KPMG Auditores S.L., a limited liability Spanish company and a member firm of the
KPMG global organisation of independent member firms affiliated with KPMG
International Limited, a private English company limited by guarantee. All rights
reserved.
Paseo de la Castellana, 259C 28046 Madrid
KPMG Auditores, S.L.
Edificio Torre de Cristal
Paseo de la Castellana, 259C
28046 Madrid
Independent Auditor's Report on the Financial Statements
On the Spanish Official Register of Auditors (“ROAC”) with No. S0702, and the
Spanish Institute of Registered Auditors’ list of companies with No. 10.
Reg. Mer Madrid, T. 11.961, F. 90, Sec. 8, H. M -188.007, Inscrip. 9
N.I.F. B-78510153
To the shareholders of International Consolidated Airlines Group, S.A., commissioned by management
REPORT ON THE FINANCIAL STATEMENTS
Opinion
We have audited the annual accounts of International Consolidated Airlines Group, S.A. which comprise the
balance sheet at 31 December 2023 and the income statement, statement of changes in equity and cash flow
statement for the year then ended, and notes.
In our opinion, the accompanying annual accounts give a true and fair view, in all material respects, of the equity
and financial position of the Company at 31 December 2023, and of its financial performance and its cash flows
for the year then ended in accordance with the applicable financial reporting framework (specified in note 2 to
the accompanying annual accounts) and, in particular, with the accounting principles and criteria set forth
therein.
Basis for Opinion
We conducted our audit in accordance with prevailing legislation regulating the audit of accounts in Spain. Our
responsibilities under those standards are further described in the Auditor's Responsibilities for the Audit of the
Annual Accounts section of our report.
We are independent of the Company in accordance with the ethical requirements, including those regarding
independence, that are relevant to our audit of the annual accounts pursuant to the legislation regulating the
audit of accounts in Spain. We have not provided any non-audit services, nor have any situations or
circumstances arisen which, under the aforementioned regulations, have affected the required independence
such that this has been compromised.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our
opinion.
Key Audit Matters
Key audit matters are those matters that, in our professional judgement, were of most significance in the audit
of the annual accounts of the current period. These matters were addressed in the context of our audit of the
annual accounts as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on
these matters.
3
Other Information: Management Report
Other information solely comprises the 2023 management report, the preparation of which is the responsibility
of the Directors and which does not form an integral part of the annual accounts.
Our audit opinion on the annual accounts does not encompass the management report. Our responsibility
regarding the information contained in the management report is defined in the legislation regulating the audit
of accounts, as follows:
a) Determine, solely, whether the non-financial information statement, certain information included in the
Annual Corporate Governance Report and the Annual Report on Directors’ Remuneration, as specified in
the Spanish Audit Law, have been provided in the manner stipulated in the applicable legislation, and if
not, to report on this matter.
b) Assess and report on the consistency of the rest of the information included in the management report
with the annual accounts, based on knowledge of the entity obtained during the audit of the
aforementioned annual accounts. Also, assess and report on whether the content and presentation of this
part of the management report are in accordance with applicable legislation. If, based on the work we
have performed, we conclude that there are material misstatements, we are required to report them.
Based on the work carried out, as described above, we have observed that the information mentioned in
section a) above has been provided in the manner stipulated in the applicable legislation, that the rest of the
information contained in the management report is consistent with that disclosed in the annual accounts for
2023, and that the content and presentation of the report are in accordance with applicable legislation.
Director’s and Audit and Compliance Committee's Responsibility for the Annual Accounts
The Directors are responsible for the preparation of the accompanying annual accounts in such a way that they
give a true and fair view of the equity, financial position and financial performance of the Company in
accordance with the financial reporting framework applicable to the entity in Spain, and for such internal control
as they determine is necessary to enable the preparation of annual accounts that are free from material
misstatement, whether due to fraud or error.
In preparing the annual accounts, the Directors are responsible for assessing the Company's ability to continue
as a going concern, disclosing, as applicable, matters related to going concern and using the going concern
basis of accounting unless the Directors either intend to liquidate the Company or to cease operations, or have
no realistic alternative but to do so.
The Entity's audit and compliance committee is responsible for overseeing the preparation and presentation of
the annual accounts.
Auditor's Responsibilities for the Audit of the Annual Accounts
Our objectives are to obtain reasonable assurance about whether the annual accounts as a whole are free from
material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion.
Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance
with prevailing legislation regulating the audit of accounts in Spain will always detect a material misstatement
when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the
aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis
of these annual accounts.
