
Right of
use
assets
Lease
liabilities
Employee
leaving
indemnities
and others
Employee
benefit
plans
Fair value
gains/
losses1
Share-
based
payment
schemes
Tax loss
carried
forward
and tax
credits
Other
temporary
differences
Total
Balance at 1 January 2023
(680)
(44)
Income statement
(325)
68
Other comprehensive income
Recognised directly in equity
Exchange movements and
other
–
–
–
–
(8)
–
Balance at 31 December 2023 (1,013)
24
Balance at 1 January 2022
(477)
(220)
Income statement
(194)
169
Other comprehensive income
Recognised directly in equity
Exchange movements and
other
–
–
–
–
(9)
7
Balance at 31 December 2022
(680)
(44)
9
(2)
–
–
–
7
19
(9)
–
–
(1)
9
197
11
6
–
–
214
196
19
(17)
–
(1)
197
54
(1)
(8)
–
–
45
62
1
(3)
–
114
(5)
15
121
57
–
(12)
(46)
–
5
17
1,636
96 1,282
9
–
–
78
(3)
–
(32) (194)
(2) 107
–
(5)
–
10
26
1,721
(9)
8
53 1,198
11
6
–
–
1,573
87
3
–
61 1,282
7 86
–
(72)
–
5
3
54
(19)
(3)
–
(27)
28
(19)
17
1,636
96 1,282
1 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 2023 was €104 million (2022: €68 million, see note 30d).
€ million
Deferred tax asset
Deferred tax liability
Balance at 31 December
2023
1,202
(4)
2022
1,282
–
1,198
1,282
The deferred tax assets mainly arise in Spain and the UK and are expected to reverse in full 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 differences between the expected tax charge (2022: charge) and the actual tax charge (2022: credit) on the profit for the
year to 31 December 2023 (2022: profit) are explained below:
€ million
Accounting profit before tax
Weighted average tax charge of the Group1
Unrecognised losses and deductible temporary differences arising in the year
Fair value movement on convertible bond
Effect of tax rate changes
Prior year tax assets recognised
Effect of lower tax rate in the Canary Islands
Movement in respect of prior years
Employee benefit plans accounted for net of withholding tax
Non-deductible expenses
Other items
Tax (charge)/credit in the Income statement
2023
3,056
(718)
11
30
(13)
289
3
(11)
22
(21)
7
(401)
2022
415
(102)
(2)
–
17
153
5
(42)
3
(22)
6
16
1 The expected tax charge is calculated by aggregating the expected tax (charges)/credits arising in each company in the Group and changes each
year as tax rates and profit mix change. The 2023 corporate tax rates for the Group’s main countries of operation are Spain 25% (2022: 25%), the UK
23.5% (2022: 19%) and Ireland 12.5% (2022: 12.5%).
242
International Airlines Group | Annual Report and Accounts 2023
Notes to the accounts 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 trading losses
Other losses and temporary differences
Spanish deductible temporary differences
UK capital losses
Irish capital losses
2023
604
936
2022
522
722
1,540
1,244
2023
2022
569
406
–
13
1,596
405
72
11
988
2,084
238
341
17
596
481
343
17
841
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.
Revocation of Royal Decree-Law 3/2016 in Spain
On 18 January 2024, the Tribunal Constitucional (Constitutional Court) in Spain issued a ruling that the amendments to corporate
income tax introduced by Royal Decree Law 3/2016 were unconstitutional. Further details are given in note 38.
Unrecognised temporary differences – investment in subsidiaries and associates
No deferred tax liability has been recognised in respect of €1,910 million (2022: €823 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 3 March 2021 the UK Chancellor of the Exchequer 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 24 May 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 charge of €13 million (2022: €17 million credit) is recorded in
the Income statement and a credit of €3 million (2022: €10 million charge) is recorded in Other comprehensive income.
Engagement with tax authorities
The Group is subject to audit and enquiry by tax authorities in the territories in which it operates, and engages with those tax
authorities in a cooperative manner.
During the course of 2023, the Directorate General of GST Intelligence (DGGI) in India has been enquiring into the quantum and
nature of any services provided by the corporate head offices of a number of international airlines, including British Airways, to their
Indian branches. As at 31 December 2023 and through to the date of these financial statements, the DGGI’s enquiries are ongoing.
Pillar Two minimum effective tax rate reform
In 2021 the OECD released the Two Pillar solution to address the tax challenges arising from the digitalisation of the economy. This
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.
On 15 December 2022, the Council of the European Union formally adopted the EU Pillar Two Directive. On 22 December 2022 the
EU Minimum Tax Directive was published.
On 11 July 2023, the UK enacted Finance (No. 2) Act 2023 which introduced the Multinational Top-up Tax and the Domestic Top-up
Tax with effect for accounting periods beginning on or after 31 December 2023. These taxes are the UK’s adoption of the income
inclusion rule and domestic minimum top-up tax rule referenced in the OECD’s Pillar Two reform.
On 18 December 2023, Ireland enacted Finance (No. 2) Act 2023 which, pursuant to the EU Minimum Tax Directive, provided for the
introduction of a new minimum effective rate of tax for certain businesses. These rules provide for a Qualified Domestic Top-Up Tax
where an in-scope group’s Irish operations have an effective rate of tax of less than 15%. They come into force for accounting periods
beginning on or after 31 December 2023.
International Airlines Group | Annual Report and Accounts 2023
243
Corporate GovernanceStrategic ReportFinancial Statements
10 Tax continued
On 19 December 2023, Spain’s Council of Ministers approved a draft law to implement the EU Minimum Tax Directive. This is to be
subject to consultation, prior to being sent to Parliament.
Under the legislation, the Group is liable to pay a top-up tax for the difference between the effective rate per jurisdiction and the 15
per cent minimum rate. Such legislation applies prospectively for accounting periods beginning on or after 31 December 2023.
For 2023, the predominant jurisdiction in which the Group operates with an effective tax rate of less than 15 per cent is Ireland
through Aer Lingus. While the impact of Pillar Two is not yet reasonably possible to estimate, for indicative purposes, in 2023 Aer
Lingus recorded a current tax expense of €24 million relating to its Irish operations, representing an effective tax rate of 13 per cent.
Had the effective tax rate applied by Aer Lingus to its Irish operations been 15 per cent, the current tax expense would have
increased by €4 million to €28 million, which would not have had a significant impact on the overall Group effective tax rate of 13 per
cent.
On 23 May 2023, the IASB issued the amendments to IAS 12 – international tax reform: Pillar Two model reforms, effective for
periods beginning on or after 1 January 2023. The amendments to IAS 12 provide temporary mandatory relief from the recognition of
deferred tax balances arising from the implementation of the Pillar Two legislation. Accordingly, the Group has developed an
accounting policy with regard to the recognition of deferred taxes arising from the Pillar Two model rules, where no adjustments to
deferred tax assets and liabilities are recognised that arise from the introduction of the minimum 15 per cent effective tax rate.
g Tax-related contingent liabilities
The Group has certain contingent liabilities that could be reliably estimated, across all taxes, but excluding the IAG Loyalty VAT
matter detailed below, at 31 December 2023 amounting to €110 million (31 December 2022: €110 million). While the Group does not
consider it more likely than not that there will be material losses on these matters, given the inherent uncertainty associated with tax
litigation and tax audits, there can be no guarantee that material losses will not eventuate. As the Group considers that its chances of
success in each of these matters is more probable than not, it is not appropriate to make a provision for these amounts. Included in
the tax-related contingent liabilities are 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 ‘Merger’). The maximum exposure in this case is €100
million (31 December 2022: €98 million), being the amount in the tax assessment with an estimate of the interest accrued on that
assessment through to 31 December 2023.
The Company appealed the assessment to the Tribunal Económico-Administrativo Central or ‘TEAC’ (Central Administrative Tax
Tribunal). On 23 October 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 20 December 2019, and on 24 July 2020 filed submissions in support of its
case. To assist it in its deliberations as to whether a gain arose from the Merger, on 15 September 2023, the Audiencia Nacional
commissioned an independent accounting expert to provide a report on the appropriate basis of accounting. As at 31 December
2023 and through to the date of these financial statements, the Audiencia Nacional has not ruled on whether a gain arose from the
Merger. The Company does not expect a hearing at the Audiencia Nacional on this case until mid to late 2024 at the earliest.
The Company disputes the technical merits of the assessment and ruling of the TEAC. Based on legal advice and an external
accounting expert’s opinion, the Company believes that it has strong arguments to support its appeal. The Company does not
consider it appropriate to make a provision for these amounts and accordingly has classified this matter as a contingent liability.
Should the Company be unsuccessful in its appeal to the Audiencia Nacional, it would re-assess its position and the associated
accounting treatment accordingly.
Within the context of the aforementioned tax audits, the Spanish tax authorities concluded on the value of Iberia’s business within
the Merger. This valuation was contested by the Company in a separate case, where no tax liability is due. The Company believes
there are technical merits for a higher value, something that would indirectly reduce the quantum of the merger gain assessed in the
dispute described above. On 18 January 2024, the Audiencia Nacional served notice on its judgment issued on 13 December 2023,
whereby it ruled in favour of the Spanish tax authorities. The Company believes there are grounds to appeal the judgement to the
Supreme Court in Spain. If an appeal on this matter was ultimately successful, it would reduce the exposure of the merger gain
described above.
IAG Loyalty VAT
At 31 December 2023, and through to the date of this report, His Majesty’s Revenue and Customs (HMRC) has issued protective
notices of VAT assessments for the 24 months ended March 2020 to Avios Group (AGL) Limited, a controlled undertaking of the
Group trading as IAG Loyalty. At the date of this report none of these protective notices of assessment are due for payment.
During the second quarter of 2023, and while its enquiries are ongoing at the date of this report, HMRC shared with the Group its
emerging view on the appropriate VAT accounting, which differs to the current approach by IAG Loyalty. HMRC’s emerging view
asserts that the charges made by IAG Loyalty are for participating/membership in the Avios scheme and the associated charges and
are subject to VAT. IAG Loyalty accounts for VAT depending on the nature of the goods or services for which Avios are redeemed,
the vast majority of which are flights, and zero-rated. IAG Loyalty’s VAT accounting has and continues to be based on a ruling issued
by HMRC.
As at the date of this report, this emerging view did not consider the validity of the rulings HMRC has previously issued with regard
to IAG Loyalty’s VAT accounting. Accordingly, and while having issued the protective notices, HMRC has not confirmed whether it
considers its emerging view to be retroactive or only prospective in nature. The Group expects further developments in this matter
during 2024, which may include HMRC issuing an update to its emerging view.
244
International Airlines Group | Annual Report and Accounts 2023
Notes to the accounts continued While the Group has continued to engage with HMRC on the underlying facts, circumstances and technical analysis of the matter, as
at the date of this report there remain a number of possible scenarios that could eventuate. The Group has reviewed HMRC’s
emerging view with its legal and tax advisors and considers it has strong arguments to support its VAT accounting, including having
received a ruling previously from HMRC on the matter, and therefore does not consider it probable that an adverse outcome will
eventuate. Accordingly, the Group does not consider it appropriate to record any provision for this case at 31 December 2023. The
Group, in conjunction with its advisors, considers the disclosure of a potential range of exposures, associated with the
aforementioned possible scenarios that could eventuate, could prejudice seriously the position of the Group in its ongoing
engagement with HMRC.
Should the Group and HMRC be unable to reach agreement on the appropriate VAT accounting, then the Group will have the ability
to advance the case by initiating legal proceedings. To enable the Group to advance to initiate legal proceedings, it will need to pay,
without admission of liability, to HMRC the total amount of assessments issued at the relevant time, which will be recoverable, in part
or in full, should the Group be successful in the case. Until HMRC further progresses its enquiries, it is not possible to determine the
payment required, if any, but any potential payment may result in a material cash outflow from the Group.
11 Earnings per share
€ million
Earnings attributable to equity holders of the parent for basic earnings per share
Income statement impact of convertible bonds
Diluted earnings attributable to equity holders of the parent for diluted earnings per share
Weighted average number of ordinary shares in issue used for basic earnings per share
Assumed conversion on convertible bonds
Dilutive employee share schemes outstanding
Weighted average number of ordinary shares used for diluted earnings per share
€ cents
Basic earnings per share
Diluted earnings per share
2023
2,655
15
2,670
2022
431
(104)
327
2023
Number
‘000
2022
Number
‘000
4,932,631 4,958,420
244,851
299,557
99,093
86,175
5,276,575 5,344,152
2023
53.8
50.6
2022
8.7
6.1
The assumed conversion of the €825 million convertible bond 2028 and outstanding employee share schemes have a dilutive impact
on the earnings per share for the years to 31 December 2023 and 31 December 2022 due to the reported profit after tax for the
respective years.
For information relating to Adjusted earnings per share refer to the Alternative performance measures section.
12 Dividends
The Directors propose that no dividend be paid for the year to 31 December 2023 (2022: €nil).
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.
As at 31 December 2022, certain debt obligations placed 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 the UKEF and loans to Iberia
and Vueling partially guaranteed by the Instituto de Crédito Oficial (ICO) in Spain.
As at 31 December 2023, the Group had no restrictions on the payment of dividends from the Group’s main operating companies to
the Company, other than for British Airways, which has several undrawn committed credit facilities for which the commitments
available are subject to certain conditions depending on the scale of any dividend from British Airways to the Company.
In addition, British Airways agreed with the Trustee of its main UK defined benefit pension scheme (NAPS) as part of the triennial
valuation as at 31 March 2021 that, subject to the scheme being in technical deficit, any dividends paid to IAG from 1 January 2024
through to 31 December 2024, will trigger a pension contribution of 50 per cent of the amount of the dividend. For the period of 1
January 2025 to 30 September 2025, any dividend in excess of 50 per cent of British Airways’ profit after tax will trigger a pension
contribution of 50 per cent of the amount of the dividend in excess of the 50 per cent of profit after tax. At 31 December 2023,
NAPS was in technical surplus, and any dividend that British Airways were to pay to IAG, would not trigger a payment into NAPS
unless NAPS were to move back into technical deficit. Further details on the British Airways dividend restrictions agreed with NAPS
are given in note 34a.
International Airlines Group | Annual Report and Accounts 2023
245
Corporate GovernanceStrategic ReportFinancial Statements
13 Property, plant and equipment
€ million
Cost
Balance at 1 January 2022
Additions
Modification of leases
Disposals
Reclassifications
Transfers to Non-current assets held for sale (note 16)
Exchange movements
Balance at 31 December 2022
Additions
Modification of leases
Disposals
Reclassifications
Exchange movements
Balance at 31 December 2023
Depreciation and impairment
Balance at 1 January 2022
Depreciation charge for the year
Impairment reversal for the year1
Disposals
Transfers to Non-current assets held for sale (note 16)
Exchange movements
Balance at 31 December 2022
Depreciation charge for the year
Disposals
Exchange movements
Balance at 31 December 2023
Fleet
Property
Equipment
Total
25,996
3,125
1,450
30,571
3,765
241
61
129
101
–
3,927
370
(1,700)
(406)
(120)
(2,226)
(4)
(44)
(552)
–
–
–
–
(4)
(44)
(73)
(31)
(656)
27,702
2,836
1,400
31,938
3,543
224
(1,360)
(2)
264
47
204
(35)
(1)
35
163
1
3,753
429
(40)
(1,435)
(7)
15
(10)
314
30,371
3,086
1,532
34,989
10,880
1,473
1,057
1,642
(8)
(857)
(25)
(247)
168
–
79
–
13,410
1,889
(8)
(403)
(107)
(1,367)
–
(32)
–
(28)
(25)
(307)
11,385
1,206
1,001
13,592
1,676
(331)
121
122
(34)
16
72
(34)
13
1,870
(399)
150
12,851
1,310
1,052
15,213
1 For details regarding the 2022 impairment reversal on fleet assets refer to the Alternative performance measures section. For details regarding the
operating segment in which the 2022 impairment reversal arose, see note 5.
Net book values
31 December 2023
31 December 2022
€ million
Analysis at 31 December 2023
Owned
Right of use assets (note 14)
Progress payments
Assets not in current use
Property, plant and equipment
Analysis at 31 December 2022
Owned
Right of use assets (note 14)
Progress payments
Assets not in current use
Property, plant and equipment
17,520
16,317
1,776
1,630
480
399
19,776
18,346
Fleet
Property
Equipment
Total
8,828
7,681
914
97
907
838
31
–
384
15
79
2
10,119
8,534
1,024
99
17,520
1,776
480
19,776
7,242
7,993
1,071
11
833
684
113
–
338
20
40
1
8,413
8,697
1,224
12
16,317
1,630
399
18,346
246
International Airlines Group | Annual Report and Accounts 2023
Notes to the accounts continued
The net book value of property comprises:
€ million
Freehold
Right of use assets (note 14)
Long leasehold improvements with a contractual life in excess of 50 years
Short leasehold improvements with a contractual life of less than 50 years
Property
2023
482
838
308
148
2022
469
684
301
176
1,776
1,630
At 31 December 2023, bank and other loans of the Group are secured on owned fleet assets with a net book value of €4,736 million
(2022: €3,931 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 1 January 2022
Additions
Modifications of leases
Disposals
Reclassifications1
Exchange movements
31 December 2022
Additions
Modification of leases
Disposals
Reclassifications1
Exchange movements
31 December 2023
Depreciation and impairment
Balance at 1 January 2022
Depreciation charge for the year
Impairment reversal for the year2
Disposals
Reclassifications1
Exchange movements
31 December 2022
Depreciation charge for the year
Disposals
Reclassifications1
Exchange movements
31 December 2023
Net book value
31 December 2023
31 December 2022
Fleet
Property
Equipment
Total
14,218
949
74
15,241
586
241
(214)
(849)
(232)
13,750
853
224
(117)
(831)
104
28
129
(171)
–
(24)
911
17
204
(5)
–
13
1
–
(2)
(24)
–
49
–
1
(6)
(1)
–
615
370
(387)
(873)
(256)
14,710
870
429
(128)
(832)
117
13,983
1,140
43
15,166
5,592
309
991
(8)
(191)
(528)
(99)
5,757
996
(117)
(380)
46
93
–
(170)
–
(5)
227
76
(4)
–
3
37
8
–
(1)
(14)
(1)
29
5
(6)
–
–
5,938
1,092
(8)
(362)
(542)
(105)
6,013
1,077
(127)
(380)
49
6,302
302
28
6,632
7,681
7,993
838
684
15
20
8,534
8,697
1 Amounts with a net book value of €452 million (2022: €331 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 2022 impairment reversal on fleet assets refer to the Alternative performance measures section.