INTERNATIONAL CONSOLIDATED AIRLINES GROUP, S.A.
Financial statements for the year to 31 December 2023
CONTENTS
▪ Balance sheet at 31 December 2023 1
▪ Income statement for the year to 31 December 2023 2
▪ Statement of changes in equity for the year to 31 December 2023 3
▪ Cash flow statement for the year to 31 December 2023 5
▪ Notes to the financial statements for the year to 31 December 2023 6
MANAGEMENT REPORT FOR THE YEAR TO 31 DECEMBER 2023
STATEMENT OF DIRECTORS’ RESPONSIBILITIES
1
INTERNATIONAL CONSOLIDATED AIRLINES GROUP, S.A.
Balance sheet at 31 December 2023
(Expressed in thousands of euros)
2023
2022
ASSETS
NON-CURRENT ASSETS
9.812.384
9.713.312
Intangible assets
6.472
-
Property, plant and equipment
61.986
83.046
Investments in Group companies
Equity instruments
7.483.506
7.573.190
Loan receivable from Group companies
2.102.789
2.011.922
Non-current financial assets
Equity instruments
152.250
41.423
Deferred tax asset
5.381
3.731
CURRENT ASSETS
1.588.937
2.488.528
Trade and other receivables
Clients, Group companies
187.530
205.789
Current tax receivable
7.810
40.032
Other receivables
13.554
9.565
Investments in Group companies
Loan receivable from Group companies
25.824
91.885
Cash and cash equivalents
Cash
151.605
147.200
Cash equivalents
1.202.614
1.994.057
TOTAL ASSETS
11.401.321
12.201.840
EQUITY AND LIABILITIES
EQUITY
8.645.732
8.676.719
SHAREHOLDERS’ FUNDS
Capital
Registered share capital
497.147
497.147
Share premium
7.770.439
7.770.439
Reserves
Legal and statutory reserves
99.429
99.429
Other reserves
186.132
222.821
Own shares and equity holdings
(99.333)
(28.012)
(Loss)/profit for the year
(22.749)
50.586
Other equity instruments
118.843
75.312
VALUATION ADJUSTMENTS
Valuation adjustments to financial assets at fair value through equity
106.562
1.870
Translation differences
(10.738)
(12.873)
LIABILITIES
NON-CURRENT LIABILITIES
2.405.748
2.481.312
Non-current debt
Bond and other marketable securities
2.404.740
2.272.312
Group companies, non-current
-
209.000
Deferred tax liability
1.008
-
CURRENT LIABILITIES
349.841
1.043.809
Current provisions
600
600
Current debt
Bond and other marketable securities
56.781
557.328
Group companies, current
209.137
408.704
Trade and other payables
Suppliers, Group companies
17.567
9.051
Various creditors
39.976
29.939
Current tax payable
248
17.339
Other amounts due to tax authorities
25.532
20.848
TOTAL EQUITY AND LIABILITIES
11.401.321
12.201.840
2
`
INTERNATIONAL CONSOLIDATED AIRLINES GROUP, S.A.
Income statement for the year to 31 December 2023
(Expressed in thousands of euros)
Note
2023
2022
Continuing operations
Revenue from operations
13,16
248.993
181.053
Rendering of services to Group companies
71.991
71.226
Finance income receivable from debt with Group companies and associates
177.002
109.827
Employee costs
13
(65.920)
(59.918)
Wages, salaries and other costs
(55.902)
(52.075)
Social security costs
(10.018)
(7.843)
Other operating expenses
(47.762)
(31.973)
External services received
(44.876)
(29.368)
Other operating expenses
(2.886)
(2.605)
Finance costs
(5.764)
(14.993)
Payable on debt with Group companies and associates
16
(5.764)
(14.993)
OPERATING PROFIT
129.547
74.169
Finance income
54.504
10.767
Receivable from third parties
13
54.504
10.767
Finance costs
(63.622)
(92.714)
Payable on debt with third parties
13
(63.622)
(92.714)
Impairment and losses on disposal of financial instruments
9,13
-
(1.950)
Impairment and loss on disposal of other equity investments
-
(1.950)
Change in fair value of financial instruments
13
(130.119)
72.895
Currency differences
(2.368)
1.607
NET FINANCE EXPENSE
(141.605)
(9.395)
(LOSS)/PROFIT BEFORE TAX
(12.058)
64.774
Taxes
12
(10.691)
(14.188)
(LOSS)/PROFIT FOR THE YEAR
3
(22.749)
50.586
3
INTERNATIONAL CONSOLIDATED AIRLINES GROUP, S.A.