International Airlines Group | Annual Report and Accounts 2023
247
Corporate GovernanceStrategic ReportFinancial Statements
14 Leases continued
Interest-bearing long-term borrowings includes the following amount relating to lease liabilities:
€ million
1 January
Additions
Modifications of leases
Repayments
Interest expense
Disposals
Exchange movements
31 December
Current
Non-current
b Amounts recognised in the Income statement
€ million
Amounts not included in the measurement of lease liabilities
Variable lease payments
Expenses relating to short-term leases
Amounts expensed as a result of the recognition of ROU assets and lease liabilities
Interest expense on lease liabilities
(Gains)/losses arising from sale and leaseback transactions
Depreciation charge for the year
Impairment reversal for the year
c Amounts recognised in the Cash flow statement
2023
9,619
876
439
2022
9,637
639
378
(2,216)
(1,886)
508
–
(259)
8,967
464
(28)
415
9,619
1,826
7,141
1,766
7,853
2023
2022
1
24
2
39
508
(7)
1,077
–
464
1
1,092
(8)
See note 35 for details of the amounts recognised in the Cash flow statement for the years to 31 December 2023 and 31 December
2022.
The Group is exposed to future cash outflows (on an undiscounted basis) at 31 December 2023, for which an amount of €36 million
(2022: nil) has been recognised in relation to leases not yet commenced to which the Group is committed.
d Maturity profile of the lease liabilities
The maturity profile of the lease liabilities is disclosed in note 29f.
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) at 31 December 2023, for which no amount has been
recognised, for potential extension options of €979 million (2022: €945 million) due to it not being reasonably certain that these
leases will be extended.
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.
Finance leases
Rental income from finance leases recognised by the Group in 2023 was €2 million (2022: €4 million). Rental income is recorded
within Property, IT and other within the Income statement.
248
International Airlines Group | Annual Report and Accounts 2023
Notes to the accounts continued
The following table sets out a maturity analysis of finance 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
Total undiscounted lease receipts
Less finance income
Net investment in finance leases
2023
2022
6
5
3
–
14
(1)
13
2
6
–
–
8
(1)
7
15 Capital expenditure commitments
Capital expenditure authorised and contracted but not provided for in the accounts, including outstanding aircraft commitments, at
31 December 2023 amounted to €12,706 million (31 December 2022: €13,749 million). The outstanding aircraft commitments
including the expected delivery timeframes, totalling €11,966 million (2022: €13,484 million), are as follows:
Aircraft future deliveries at 31 December
Airbus A320 (from 2024 to 2028)
Airbus A321 (from 2024 to 2028)
Airbus A321 XLR (from 2024 to 2026)
Airbus A350-900 (from 2024 to 2025)
Airbus A350-1000 (in 2024)
Boeing 777-9 (from 2026 to 2028)
Boeing 787-10 (from 2024 to 2026)
Boeing 737-8200 (from 2025 to 2027)
Boeing 737-10 (from 2027 to 2028)
Total2
20231
20221
49
33
14
2
1
18
11
25
25
45
46
14
7
5
18
7
25
25
178
192
1 Capital commitments exclude options to purchase additional aircraft.
2 Total deliveries excludes three Airbus A320 aircraft committed for delivery under lease agreements in 2024. For further information see note 14.
On 30 June 2023 the Group converted 10 Airbus A320neo options into firm orders. The aircraft will be delivered in 2028 and will be
used by any of the Group’s current airlines to replace A320ceo family aircraft.
On 27 July 2023, the Group converted six Boeing 787-10 options held by British Airways into firm orders and at the same time added
a further six 787-10 options to its long-haul order book. The Group also converted one Airbus A350-900 option held by Iberia into a
firm order. These aircraft will be delivered in 2025 and 2026 and will be used by British Airways and Iberia to restore capacity in the
airlines’ long-haul fleets.
The majority of these commitments are denominated in US dollars translated at the closing exchange rate at the reporting date and
include escalation clauses dependent on the timing of aircraft deliveries. Under the terms of the committed purchase agreements,
the Group is required to make periodic progress payments towards the purchase price, with the commitments above stated net of
progress payments that have been made at the reporting date.
The Group has certain rights to defer aircraft deliveries and 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 31 December 2023.
16 Non-current assets held for sale
As at 31 December 2023, there were no non-current assets held for sale.
As at 31 December 2022, the non-current assets held for sale of €19 million represented two Airbus A321 aircraft. No gain or loss was
recognised on classification as non-current assets held for sale. These aircraft were presented within the British Airways segment
and exited the business during the first half of 2023.
International Airlines Group | Annual Report and Accounts 2023
93
249
Corporate GovernanceStrategic ReportFinancial Statements
17 Intangible assets and impairment review
a Intangible assets
€ million
Cost
Goodwill
Brand
Customer
loyalty
programmes
Landing
rights1
Software
ETS assets
Other
Total
Balance at 1 January 2022
596
451
253
1,605
1,674
Additions
Disposals
Exchange movements
–
–
(1)
–
–
–
–
–
–
14
(6)
(25)
218
(52)
(34)
Balance at 31 December 2022
595
451
253
1,588
1,806
62
360
(9)
(6)
407
264
(96)
–
2
87
4,728
1
–
–
88
1
–
(15)
–
593
(67)
(66)
5,188
630
(151)
8
32
–
–
–
1
–
–
–
–
–
–
–
–
–
(6)
–
11
365
(49)
23
18
596
451
253
1,593
2,163
577
74
5,707
249
–
–
–
249
–
–
–
249
347
346
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
142
1,032
6
–
(2)
210
(50)
(23)
146
1,169
6
–
1
185
(39)
11
153
1,326
–
–
–
–
–
–
–
–
–
66
1,489
2
–
–
218
(50)
(25)
68
1,632
2
–
–
193
(39)
12
70
1,798
451
451
253
253
1,440
1,442
837
637
577
407
4
3,909
20
3,556
Additions
Disposals
Reclassifications
Exchange movements
31 December 2023
Amortisation and impairment
Balance at 1 January 2022
Amortisation charge for the year
Disposals
Exchange movements
Balance at 31 December 2022
Amortisation charge for the year
Disposals
Exchange movements
31 December 2023
Net book values
31 December 2023
31 December 2022
1 The net book value includes non-UK and non-EU based landing rights of €63 million (2022: €69 million) that have a definite life. The remaining
average life of these landing rights is 12 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
2023
Iberia
Goodwill
Brand
Customer
loyalty
programmes
Landing
rights1
Total
1 January and 31 December 2023
–
306
–
423
729
British Airways
1 January 2023
Disposals
Exchange movements
31 December 2023
Vueling
1 January and 31 December 2023
Aer Lingus
1 January and 31 December 2023
IAG Loyalty
1 January and 31 December 2023
46
–
1
47
–
–
–
–
–
–
–
–
794
840
(6)
10
(6)
11
798
845
28
35
–
94
157
272
110
–
62
444
–
–
253
–
253
31 December 2023
347
451
253
1,377
2,428
250
International Airlines Group | Annual Report and Accounts 2023
Notes to the accounts continued
€ million
2022
Iberia
Goodwill
Brand
Customer
loyalty
programmes
Landing
rights1
Total
1 January and 31 December 2022
–
306
–
423
729
British Airways
1 January 2022
Additions
Disposals
Exchange movements
31 December 2022
Vueling
1 January and 31 December 2022
Aer Lingus
1 January and 31 December 2022
IAG Loyalty
1 January and 31 December 2022
47
–
–
(1)
46
–
–
–
–
–
–
–
–
–
–
809
856
14
(6)
(23)
794
14
(6)
(24)
840
28
35
–
94
157
272
110
–
62
444
–
–
253
–
253
31 December 2022
346
451
253
1,373
2,423
1 Landing rights excludes non-UK and non-EU based landing rights of €63 million (2022: €69 million) that have a definite life.
Basis for calculating recoverable amount
The recoverable amounts of the 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 and 30 per cent to the Downside 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 their respective boards approve three-year business plans, and the IAG
Board approves the Group three-year business plan in the fourth quarter of the year. Adjustments have been made to the final 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 (see 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 labour agreements.
Key assumptions
The value-in-use calculations for each CGU reflect the wider economic and geopolitical environments, including updated projected
cash flows for activity from 2024 through to the end of 2026. For each of the Group’s CGUs the key assumptions used in the value-
in-use calculations are as follows:
Per cent
Operating margin1
Average ASK growth per annum1
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
7-14
3-9
1.7
11.2
British
Airways
5-13
Iberia
7-14
4-10
1.5
12.2
2023
Vueling
Aer Lingus
IAG Loyalty
4-12
1-6
0.9
14.3
2022
6-14
2-16
1.3
10.9
23
n/a
1.5
14.8
Iberia
5-10
Vueling
Aer Lingus
IAG Loyalty
0-10
4-12
23-25
90-105
92-107
113-123
102-127
1.7
10.4
1.5
11.2
1.4
12.8
1.6
10.1
n/a
1.7
13.4
1 Average ASK growth per annum, ASKs as a proportion of 2019 and operating margin are stated as the weighted average derived from the multi-
scenario discounted cash flow model.
2 Given the impact of the COVID-19 pandemic, in 2022 the Group presented ASKs as a proportion of the level of ASKs achieved in 2019, prior to the
application of the terminal value calculation.
International Airlines Group | Annual Report and Accounts 2023
251
Corporate GovernanceStrategic ReportFinancial Statements
17 Intangible assets and impairment review continued
Jet fuel price ($ per MT)
2023
2022
Within 12
months
895
867
1-2 years
2-3 years
3 years and
thereafter
829
809
800
780
800
780
Forecast ASKs in the current year modelling represent the range of average annual increases in capacity 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, considering a number of data points: (i) industry publications; (ii) forecast
weighted average exposure in each primary market using gross domestic product (GDP); and (iii) internal analysis regarding the
long-term changes in consumer preferences and the effects on demand from the increased costs to the Group of climate change.
The calculation of the long-term growth rate utilises a Base Case and a Downside Case growth rate, which is then weighted on the
same basis as the cash flows detailed above of 70 per cent to the Base Case and 30 per cent to the Downside Case. The terminal
value cash flows and long-term growth rate incorporate the impacts of climate change insofar as they can be determined (see note
4). The airlines’ network plans and the IAG Loyalty forecasts are reviewed annually as part of the three-year business plan
preparation 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 calculations are based on the circumstances of the
airline industry, the loyalty scheme industry, the Group and the CGU. These rates are derived from the weighted average cost of
capital (WACC). The WACC takes into consideration both debt and equity available to airlines and loyalty schemes. The cost of
equity is derived from the expected return on investment by airline and loyalty scheme investors and the cost of debt is derived
from both market data and industry gearing levels derived from comparable companies. 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. The Group engages an external valuation expert as at the valuation date to assist in the determination of
the post-tax discount rate.
Jet fuel price assumptions are derived from forward price curves in the fourth quarter of each year and sourced externally from
readily available market data at the valuation date. The cash flow forecasts reflect these price increases after taking into
consideration the level of fuel derivatives and their associated prices that the Group has in place and the incremental price
differentials expected for the purchase of SAF.
As detailed above, the Group adjusts the final year of the three-year business plans to incorporate the medium-term impacts of
climate change from the Group’s Flightpath Net Zero climate strategy through to 2030. These adjustments include the following key
assumptions: (i) a 10 per cent level of SAF consumption out of the overall fuel mix with an assumed price of €3,412 per metric tonne;
(ii) a kerosene tax of €526 per metric tonne on all intra-EU flights; (iii) for costs of carbon, prices of €173, €173, €110 and €19 for EU
ETS allowances, Swiss ETS allowances, UK ETS allowances and CORSIA allowances, respectively, per tonne of CO2 equivalents
emitted; and (iv) the removal of all free ETS and CORSIA allowances.
Summary of results
At 31 December 2023 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, reducing ASKs by 5 percentage points
in each year, reducing long-term growth rates in the terminal value calculation to zero, increasing pre-tax discount rates by 2.5
percentage points and increasing the fuel price (both jet fuel and SAF) by 40 per cent, both with cost recovery consistent with that
experienced historically and with no assumed cost recovery. Given the inherent uncertainty associated with the impact of climate
change, these sensitivities represent a reasonably possible impact of climate change on the CGUs greater 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 €15,752 million, €4,736 million, €1,271 million and €1,884 million, respectively, the recoverable amounts would be below
the carrying amounts when applying reasonable possible but not probable changes, over the forecast period, in assumptions in each
of the following scenarios:
• British Airways: (i) if ASKs had been 5 per cent lower combined with a fuel price increase without cost recovery of 24 per cent;
and (ii) if the fuel price had been 29 per cent higher without cost recovery;
• Iberia: (i) if ASKs had been 5 per cent lower combined with a fuel price increase without cost recovery of 21 per cent; and (ii) if the
fuel price had been 24 per cent higher without cost recovery;
• Vueling: (i) if ASKs had been 5 per cent lower combined with a fuel price increase without cost recovery of 12 per cent; and (ii) if
the fuel price had been 18 per cent higher without cost recovery; and
• Aer Lingus: (i) if ASKs had been 5 per cent lower combined with a fuel price increase without cost recovery of 16 per cent; and (ii)
if the fuel price had been 23 per cent higher without cost recovery.
For the remainder of the reasonably possible changes in key assumptions applied to the British Airways, Iberia, Vueling and Aer
Lingus CGUs and for all the reasonably possible changes in key assumptions applied to the IAG Loyalty CGU, no impairment arises.
252
International Airlines Group | Annual Report and Accounts 2023
Notes to the accounts continued
18 Investments
a Investments in subsidiaries
The Group’s subsidiaries at 31 December 2023 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 31 December 2023 is €6 million (2022: €6 million).
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
Share of retained profits
Dividends received
2023
166
(119)
107
6
2023
43
6
(2)
47
2022
148
(104)
89
5
2022
40
5
(2)
43
At 31 December 2023 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 31 December 2023 and 31 December 2022 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.
19 Other equity investments
Other equity investments include the following:
€ million
Unlisted securities
2023
188
188
2022
55
55
The credit relating to Other equity investments was €3 million (2022: charge of €3 million).
Investment in Air Europa Holdings
On 15 June 2022, the Group entered into a financing arrangement with Globalia Corporación Empresarial, S,A, (‘Globalia’), whereby,
the Group provided a €100 million seven-year unsecured loan, which was convertible for a period of two years from inception into a
fixed number of the shares of Air Europa Holdings, S.L. (‘Air Europa Holdings’), a wholly owned subsidiary of Globalia. Subsequently,
on 16 August 2022, the Group exercised its exchange option with Globalia and converted the aforementioned loan into an
investment in 20 per cent of the share capital of Air Europa Holdings, which is recorded as an Other equity investment.
On 23 February 2023, the Group entered into an agreement to acquire the remaining 80 per cent of the share capital of Air Europa
Holdings that it had not previously owned. The acquisition is conditional on Globalia receiving approval from the syndicated banks
that provide the loan agreements that are partially guaranteed by the Instituto de Crédito Oficial (ICO) and Sociedad Estatal de
Participaciones Industriales (SEPI) in Spain. The acquisition is also subject to approval by relevant competition authorities. Until the
completion of these approvals, the acquisition does not meet the recognition criteria under IFRS 3 Business combinations, and
accordingly the Group continues to recognise the 20 per cent share capital ownership of Air Europa Holdings as an Other equity
investment (see note 2 for critical judgement applied in this classification).
At 31 December 2023, the fair value of the investment in Air Europa Holdings was €129 million, representing an increase of €105
million from the €24 million recorded at 31 December 2022, with the fair value movement having been recorded within Other
comprehensive income.
The Group, with its external valuation advisors, determined the fair value of the investment in Air Europa Holdings at 31 December
2023 and 31 December 2022, using both the market approach and the income approach, whereby the Group used both observable
market data and unobservable inputs. The fair value was determined on the stand-alone basis of Air Europa Holdings without
consideration of potential synergies that could be obtained if the Group were able to obtain control over the operations of Air
Europa Holdings.
In determining the fair value of the investment in Air Europa Holdings at 31 December 2023, the Group used the following significant
unobservable inputs: (i) revenue compound annual growth rate of 4.0 per cent; (ii) an EBITDA range of 3.6 to 6.5 per cent; and (iii) a
risk-adjusted pre-tax discount rate of 13.9 per cent.
International Airlines Group | Annual Report and Accounts 2023
253
Corporate GovernanceStrategic ReportFinancial Statements
20 Trade and other receivables
€ million
Amounts falling due within one year
Trade receivables
Provision for expected credit loss
Net trade receivables
Prepayments1
Accrued income1, 2
Other non-trade receivables
Other current receivables
Amounts falling due after one year
Prepayments
Accrued income
Other non-trade receivables
Other receivables due after one year
2023
2022
1,673
(114)
1,559
750
495
329
1,574
401
9
22
432
1,444
(114)
1,330
639
231
356
1,226
337
–
25
362
1 For the year ended 31 December 2023, the Group has elected to disaggregate prepayments and accrued income, which had previously been
aggregated into a single line item. Accordingly figures for the comparative year to 31 December 2022 have been reclassified to conform with the
current year presentation.
2 The accrued income balance (representing contract assets) predominantly relates to revenue earned from ongoing maintenance and overhaul
services, where the balances vary depending on the number of ongoing activities at the reporting date.
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
2023
114
4
(3)
(1)
–
114
2022
115
10
(1)
(9)
(1)
114
Trade receivables are generally non-interest-bearing and on 30 days terms (2022: 30 days).
The credit risk exposure on the Group’s trade receivables is set out below:
31 December 2023
€ million
Trade receivables
Expected credit loss rate
Provision for expected credit loss
31 December 2022
€ million
Trade receivables
Expected credit loss rate
Provision for expected credit loss
Current
<30 days
30-180 days
180-365 days
> 365 days
959
0.1%
–
296
0.1%
–
241
1.7%
4
53
7.5%
4
124
85.2%
106
Current
<30 days
30-180 days
180-365 days
> 365 days
719
0.3%
2
509
0.1%
–
91
1.1%
1
25
100
44.0%
100.0%
11
100
254
International Airlines Group | Annual Report and Accounts 2023
Notes to the accounts continued
21 Inventories
€ million
Engineering expendables
Catering consumables
Other inventories
2023
417
43
34
494
20221
296
36
21
353
1 For the year to 31 December 2023, the Group has elected to provide a disaggregated breakdown of the Balance sheet caption ‘Inventories’ and has
accordingly provided figures for the comparative year at 31 December 2022.