Statement of changes in equity for the year to 31 December 2023
(Expressed in thousands of euros)
A) Statement of other comprehensive income
Note
2023
2022
(LOSS)/PROFIT FOR THE YEAR
3
(22.749)
50.586
Income and expenses recognised directly in equity
Fair value movements on other equity investments
9
105.700
1.870
Currency differences
2.135
(11.644)
Tax effect
12
(1.008)
-
TOTAL INCOME AND EXPENSES RECOGNISED DIRECTLY IN EQUITY
11
106.827
(9.774)
TOTAL INCOME AND EXPENSES RECOGNISED
84.078
40.812
4
INTERNATIONAL CONSOLIDATED AIRLINES GROUP, S.A.
Statement of changes in equity for the year to 31 December 2023
(Expressed in thousands of euros)
B) Statement of changes in equity
Issued share
capital
Share
premium
Reserves
Own shares and
equity holdings
(Loss)/profit
for the year
Other
equity
instruments
Valuation
adjustments
TOTAL
BALANCE AT 31 DECEMBER 2021
497.147
7.770.439
218.640
(24.000)
51.359
111.257
(1.229)
8.623.613
Total recognised income and expense
-
-
-
-
50.586
-
(9.774)
40.812
Transactions with shareholders and owners
-
-
(9.785)
(4.012)
-
(12.703)
-
(26.500)
Acquisition of treasury shares
-
-
-
(22.674)
-
-
-
(22.674)
Vesting of share-based payment schemes
-
-
(9.785)
18.662
-
(12.703)
-
(3.826)
Other movements in equity
-
-
62.036
-
-
(23.242)
-
38.794
Redemption of convertible bond (note 9.2)
-
-
62.036
-
-
(62.036)
-
-
Share-based payments charge (note 17)
-
-
-
-
-
38.794
-
38.794
Appropriation of prior year profit
-
-
51.359
-
(51.359)
-
-
-
BALANCE AT 31 DECEMBER 2022
497.147
7.770.439
322.250
(28.012)
50.586
75.312
(11.003)
8.676.719
Total recognised income and expense
-
-
-
-
(22.749)
-
106.827
84.078
Transactions with shareholders and owners
-
-
2.030
(71.321)
-
(8.385)
-
(77.676)
Acquisition of treasury shares
-
-
-
(76.716)
-
-
-
(76.716)
Vesting of share-based payment schemes
-
-
2.030
5.395
-
(8.385)
-
(960)
Other movements in equity
-
-
(89.305)
-
-
51.916
-
(37.389)
Share-based payments charge (note 17)
-
-
-
-
-
51.916
-
51.916
Reverse merger of Veloz and Vueling (note 8.1)
-
-
(89.305)
-
-
-
-
(89.305)
Appropriation of prior year profit
-
-
50.586
-
(50.586)
-
-
-
BALANCE AT 31 DECEMBER 2023
497.147
7.770.439
285.561
(99.333)
(22.749)
118.843
95.824
8.645.732
5
INTERNATIONAL CONSOLIDATED AIRLINES GROUP, S.A.
Cash flow statement for the year to 31 December 2023
(Expressed in thousands of euros)
Note
2023
2022
CASH FLOWS FROM OPERATING ACTIVITIES
(Loss)/profit for the year before tax
(Loss)/profit from continuing operations
(12.058)
64.774
Adjustments to (loss)/profit
Finance income
13
(231.506)
(120.594)
Finance costs
13
69.386
107.707
Change in fair value of financial instruments
13
130.119
(72.895)
Currency differences
2.368
(1.609)
Share-based payments
17
10.376
8.722
Impairment charge
8,16
-
1.950
Changes in working capital
Trade and other payables
14.131
(18.412)
Trade and other receivables
28.807
30.957
Other cash flows from operating activities
Interest paid
(3.022)
(12.112)
Taxation received/(paid)
13.312
(48.459)
CASH FLOWS FROM OPERATING ACTIVITIES
21.913
(59.971)
CASH FLOWS FROM INVESTING ACTIVITIES
Amounts paid
Purchase of other equity instruments
(5.127)
(2.115)
Purchase of Property, plant and equipment
7
(43.901)
(112.383)
Purchase of Intangible assets
6
(6.426)
-
Amount paid to Group companies
-
(300.000)
Increase in Other financial assets
9
-
(100.000)
Amounts received
Proceeds from sale of Property, plant and equipment
90.485
-
Interest received
54.431
10.123
Amount received from Group companies
152.196
235.697
CASH FLOWS FROM INVESTING ACTIVITIES
241.658
(268.678)
CASH FLOWS FROM FINANCING ACTIVITIES
Receipts and payments on equity instruments
Acquisition of treasury shares
(76.716)
(22.674)
Repayment of equity instruments
(559.284)
(562.406)
Repayment
Debt with Group companies
(413.820)
(424.976)
CASH FLOWS FROM FINANCING ACTIVITIES
(1.049.820)
(1.010.056)
IMPACT OF EXCHANGE DIFFERENCES
(789)
(7.624)
INCREASE IN CASH AND CASH EQUIVALENTS
(787.038)
(1.346.329)
Cash and cash equivalents at the beginning of the year
9,10
2.141.257
3.487.586
CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR
9,10
1.354.219
2.141.257
INTERNATIONAL CONSOLIDATED AIRLINES GROUP, S.A.
Notes to the financial statements
6
1. CORPORATE INFORMATION AND ACTIVITY
International Consolidated Airlines Group S.A. (hereinafter the ‘Company’ or ‘IAG’) is a Spanish company formed to hold the
interests of airline and ancillary operations, and is registered in Madrid and was incorporated on 17 December 2009. IAG is the
parent company of British Airways, Iberia, Vueling, Aer Lingus, IAG Cargo Ltd (hereinafter ‘IAG Cargo’), IAG GBS, AERL Holding
Limited (hereinafter ‘AERL Holding'), LEVEL and IAG Connect all collectively defined as the ‘Group’. The Group presents
consolidated financial statements separately. These will be deposited at the Madrid Mercantile Registry and the FCA in London on
5 March 2024.
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. (hereinafter
‘Vueling’) was acquired on 26 April 2013 and Aer Lingus Group DAC (hereinafter ‘Aer Lingus’) was acquired on 18 August 2015.
During 2017, the Group incorporated FLY LEVEL S.L. and FLYLEVEL UK Limited (hereinafter ‘LEVEL’) and IAG Connect Limited
(hereinafter ‘IAG Connect’), with a 100 per cent investment by the Company. The objective and main activity, among others, of the
Company is the acquisition, ownership, management and disposal of shares or other equity interests in other companies, provision
of management services to those companies, and significant Group investments including aircraft procurement.
Following a shareholder meeting of Vueling Airlines, S.A. (‘Vueling’) on 29 December 2023, Veloz Holdco S.L.U. (‘Veloz') (legally
absorbed entity) and Vueling (legally absorbing entity) completed a reverse merger in which Vueling absorbed Veloz by means of
the block transfer of the entire assets of Veloz.
Prior to the reverse merger, the Company owned 100 per cent of the share capital of Veloz, which in turn owned 49.39 per cent of
Vueling, with Iberia Líneas Aéreas de España, S.A. Operadora (‘Iberia LAE’) (which the Company owns indirectly through its direct
investment in Iberia Opco Holding) owning 50.10 per cent and a further 0.51 per cent held by shareholders external to the Group.
Subsequent to the merger, the Company holds a direct investment in Vueling of 49.39 per cent, such that the investment in Veloz
has been allocated proportionally to the shareholding. For further information refer to note 8.1.
IAG is a Spanish Private Law entity, incorporated for an indefinite period by virtue of a public deed granted before the Public Notary
of Madrid Ignacio Martínez-Gil Vich on 17 December 2009 under number 3.866 of his files, with its registered office in Madrid, at El
Caserío, Iberia Zona Industrial nº 2 (La Muñoza), Camino de La Muñoza, s/n, 28042, Madrid, Spain and entered at the Madrid
Mercantile Registry with registration number M-492129 in Volume 27312, Book 0, Section 8, Folio 11.
IAG holds a premium listing on the FTSE’s UK index series. 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’).
The Company's presentation currency is euro. The United Kingdom (‘UK’) branch's functional currency is pound sterling as this is
the currency of the economic environment in which it operates.
2. BASIS OF PRESENTATION OF THE FINANCIAL STATEMENTS
Applicable financial reporting framework
The financial statements have been prepared in accordance with the accounting principles approved by Royal Decree 1514/2007,
of 16 November 2007, which was amended in 2016 by Royal Decree 602/2016 of 2 December 2016, and in 2021 by Royal Decree
1/2021, and the remaining prevailing mercantile law.