22 Cash, cash equivalents and other current interest-bearing deposits
a Cash
€ 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
2023
1,531
3,910
5,441
1,396
6,837
2022
3,286
5,910
9,196
403
9,599
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 31 December 2023, the Group had no outstanding bank overdrafts (2022: €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 31 December 2023, Aer Lingus held €31 million of restricted cash (2022: €33 million) within interest-bearing deposits maturing
after more than three months to be used for employee-related obligations.
b Net debt
Movements in net debt were as follows:
€ million
Bank, other loans, convertible bond and asset
financed liabilities
Lease liabilities
Cash and cash equivalents
Current interest-bearing deposits
Balance at 1
January 2023
Cash flows
Exchange
movements
New leases and
modifications
Other items
Balance at 31
December
2023
10,365
(3,267)
9,619
(9,196)
(403)
(1,731)
3,753
(985)
(102)
(259)
2
(8)
–
1,315
–
–
119
23
–
–
7,115
8,967
(5,441)
(1,396)
10,385
(2,230)
(367)
1,315
142
9,245
€ million
Bank, other loans, convertible bond and asset
financed liabilities
Lease liabilities
Cash and cash equivalents
Current interest-bearing deposits
Balance at 1
January 2022
Cash flows
Exchange
movements
New leases and
modifications
Other items
Balance at 31
December
2022
9,973
9,637
(7,892)
(51)
386
(1,455)
(1,316)
(351)
103
415
12
(1)
–
1,017
–
–
(97)
10,365
5
–
–
9,619
(9,196)
(403)
11,667
(2,736)
529
1,017
(92)
10,385
International Airlines Group | Annual Report and Accounts 2023
255
Corporate GovernanceStrategic ReportFinancial Statements
23 Trade and other payables
€ million
Trade creditors1
Other creditors
Other taxation and social security
Accruals1
Deferred income relating to non-flight activity2
2023
3,177
1,244
262
683
224
2022
2,969
1,244
228
665
103
5,590
5,209
1 Trade creditors includes €nil (2022: €48 million) due to suppliers that have signed up to supply chain financing programmes offered by a number of
partner financial institutions. While the Group no longer provides such a service to its suppliers, in 2022, these programmes either or both: (i) the
suppliers could 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 could have elected 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 enter into payment terms with the partner financial institution of
up to 150 days with interest incurred at 2.5 per cent.
The Group, in 2022, assessed the arrangement against indicators to assess if liabilities which suppliers had transferred to the partner financial
institutions under the supplier financing programmes continued to meet the definition of trade creditors or should have been classified as
borrowings. The cash flows arising from such arrangements were 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 met the definition of trade creditors or
as borrowings.
At 31 December 2023 and 31 December 2022, these liabilities met the criteria of Trade creditors and are excluded from the Net debt table in note 22b.
2 For the year ended 31 December 2023, the Group has elected to disaggregate accruals and deferred income, which had previously been aggregated
into a single line item. Accordingly figures for the comparative year to 31 December 2022 have been reclassified to conform with the current year
presentation.
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
2023
25
25
17
2022
34
33
53
2023
10,966
158
2022
6,676
264
Information on invoices paid in a period shorter than the maximum period established in the late payment regulations – Spanish
Group companies
Total payments made (€ million)
Percentage share of total payments to suppliers
Number of invoices paid (thousand)
Percentage share of total number of invoices paid
24 Deferred revenue
€ million
Balance at 1 January 2023
Cash received from customers1
Revenue recognised in the Income statement2, 3
Financing charge recognised in the Income statement
Loyalty points issued to customers4
Exchange movements
Balance at 31 December 2023
Analysis:
Current
Non-current
2023
10,002
91%
213
76%
2022
5,111
77%
110
48%
Customer
loyalty
programmes
2,630
Sales in
advance of
carriage
5,014
–
21,107
Total
7,644
21,107
(1,052)
(21,015)
(22,067)
15
1,085
34
–
161
44
15
1,246
78
2,712
5,311
8,023
2,455
257
2,712
5,311
–
7,766
257
5,311
8,023
256
International Airlines Group | Annual Report and Accounts 2023
Notes to the accounts continued
€ million
Balance at 1 January 2022
Cash received from customers1
Revenue recognised in the Income statement2, 3, 5
Financing charge recognised in the Income statement
Loyalty points issued to customers4
Exchange movements
Balance at 31 December 2022
Analysis:
Current
Non-current
Customer
loyalty
programmes
Sales in
advance of
carriage
2,820
3,732
Total
6,552
–
21,000
21,000
(801)
(19,708)
(20,509)
21
662
(72)
–
82
(92)
21
744
(164)
2,630
5,014
7,644
2,304
5,014
326
–
7,318
326
2,630
5,014
7,644
1 Cash received from customers is net of refunds.
2 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.
3 Included within revenue recognised in the Income statement during 2023 is an amount of €3,914 million previously held as deferred revenue at 1
January 2023 (recognised during 2022 and previously held as deferred revenue at 1 January 2022: €2,183 million).
4 Included within loyalty points issued to customers at 31 December 2023 is an amount of €161 million (31 December 2022: €82 million) classified within
Sales in advance of carriage representing the cash component of the consideration paid by customers, where such consideration comprises both
cash and the redemption of Avios.
5 The 2022 results include an aggregation to conform with the current basis of preparation, where the changes in estimates have been amalgamated
with revenue recognised in the Income statement.
The unsatisfied performance obligation under the Group’s customer loyalty programmes that is classified as non-current was €241
million at 31 December 2023, all of which is expected to be recognised as revenue within one to five years from the reporting date.
Deferred revenue relating to customer loyalty programmes consists primarily of consideration 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 programmes. While Avios do not have an expiry date and can be
redeemed at any time in the future, a customer’s membership account is closed if there is a period of 36 months of inactivity in
terms of both issuances and redemptions. Revenue may therefore be recognised at any time in the future.
Unredeemed vouchers liability
At 31 December 2023 the Group recognised €645 million in respect of unredeemed vouchers, including associated taxes (2022: €911
million) within Deferred revenue. Of the €645 million, €139 million relates to vouchers issued due to COVID-19 pandemic flight
cancellations, referred to as ‘disrupted flights’ and €506 million relates to non-disrupted voucher issuance, such as the British
Airways ‘Book with Confidence’ policy (where customers were provided the flexibility to change their destination and/or date of
travel on non-disrupted flights), certain other flexible fare options, non-air partner companion vouchers and gift vouchers.
The jurisdiction in which a voucher is issued, dictates the period over which a customer can redeem the voucher, which ranges up to
six years from the point of issuance. This period of time is also influenced by whether the voucher was issued for disrupted flights or
non-disrupted issuance and whether statutory or commercial expiry policies prevail. The Group expects the majority of the total
voucher liability to mature within 12 months of the reporting date.
During, and subsequent to, the recovery from the COVID-19 pandemic, the Group, across each of its operating companies, has
engaged in marketing campaigns and direct customer engagement in an attempt to maximise redemption of these vouchers.
Despite these efforts, the Group expects some of these vouchers to expire unredeemed. The Group estimates the number of these
vouchers, both for disrupted flights and non-disrupted issuance, not expected to be redeemed prior to expiry using statistical
modelling based on historical experience and expected future redemptions, recognising this estimated value as passenger revenue
when it can be reasonably determined that there will not be a significant reversal of this revenue in future accounting periods.
A 5 percentage point increase in the assumption of the number of vouchers outstanding at 31 December 2023 and not expected to
be redeemed prior to expiry would result in a reduction to Deferred revenue of €32 million, with an offsetting adjustment to increase
Passenger revenue and Operating profit recognised in the year.
25 Other long-term liabilities
€ million
Non-current trade creditors
Accruals and deferred income
2023
164
55
219
2022
147
53
200
International Airlines Group | Annual Report and Accounts 2023
257
Corporate GovernanceStrategic ReportFinancial Statements
26 Long-term borrowings
a Total borrowings
€ million
Bank and other loans1
Convertible bond1
Asset financed liabilities
Lease liabilities
Interest-bearing long-term borrowings
2023
Current
Non-current
2022
Current
Non-current
1,840
726
4,124
7,141
Total
1,953
735
4,427
8,967
113
9
303
1,826
2,251
813
9
255
1,766
2,843
5,128
596
3,564
7,853
Total
5,941
605
3,819
9,619
13,831
16,082
17,141
19,984
1 The 2022 total borrowings include a reclassification to conform with the current basis of presentation, where the 2028 convertible bond, amounting
to €605 million at 31 December 2022 and accounted for at fair value, has been separated from Bank and other loans. There is no change to total
borrowings.
Long-term borrowings of the Group amounting to €4,516 million (31 December 2022: €3,962 million) are secured on owned fleet
assets with a net book value of €4,736 million (31 December 2022: €3,931 million). All asset financed liabilities, included within long-
term borrowings, are all secured on the associated aircraft or other property, plant and equipment.
b Bank, other loans and convertible bond
€ million
€825 million fixed rate 1.125 per cent convertible bond 20281
€700 million fixed rate 3.75 per cent unsecured bond 20292
€500 million fixed rate 2.75 per cent unsecured bond 20252
€500 million fixed rate 1.50 per cent bond 20273
Floating rate euro mortgage loans secured on aircraft4
Fixed rate secured bonds5
Fixed rate unsecured US dollar mortgage loan6
Fixed rate unsecured euro loans with the Spanish State (Department of Industry)7
Floating rate pound sterling term loan guaranteed by the UK Export Finance (UKEF)8
Floating rate Instituto de Crédito Oficial (ICO) guaranteed loans9
€500 million fixed rate 0.50 per cent bond 20233
Ireland Strategic Investment Fund (ISIF) facility10
Total bank, other loans and convertible bond
Less: current instalments due on bank, other loans and convertible bond
Total non-current bank, other loans and convertible bond
2023
735
717
510
500
114
56
46
10
–
–
–
–
2022
605
717
509
499
143
56
71
10
2,315
1,070
501
50
2,688
6,546
(122)
(822)
2,566
5,724
1 See details of the 2028 convertible bond below.
2 On 25 March 2021, the Group issued two tranches of senior unsecured bonds for an aggregate principal amount of €1.2 billion, €500 million due
25 March 2025 and €700 million due 25 March 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.
3 In July 2019, the Group issued two tranches of senior unsecured bonds for an aggregate principal amount of €1 billion, €500 million due 4 July 2023
and €500 million due 4 July 2027. The 2023 bond bore a fixed rate of interest of 0.5 per cent per annum and was redeemed in full at maturity on 4
July 2023. The 2027 bond bears a fixed rate of interest of 1.5 per cent per annum annually payable in arrears. The 2027 bond was issued at 98.803
per cent of its principal amount, and, unless previously redeemed or purchased and cancelled, will be redeemed at 100 per cent of its principal
amount on its maturity date.
4 Floating rate euro mortgage loans are secured on specific aircraft assets of the Group and bear interest of between 4.45 and 5.46 per cent. The loans
are repayable between 2024 and 2027.
5 Total of €55 million fixed rate secured bonds with 3.75 per cent coupon repayable between 2024 and 2027.
6 Fixed rate unsecured US dollar mortgage loan bearing interest between 1.38 to 2.86 per cent. The loan is repayable between 2025 and 2026.
7 Fixed rate unsecured euro loans with the Spanish State (Department of Industry) bear nil interest and are repayable in 2031.
8 On 22 February 2021, British Airways entered into a floating rate 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 the UKEF. On 1 November 2021, British Airways entered
into a further five-year term loan Export Development Guarantee Facility of €1.1 billion (£1.0 billion) underwritten by a syndicate of banks, with 80 per
cent of the principal guaranteed by the UKEF. On 28 September 2023, British Airways repaid the £2.0 billion term loan in full, while concurrently
entering into a further five-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 the UKEF. The terms and maturity of the Export Development Guarantee Facility entered into in
November 2021 remain unchanged. These two remaining UKEF guaranteed facilities had not been drawn as at 31 December 2023.
9 On 30 April 2020, Iberia and Vueling entered into floating rate syndicated financing agreements of €750 million and €260 million respectively. On 31
October 2023, Iberia repaid its loan in full. On 30 November 2023, Vueling repaid its loan in full.
10 On 23 December 2020, Aer Lingus entered into a floating rate financing agreement with the Ireland Strategic Investment Fund (ISIF) for €75 million.
On 27 March 2021, Aer Lingus entered into a further floating rate financing agreement with the ISIF for an additional €75 million. On 4 March 2022,
Aer Lingus entered into a financing arrangement with ISIF, which subsequently extinguished the existing €150 million of facilities and replaced them
with a €350 million facility that matures in March 2025. On 13 December 2022 and 4 March 2023, Aer Lingus early repaid €100 million and €50
million, respectively, of the ISIF facility, with these amounts being available to draw again over the tenor of the facility. The facility is secured on
specific landing rights. At 31 December 2023, €350 million of this facility remained undrawn.
258
International Airlines Group | Annual Report and Accounts 2023
Notes to the accounts continued
In addition, on 23 March 2021, the Group entered into a three-year US dollar secured Revolving Credit Facility of $1.755 billion
accessible by British Airways, Iberia and Aer Lingus. On 23 August 2022, the Group extended the term of the Revolving Credit
Facility by an additional 12 months through to March 2025. On 23 August 2023, of the $1.755 billion facility, the Group further
extended the terms of the $1.655 billion Revolving Credit Facility by an additional 12 months through to March 2026 with the
remaining $100 million available through to March 2025. As at 31 December 2023 no amounts had been drawn under the facility
(2022: nil). While the Group does not forecast drawing down on the Revolving Credit Facility, should it do so, the resultant debt
would be secured, in the respective operating companies, against: (i) specific landing rights; or (ii) aircraft; or (iii) or a combination of
both.
Details of the 2028 convertible bond
On 11 May 2021, the Group issued the €825 million fixed rate 1.125 per cent senior unsecured bond convertible into ordinary shares of
IAG. The convertible bond raised net proceeds of €818 million and matures 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 convertible bond provides bondholders with dividend protection and includes a total of 244,850,715 options at inception and at
31 December 2023 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. The bondholders
conversion right is currently exercisable.
The convertible bond is recorded at its fair value, which at 31 December 2023 was €735 million (2022: €605 million), representing an
increase of €130 million since 1 January 2023. Of this increase, the charge recorded in Other comprehensive income arising from
credit risk of the convertible bonds was €119 million and a charge recorded within Finance costs in the Income statement attributable
to changes in market conditions of €11 million.
Transactions with unconsolidated entities
The Group has entered into asset financing transactions with unconsolidated entities as follows:
• The British Airways Pass Through Certificates, Series 2019-1 were entered into in the third quarter of 2019, recognising Asset
financed liabilities of €725 million for eight aircraft that mature between 2029 and 2034;
• The British Airways Pass Through Certificates, Series 2020-1 were entered into in the fourth quarter of 2020, recognising Asset
financed liabilities of €472 million for nine aircraft that mature between 2028 and 2032;
• The British Airways Pass Through Certificates, Series 2021-1 were entered into in the third quarter of 2021, recognising Asset
financed liabilities of €204 million for seven aircraft that mature between 2031 and 2035;
• The Iberia Pass Through Certificates, Series 2022-1 were entered into in April 2022, recognising Asset financed liabilities of €680
million for five aircraft that mature between 2032 and 2036;
• The British Airways Pass Through Certificates, Series 2022-1 were entered into in October 2022, recognising Asset financed
liabilities of €159 million for four aircraft that mature between 2032 and 2036; and
• There have been no asset financing transactions with unconsolidated entities during the year to 31 December 2023.
As at 31 December 2023, Asset financed liabilities include cumulative amounts of €2,948 million (2022: €2,983 million) and the
associated assets recorded within Property, plant and equipment include cumulative amounts of €2,757 million (2022: €3,400
million) associated with transactions with unconsolidated structured entities having issued EETCs.
International Airlines Group | Annual Report and Accounts 2023
259
Corporate GovernanceStrategic ReportFinancial Statements 26 Long-term borrowings continued
c Total loans, convertible bond, asset financed liabilities and lease liabilities
Million
Loans
Bank:
US dollar
Euro
Pound sterling
Fixed rate bonds:
Euro
Convertible bond
Euro
Asset financed liabilities
US dollar
Euro
Japanese yen
Lease liabilities
US dollar
Euro
Japanese yen
Pound sterling
Total interest-bearing borrowings
27 Provisions
2023
2022
$50
€124
$75
€1,273
–
£2,026
€170
€3,659
€1,783
€2,282
€1,783
€2,282
€735
€735
€605
€605
$3,849
$3,285
€746
€542
¥28,432 ¥25,748
€4,427
€3,819
$7,399
€1,008
$7,621
€1,239
¥68,998
¥71,994
£690
£620
€8,967
€9,619
€16,082 €19,984
€ million
Restoration
and handback
provisions
Restructuring
provisions
Net book value 1 January 2023
2,400
194
Provisions recorded during the year
Reclassifications
Utilised during the year
Extinguished during the year
Release of unused amounts
Unwinding of discount
Remeasurements
Exchange differences
520
4
(338)
–
(68)
78
4
(71)
1
–
(82)
–
(21)
2
–
–
Employee
leaving
indemnities
and other
employee
related
provisions
Legal claims
and
contractual
disputes
provisions
ETS
provisions
Other
provisions
673
53
–
(35)
–
(2)
23
24
(1)
89
15
(1)
(9)
–
(15)
–
–
3
132
238
–
–
(98)
(26)
–
–
1
60
32
(6)
(32)
–
(1)
–
–
–
Total
3,548
859
(3)
(496)
(98)
(133)
103
28
(68)
Net book value 31 December 2023
2,529
94
735
82
247
53
3,740
Analysis:
Current
Non-current
467
2,062
2,529
59
35
94
73
662
735
56
26
82
247
–
247
7
46
53
909
2,831
3,740
260
International Airlines Group | Annual Report and Accounts 2023
Notes to the accounts continued
Restoration and handback provisions
Provisions for restoration and handback costs are maintained to meet the contractual maintenance and return conditions on aircraft
held under lease. For those obligations arising on inception of an aircraft lease, the associated estimated cost is capitalised within the
ROU asset. For those obligations that arise through usage or through the passage of time, the associated estimated costs are
recognised in the Income statement as the associated asset is used or through the passage of time. The provision is long term in
nature, typically covering the leased asset term, which for aircraft is up to 12 years.
The provisions also include 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 provisions are determined by discounting the future cash flows using pre-tax risk-free rates specific to the tenor of the provision
and the currency in which it arises. The unwinding of the discounting of the provisions is recorded as a finance cost in the Income
statement (see note 9a).
Remeasurements arising from changes in estimates relating to the effects of both discounting and inflation are recorded in the
Income statement to the extent they relate to avoidable provisions or recorded as an adjustment to the right of use asset (see note
14) for those unavoidable provisions.
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 2023, 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 3.2 per cent. The payments related to this provision will continue over the next six years.
At 31 December 2023, €88 million of this provision related to collective redundancy programmes (2022: €185 million).
Employee leaving indemnities and other employee related provisions
This provision includes employee leaving indemnities relating to staff under various contractual arrangements. As part of these
provisions, the Group recognises provisions relating to the Iberia flight crew (both pilots and cabin crew):
• Pilots – under the relevant collective bargaining agreement, pilots have the option at the age of 60 to elect to: continue in full-time
employment; being placed on reserve and retaining their employment relationship until reaching the statutory retirement age
(referred to as ‘active’); or alternatively taking early retirement (referred to as ‘inactive’). Additionally, and in certain cases, those
pilots from the age of 55, may apply for retaining their employment relationship, but with reduced activity (referred to as ‘special
leave’); and
• Cabin crew – under the relevant collective bargaining agreement, cabin crew have the option at the age of 62 to elect to: continue
in full-time employment; being transferred to active status; or being transferred to inactive status. Additionally, and in certain
cases, those cabin crew employees from the age of 57, may apply for ‘special leave’.
The Group is required to remunerate these employees until they reach the statutory retirement age. In determining the provision to
be recognised for the proportion of employees that will elect either special leave or to be inactive, the Group estimates a number of
financial assumptions, including, but not limited to: (i) medium to long-term salary growth and inflation; (ii) the discount rate to
apply; (iii) the rate of public social security growth; (iv) mortality rates; and (v) staff turnover.
The provision was re-assessed at 31 December 2023 with the use of independent actuaries using the projected unit credit method,
based on a discount rate consistent with the iBoxx index of 3.17 per cent for active employees and 2.98 per cent for inactive
employees (2022: iBoxx index of 3.72 per cent and 3.50 per cent, respectively), the PER_Col_2020.1er.orden. mortality tables, and
assuming contractual salary increases of up to 3.8 per cent in 2024 and 3.3 per cent in 2025 and then 2.0 per cent per annum
thereafter derived from increases in the Consumer Price Index (CPI). At 31 December 2023, there were a total of 5,179 flight crew (31
December 2022: 4,827) eligible for making such elections when they reach the age of 60. At 31 December 2023, there were 479
employees who had not reached the age of retirement, and eligible to elect for early retirement (‘special leave’) who had elected to
become inactive (31 December 2022: 426). In addition, at 31 December 2023, there were 25 employees having reached the age of
retirement, who had elected to become inactive (31 December 2022: 15).
At 31 December 2023, the average length of employment of the eligible flight crew was 17 years (31 December 2022: 18 years). 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 €677 million at 31 December 2023 (2022: €611 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 their employment, including claims
for additional holiday pay and for age discrimination;
• amounts related to ongoing contractual disputes arising from the Group’s operations; 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 settle the remaining claims and fines is subject to uncertainty.
ETS provisions
ETS provisions relate to the Emissions Trading Scheme for CO2 equivalent emitted on flights within the EU, Switzerland and the UK
and due to be extinguished in the year subsequent to the reporting date through settlement with the relevant authorities. See notes
2 and 4 for further information.
International Airlines Group | Annual Report and Accounts 2023
261
Corporate GovernanceStrategic ReportFinancial Statements 28 Contingent liabilities
There are a number of legal and regulatory proceedings against the Group in a number of jurisdictions which at 31 December 2023,
where they could be reliably estimated, but excluding the Vueling hand luggage matter detailed below, amounted to €58 million (31
December 2022: €11 million). The Group does not consider it probable that there will be an outflow of economic resources with
regard to these proceedings and accordingly no provisions have been recorded.
Contingent liabilities associated with income taxes, deferred taxes and indirect taxes are presented in note 10.
Included in contingent liabilities is the following:
Air Europa Holdings acquisition break-fee
On 23 February 2023, the Group entered into an agreement to acquire the remaining 80 per cent of the share capital of Air Europa
Holdings from Globalia that it had not previously owned. The acquisition is conditional on Globalia receiving approval from the
syndicated banks that provide the loan agreements that are partially guaranteed by the Instituto de Crédito Oficial (ICO) and
Sociedad Estatal de Participaciones Industriales (SEPI) in Spain. The acquisition is also subject to approval by relevant competition
authorities.
In the event that the relevant approvals, detailed above, are not forthcoming within 24 months of entering into the agreement or the
Group terminates the agreement at any time prior to completion, then the Group is required to pay a break-fee to Globalia of €50
million. Under the agreement, this 24-month period can be extended, by mutual consent.
At 31 December 2023 and through to the date of the consolidated financial statements, the Group considers that it is probable that
the acquisition will successfully complete and accordingly does not consider it probable that the break-fee shall be paid. Given the
above the Group does not consider it appropriate to record a provision for the break-fee.
Vueling commercial hand luggage policy
In the year ended 31 December 2023, Vueling received a number of information requests from the Ministerio de Consumo (Ministry
of Consumer Affairs) in Spain, with regard to its commercial hand luggage policy, for which Vueling complied with. On 12 January
2024, the Ministerio de Consumo issued Vueling with a List of Charges asserting that the Vueling commercial hand luggage policy
infringes consumers rights under Article 47.1 of Royal Legislative Decree 1/2007. While the List of Charges notifies Vueling of its
intention to sanction the company for such infringements, it stipulates that the basis for determining such penalties is subject to the
provision of further information by the company. Accordingly, it is not possible to estimate reliably any exposure that may arise from
this matter until ongoing proceedings with the Ministerio de Consumo are further progressed. The Group, with its advisors, has
reviewed the correspondence and List of Charges from the Ministerio de Consumo and considers it has strong arguments to support
its commercial hand luggage policy and does not consider it probable that an adverse outcome will result in the future. As such, the
Group does not consider it appropriate to record any provision. The Group expects further developments on this matter during the
remainder of 2024.
29 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 impacts 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 within the approved hedging profile.
The following table demonstrates the sensitivity of the Group’s principal exposure to a reasonable possible change in the fuel price,
based on current market volatility, with all other variables held constant on the profit before tax and equity1. The sensitivity analysis
has been performed on fuel derivatives (both those designated in hedge relationships and those not designated in hedge
relationships) at the reporting date only and is not reflective of the impact had the sensitised rates been applied through the
duration of the years to 31 December 2023 and 2022.
Increase/(decrease)
in fuel price
per cent
40
(40)
2023
Effect on profit
before tax
€ million
–
–
Effect on
equity
€ million
1,497
(1,526)
Increase/(decrease)
in fuel price
per cent
45
(45)
2022
Effect on profit
before tax
€ million
–
–
Effect on
equity
€ million
1,402
(1,200)
1 The sensitivity analysis on equity excludes the sensitivity amounts recognised in the profit before tax.
During 2023, following a substantial recovery in the global price of crude oil and jet fuel, which continues to be impacted by
geopolitical events, the fair value of such net liability derivative instruments was €115 million at 31 December 2023 (2022: net asset of
€87 million), representing a decrease of €202 million since 1 January 2023. Of the carrying amount of the net liability at 31 December
2023, all (2022: all) of the associated derivatives were designated within hedge relationships.
262
International Airlines Group | Annual Report and Accounts 2023
Notes to the accounts continued
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 each of the Group’s operating companies, being pound sterling and the euro. The currencies in which
these transactions are denominated are primarily US dollar, pound sterling and the euro. The Group has a number of strategies to
hedge foreign currency risk including hedging 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, based on current market volatility, with all other variables held
constant on the profit before tax and equity1. The sensitivity analysis has been performed on interest-bearing liabilities, lease
liabilities and derivatives (both those designated in hedge relationships and those not designated in hedge relationships)
denominated in foreign currencies at the reporting date only and is not reflective of the impact had the sensitised rates been applied
through the duration of the years to 31 December 2023 and 2022.
Strengthening/
(weakening) in US
dollar rate
per cent
Effect on
profit
before tax
€ million
Effect on
equity
€ million
Strengthening/
(weakening) in
pound
sterling rate
per cent
Effect on
profit
before tax
€ million
Effect on
equity
€ million
Strengthening/
(weakening) in
Japanese yen rate
per cent
Effect on
profit
before tax
€ million
Effect on
equity
€ million
2023
2022
20
343
1,005
(20)
(346)
(1,159)
20
(20)
6
(8)
262
(262)
20
(20)
(50)
50
20
(20)
904
1,299
(922)
(1,161)
20
(20)
(20)
18
241
(241)
20
(20)
(58)
58
(64)
64
(70)
70
1 The sensitivity analysis on equity, excludes the sensitivity amounts recognised in the profit before tax.
At 31 December 2023, the fair value of foreign currency net liability derivative instruments was €357 million (2022: net asset of €108
million), representing a decrease of €465 million since 1 January 2023. These comprise both derivatives designated in hedge
relationships and those derivatives that are not designated in a hedge relationship at inception. Of the carrying amount of the net
liability at 31 December 2023, €151 million (2022: net asset of €96 million) of the associated derivatives were designated within hedge
relationships. 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 credits/(charges).
c Interest rate risk
The Group is exposed to changes in interest rates on debt and on cash deposits. In order to mitigate the interest rate risk, the
Group’s policies allow a variety of over the counter derivative instruments to be entered into.
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, based on expectations regarding forward rate movements, on the profit before tax and
equity1. The sensitivity analysis has been performed on interest rate derivatives (both those designated in hedge relationships and
those not designated in hedge relationships) at the reporting date only and is not reflective of the impact had the sensitised rates
been applied through the duration of the years to 31 December 2023 and 2022.
Strengthening/
(weakening) in
US interest
rate
Basis points
Effect on
profit
before tax
€ million
Effect on
equity
€ million
Strengthening/
(weakening) in
euro interest
rate
Basis points
Effect on
profit
before tax
€ million
Effect on
equity
€ million
Strengthening/
(weakening) in
sterling interest
rate
Basis points
Effect on
profit
before tax
€ million
Effect on
equity
€ million
2023
2022
100
(100)
150
(150)
–
–
–
–
–
–
6
(7)
100
(100)
150
(150)
(12)
12
5
(4)
16
(16)
17
(17)
100
(100)
–
–
150
(150)
(35)
35
–
–
–
–
1 The sensitivity analysis on equity excludes the sensitivity amounts recognised in the profit before tax.
At 31 December 2023, the fair value of interest rate net asset derivative instruments was €28 million (2022: net asset of €60 million),
representing a decrease of €32 million since 1 January 2023. Of the carrying amount of net asset at 31 December 2023, all (2022: all)
of the associated derivatives were designated within hedge relationships.
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 credits.
International Airlines Group | Annual Report and Accounts 2023
263
Corporate GovernanceStrategic ReportFinancial Statements
29 Financial risk management objectives and policies continued
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 31 December 2023 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
f Liquidity risk
Mark-to-market of treasury
controlled financial
instruments allocated by
geography
2023
2022
55 %
– %
16 %
24 %
5 %
51 %
1 %
20 %
27 %
1 %
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 31 December 2023, the Group had undrawn overdraft facilities of €53 million (2022: €53 million).
The Group held the following undrawn general and committed aircraft financing facilities:
Million
General facilities1
Euro facilities expiring between March and May 2024
Euro facility expiring March 20252
US dollar facilities expiring March 2025 and March 20262
Pound sterling facilities expiring November 2026 and September 20282
Committed aircraft facilities
US dollar facilities expiring between June and July 20244
Million
General facilities1
Euro facilities expiring between January and March 2023
US dollar facility expiring November 2023
Euro facility expiring March 20252
US dollar facility expiring March 20252
Pound sterling facility expiring November 20262
Committed aircraft facilities
US dollar facilities expiring between February and September 20233
US dollar facility expiring April 20233
US dollar facilities expiring between October 2023 and March 20244
2023
Currency
€ equivalent
€87
€350
$1,755
£2,000
$410
87
350
1,605
2,317
4,359
375
375
2022
Currency
€ equivalent
€87
$50
€300
$1,755
£1,000
$386
$273
$525
87
47
300
1,654
1,143
3,231
364
257
495
1,116
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 Further information regarding these facilities is given in note 26b.
3 The aircraft facilities that matured in 2023 were available for specific committed aircraft deliveries.
4 The aircraft facilities maturing between June 2024 and July 2024 (2022: maturing between October 2023 and March 2024) are available for specific
committed aircraft deliveries.
264
International Airlines Group | Annual Report and Accounts 2023
Notes to the accounts continued
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 31 December 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
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
31 December 2023
€ million
Interest-bearing loans and borrowings:
Asset financing liabilities
Lease liabilities
Fixed rate borrowings
Floating rate borrowings
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
31 December 2022
Within 6
months
6-12
months
1-2
years
2-5
years
More than 5
years
Total 2023
(241)
(1,303)
(59)
(15)
(5,590)
12
35
5
(1)
(206)
(42)
(230)
(864)
(16)
(38)
–
9
17
4
(1)
(179)
(43)
(448)
(1,317)
(3,195)
(5,431)
(1,546)
(3,798)
(5,017)
(12,528)
(588)
(27)
(219)
8
6
26
(1)
(38)
(35)
(1,513)
(726)
(2,902)
(42)
–
4
–
–
(1)
–
(39)
–
–
1
–
–
–
–
–
(122)
(5,809)
34
58
35
(4)
(423)
(159)
(7,405)
(1,341)
(2,862)
(6,706)
(8,937)
(27,251)
Within 6
months
6-12
months
1-2
years
2-5
years
More than 5
years
Total 2022
(196)
(955)
(64)
(227)
(5,209)
42
245
122
(4)
(185)
(42)
(190)
(374)
(1,081)
(2,823)
(4,664)
(1,050)
(2,120)
(3,374)
(5,295)
(12,794)
(523)
(146)
–
(78)
(455)
(200)
9
195
62
(1)
(121)
(59)
12
46
13
(1)
(68)
(10)
(1,242)
(3,191)
–
9
–
–
(3)
–
–
(757)
(2,664)
–
–
–
–
–
–
–
–
(4,019)
(5,409)
72
486
197
(9)
(374)
(111)
(6,473)
(1,824)
(3,235)
(8,882)
(8,875)
(29,289)
International Airlines Group | Annual Report and Accounts 2023
265
Corporate GovernanceStrategic ReportFinancial Statements
29 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.
31 December 2023
€ million
Financial assets
Derivative financial assets
Financial liabilities
Derivative financial liabilities
Gross value of
financial
instruments
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
Net amount
151
(28)
123
(2)
121
595
(28)
567
(2)
565
1 The Group has pledged cash and cash equivalents as collateral against certain of its derivative financial liabilities. As 31 December 2023, the Group
recognised €nil of collateral (2022: €nil) offset in the balance sheet and €2 million (2022: €5 million) not offset in the Balance sheet.
31 December 2022
€ million
Financial assets
Derivative financial assets
Financial liabilities
Derivative financial liabilities
h Capital risk management
Gross value of
financial
instruments
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
Net amount
760
(34)
726
(5)
721
505
(34)
471
(5)
466
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 before exceptional items ratio. For the year to 31 December
2023, the net debt to EBITDA before exceptional items was 1.7 times (2022: 3.1 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.
266
International Airlines Group | Annual Report and Accounts 2023
Notes to the accounts continued
30 Financial instruments
a Financial assets and liabilities by category
The detail of the Group’s financial instruments at 31 December 2023 and 31 December 2022 by nature and classification for
measurement purposes is as follows:
31 December 2023
€ 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
31 December 2022
€ 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
Financial assets
Fair value
through Other
comprehensive
income
Amortised cost
Fair value through
Income statement Non-financial assets
Total
carrying amount by
balance sheet item
–
–
211
1,559
545
–
1,396
5,441
188
–
–
–
–
–
–
–
–
42
–
–
–
81
–
–
–
–
221
–
1,029
–
–
–
188
42
432
1,559
1,574
81
1,396
5,441
Financial liabilities
Amortised cost
Fair value through
Income statement
Non-financial
liabilities
Total
carrying amount by
balance sheet item
7,141
5,964
–
151
1,826
416
5,198
–
–
726
106
–
–
9
–
461
–
–
–
68
–
–
392
–
7,141
6,690
106
219
1,826
425
5,590
461
Financial assets
Fair value
through Other
comprehensive
income
Amortised cost
Fair value through
Income statement Non-financial assets
Total
carrying amount by
balance sheet item
–
–
180
1,330
308
–
403
9,196
55
–
–
–
–
–
–
–
–
81
–
–
–
645
–
–
–
–
182
–
918
–
–
–
55
81
362
1,330
1,226
645
403
9,196
International Airlines Group | Annual Report and Accounts 2023
267
Corporate GovernanceStrategic ReportFinancial Statements
30 Financial instruments continued
€ 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 liabilities
Amortised cost
Fair value through
Income statement
Non-financial
liabilities
Total
carrying amount by
balance sheet item
7,853
8,692
–
131
1,766
1,068
4,898
–
–
596
84
–
–
9
–
387
–
–
–
69
–
–
311
–
7,853
9,288
84
200
1,766
1,077
5,209
387
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 the principal 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, excluding lease liabilities, 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. For other equity investments where cash flow information is not available, an adjusted net asset method is
applied. For the methodology in the determination of the fair value of the investment in Air Europa Holdings, see note 19.
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.
268
International Airlines Group | Annual Report and Accounts 2023
Notes to the accounts continued
The carrying amounts and fair values of the Group’s financial assets and liabilities at 31 December 2023 are as follows:
Fair value
Carrying value
€ million
Financial assets
Other equity investments
Other non-current financial assets
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
Derivative financial liabilities:
Interest rate derivatives2
Foreign exchange contracts2
Fuel derivatives2
Level 1
Level 2
Level 3
Total
1
–
–
–
–
–
12
32
58
33
–
3,900
2,429
–
–
–
–
53
111
4
415
148
187
–
–
–
–
–
–
–
–
–
–
188
12
32
58
33
3,900
2,482
111
4
415
148
Total
188
25
32
58
33
4,427
2,574
114
4
415
148
1 Current portion of derivative financial assets is €81 million.
2 Current portion of derivative financial liabilities is €461 million.
The carrying amounts and fair values of the Group’s financial assets and liabilities at 31 December 2022 are set out below:
€ million
Financial assets
Other equity investments
Other non-current financial assets
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
Derivative financial liabilities:
Interest rate derivatives2
Foreign exchange contracts2
Fuel derivatives2
Fair value
Carrying value
Level 1
Level 2
Level 3
Total
Total
–
–
–
–
–
–
20
66
467
193
–
2,925
2,538
72
–
3,419
–
–
–
6
359
106
55
–
–
–
–
–
–
–
–
–
–
55
20
66
467
193
2,925
2,610
3,419
6
359
106
55
31
66
467
193
3,819
2,967
3,579
6
359
106
1 Current portion of derivative financial assets is €645 million.
2 Current portion of derivative financial liabilities is €387 million.
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 €825 million convertible bond due
2028 which is measured at fair value, are measured at amortised cost.
International Airlines Group | Annual Report and Accounts 2023
269
Corporate GovernanceStrategic ReportFinancial Statements
30 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 - other
Addition of Air Europa Holdings
Transfers to Level 1 financial assets
Net gains recognised in Other comprehensive income
Net losses recognised in the Income statement
Closing balance for the year
2023
55
5
–
(1)
128
–
187
2022
31
2
22
–
2
(2)
55
For details regarding the valuation of Air Europa Holdings, see note 19.