These financial statements have been prepared by the Directors of the Company for submission to and for approval at the General
Shareholders’ Meeting, where it is expected they will be approved without modification.
The figures shown in these financial statements are presented in thousands of euros unless otherwise indicated.
Going concern
At 31 December 2023 the Company had cash and cash equivalents of €1.354 million and the Group had total liquidity of €11.624
million (31 December 2022: total liquidity of €13.999 million), comprising cash 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 Company has no financial covenants associated with its loans and borrowings.
In its assessment of going concern, the Company and the Group have 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 Company and 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;
• the Company and the Group have 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 Company and the Group have assumed that the undrawn aircraft facilities of €375 million, relating to specific financing
structures, are expected to be utilised over the going concern period;
INTERNATIONAL CONSOLIDATED AIRLINES GROUP, S.A.
Notes to the financial statements continued
7
2. BASIS OF PRESENTATION OF THE FINANCIAL STATEMENTS continued
• the Company and the Group have assumed that the €500 million bond that matures in March 2025 will not be refinanced;
• €3.207 million of capital commitments are due to be paid over the period to 31 March 2025;
• while the Company and the Group do not expect to finance all expected deliveries over the going concern period, for
those expected to be financed, the Company and the Group have 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 expected to be financed, including aircraft delivered in 2023 that had not had
their financing secured at the reporting date; and
• the Company and the Group have 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 at least 25 per cent for three
months over the going concern period; reduced passenger unit revenue per 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. 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, Downside Case, the Directors of the Company have a reasonable expectation that the Company
and the Group have sufficient liquidity to continue in operational existence for a period of at least 12 months from the date of
approval of these financial statements and hence continue to adopt the going concern basis in preparing the financial statements
at 31 December 2023.
2.1 True and fair view
The accompanying financial statements have been prepared from the Company's accounting records in accordance with prevailing Spanish
accounting legislation to give a true and fair view of its equity, financial position and reserves. The cash flow statement has been prepared
to present fairly the origin and usage of monetary assets, such as cash and cash equivalents.
The annual accounts for 2023 shall be submitted for the approval in the Shareholders Meeting in June 2024, and it is expected that they
will be approved without any modification.
2.2 Comparative information
According to corporate law, the prior year information in the Balance sheet, Income statement, Statement of other comprehensive income,
Statement of changes in equity and Cash flow statement is presented for comparison purposes, in addition to figures for 2023. The notes
to the financial statements also include quantitative information for the prior year, unless an accounting standard specifies that it is not
necessary.
The notes to the financial statements for the prior year include reclassifications that were made to conform to the current year presentation.
The amendments have no material impact on the financial statements.
2.3 Critical accounting estimates and assumptions
The Directors have prepared the financial statements using estimates and assumptions based on current and historical experience and
various other factors that affect the reported value of the assets and liabilities, and are considered reasonable under the circumstances.
The carrying amount of assets and liabilities, which are not readily apparent from other sources, is established on the basis of these
estimates. The Directors are not aware of any specific risks that might significantly alter the value of the assets or liabilities in the following
year and, therefore, considers that it is not necessary to make estimates of uncertainty at the end of the reporting period.
Impairment of investments in Group companies
The Company assesses whether there are any indicators of impairment for equity investments in Group companies. An impairment loss is
recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amounts of equity
investments in Group companies have been determined based on the future forecast cash flows of the investments, which require the use
of estimates and assumptions, including three year business plan assumptions, long-term growth rates and discount rates.
Impairment losses can be reversed and recognised in the Income statement if there is any indication that the impairment loss no longer
exists. The reversal is limited to the carrying value of the asset that would have been recognised on the reversal date had the original
impairment not occurred.
INTERNATIONAL CONSOLIDATED AIRLINES GROUP, S.A.
Notes to the financial statements continued
8
2. BASIS OF PRESENTATION OF THE FINANCIAL STATEMENTS continued
2.3 Critical accounting estimates and assumptions continued
Determining whether the Company has significant influence over Air Europa Holdings
The Company 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. Such judgement includes the consideration as to the ability of the
Company 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 Company; enable the interchange of management personnel; and provide essential technical information.
In forming its judgement, the Company 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 Company has therefore concluded that it does not have significant influence over Air Europa Holdings.
Accordingly, the Company accounts for its shareholding in Air Europa Holdings as an Equity instrument and measures it at fair
value through other comprehensive income. Had the Company concluded that it does have significant influence over Air Europa
Holdings, then the shareholding would have been classified as an associate.