During the year to 31 December 2023, the Group recorded a transfer of an Other equity instrument of €1 million from Level 3 to
Level 1 following the public listing of the associated investment. There have been no other transfers between levels of the fair value
hierarchy during the year.
d Hedges
Cash flow hedges
At 31 December 2023, the Group’s principal risk management activities that were hedging future forecast transactions were:
• foreign exchange contracts, hedging foreign currency exchange risk on 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;
• crude, gas oil and jet kerosene derivative contracts, hedging price risk on fuel expenditure. Remeasurement gains and losses on
the derivatives are: (i) recognised in equity and transferred to the Income statement within Fuel, oil costs and emissions charges to
match against the related fuel cash outflow, where the underlying hedged item does not give rise to the recognition of fuel
inventory; and (ii) recognised in equity and transferred to the Balance sheet within Inventory, where the underlying hedged item is
fuel inventory. Gains and losses recorded within Inventory are recognised in the Income statement when the underlying fuel
inventory is consumed, within Fuel, oil costs and emission charges. 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 Balance sheet, where the hedged item is a non-financial asset or liability when the loan repayments are made
(generally in instalments over the life of the loan).
The amounts included in equity are summarised below:
Losses/(gains) 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)/charge
Total amount included within equity
2023
22
94
67
(1)
123
305
(75)
230
2022
87
(178)
(127)
(46)
213
(51)
20
(31)
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 transactions remain expected to occur.
270
International Airlines Group | Annual Report and Accounts 2023
Notes to the accounts continued
Notional amounts of significant financial instruments used as cash flow hedging instruments:
Notional principal amounts
(€ million)
Average
hedge rate
Hedge range
Within
1 year
1-2 years
2-5 years
5+ years
Total 31
December
2023
Foreign exchange contracts to hedge
future revenue and expenditure from US
dollars to pound sterling1
Foreign exchange contracts to hedge
future revenue and expenditure from US
dollars to euros1
Foreign exchange contracts to hedge
future revenue and expenditure from euros
to pound sterling1
Fuel commodity price contracts to hedge
future US dollar fuel expenditure2
Interest rate contracts to hedge future
interest expenditure3, 4
1.21
1.05 to 1.35
3,147
1,239
–
–
4,386
1.00
0.86 to 1.24
2,458
939
305
–
3,702
1.21
1.07 to 1.42
479
375
357
124
1,335
722
489 to 1,200
5,425
1,948
980
–
8,353
1.83 (0.06) to 3.90
2,127
912
493
2
1 Expenditure includes both operating and capital expenditure.
2 Notional amounts of fuel commodity price hedging instruments represent 10.0 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.
3 The hedge range for interest rate contracts is expressed as a percentage.
4 The notional amounts of interest rate contracts at 31 December 2023 were €1,354 million. Amounts included reflect the notional amortising amounts
outstanding at the end of each period and align with the profiles of the underlying hedged items.
Notional principal amounts
(€ million)
Average
hedge rate
Hedge range
Within
1 year
1-2 years
2-5 years
5+ years
Total 31
December
2022
Foreign exchange contracts to hedge future
revenue and expenditure from US dollars to
pound sterling1
Foreign exchange contracts to hedge future
revenue and expenditure from US dollars to
euros1
Foreign exchange contracts to hedge future
revenue and expenditure from euros to
pound sterling1
Fuel commodity price contracts to hedge
future US dollar fuel expenditure2
Interest rate contracts to hedge future
interest expenditure3, 4
1.23
1.05 to 1.45
3,582
1,355
–
–
4,937
1.08
0.91 to 1.26
2,578
1,318
–
–
3,896
1.23
1.00 to 1.42
371
406
458
14
1,249
718
416 to 2,200
2,935
331
–
–
3,266
1.04
(0.03) to 3.13
2,360
504
238
9
1 Expenditure includes both operating and capital expenditure.
2 Notional amounts of fuel commodity price hedging instruments represent 5.4 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.
3 The hedge range for interest rate contracts is expressed as a percentage.
4 The notional amounts of interest rate contracts at 31 December 2022 were €1,703 million. Amounts included reflect the notional amortising amounts
outstanding at the end of each period and align with the profiles of the underlying hedged items.
International Airlines Group | Annual Report and Accounts 2023
271
Corporate GovernanceStrategic ReportFinancial Statements
30 Financial instruments continued
Movements recorded in the cash flow hedge reserve
For the year to 31 December 2023
(€ 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
Reclassified to
the Income
statement
Total
recognised
movements
Fair value
movements
recognised in
Other
comprehensive
income2
Amounts
transferred to
the Balance
sheet
(1)
9
–
–
–
8
–
–
–
–
–
–
31
30
234
99
48
–
–
178
108
48
–
–
186
(44)
71
(3)
(47)
–
255
(60)
3
13
–
(18)
(92)
(94)
10
142
195
(84)
For the year to 31 December 2022
(€ 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
Reclassified to
the Income
statement
Total
recognised
movements
Fair value
movements
recognised in
Other
comprehensive
income2
Amounts
transferred to
the Balance
sheet
–
19
–
–
–
19
29
228
257
(525)
–
–
–
–
29
1,299
1,318
(1,249)
(12)
–
–
1,515
(12)
–
–
1,563
(330)
(95)
(1)
–
(1,870)
398
43
66
–
(7)
(27)
75
(1)
1,233
(1,472)
74
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.
Discontinuance of hedge accounting
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 reporting date and
the maturity date of the derivative are set out below:
€ million
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 statement
2023
–
–
–
2022
(29)
–
(29)
272
International Airlines Group | Annual Report and Accounts 2023
Notes to the accounts continued
Fair value hedges
At 31 December 2023, the Group’s principal risk management activities associated with fair value hedging were related to interest
rate contracts hedging the fair value risk on fixed rate lease liabilities. Remeasurement gains and losses on both the derivatives and
the host financial liability are recognised in Income statement within Other non-operating credits.
The carrying values of the hedged items and hedging instruments of the Group’s fair value hedges at 31 December 2023 are as
follows:
€ million
Carrying value of lease liabilities to which fair value hedging has been applied (hedged items)1
Carrying amount of the interest rate derivatives (hedging instruments)
Accumulated amount of fair value hedge adjustments on the hedged item included in the carrying
amount of the hedged item
Change in value used for calculating hedge ineffectiveness
2023
(65)
(4)
(2)
3
2022
–
–
–
–
1 Hedged items included in the fair value hedges are presented within Borrowings in the Balance sheet and in note 26.
31 Share capital, share premium and treasury shares
Allotted, called up and fully paid
31 December 2022: Ordinary shares of €0.10 each
31 December 2023: Ordinary shares of €0.10 each
a Treasury shares
Number of
shares
‘000s
Ordinary
share capital
€ million
4,971,476
4,971,476
497
497
Share
premium
€ million
7,770
7,770
During the year to 31 December 2023, the Group purchased 42.0 million shares at a weighted average share price of €1.83 per share
totalling €77 million, which are held as Treasury shares. A total of 3.3 million shares (2022: 8.1 million) were issued to employees
during the year as a result of vesting of employee share schemes. At 31 December 2023 the Group held 55.8 million shares (2022: 17.1
million) which represented 1.12 per cent (2022: 0.34 per cent) of the issued share capital of the Company.
32 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) was 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. Awards made from 2015 to 2020 were nil-cost options,
with a two-year holding period following the three-year performance period, before options can be exercised. All awards had three
independent performance measures with equal weighting: Total Shareholder Return (TSR) relative to the STOXX Europe 600 Travel
and Leisure Index (2020 awards) or MSCI European Transportation Index (prior to 2020 awards), earnings per share, and Return on
Invested Capital.
b IAG Restricted Share Plan
The IAG Restricted Share Plan (RSP) was introduced in 2021 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 conditional awards, with a two-
year holding period following the three-year vesting period. There are no performance measures associated with the awards. Vesting
will be contingent on the satisfaction of a discretionary underpin, normally assessed over three financial years commencing from the
financial year in which the award was granted. 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
In 2021, the Group launched the Full Potential Incentive Plan (FPIP), which was 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 conditional awards, 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 annual 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.
International Airlines Group | Annual Report and Accounts 2023
273
Corporate GovernanceStrategic ReportFinancial Statements
32 Share-based payments continued
e Share-based payment schemes summary
Number of awards ’000s
Performance Share Plan
Restricted Share Plan
Full Potential Incentive Plan
Incentive Award Deferral Plan
Outstanding
at 1 January
2023
Granted
number
Lapsed
number
Vested
number
16,339
–
6,263
40,334
24,462
27,705
2,411
5,681
1,007
5,152
3,786
Outstanding at
31 December
2023
9,132
59,213
944
431
–
29,600
Exercisable 31
December
2023
4,166
–
–
–
173
2,387
858
The weighted average share price at the date of exercise of options exercised during the year to 31 December 2023 was £1.52 (2022:
£1.35).
The Group recognised a share-based payment charge of €52 million for the year to 31 December 2023 (2022: €39 million).
86,789
31,150
15,374
3,762
98,803
4,166
33 Other reserves and non-controlling interests
For the year to 31 December 2023
Other reserves
Unrealised
gains and
losses1
Cost of
hedging
reserve2
Currency
translation3
Merger
reserve5
Capital
reserves6
Total other
reserves
Non-
controlling
interest
67
(66)
(118)
(2,467)
867
(1,717)
6
€ million
1 January 2023
Other comprehensive (loss)/income for the year
Cash flow hedges reclassified and reported in net
profit:
Fuel and oil costs
Currency differences
Finance costs
Ineffectiveness recognised in other non-
operating costs
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 net
profit
Fair value movements on liabilities attributable to
credit risk changes
Currency translation differences
Hedges transferred and reported in property,
plant and equipment
Hedges transferred and reported in sales in
advance of carriage
Hedges transferred and reported in inventory
(81)
(20)
(35)
(6)
(195)
127
–
–
–
–
–
–
–
(120)
–
82
(119)
–
–
–
9
(15)
84
(9)
1
–
–
–
–
–
–
–
–
–
–
18
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(81)
(20)
(35)
(6)
(195)
127
(120)
82
(119)
18
(6)
85
(9)
–
–
–
–
–
–
–
–
–
–
–
–
–
6
31 December 2023
(178)
(118)
(100)
(2,467)
867
(1,996)
274
International Airlines Group | Annual Report and Accounts 2023
Notes to the accounts continued
€ million
1 January 2022
Other comprehensive income/(loss)
for the year
Cash flow hedges reclassified and
reported in net profit:
Fuel and oil costs
Currency differences
Finance costs
Discontinuance of hedge
accounting
Ineffectiveness recognised in other
non-operating costs
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 net profit
Fair value movements on liabilities
attributable to credit risk changes
Currency translation differences
Hedges transferred and reported in
property, plant and equipment
Hedges transferred and reported in
sales in advance of carriage
Hedges transferred and reported in
inventory
Redemption of convertible bond
31 December 2022
Other reserves
Unrealised
gains and
losses1
Cost of
hedging
reserve2
Currency
translation3
Equity
portion of
convertible
bond4
Merger
reserve5
Redeemed
capital
reserve6
Total other
reserves
Non-
controlling
interest
(94)
24
(65)
62
(2,467)
867
(1,673)
6
(1,115)
(90)
10
(22)
(16)
1,472
2
–
–
(6)
–
–
–
–
–
–
–
–
(115)
38
–
–
–
–
–
–
–
–
–
–
–
–
(53)
(51)
(14)
35
(58)
–
67
1
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(62)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(1,115)
(90)
10
(22)
(16)
–
1,472
–
–
–
–
–
–
–
–
–
2
(115)
38
(6)
(53)
(65)
36
(58)
(62)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
6
(66)
(118)
–
(2,467)
867
(1,717)
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 31 December 2023 that relate to the fair value changes on equity
instruments and to the cash flow hedge reserve were €138 million credit and €305 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 During 2022, the Group redeemed the €500 million convertible bond with no conversion into ordinary shares. On redemption, an amount of €62
million was transferred to Retained earnings.
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 (2022: €70 million) associated with the decrease in share capital relating to
cancelled shares and a Share capital reduction reserve of €797 million (2022: €797 million) associated with a historical reduction in the nominal value
of the Company’s share capital.
International Airlines Group | Annual Report and Accounts 2023
275
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34 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 (see note
27).
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 31 December 2023 were
€279 million (2022: €251 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 2003 and closed to future accrual since 2018. Following closure, members’ deferred
pensions are increased annually by inflation up to 5 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, certain aspects of
the business of the two schemes are common. APS and NAPS have developed certain joint working groups that are attended by the
Trustee Board members of each scheme although each Trustee Board reaches its decisions independently. There are 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.
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 payment 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 funding levels.
During 2022, the triennial valuations, as at 31 March 2021, were finalised for APS and NAPS which resulted in a technical surplus of
€343 million (£295 million) for APS and a technical deficit of €1,887 million (£1,650 million) for NAPS. The actuarial valuations
performed for APS and NAPS are different to the valuation performed as at 31 December 2023 under IAS 19 ‘Employee Benefits’
mainly due to timing differences of the measurement dates and to the specific scheme assumptions in the actuarial valuation
performed as at 31 March 2021 compared with IAS 19 requirements used in the accounting valuation assumptions as at the reporting
date. The actuarial valuation of neither APS and NAPS is updated outside of the triennial valuations, making comparability between
the scheme liabilities applying the principles set out in the UK Pension legislation and the requirements of IAS 19 not possible. The
principal difference relates to the discount rate applied, which under the triennial actuarial valuation, aligns with a prudent estimate
of the future investment returns on the assets of the respective schemes, whereas, under IAS 19, the rates are based on high-quality
corporate bond yields, regardless of how the assets are invested.
The triennial valuation as at 31 March 2021 for NAPS supersedes the previous agreements reached in 2020 and 2021 between British
Airways and the Trustee of NAPS relating to the deferral of deficit contributions. The deferred deficit contributions have been
incorporated into the deficit payment plan agreed as part of the triennial valuation as at 31 March 2021.
As part of the triennial valuation as at 31 March 2021 for NAPS, British Airways has agreed to provide certain property assets as
security, which will remain in place until 30 September 2028.
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 British Airways’ other plans are fully funded, but there are also a number of unfunded plans, for which the Group
meets the benefit payment obligations as they fall due.
In addition, Aer Lingus operates certain defined benefit plans, both funded and unfunded.
276
International Airlines Group | Annual Report and Accounts 2023
Notes to the accounts continued 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 NAPS. Total payments for the year to 31 December 2023 net of service costs made
by the Group were €48 million (2022: €20 million) being the employer contributions of €49 million (2022: €22 million) less the
current service cost of €1 million (2022: €2 million) (note 34b,c).
Future funding arrangements
Pension contributions for APS and NAPS were determined by actuarial valuations made at 31 March 2021, 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 2024.
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 reporting date (€ million, unaudited)
900
800
700
600
500
400
300
200
100
0
2024
2029
2034
2039
2044
2049
2054
2059
2064
2069
2074
2079
2084
2089
n APS
n NAPS
The amounts and timing of these projected benefit payments are subject to the aforementioned risks to the schemes.
Deficit contributions
At the date of the actuarial valuation, the actuarial deficit of NAPS amounted to €1,887 million. In order to address the deficit in the
scheme, the Group committed to deficit contribution payments through to 30 June 2023, amounting to approximately €58 million
per year, increasing by €58 million each year up to 30 June 2026 and subsequently capped at €257 million per year through to 31
May 2032. The deficit contribution plan includes an over-funding protection mechanism, based on the triennial valuation
methodology for measuring the deficit, whereby deficit contributions 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, or until such point as
the scheme funding level reaches 100 per cent.
During the year ended and as at 31 December 2023, the NAPS funding position exceeded 100 per cent and accordingly
deficit contributions were suspended. At 31 December 2023, 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 not need to be incorporated into future triennial
actuarial valuations.
At 31 December 2023, had the over-funding protection mechanism not been applied, then the asset ceiling adjustment (as detailed
in note 34c) would have been €638 million higher, reducing the surplus accordingly.
International Airlines Group | Annual Report and Accounts 2023
277
Corporate GovernanceStrategic ReportFinancial Statements 34 Employee benefit obligations continued
At 31 December 2023, 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
NAPS1
Other
schemes
–
–
–
–
–
36
37
38
–
111
1 Committed deficit contributions, agreed as part of the 31 March 2021 actuarial valuation, were suspended at 31 December 2023 as an effect of the
over-funding protection mechanism.
Deficit payments in respect of local arrangements outside of the UK have been determined in accordance with local practice.
Under the triennial valuation of NAPS as at 31 March 2021, in the period up to 31 December 2023, no dividend payment was
permitted from British Airways to IAG. In the period from 1 January to 31 December 2024, any dividends paid by British Airways will
be matched by contributions to NAPS of 50 per cent of the value of dividends paid. In the period from 1 January to 30 September
2025, any dividend payment from British Airways to IAG that exceeds 50 per cent of the pre-exceptional profit after tax in each
financial year will require additional payments to be made to NAPS if the scheme is not at least 100 per cent funded. All dividend
restrictions cease from 1 October 2025, onwards. British Airways must maintain a minimum cash level of €1,854 million (£1,600
million) as at the date of the declaration of any dividends as well as immediately following the payment of any dividends to IAG and
the associated matching contributions to NAPS. The amount of any deficit contributions and dividend matching contributions in a
single financial year is limited to €348 million (£300 million).
b Employee benefit scheme amounts recognised in the financial statements
i Amounts recognised on the Balance sheet
€ million
Scheme assets at fair value1
Present value of scheme liabilities1
Net pension asset/(liability)
Effect of the asset ceiling2
Other employee benefit obligations
31 December 2023
Represented by:
Employee benefit asset
Employee benefit obligation
Net employee benefit asset3
€ million
Scheme assets at fair value1
Present value of scheme liabilities1
Net pension asset/(liability)
Effect of the asset ceiling2
Other employee benefit obligations
31 December 2022
Represented by:
Employee benefit asset
Employee benefit obligation
Net employee benefit asset3
2023
APS
6,070
NAPS
16,724
Other
393
Total
23,187
(6,048)
(14,644)
(547)
(21,239)
22
(7)
–
15
2,080
(728)
–
(154)
–
(8)
1,948
(735)
(8)
1,352
(162)
1,205
1,380
(175)
1,205
2022
APS
NAPS
Other
Total
6,283
17,029
356
23,668
(6,052)
(13,692)
(548)
(20,292)
(192)
3,376
231
(80)
–
151
3,337
(1,168)
–
–
(11)
2,169
(203)
(1,248)
(11)
2,117
2,334
(217)
2,117
1
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 31 December 2023, such assets were €322 million (2022: €320 million) with a corresponding
amount recorded in the scheme liabilities.
2 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.
3 The net deferred tax asset recognised on the net employee benefit asset (2022: asset) was €48 million at 31 December 2023 (2022: €54 million). The
defined benefit obligation includes €20 million (2022: €21 million) arising from unfunded plans.