At 31 December 2023, the fair value of its shareholding in Air Europa Holdings was €129 million. Further information is given in
note 9.1.2.
3. APPROPRIATION OF (LOSS)/PROFIT
The appropriation of the 2022 result was approved in the Shareholders’ Meeting dated 15 June 2023.
The Board of Directors will submit the following proposed appropriation of the 2023 result for approval at the Shareholders'
Meeting in June 2024:
€'000
2023
2022
Proposed appropriation:
(Loss)/profit for the year
(22.749)
50.586
(22.749)
50.586
Appropriation to:
Voluntary reserve
-
50.586
Prior year reserves
(22.749)
-
(22.749)
50.586
3.1 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.
3.2 Limitations on the distribution of the profit
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.
The Company is obliged to transfer 10 per cent of the profit for the year to a legal reserve until this reserve reaches an amount at
least equal to 20 per cent of share capital. Unless the balance of the reserve exceeds this amount, it cannot be distributed to
shareholders. As at 31 December 2023 and 2022 the legal reserve included the minimum amount required by law. The non-
distributable reserves at 31 December 2023 are €966.720.000 (2022: €966.720.000).
Once the guidance provided by the law or the statutes has been covered, dividends can only be distributed from profit for the year,
or from distributable reserves, if the value of equity is not or, does not become as a result of the distribution, lower than share
capital. In this case, the profit charged directly to equity cannot be distributed, directly or indirectly. If losses from previous years
existed, that make the Company’s equity lower than share capital, the profits would be used to compensate those losses.
INTERNATIONAL CONSOLIDATED AIRLINES GROUP, S.A.
Notes to the financial statements continued
9
4. RECOGNITION AND MEASUREMENT ACCOUNTING POLICIES
The main recognition and measurement accounting policies applied in the preparation of the 2023 financial statements are the
following:
4.1 Leases
Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership
to the Company. All other lease arrangements are classified as operating leases.
For operating leases, the total minimum payments, measured at inception, are charged to the Income statement in equal annual
amounts over the term of the lease.
4.2 Intangible assets
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.
4.3 Property, plant and equipment
Property, plant and equipment is stated at historical cost less accumulated depreciation and impairment losses. The Company
depreciates property, plant and equipment on a straight-line basis at annual rates over their useful economic lives.
4.4 Investments in Group Companies
Equity investments in Group companies include investments in entities over which the Company has control. On intial recognition
the investments are measured at fair value, which generally is equal to the fair value of the consideration paid, plus directly
attributable transaction costs. Equity investments are subsequently measured at cost less, where appropriate, provisions for
impairment, or distributions received recognised against the cost of the investment, if applicable.
4.5 Impairment of non-financial assets
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.
Equity investments in Group companies are not subject to amortisation and are tested annually for impairment. An impairment loss
is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the
higher of an asset’s fair value less cost to dispose and the equity value, which is based on the associated future cash flows of the
related investment. Non-financial assets other than goodwill that have suffered an impairment are reviewed for possible reversal of
the impairment at each reporting date.
4.6 Financial instruments
The Company classifies financial instruments on initial recognition as a financial asset, a financial liability or an equity instrument in
accordance with the economic substance of the contractual arrangement and the definitions of a financial asset, a financial liability
and an equity instrument.
The Company recognises a financial instrument when it becomes party to the contract or legal transaction, in accordance with the
terms set out therein, either as the issuer or as the holder or acquirer thereof.
The Company classifies financial instruments into the following categories: financial assets and financial liabilities at fair value
through profit or loss and financial assets and financial liabilities measured at amortised cost.
Other equity investments, on initial recognition, 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.
The Company classifies investments in equity instruments of Group companies and associates, and investments in equity
instruments whose fair value cannot be determined by reference to a quoted price in an active market for an identical asset, or
cannot be reliably estimated, at cost.
All other financial assets are classified at fair value through profit or loss.
The Company designates a financial liability at initial recognition as measured at fair value through profit or loss when doing so
eliminates or significantly reduces a measurement or recognition inconsistency or mismatch that would otherwise arise from
measuring assets or liabilities or recognising the gains and losses on them on different bases.
The Company classifies all other financial liabilities at amortised cost.
(i) Offsetting principles
A financial asset and a financial liability are offset only when the Company currently has the legally enforceable right to offset the
recognised amounts and intends either to settle on a net basis or to realise the asset and settle the liability simultaneously.
INTERNATIONAL CONSOLIDATED AIRLINES GROUP, S.A.
Notes to the financial statements continued
10
4. RECOGNITION AND MEASUREMENT ACCOUNTING POLICIES continued
4.6 Financial instruments continued
(ii) Financial assets and financial liabilities
Financial assets and financial liabilities are classified, upon initial recognition, as measured at amortised cost, 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 and financial
liabilities.
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
and 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.
(iii) 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 Company has
no alternative other than to settle the convertible bonds into a fixed number of ordinary shares of the Company, then the bonds are
classified as a compound financial instrument. Where the Group has an alternative settlement mechanism to the convertible bonds
that permits settlement in cash, then the convertible instrument is classified as a hybrid financial instrument.
Convertible bonds that are classified as compound financial instruments consist of a liability and an equity component. At the date
of issue, the fair value of the liability component is estimated using the prevailing market interest rate for similar non-convertible
debt, and is subsequently recorded at an amortised cost basis using the effective interest method until extinguished on conversion
or maturity of the bonds, and is recognised within Long-term borrowings. The difference between the proceeds of issue of the
convertible bond and the fair value assigned to the liability component, representing the embedded option to convert the liability
into equity of the Company, is included in the equity portion of the convertible bond in Other reserves and is not subsequently
remeasured. The interest expense on the liability component is calculated by applying the effective interest rate for similar non-
convertible debt to the liability component of the instrument. The difference between this value and the interest paid is added to the
carrying amount of the liability.
Convertible bonds that are classified as hybrid financial instruments consist only of a liability component recognised within Long-
term borrowings. At the date of issue, the entirety of the convertible bonds is accounted for at fair value with subsequent fair value
gains or losses recorded within Finance cost in the Income statement. The fair value of such financial instruments is obtained from
their respective quoted prices in active markets.
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.
(iv) Investments in Group companies and associates
Equity investments in Group companies and associates are measured at the fair value of the consideration given, plus any directly
attributable transaction costs (except fees paid to legal advisors or other professionals, which are taken directly to the income
statement), less any accumulated impairment. Such impairment is calculated as the difference between the carrying amount and
the recoverable amount, which is the higher of fair value less costs to sell and the present value of future cash flows from the
investment. In the absence of better evidence of the recoverable amount, the investee's equity is taken into consideration, corrected
for any unrealised gains existing at the measurement date (including any goodwill).
(v) Equity instruments
Equity instruments are non-derivative financial assets including unlisted investments, excluding interests in associates and joint
ventures. On initial recognition, these equity instruments 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 Equity instruments. Dividends received on equity instruments 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.
INTERNATIONAL CONSOLIDATED AIRLINES GROUP, S.A.
Notes to the financial statements continued
11
4. RECOGNITION AND MEASUREMENT ACCOUNTING POLICIES continued
4.6 Financial instruments continued
(vi) Reclassification of financial instruments
The Company reclassifies financial assets when it changes the business model for their management or when they meet or cease
to meet the criteria for classification as an investment in Group companies or associates, or the fair value of an investment ceases
to be or is once again reliable, except for equity instruments classified at fair value through equity, which cannot be reclassified.
The Company does not reclassify financial liabilities.
(vii) Interest and dividends
The Company recognises interest and dividends accrued on financial assets after their acquisition as income.
The Company accounts for interest on financial assets carried at amortised cost using the effective interest rate method and
recognises dividends when the Company’s right to receive payment is established.
If the dividends are clearly derived from profits generated prior to the acquisition date because amounts higher than the profits
generated by the investee itself or by any investee thereof since acquisition have been distributed, the carrying amount of the
investment is reduced. This criterion applies irrespective of the measurement criterion used to measure equity instruments.
Therefore, in the case of equity instruments at fair value, the value of the investment is also reduced, and any subsequent increase
in value is recognised in the income statement or in equity, depending on the instrument’s classification.
(viii) Impairment of financial assets
A financial asset or a group of financial assets is impaired and impairment losses are incurred if there is objective evidence of
impairment as a result of one or more events that occurred after the initial recognition of the asset and the event or events have an
impact on the estimated future cash flows of the financial asset or group of financial assets that can be reliably estimated.
The Company recognises impairment on financial assets at amortised cost when estimated future cash flows are reduced or delayed
due to debtor insolvency.
For equity instruments, objective evidence of impairment exists when the carrying amount of an asset is uncollectible due to a
significant or prolonged decline in its fair value.
• Impairment of financial assets carried at amortised cost.