278
International Airlines Group | Annual Report and Accounts 2023
Notes to the accounts continued
ii Amounts recognised in the Income statement
Pension costs charged to operating result are:
€ million
Defined benefit plans:
Current service cost
Administrative expenses
Defined contribution plans
Pension costs recorded as employee costs
€ million
Interest income on scheme assets
Interest expense on scheme liabilities
Interest expense on asset ceiling
Net financing credit relating to pensions
iii Amounts recognised in the Statement of other comprehensive income
€ million
Return on plan assets excluding interest income
Remeasurement of plan liabilities from changes in financial assumptions
Remeasurement of plan liabilities from changes in demographic assumptions
Remeasurement of experience losses
Remeasurement of the APS and NAPS asset ceilings
Exchange movements
Pension remeasurements credited/(charged) to Other comprehensive income
Tax arising on pension remeasurements
2023
2022
1
17
18
279
297
2023
(1,117)
955
59
(103)
2023
857
314
55
430
(583)
–
1,073
3
2
19
21
251
272
2022
(633)
584
23
(26)
2022
9,360
(10,476)
(202)
627
14
6
(671)
9
Pension remeasurements charged to Other comprehensive income, net of tax
1,076
(662)
c Fair value of scheme assets
i Investment strategies
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.
Along with existing contracts with Rothesay Life (as detailed in note 34c(iii)), 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 31 March 2018. APS is nearly 90 per cent protected
against interest rates and inflation (on a Retail Price Index basis). NAPS is 95 per cent protected against interest rates and inflation
(on a Consumer Price Index basis).
The assets held by APS and NAPS are split between ‘return seeking assets’ and ‘liability matching assets’ depending on the maturity
of each scheme. At 31 December 2023, the actual asset allocation for NAPS was 19 per cent (2022: 31 per cent) in return seeking
assets and 81 per cent (2022: 69 per cent) in liability matching investments. For NAPS, the Trustee agreed an updated investment
framework with British Airways as part of the Scheme’s 31 March 2021 actuarial valuation agreement. The Trustee aims towards an
overall asset allocation with an agreed modest expected return relative to liabilities, and sufficient liquidity to manage investment
risk appropriately on an on-going basis. The actual asset allocation for APS at 31 December 2023 was 1 per cent (2022: 1 per cent) in
return seeking assets and 99 per cent (2022: 99 per cent) in liability matching investments. NAPS uses Liability Driven Investments
(LDIs) to effectively hedge volatility in the scheme liabilities. This is achieved through direct bond holdings as opposed to the use of
derivatives and as such leverage is low. Accordingly, as at 31 December 2023, NAPS has not been required to raise additional cash or
liquidate existing assets in order to fund derivative positions.
International Airlines Group | Annual Report and Accounts 2023
279
Corporate GovernanceStrategic ReportFinancial Statements
34 Employee benefit obligations continued
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
1 January
Interest income
Administrative expenses
Return on plan assets excluding interest income
Employer contributions1
Employee contributions
Benefits paid
Exchange movements
31 December
2023
23,668
2022
34,370
1,114
(14)
633
(13)
(857)
(9,360)
49
8
(1,065)
284
22
6
(1,301)
(689)
23,187
23,668
1
Includes employer contributions to APS of €1 million (2022: €1 million) and to NAPS of €nil (2022: €nil) of which deficit-funding payments
represented €nil for APS (2022: €nil) and €nil for NAPS (2022: €nil).
iii Composition of scheme assets
Scheme assets held by the Group at 31 December 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
Total scheme assets
2023
APS
NAPS
Other
Total
2022
8
1
29
–
35
73
861
874
899
3,353
109
438
677
1,577
1,695
4,496
5,132
9,438
–
–
6
163
15
14
2
123
602
721
1,591
1,732
200
4,769
127
6,120
8
–
38
10,320
899
3,391
5,987
14,570
173
20,730
139
1,047
1,566
2,142
1,881
6,775
5,279
8,093
1,114
3,392
17,878
50
(38)
(2)
10
640
(2,985)
3
(2,342)
6,070
16,724
7
8
5
697
684
(3,015)
(1,688)
6
19
20
393
(2,312)
(985)
23,187
23,668
The fair values of the Group’s scheme assets, which are not derived from quoted prices on active markets, are determined
depending on the nature of the inputs used in determining the fair values (see note 30b 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. The dates of these valuations typically precede
the reporting date and have been adjusted for any cash movements between the date of the valuation and the reporting date.
Typically, the valuation approach and inputs for these investments are not updated through to the reporting date unless there are
indications of significant market movements.
• 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 to the reporting date.
The dates of these valuations typically precede the reporting date and have been adjusted for any cash movements between the
date of the valuation and the reporting date. Typically, the valuation approach and inputs for these investments are not updated
through to the reporting date unless there are indications of significant market movements.
• 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.
280
International Airlines Group | Annual Report and Accounts 2023
Notes to the accounts continued
• derivative financial instruments are entered into predominantly to mitigate interest rate and inflation rate risks. These derivative
financial instruments are stated at their fair value using pricing models and relevant market data as 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 (2022: 25 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) held by the scheme and the
contractual payments made by APS to Rothesay Life on the longevity swaps. 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 (2022: 21 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 31 March 2018, excluding dependent children, receiving a pension at that date and
members in receipt of equivalent pension only benefits, who were alive on 1 October 2018. Benefits coming into payment for
retirements after 31 March 2018 are not covered. The contract covers benefits payable from 1 October 2018 onwards. The policy
covers approximately 60 per cent of all benefits APS expects to pay out in future.
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 34a, 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 is 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
1 January
Interest expense
Remeasurements
Exchange movements
31 December
2023
1,248
59
(583)
11
735
2022
1,247
23
14
(36)
1,248
On 22 November 2023, the UK Government announced that it intended to reduce the withholding tax payable upon winding up of
pension schemes from 35 per cent to 25 per cent. While this change had not been substantively enacted at the reporting date and
as such not reflected in the figures above, had the rate of withholding tax been reduced to 25 per cent at 31 December 2023, the
effect would have been to reduce the effect of the asset ceiling by €210 million to €525 million, with a corresponding increase in the
net employee benefit asset.
International Airlines Group | Annual Report and Accounts 2023
281
Corporate GovernanceStrategic ReportFinancial Statements
34 Employee benefit obligations continued
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
1 January
Current service cost
Interest expense
Remeasurements – financial assumptions1
Remeasurements – demographic assumptions
Remeasurements of experience losses
Benefits paid
Employee contributions
Exchange movements
31 December
2023
20,292
1
952
314
55
430
(1,065)
8
252
2022
31,622
2
584
(10,476)
(202)
627
(1,301)
6
(570)
21,239
20,292
1
Included in the remeasurements from financial assumptions is an amount of €670 million (2022: increase of €10,299 million) that increases the
scheme liabilities relating to changes in the discount rates and €356 million (2022: increase of €177 million) that reduces the scheme liabilities relating
to changes in inflation rates.
ii Scheme liability assumptions
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
2023
2022
APS
4.50
3.20
3.20
3.20
2.65
NAPS
4.55
Other
schemes4
1.0 - 7.1
–
2.0 - 5.0
2.65
3.00
2.65
0.7 - 3.4
2.2 - 2.9
2.0 - 2.5
APS
4.85
3.40
3.40
3.40
2.80
NAPS
4.80
Other
schemes4
0.8 - 7.2
–
2.0 - 6.0
2.80
3.20
2.80
0.3 - 3.0
2.2 - 3.1
2.0 - 2.6
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, which reflects inflationary increases, is assumed to be in line with increases in RPI.
3 It has been assumed that the rate of increase of pensions in payment, which reflects inflationary increases, will be in line with CPI for NAPS and RPI
for APS as at 31 December 2023.
4 The rate of increase in healthcare costs for schemes based in the United States, which is based on medical trends, is assumed at 7.00 per cent
grading down to 5.00 per cent over six years (2022: 6.25 per cent to 5.00 per cent over five years).
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
2023
2022
27.5
28.8
29.0
31.2
27.9
29.1
29.3
31.5
For APS, the base mortality tables are based on the Agreed Valuation Basis (AVB) as agreed between British Airways and the
trustees of APS. For NAPS, the base mortality tables are based on analysis undertaken for the purpose of the triennial valuation
dated 31 March 2021. Future mortality improvements reflect the most recent model published by the UK actuarial profession’s
Continuous Mortality Investigation (CMI), being its 2022 model. These standard mortality tables, for both APS and NAPS, incorporate
adjustments specific to the demographics of scheme members, including a long-term improvement parameter of 1.00 per cent per
annum (2022: 1.00 per cent).
For schemes in the United States, mortality rates were based on the MP-2021 mortality tables incorporating adjustments for the
long-term impact COVID-19 is expected to have on mortality.
At 31 December 2023, the weighted-average duration of the defined benefit obligation was 9 years for APS (2022: 10 years) and 14
years for NAPS (2022: 15 years). The weighted average duration of the defined benefit obligations was 2 to 16 years for other
schemes (2022: 3 to 19 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.
282
International Airlines Group | Annual Report and Accounts 2023
Notes to the accounts continued
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 50 basis points)1
Future pension growth (increase of 50 basis points)1
Future mortality rate (one year increase in life expectancy)
Increase in scheme liabilities
APS
278
243
301
NAPS
1,020
973
394
Other
schemes
29
5
22
1 Sensitivities smaller than those disclosed can be approximately interpolated from those sensitivities above.
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.
35 Supplemental cash flow information
a Reconciliation of movements of liabilities to cash flows arising from financing activities
€ million
Balance at 1 January 2023
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
Exchange movements
Balance at 31 December 2023
€ million
Balance at 1 January 2022
Proceeds from borrowings
Repayment of borrowings
Repayment of lease liabilities
Settlement of derivative financial instruments1
Total changes from financing cash flows
Interest paid1
Interest expense
New leases and lease modifications
Fair value movements
Other non-cash movements
Exchange movements
Balance at 31 December 2022
Bank, other
loans and
asset financed
liabilities
Convertible
bond
Lease
liabilities
Derivatives to
mitigate
volatility in
financial
liabilities
9,760
1,001
(4,268)
–
–
(3,267)
(488)
476
–
–
1
(102)
605
9,619
(71)
–
–
–
–
–
(9)
9
–
130
–
–
–
–
(1,731)
–
(1,731)
(472)
508
1,315
–
(13)
(259)
–
–
–
(119)
(119)
44
–
–
322
(2)
6
Total
19,913
1,001
(4,268)
(1,731)
(119)
(5,117)
(925)
993
1,315
452
(14)
(355)
6,380
735
8,967
180
16,262
Bank, other
loans and
asset
financed
liabilities2
9,217
1,436
(1,050)
–
–
386
(325)
368
–
–
11
103
Convertible
bond2
Lease
liabilities
Derivatives to
mitigate
volatility in
financial
liabilities
Total
756
9,637
(136)
19,474
–
–
–
–
–
(9)
9
–
(151)
–
–
–
–
(1,455)
–
(1,455)
(422)
464
1,017
–
(37)
415
–
–
–
1,036
1,036
(7)
–
–
(990)
–
26
(71)
1,436
(1,050)
(1,455)
1,036
(33)
(763)
841
1,017
(1,141)
(26)
544
19,913
9,760
605
9,619
1 The 2022 reconciliation includes a reclassification of €7 million from the Settlement of derivative financial instruments to Interest paid to reflect the
settlement loss arising on interest rate derivatives designated in hedge relationships. The reclassification of the settlement loss aligns with the
classification within Net cash flows from operating activities in the Cash flow statement.
2 The 2022 reconciliation includes a reclassification to conform with the 2023 presentation, whereby, the 2028 convertible bond has been disclosed
separately from the Bank, other loans and asset financed liabilities category. The reclassification resulted in an amount of €735 million and €605
million being recorded within the 2028 convertible bond at 1 January 2022 and 31 December 2022, respectively.
International Airlines Group | Annual Report and Accounts 2023
283
Corporate GovernanceStrategic ReportFinancial Statements
35 Supplemental cash flow information continued
b Reconciliation of movement in provisions included within Net cash flows from operating activities
€ million
Opening provisions
Non-cash additions recorded in operating profit
Non-cash releases of unused provisions recorded in operating profit
Other non-cash amounts recorded within operating profit
Cash settlements relating to operating provisions
Movements in provisions recorded within net cash flows from operating activities
Movements in provisions recorded within Other comprehensive income
Movements elsewhere within the Balance sheet
Unrealised currency differences arising on provisions recorded within operating profit
Non-cash settlement of ETS obligations
Movements in provisions recorded in the Income statement outside of operating profit
Closing provisions (note 27)
c Other items included within Net cash flows from operating activities
€ million
Non-cash equity settled share-based payments
Ineffectiveness arising on hedge accounting
Non-cash movements on derivative and non-derivative financial instruments
Settlement of interest rate derivatives
Other
2023
3,548
862
(133)
4
(496)
237
24
(6)
(68)
(98)
103
2022
2,999
896
(137)
27
(323)
463
(69)
(15)
127
(10)
53
3,740
3,548
2023
2022
50
6
16
44
(5)
111
36
17
45
(7)
(15)
76
d Details of acquisition of property, plant and equipment and intangible assets within Net cash flows from investing activities
€ million
Purchase of property, plant and equipment – fleet
Purchase of property, plant and equipment – other
Purchase of intangible assets – ETS allowances
Purchase of intangible assets – other
e Details of cash flows arising from lease transactions presented in the Cash flow statement
€ million
Cash flows arising from transactions giving rise to lease liabilities
Total cash outflows arising from lease liabilities – aircraft
Total cash outflows arising from lease liabilities – other
Total cash inflows arising from sale and leaseback transactions – aircraft
Cash flows arising from transactions that do not give rise to the recognition of lease liabilities
Total cash outflows arising from short-term leases, low-value assets and variable lease payments
Total cash inflows arising from the recognition of asset financed liabilities
Total cash outflows arising from asset financed liabilities
2023
2,715
193
264
372
2022
3,146
132
360
237
3,544
3,875
2023
2022
(2,076)
(1,699)
(127)
826
(25)
(999)
(416)
(178)
718
(41)
1,424
(292)
284
International Airlines Group | Annual Report and Accounts 2023
Notes to the accounts continued
36 Related party transactions
The following transactions took place with related parties for the financial years to 31 December:
€ 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
2023
2022
5
261
72
131
18
136
6
12
5
141
61
113
13
25
–
26
1 Sales to associates: Consisted primarily of sales for airline-related services to Dunwoody Airline Services (Holding) Limited (Dunwoody) of €4 million
(2022: €4 million) and €1 million (2022: €1 million) to Serpista, S.A. and Multiservicios Aeroportuarios, S.A.
2 Sales to and purchases from significant shareholders principally relates to interline services, the purchase of cargo capacity, the provision of
maintenance services and the income from licensing of the Avios brand with Qatar Airways (Q.C.S.C.).
3 Purchases from associates: Consisted primarily of €41 million of airport auxiliary services purchased from Multiservicios Aeroportuarios, S.A. (2022:
€35 million), €13 million of handling services provided by Dunwoody (2022: €14 million) and €17 million of maintenance services received from
Serpista, S.A. (2022: €13 million).
4 Amounts owed by associates: Consisted primarily of €17 million from a long-term loan provided to LanzaJet, Inc. (2022: €12 million) and €1 million of
services provided to Multiservicios Aeroportuarios, S.A., Serpista, S.A., Dunwoody, Empresa Hispano Cubana de Mantenimiento de Aeronaves, Ibeca,
S.A., Empresa Logística de Carga Aérea, S.A., Sociedad Conjunta para la Emisión y Gestión de Medios de Pago, EFC, S.A. and Viajes AME, S.A.U.
(2022: €1 million).
5 Amounts owed by and to significant shareholders related to Qatar Airways (Q.C.S.C.).
6 Amounts owed to associates: Consisted primarily of €2 million of maintenance of airport equipment to Serpista, S.A. (2022: €nil) and €3 million of
auxiliary airport services to Multiservicios Aeroportuarios, S.A. and Dunwoody (2022: €nil).
During the year to 31 December 2023 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 €1 million (2022: €2
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 and loyalty operating
companies, which include the provision of airline and related services and loyalty services. All such transactions are carried out on an
arm’s length basis.
During the course of 2022, the Group renewed its loyalty currency exchange agreement with Qatar Airways (Q.C.S.C.), where Avios
could be exchanged for points within the Qatar Airways (Q.C.S.C.)’s loyalty programme, the Privilege Club. In addition, in renewing
the agreement, IAG Loyalty licensed the Avios brand name for use within the Privilege Club.
During the course of 2023, the Group provided a long-term shareholder loan of €5 million ($5 million) to LanzaJet, Inc., in addition to
the initial long-term shareholder loan of €12 million ($14 million) provided to LanzaJet, Inc. in 2022. LanzaJet, Inc. is a company which
specialises in the generation of Sustainable Aviation Fuels of which the Group has a 16.7 per cent equity interest, classified as an
associate and presented within Investments accounted for using the equity method in the Balance sheet.
For the year to 31 December 2023, the Group has not made any provision for expected credit loss arising relating to amounts owed
by related parties (2022: €nil).
International Airlines Group | Annual Report and Accounts 2023
285
Corporate GovernanceStrategic ReportFinancial Statements
Notes to the accounts continued
36 Related party transactions continued
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 31
December 2023, the only significant shareholder of the Group was Qatar Airways (Q.C.S.C.).
At 31 December 2023 the Group had cash deposit balances with shareholders holding a participation of between 3 to 5 per cent, of
€nil (2022: €nil).
Board of Directors and Management Committee remuneration
Compensation received by the Group’s Board of Directors and Management Committee, in 2023 and 2022 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 31 December
2023
2022
4
1
15
–
4
1
15
2
For the year to 31 December 2023, the Board of Directors includes remuneration for one Executive Director (31 December 2022: one
Executive Director). The Management Committee includes remuneration for 14 members (31 December 2022: 14 members), and
excludes remuneration for the one Executive Director.
The Company provides life insurance for the Executive Director and all members of the Management Committee. For the year to 31
December 2023, the Company’s obligation was €45,000 (2022: €38,000).
At 31 December 2023 the transfer value of accrued pensions covered under defined benefit pension obligation schemes, relating to
the current members of the Management Committee totalled €4 million (2022: €5 million).
No loan or credit transactions were outstanding with Directors or officers of the Group at 31 December 2023 (2022: €nil).
37 Change in presentation of the Cash flow statement
During the course of 2023, the Group has made a number of changes to the presentation of its Cash flow statement. These changes
have been applied retrospectively to the Cash flow statement and are detailed below.
Net gain on sale of property plant and equipment
Previously gains/losses on the sale of property, plant and equipment were recorded in the Income statement within Other non-
operating credits. Under the updated presentation, Net (gain)/loss on sale of property, plant and equipment is presented separately
in the Income statement and included within Operating profit. Accordingly, operating profit included within Net cash flows from
operating activities has been updated. See note 2 for further information.
Unrealised currency differences
Previously all unrealised foreign currency gains/losses arising in the Cash flow statement were recorded within Net foreign exchange
differences. Under the updated presentation, Net foreign exchange differences has been amended to only include those unrealised
currency differences arising from the retranslation of opening cash and cash equivalent balances, while unrealised currency
differences arising from working capital used in operating activities are presented within Net cash flows from operating activities.
Other cash flows from operating activities
Previously movements in working capital balances were presented aggregated between working capital assets and working capital
liabilities. Under the updated presentation working capital balances have been disaggregated by their nature to allow greater
visibility as to the cash flow impacts associated with these balances. There has been no change in the overall total movement in
working capital.
In addition, previously the Group presented the non-cash movements in provisions combined with other non-cash movements.
Under the updated presentation these items have been separated into individual row items within the Cash flow statement.
286
International Airlines Group | Annual Report and Accounts 2023
The following table summarises the impact of the changes in presentation in the Cash flow statement for the year to 31 December
2022:
Cash flow statement (extract for the year to 31 December 2022)
€ million
As reported
Adjustment –
net gain on
sale of
property,
plant and
equipment
Adjustment –
unrealised
currency
differences
Adjustment –
operating
cash flow
items
Cash flows from operating activities
Operating profit
Depreciation, amortisation and impairment
1,256
2,070
22
Net gain on disposal of property, plant and equipment
–
(22)
Movement in working capital
(Increase)/decrease in trade receivables, inventories and other
current assets
Increase/(decrease) in trade and other payables and deferred
revenue
Employer contributions to pension schemes
Pension scheme service costs
Payments related to restructuring
Provisions and other non-cash movements
Increase in provisions
Unrealised currency differences
Other movements
Interest paid
Interest received
Tax paid
1,884
(914)
2,798
(22)
17
(81)
627
–
–
–
(824)
42
(134)
19
Net cash flows from operating activities before movements in
working capital
4,835
–
19
Increase in trade receivables
Increase in inventories
Increase in other receivables and current assets
Increase in trade payables
Increase in deferred revenue
Increase in other payables and current liabilities
Net cash flows from operating activities
Net cash flows from investing activities
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
–
–
–
–
–
–
4,835
(3,463)
(56)
1,316
(12)
7,892
9,196
Interest-bearing deposits maturing after more than three months
403
Cash, cash equivalents and interest-bearing deposits
9,599
–
–
–
–
–
–
–
19
–
4,854
–
–
19
(19)
–
–
–
–
(3,463)
–
(56)
–
1,335
(31)
7,892
9,196
–
–
403
–
9,599
Restated
1,278
2,070
(22)
–
–
–
(22)
17
–
–
463
19
76
(817)
42
(134)
2,970
(660)
(21)
(233)
886
1,236
676
(1,884)
914
(2,798)
81
(627)
463
76
7
(1,884)
(660)
(21)
(233)
886
1,236
676
International Airlines Group | Annual Report and Accounts 2023
287
Corporate GovernanceStrategic ReportFinancial Statements
38 Post balance sheet events
Revocation of Royal Decree-Law 3/2016 in Spain
On 18 January 2024 the Tribunal Constitucional (Constitutional Court) in Spain, issued a ruling that a number of the amendments to
corporate income tax arising from the introduction of Royal Decree-Law 3/2016 were unconstitutional and accordingly revoked. The
revocation of Royal Decree-Law 3/2016 impacts the Groups operations as follows:
• Limitation of the use of historic tax losses
Prior to the introduction of Royal Decree-Law 3/2016, the Spanish subsidiaries of the Group were permitted to offset up to 70 per
cent of their taxable profit with historical accumulated tax losses (to the extent there were sufficient tax losses to do so). With the
introduction of the Royal Decree-Law 3/2016, this limitation of tax losses applied to taxable profit was reduced to 25 per cent.
• Tax deductibility of impairments of investment in subsidiary undertakings
Where companies had impaired investments in subsidiaries prior to 2013 and deducted those impairments for tax purposes, Royal
Decree-Law 3/2016 retrospectively required companies to reverse those impairment charges, for tax purposes, with the effect
recognised equally over the five years commencing 1 January 2016.
The Group does not consider that the ruling by the Tribunal Constitucional constitutes an adjusting post-balance sheet event and
accordingly the impact of these changes are not reflected in the financial statements. As at the date of these financial statements,
there remains uncertainty as to how the revocation of Royal Decree-Law 3/2016 will be applied and accordingly the methodology by
which the Group, with its external tax advisors, quantifies the impacts of this revocation. Had the Group reflected the impact of
ruling into the financial statements as at 31 December 2023, the impact would have been as follows:
• Current tax impact of historic loss limitation and deductibility of historic impairments of investments for fiscal years 2016 through
2022
The Royal Decree Law 3/2016 restricted the use of prior year tax losses to 25 per cent of current year profits in the Group's
Spanish companies. In addition, prior to 2013, Iberia impaired its subsidiary undertakings in Venezuela. Had the loss limitation been
70 per cent and the historic impairment been tax deductible, the tax paid to the Spanish tax authorities, would have been up to
approximately €83 million lower. The Group expects to record an associated current tax credit, with a corresponding receivable
from the Spanish tax authorities. The Group is currently assessing the potential interest due, if any, from the Spanish tax authorities
arising on this receivable.
• Current tax impact of loss limitation for fiscal year 2023
The Group measures current tax expense based on the regulations in effect as of the date when corporate income taxes are
accrued. With the change in loss limitation, the Group anticipates the ability to offset up to 70 per cent of their Spanish taxable
profits with prior-year losses for their 2023 Spanish taxes. If this limit had been applied at 31 December 2023 the Group foresees a
reduction in the 2023 current tax expense of approximately €108 million.
• Deferred tax impact of future loss limitation
The Group measures deferred tax assets at the tax rates that are expected to apply when the related asset is realised. As detailed
in note 2, the Group uses future cash flow projections over periods of up to ten years to determine the recoverability of deferred
tax assets. With the change in loss limitation, the Group expects to be able to utilise more of its historical tax losses within this ten-
year period. Had the Royal Decree-Law 3/2016 not applied at 31 December 2023, the Group expects that the deferred tax assets
of the Group, attributable to tax losses and tax credits, would have decreased by approximately €58 million, with a corresponding
charge to Tax in the Income statement.
288
International Airlines Group | Annual Report and Accounts 2023
Notes to the accounts continued 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. Further information on why these
APMs are used is provided in the Key performance indicators section. They are used to measure the outcome of the Group’s
strategy based on the Group’s strategic imperatives of: strengthening our core; driving earnings growth through asset-light
businesses; and operating under a strengthened financial and sustainability framework.
During 2023, the Group has replaced the Levered free cash flow measure with the Free cash flow measure. The Free cash flow
measure represents the cash generating ability of the Group to support operations and maintain its capital assets. This measure is
monitored by the Group in making both investment and capital decisions. In addition, the Group has added an APM regarding the
Ownership costs of the Group to enable a better understanding of how the capital assets of the Group contribute to the operating
result in each reporting period. Other than the aforementioned change, 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 31 December 2022.
The definition of each APM, together with a reconciliation to the nearest measure prepared in accordance with IFRS is presented below.
a Profit after tax before exceptional items
Exceptional items are those that in the Board’s and management’s view need to be separately disclosed by virtue of their size or
incidence to supplement the understanding of 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.
While there have been no exceptional items recorded in the year to 31 December 2023, exceptional items in the year to 31 December 2022
include: significant changes in the long-term fleet plans that result in the reversal of impairment of fleet assets and legal reimbursements.
The table below reconciles the statutory Income statement to the Income statement before exceptional items of the Group:
€ 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 costs2
Selling costs
Depreciation, amortisation and impairment3
Net gain on sale of property, plant and equipment1
Currency differences
Total expenditure on operations
Operating profit
Finance costs
Finance income
Net change in fair value of financial instruments
Net financing credit relating to pensions
Net currency retranslation credits/(charges)
Other non-operating credits1
Total net non-operating costs
Profit before tax
Tax
Profit after tax
Year to 31 December
Statutory
2023
Exceptional
items
Before
exceptional
items
2023
Statutory
20221
Exceptional
items
25,810
1,156
2,487
29,453
5,423
7,557
3,849
2,308
2,509
1,058
1,155
2,063
(2)
26
25,946
3,507
(1,113)
386
(11)
103
176
8
(451)
3,056
(401)
2,655
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
25,810
19,458
1,156
2,487
1,615
1,993
29,453
23,066
5,423
7,557
3,849
2,308
2,509
1,058
1,155
4,647
6,120
2,971
1,890
2,101
950
920
2,063
2,070
(2)
26
(22)
141
25,946
21,788
3,507
1,278
(1,113)
(1,017)
386
(11)
103
176
8
(451)
3,056
(401)
2,655
52
81
26
(115)
110
(863)
415
16
431
–
–
–
–
–
–
–
–
–
(23)
–
(8)
–
–
(31)
31
–
–
–
–
–
–
–
31
(2)
29
Before
exceptional
items
20221
19,458
1,615
1,993
23,066
4,647
6,120
2,971
1,890
2,101
973
920
2,078
(22)
141
21,819
1,247
(1,017)
52
81
26
(115)
110
(863)
384
18
402
1 The 2022 results include a reclassification to conform with the current year presentation for the Net gain on sale of property, plant and equipment.
There is no impact on the Profit after tax. Further information is given in note 2.
International Airlines Group | Annual Report and Accounts 2023
289
Corporate GovernanceStrategic ReportFinancial Statements
Alternative performance measures continued
The rationale for each exceptional item is given below.
2 Partial reversal of historical fine
The exceptional credit of €23 million for the year to 31 December 2022 relates to the partial reversal of the fine, plus accrued interest, initially issued
by the European Commission, in 2010, to British Airways regarding its involvement in cartel activity in the air cargo sector and that had been
recognised as an exceptional charge. The exceptional credit has been recorded within Property, IT and other costs in the Income statement with no
resultant tax charge arising. The cash inflow associated with the partial reversal of the fine was recognised during 2022.
3 Impairment reversal of fleet and associated assets
The exceptional impairment reversal of €8 million for the year to 31 December 2022 relates to six Airbus A320s in Vueling, previously stood down in
the fourth quarter of 2020 and subsequently stood up in the second and third quarters of 2022. The exceptional impairment reversal was recorded
within Right of use assets on the Balance sheet and within Depreciation, amortisation and impairment in the Income statement.
There is no cash flow impact and there has been a tax charge of €2 million on the recognition of the impairment reversal.
The table below provides a reconciliation of the statutory to pre-exceptional condensed alternative income statement by operating
segment for the years to 31 December 2023 and 2022:
Year to 31 December 2023
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
l
a
n
o
i
t
p
e
c
x
e
s
m
e
t
i
s
m
e
t
i
e
r
o
f
e
B
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
y
r
o
t
u
t
a
t
S
l
a
n
o
i
t
p
e
c
x
E
l
a
n
o
i
t
p
e
c
x
e
s
m
e
t
i
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
l
a
n
o
i
t
p
e
c
x
e
s
m
e
t
i
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
l
a
n
o
i
t
p
e
c
x
e
s
m
e
t
i
e
r
o
f
e
B
s
m
e
t
i
Million
Passenger revenue
12,668
–
12,668
14,558
–
14,558
5,262
–
5,262
3,181
–
3,181
2,209
–
2,209
Cargo revenue
Other revenue
Total revenue
757
898
14,323
–
757
869
–
869
275
–
275
–
898
1,032
–
1,032
1,421
–
1,421
–
17
–
–
–
17
55
10
–
–
55
10
–
14,323
16,459
–
16,459
6,958
–
6,958
3,198
–
3,198
2,274
–
2,274
Employee costs
2,577
–
2,577
2,960
–
2,960
1,284
–
1,284
399
–
399
471
–
471
Fuel, oil costs and
emissions charges
Ownership costs
Supplier costs
Total expenditure on
operations
Operating profit
3,825
1,015
5,475
12,892
1,431
–
3,825
4,395
–
4,395
1,496
–
1,496
907
–
907
639
–
639
–
1,015
1,166
–
1,166
411
–
411
256
–
256
150
–
150
–
5,475
6,288
–
6,288
2,827
–
2,827
1,240
–
1,240
789
–
789
–
12,892
14,809
–
14,809
6,018
–
6,018
2,802
–
2,802
2,049
–
2,049
–
1,431
1,650
–
1,650
940
–
940
396
–
396
225
–
225
Operating margin (%)
10.0%
10.0%
13.5%
13.5%
12.4%
12.4%
9.9%
9.9%
Year to 31 December 2023
IAG Loyalty (£)
IAG Loyalty (€)
Million
Passenger revenue
Other revenue
Total revenue
Employee costs
Ownership costs
Supplier costs
Total expenditure on operations
Operating profit
Operating margin (%)
y
r
o
t
u
t
a
t
S
l
a
n
o
i
t
p
e
c
x
E
l
a
n
o
i
t
p
e
c
x
e
s
m
e
t
i
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
961
524
837
455
1,292
61
10
941
1,012
280
–
837
–
455
961
524
–
1,292
1,485
–
1,485
–
–
61
10
70
11
–
–
70
11
–
941
1,083
–
1,083
–
1,012
–
280
1,164
321
–
–
1,164
321
21.7%
21.7%
290
International Airlines Group | Annual Report and Accounts 2023
Year to 31 December 20221
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
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r
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f
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B
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t
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a
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o
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r
o
f
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B
s
m
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t
i
y
r
o
t
u
t
a
t
S
y
r
o
t
u
t
a
t
S
l
a
n
o
i
t
p
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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
l
a
n
o
i
t
p
e
c
x
e
s
m
e
t
i
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
l
a
n
o
i
t
p
e
c
x
e
s
m
e
t
i
e
r
o
f
e
B
s
m
e
t
i
Million
Passenger revenue
9,215
–
9,215
10,790
–
10,790
4,042
–
4,042
2,584
–
2,584
1,679
–
1,679
Cargo revenue
Other revenue
Total revenue
1,060
755
11,030
–
1,060
1,245
–
1,245
347
–
347
–
755
886
–
886
1,122
–
1,122
–
14
–
–
–
80
–
80
14
10
–
10
–
11,030
12,921
–
12,921
5,511
–
5,511
2,598
–
2,598
1,769
–
1,769
Employee costs
2,100
–
2,100
2,464
–
2,464
1,161
–
1,161
370
–
370
393
–
393
Fuel, oil costs and
emissions charges
Ownership costs1
2,929
1,081
–
–
2,929
3,432
1,081
1,268
–
–
3,432
1,313
1,268
364
Supplier costs
4,595
(19) 4,614
5,391
(23) 5,414
2,284
–
–
–
1,313
739
–
739
539
364
206
(8) 214
134
2,284
1,088
–
1,088
646
–
–
–
539
134
646
Total expenditure on
operations1
Operating profit1
10,705
(19) 10,724
12,555
(23) 12,578
5,122
–
5,122
2,403
(8) 2,411
1,712
–
1,712
325
19
306
366
23
343
389
–
389
195
8
187
57
–
57
Operating margin (%)1
2.9%
2.8%
7.1%
7.1%
7.5%
7.2%
3.2%
3.2%
Million
Passenger revenue
Other revenue
Total revenue
Employee costs
Ownership costs
Supplier costs
Total expenditure on operations
Operating profit
Operating margin (%)
Year to 31 December 2022
IAG Loyalty (£)
IAG Loyalty (€)
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
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
569
274
843
50
7
546
603
240
–
569
676
–
676
–
274
325
–
843
1,001
–
–
50
7
56
8
–
–
–
–
325
1,001
56
8
–
546
655
–
655
–
603
–
240
719
282
–
–
719
282
28.4%
28.4%
1 Segment information for 2022 has been restated for the reclassification to conform with the current year presentation for the Net gain on sale of
property, plant and equipment.
b Adjusted earnings per share (KPI)
Adjusted 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
Profit after tax attributable to equity holders of the parent
Exceptional items
Profit after tax attributable to equity holders of the parent before exceptional items
Income statement impact of convertible bonds
Adjusted profit
Weighted average number of ordinary shares in issue used for basic earnings per share
Weighted average number of ordinary shares used for diluted earnings per share
Basic earnings per share (€ cents)
Basic earnings per share before exceptional items (€ cents)
Adjusted earnings per share before exceptional items (€ cents)
Note
a
a
11
11
11
2023
2,655
–
2,655
15
2,670
2022
431
29
402
(104)
298
4,933
5,277
4,958
5,344
53.8
53.8
50.6
8.7
8.1
5.6
International Airlines Group | Annual Report and Accounts 2023
291
Corporate GovernanceStrategic ReportFinancial Statements
Alternative performance measures continued
c Ownership costs
Ownership costs represents the income statement impact of the historical purchase of capital assets and is defined as depreciation,
amortisation and impairment, arising on both property, plant and equipment and intangible assets, and the net loss/(gain) on the
sale of property, plant and equipment. The Group believes that this measure is useful to the users of the financial statements in
understanding the impact of capital assets in deriving the operating result of the Group.
€ million
Depreciation, amortisation and impairment
Net gain on sale of property, plant and equipment
Ownership costs
d Airline non-fuel costs per ASK
2023
2022
2,063
2,070
(2)
(22)
2,061
2,048
The Group monitors airline unit costs (per available seat kilometre (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
(abbreviated to ‘ccy’).
€ million
Total expenditure on operations1
Add: exceptional items in operating expenditure
Less: fuel, oil costs and emission charges
Non-fuel costs1
Less: Non-flight specific costs1
Airline non-fuel costs
ASKs (millions)
Airline non-fuel unit costs per ASK (€ cents)
Note
a
a
a
2023
Reported
25,946
–
7,557
18,389
2,141
ccy
adjustment
408
2023 ccy
26,354
20221
21,788
–
(31)
6
7,563
6,120
402
18,791
15,699
68
2,209
1,716
16,248
334
16,582
13,983
323,111
5.03
323,111
263,592
5.13
5.30
1 The 2022 results include a reclassification to conform with the current year presentation for the Net gain on sale of property, plant and equipment.
e Free cash flow (KPI)
Free cash flow represents the cash generated by the businesses and is defined as the net cash flows from operating activities taken
from the Cash flow statement, less the cash flows associated with the acquisition of property, plant and equipment and intangible
assets reported in net cash flows from investing activities from the Cash flow statement. The Group believes that this measure is
useful to the users of the financial statements in understanding the cash generating ability of the Group to support operations and
maintain its capital assets.
€ million
Net cash flows from operating activities
Acquisition of property, plant and equipment and intangible assets
Free cash flow
f Net debt to EBITDA before exceptional items (KPI)
2023
4,864
2022
4,854
(3,544)
(3,875)
1,320
979
To supplement total borrowings as presented in accordance with IFRS, the Group reviews net debt to EBITDA before exceptional
items 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 23).
EBITDA before exceptional items is defined as operating result before exceptional items, interest, taxation, depreciation,
amortisation and impairment.
292
International Airlines Group | Annual Report and Accounts 2023
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 profit1
Add: Depreciation, amortisation and impairment
EBITDA
Add: Exceptional items (excluding those reported within Depreciation, amortisation and
impairment)
EBITDA before exceptional items
Note
26
22
22
a
a
a
2023
16,082
5,441
1,396
9,245
3,507
2,063
5,570
–
5,570
20221
19,984
9,196
403
10,385
1,278
2,070
3,348
(23)
3,325
Net debt to EBITDA before exceptional items (times)
1.7
3.1
1 The 2022 results include a reclassification to conform with the current year presentation for the Net gain on sale of property, plant and equipment.
g 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 before exceptional items, 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 before exceptional items
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 adjustment5
Average net book value of other property, plant and equipment6
Average net book value of software intangible assets7
Total invested capital
Return on invested capital
Note
2023
f
5,570
(1,976)
(194)
(185)
3,215
16,919
(993)
15,926
1.18
18,811
2,143
737
21,691
13
13
13
17
20221, 2
3,325
(1,944)
(247)
(210)
924
15,717
(910)
14,807
1.18
17,435
2,037
640
20,112
14.8%
4.6%
1 The 2022 results include a reclassification to conform with the current year presentation for the Net gain on sale of property, plant and equipment.
2 The 2022 RoIC calculation excludes the effect of the €29 million credit recorded in Depreciation, amortisation and impairment in the Income
statement relating to the de-designation of hedge accounting (see note 6 of the Group financial statements).
3 The average net book value of aircraft is calculated from an amount of €17,520 million at 31 December 2023 and €16,317 million at 31 December 2022.
4 The average net book value of progress payments is calculated from an amount of €914 million at 31 December 2023 and €1,071 million at 31
December 2022.
5 Presented to two decimal places and calculated using a 1.5 per cent inflation (31 December 2022: 1.5 per cent inflation) rate over the weighted
average age of the fleet at 31 December 2023: 11.0 years (31 December 2022: 11.3 years).
6 The average net book value of other property, plant and equipment is calculated from an amount of €2,256 million at 31 December 2023 and €2,029
million at 31 December 2022.
7 The average net book value of software intangible assets is calculated from an amount of €837 million at 31 December 2023 and €637 million at 31
December 2022.
International Airlines Group | Annual Report and Accounts 2023
293
Corporate GovernanceStrategic ReportFinancial Statements
Alternative performance measures continued
h Results on a constant currency basis
Movements in foreign exchange rates impact the Group’s financial results. The IAG Board and Management Committee review the
results, including revenue and operating costs at constant rates of exchange. These financial measures are calculated 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
Board and Management Committee do not believe that these measures are a substitute for IFRS measures, the Board and
Management Committee do 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 2023 figures are stated
at a constant currency basis, the 2022 rates stated below have been applied:
Foreign exchange rates
Pound sterling to euro
Euro to US dollar
Pound sterling to US dollar
Weighted average
Closing
2023
1.15
1.09
1.26
2022
1.17
1.05
1.23
2023
1.16
1.09
1.27
2022
1.14
1.06
1.21
'Section i' below was inadvertently omitted from the English version of the Group's Annual Report and Accounts filed on 5 March
2024 and is included below for completeness.
i Liquidity
The Board and the Management Committee monitor liquidity in order to assess the resilience of the Group to adverse events and
uncertainty and develop funding initiatives to maintain this resilience.
Liquidity is used by analysts, investors and other users of the financial statements as a measure of 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
22
22
29f
29f
29f
2023
5,441
1,396
4,359
375
53
2022
9,196
403
3,231
1,116
53
11,624
13,999
294
International Airlines Group | Annual Report and Accounts 2023
Group investments
Subsidiaries
British Airways
Name and address
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 Euroflyer 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
Teleflight Limited
Waterside, PO Box 365, Harmondsworth, UB7 0GB
British Mediterranean Airways Limited
Waterside, PO Box 365, Harmondsworth, UB7 0GB
Avios Group (AGL) Limited*
Waterside, PO Box 365, Harmondsworth, UB7 0GB
Principal activity
Country of
Incorporation
Percentage of
equity owned
Holding company
England
100 %
Call centre
India
100 %
Airline operations
England
100 %
Airline operations
England
100 %
Holding company
England
100 %
Life insurance
England
100 %
Healthcare
England
100 %
Holding company
England
100 %
Holding company
England
100 %
Holding company
Jersey
100 %
Dormant
England
100 %
Holding company
England
100 %
Dormant
England
100 %
Aircraft leasing
England
100 %
Holding company
England
100 %
Aircraft maintenance
England
100 %
Aircraft financing
Jersey
100 %
Holding company
Netherlands
100 %
Tour operator
England
100 %
Aircraft maintenance
England
100 %
Aircraft leasing
England
100 %
Aircraft maintenance
England
100 %
Trustee company
England
100 %
Former airline
England
100 %
Dormant
England
100 %
Call centre
Germany
100 %
Ground services
England
100 %
Transport
England
100 %
Insurance
Bermuda
100 %
Call centre
England
100 %
Former airline
England
Management of airline
loyalty programmes
England
99 %
86 %1
International Airlines Group | Annual Report and Accounts 2023
295
Corporate GovernanceStrategic ReportFinancial Statements Group investments continued
Iberia
Name and address
Compañía Operadora de Corto y Medio Radio Iberia Express, S.A.*
Calle Alcañiz 23, Madrid, 28006
Compañía Explotación Aviones Cargueros Cargosur, S.A.
Calle Martínez Villergas 49, Madrid, 28027
Iberia LAE México SA de CV
Xochicalco 174, Col. Narvarte, Alcaldía Benito Juárez,
Mexico City, 03020
Iberia Líneas Aéreas de España, S.A. Operadora*
Calle Martínez Villergas 49, Madrid, 28027
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
Avios Group (AGL) Limited*
Waterside, PO Box 365, Harmondsworth, UB7 0GB
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, Douglas, 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, 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
IAG Loyalty Retail Limited
Waterside, PO Box 365, Harmondsworth, UB7 0GB
Principal activity
Airline operations
Cargo transport
Aircraft technical
assistance
Country of
incorporation
Percentage of
equity owned
Spain
Spain
100 %
100 %
Mexico
100 %
Airline operations and
maintenance
Spain
Holding company
England
Aircraft maintenance
Airport infrastructure
development
Management of airline
loyalty programmes
Spain
Spain
100 %2
100 %1
100 %
75 %
England
14 %1
Principal activity
Country of
incorporation
Percentage of
equity owned
Provision of human resources
support to fellow group companies
Trustee
Republic of
Ireland
Republic of
Ireland
100 %
100 %
Dormant
Isle of Man
100 %
Holding company
Airline operations
Airline operations
Republic of
Ireland
Republic of
Ireland
Northern
Ireland
100 %3
100 %
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 %
Retail services
England
100 %
296
International Airlines Group | Annual Report and Accounts 2023
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
Principal activity
Country of
Incorporation
Percentage of
equity owned
Dormant
England
100 %
Dormant
England
100 %
Vueling
Name and address
Yellow Handling, S.L.U
Carrer de Catalunya 83, Viladecans, Barcelona 08840
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
Principal activity
Ground handling
services
Country of
incorporation
Percentage of
equity owned
Spain
100 %
Principal activity
Country of
incorporation
Percentage of
equity owned
Dormant
England
100 %
Airline operations
France
100 %
Principal activity
Country of
incorporation
Percentage of
equity owned
Holding company
England
100 %
Airline operations
England
100 %4
Airline operations
Spain
100 %
IAG Cargo Limited*
Carrus Cargo Centre, PO Box 99, Sealand Road, London Heathrow
Airport, Hounslow, TW6 2JS
Air freight operations
England
100 %
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
Vueling Airlines, S.A.*
Carrer de Catalunya 83, Viladecans, Barcelona 08840
* Principal subsidiaries
Inflight eCommerce platform
IT, finance, procurement
services
IT, finance, procurement
services
Holding company
Airline operations
Republic of
Ireland
100 %
England
100 %
Poland
100 %
Spain
Spain
100 %2
100 %
1 The Group holds 100% of both the nominal share capital and economic rights in Avios Group (AGL) Limited, held directly by British Airways Plc,
which owns 86% and Iberia Operadora UK Limited which owns 14%.
2 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 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.
3 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.
4 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 2023
297
Corporate GovernanceStrategic ReportFinancial Statements Group investments continued
Associates
Name and address
Empresa Hispano Cubana de Mantenimiento de Aeronaves, Ibeca, S.A.
Carretera Aerocaribbean y Final, Terminal No 5
Jose Martí Airport, Wajay, Municipio Boyeros, Havana
Empresa Logística de Carga Aérea, S.A.
Carretera de Wajay km 1 ½, Jose Martí Airport, Havana
Mundiplan Turismo y Ocio S.L.
Calle Hermanos García Noblejas 41, Madrid, 28037
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.U.
Avenida de Bruselas 20, Alcobendas, Madrid, 28108
LanzaJet Inc.
520 Lake Cook Road, Suite 680, Deerfield, Illinois, 60015
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
50 %
Cuba
50 %
Spain
Spain
England
Spain
50 %
49 %
40 %
39 %
Spain
26.7 %
Spain
26.7 %
Spain
26.7 %
USA
16.7 %
Country of
incorporation
Percentage of
equity owned
Spain
50.5 %
Name and address
Air Europa Holdings S.L.1
Carretera Arenal - Llucmajor, km 21.5, Llucmajor, 07620
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
Eagle House 163 City Road, London, EC1V 1NR
Country of
incorporation
Percentage
of equity
owned
Shareholder’s
funds
(million)
Profit/(loss)
before tax
(million)
Currency
Spain
20 %
Spain
19.9 %
€
€
25
70
England
16.7 %
£
241
Spain
10 %
England
7.4 %
€
£
–
2
–
6
–
–
(2)
England
4.8 %
£
8
(31)
1 The Shareholder funds and result before tax of Air Europa Holdings S.L. represent the data for the year to 31 December 2022 and are prepared under
Spanish GAAP. The Group does not have access to financial information other than that reported in the statutory financial statements of the
company, which are published subsequent to the authorisation of these consolidated financial statements.
298
International Airlines Group | Annual Report and Accounts 2023
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 28 February 2024, 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 31 December 2023, 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.
28 February 2024
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
International Airlines Group | Annual Report and Accounts 2023
299
Corporate GovernanceStrategic ReportFinancial Statements Independent Auditor’s Report
300
International Airlines Group | Annual Report and Accounts 2023
International Airlines Group | Annual Report and Accounts 2023
301
Corporate GovernanceStrategic ReportFinancial Statements Independent Auditor’s Report continued
302
International Airlines Group | Annual Report and Accounts 2023
International Airlines Group | Annual Report and Accounts 2023
303
Corporate GovernanceStrategic ReportFinancial Statements Independent Auditor’s Report continued
304
International Airlines Group | Annual Report and Accounts 2023
International Airlines Group | Annual Report and Accounts 2023
305
Corporate GovernanceStrategic ReportFinancial Statements Independent Auditor’s Report continued
306
International Airlines Group | Annual Report and Accounts 2023
International Airlines Group | Annual Report and Accounts 2023
307
Corporate GovernanceStrategic ReportFinancial Statements 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 income statement impact of 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
Emissions Trading System (ETS)
Free cash flow
Gross capex
Interest cover
Invested capital
Liquidity
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
Emission Trading Systems are a market-based carbon pricing instrument that sets an explicit
price on emissions. Group airlines participate in the EU, UK and Swiss Emission Trading Systems
Cash generated by the businesses, defined as the net cash flows from operating activities taken
from the Cash flow statement, less the cash flows associated with the acquisition of property,
plant and equipment and intangible assets reported in net cash flows from investing activities
from the Cash flow statement
Gross capital expenditure is the acquisition of property, plant and equipment and intangible
assets reported in the Group’s consolidated cash flow statement and includes fleet, customer
product, IT, ETS allowances and infrastructure, including those assets initially purchased and
then subject to subsequent sale and leaseback transactions and recognised as right of use assets
The number of times the profit/(loss) 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
Cash and cash equivalents plus Current interest-bearing deposits, plus committed general
undrawn facilities and committed aircraft undrawn facilities
Current and long-term interest-bearing borrowings less cash and cash equivalents and current
interest-bearing deposits
308
International Airlines Group | Annual Report and Accounts 2023
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, extremely 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
Punctuality
Regularity
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
A one-way revenue flight
Sold cargo tonnes
The number of cargo tonnes sold, including freight, courier, mail and interline
Sustainable Aviation Fuel (SAF)
Total capital
Sustainable Aviation Fuel (SAF) is a fuel that is chemically almost identical to jet kerosene.
The feedstocks for these fuels (currently waste materials such as municipal waste or waste wood)
absorb CO2 in their growth cycle before this carbon is recycled into fuel and then emitted in the flight
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 2023
309
Additional information Aircraft fleet
Number in service with Group companies
Airbus A319ceo
Airbus A320ceo
Airbus A320neo
Airbus A321ceo
Airbus A321neo
Airbus A321 LR
Airbus A321 XLR
Airbus A330-200
Airbus A330-300
Airbus A350-900
Airbus A350-1000
Airbus A380
Boeing 737-8200
Boeing 737-10
Boeing 777-200
Boeing 777-300
Boeing 777-9
Boeing 787-8
Boeing 787-9
Boeing 787-10
Embraer E190
Group total
Owned
9
49
–
11
4
–
–
2
4
3
1
3
–
–
38
8
–
2
1
–
9
Finance
lease
Operating
lease
Total
31 December
2023
Total
31 December
2022
Changes
since
31 December
2022
Future
deliveries
Options1
–
13
38
3
6
–
–
1
4
6
14
9
–
–
2
1
–
8
8
5
–
32
128
28
29
19
8
–
16
12
12
2
–
–
–
3
7
–
2
9
2
11
41
190
66
43
29
8
–
19
20
21
17
12
–
–
43
16
–
12
18
7
20
582
41
199
60
44
16
8
–
16
20
15
13
12
–
–
43
16
–
12
18
4
21
558
–
(9)
6
(1)
13
–
–
3
–
6
4
–
–
–
–
–
–
–
–
3
(1)
24
–
3
49
–
33
–
14
–
–
2
1
–
25
25
–
–
18
–
–
11
–
–
–
40
–
–
–
14
–
–
15
36
–
100
–
–
–
24
–
–
6
–
181
235
144
118
320
1 The options to purchase 100 Boeing 737 aircraft allow for flexibility in the choice of variant.
Aircraft are reported based on their contractual definitions as opposed to their accounting determination. For accounting purposes, while all operating
leases are presented as lease liabilities, finance leases are presented as either lease liabilities or asset financed liabilities, depending on the nature of the
individual arrangement. See note 2 in the Group financial statements for further information.
As well as those aircraft in service the Group also holds 9 aircraft (31 December 2022: 18) not in service.
310
International Airlines Group | Annual Report and Accounts 2023
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 headcount3
Aircraft in service at year end
Aircraft utilisation – Long-haul
(average hours per aircraft per day)
Aircraft utilisation – Short-haul
(average hours per aircraft per day)
Punctuality – within 15 minutes
Regularity
Financial
Passenger unit revenue per ASK (PASK)4
Passenger revenue per RPK4
Cargo revenue per CTK4
Total revenue per ASK (RASK)4
Average jet fuel commodity price
Fuel cost per ASK4
Operating profit/(loss) before depreciation and
amortisation (EBITDA)4
Total operating expenditure excluding fuel per ASK
(CASK ex. fuel)4
Operating margin4
Total operating expenditure per ASK (CASK)4
Dividend cover
Interest cover
Net debt
Equity
Net debt to EBITDA before exceptional items4
Exchange rates - weighted average
Translation
Transaction
Transaction
Transaction
2023
20221
2021
20202
20192
million
323,111 263,592
million
275,727
215,749
million
4,666
3,980
‘000
115,559
94,726
‘000
596
561
121,965
78,689
3,970
38,864
539
113,195
72,262
3,399
31,275
444
337,754
285,745
5,580
118,253
682
714,562
619,122
307,519
267,748
775,486
hours 2,137,749
1,781,829
892,455
820,983
2,272,904
69,762
61,192
56,618
65,481
73,299
hours
hours
%
%
€ cents
€ cents
€ cents
€ cents
$/metric tonne
582
14.3
8.3
72.2
98.5
558
12.8
7.7
61.7
98.7
7.99
9.36
7.38
9.02
24.77
40.58
9.12
883
8.75
1,074
2.32
531
8.1
4.5
86.4
96.7
4.78
7.41
42.14
6.93
587
1.59
533
6.4
2.7
88.8
91.8
4.92
7.71
38.42
6.95
376
1.80
598
13.5
8.6
77.8
98.7
6.65
7.86
20.02
7.55
628
1.78
5,361
€ cents
2.34
€ million
5,570
3,325
(1,017)
(2,291)
€ cents
5.69
5.96
7.78
9.03
4.81
%
11.9
€ cents
times
times
8.03
n/a
5.1
5.4
8.28
n/a
1.4
€ million
9,245
10,385
€ million
3,278
2,022
times
£:€
£:€
€:$
£:$
1.7
1.15
1.15
1.09
1.26
3.1
1.17
1.17
1.05
1.23
(35.1)
9.36
n/a
(4.0)
11,667
846
(11.5)
1.15
1.15
1.20
1.38
(55.8)
10.83
n/a
(6.6)
9,762
1,610
(4.3)
1.13
1.13
1.13
1.27
12.7
6.59
3.8
6.2
7,571
7,120
1.4
1.13
1.13
1.12
1.27
1 The 2022 results have been restated for the reclassification of the Net gain on sale of property, plant and equipment within Operating profit.
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 Average headcount in 2020, 2021 and 2022 includes those employees who were on furlough, wage support and equivalent schemes, including the
Temporary Redundancy Plan arrangements in Spain.
4 Figures are shown before exceptional items.
n/a: not applicable
International Airlines Group | Annual Report and Accounts 2023
311
Additional information
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.
Madrid Commercial Registrar tomo 27312, folio 11, hoja M-492129
C.I.F. A85845535
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.
For shareholder enquiries, contact:
UK branch registered address
International Airlines Group, Waterside (HAA2), PO Box 365,
Speedbird Way, Harmondsworth, UB7 0GB
Deutsche Bank Trust Company Americas c/o Equiniti Trust
Company, LLC, Peck Slip Station, PO Box 2050, New York, NY
10272-2050
Registered in England and Wales: BR014868
Email: adr@equiniti.com
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
Toll free: 800 301 3517 (within the US)
International: +1 718 921 8137
Online: www.adr.db.com
Financial calendar
Financial year end: 31 December 2023
Q1 results: 10 May 2024
Half-year results: 2 August 2024
Q3 results: 8 November 2024
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”, “believes”, “may”, “will”, “could”, “should”, “continues”, “intends”,
“plans”, “targets”, “predicts”, “estimates”, “envisages” or “anticipates” or other words of similar meaning or their negatives. 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, acquisitions and divestments relating to the
Group and discussions of the Group’s business plans, and its 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, economic and geo-political, market,
regulatory, climate, supply chain or other significant external events, 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.
312
International Airlines Group | Annual Report and Accounts 2023
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