The amount of the impairment loss of financial assets carried at amortised cost is measured as the difference between the asset’s
carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not been incurred)
discounted at the financial asset’s original effective interest rate. For variable income financial assets, the effective interest rate
corresponding to the measurement date under the contractual conditions is used. Nevertheless, the Company uses the market
value, providing this is sufficiently reliable to be considered representative of the recoverable amount.
The impairment loss is recognised in profit or loss and may be reversed in subsequent periods if the decrease can be objectively
related to an event occurring after the impairment has been recognised. The loss can only be reversed to the limit of the amortised
cost of the assets had the impairment loss not been recognised.
The Company directly reduces the carrying amount of a financial asset when it has no reasonable expectations of recovering the
financial asset in its entirety or a portion thereof.
• Impairment of investments in Group companies, associates and equity instruments carried at cost.
Impairment is calculated by comparing the carrying amount of the equity investment with its recoverable amount. The recoverable
amount is the higher of value in use and fair value less costs to sell.
Value in use is calculated based on the Company’s share of the present value of future cash flows expected to be derived from
ordinary activities and from the disposal of the asset, or the estimated cash flows expected to be received from the distribution of
dividends and the final disposal of the investment.
Nonetheless, and in certain cases, unless better evidence of the recoverable amount of the equity investment is available, when
estimating impairment of these types of assets, the investee’s equity is taken into consideration, adjusted, where appropriate, to
generally accepted accounting principles and standards in Spain, corrected for any net unrealised gains existing at the
measurement date. If the investee forms a subgroup of companies, the equity shown in the consolidated annual accounts is taken
into account, provided that these accounts have been authorised for issue. Otherwise, the equity reflected in the individual annual
accounts is considered.
The carrying amount of the equity investment includes any monetary item that is receivable or payable for which settlement is
neither planned nor likely to occur in the foreseeable future, excluding trade receivables or trade payables.
In subsequent years, reversals of impairment losses in the form of increases in the recoverable amount are recognised, up to the
limit of the carrying amount that would have been determined for the investment if no impairment loss had been recognised.
Impairment losses are recognised and reversed in the income statement.
INTERNATIONAL CONSOLIDATED AIRLINES GROUP, S.A.
Notes to the financial statements continued
12
4. RECOGNITION AND MEASUREMENT ACCOUNTING POLICIES continued
4.6 Financial instruments continued
(ix) Derecognition and modifications of financial liabilities
The Company derecognises all or part of a financial liability when it either discharges the liability by paying the creditor, or is legally
released from primary responsibility for the liability either by process of law or by the creditor.
The exchange of debt instruments between the Company and the counterparty or substantial modifications of initially recognised
liabilities are accounted for as an extinguishment of the original financial liability and the recognition of a new financial liability,
provided that the instruments have substantially different terms. The Company considers the terms to be substantially different if
the discounted present value of the cash flows under the new terms, including any fees paid net of any fees received and discounted
using the original effective interest rate, is at least 10 per cent different from the discounted present value of the remaining cash
flows of the original financial liability.
If the exchange is accounted for as an extinguishment of the financial liability, any costs or fees incurred are recognised as part of
the gain or loss on the extinguishment. If the exchange is not accounted for as an extinguishment, any costs or fees incurred adjust
the carrying amount of the liability and are amortised at amortised cost over the remaining term of the modified liability. In the latter
case, a new effective interest rate is determined on the modification date, calculated as the rate that equates the present value of
the flows payable under the new terms to the carrying amount of the financial liability at that date.
The difference between the carrying amount of a financial liability, or part of a financial liability, extinguished or transferred to another
party and the consideration paid, including any non-cash assets transferred or liabilities assumed, is recognised in profit or loss. If
the Company transfers non-monetary assets in settlement of the debt, the difference between their fair value and their carrying
amount is recognised as results from operating activities, and the difference between the value of the debt being settled and the
fair value of the assets as net finance income/cost. If the Company transfers inventories, the corresponding sale transaction is
recognised at their fair value and the change in inventories at their carrying amount.
4.7 Treasury shares
Shares in the Company purchased and held directly by the Company are classified as Treasury shares and shown as deductions
from Shareholders’ funds at cost. When these shares are cancelled, Share capital is reduced by the nominal value of the cancelled
shares, with an increase in the Redeemed capital reserve. No gain or loss is recognised in the Income statement on the purchase,
sale, issue or cancellation of equity shares.
4.8 Cash and cash equivalents
Cash and cash equivalents includes 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.
4.9 Foreign currency translation
Transactions in foreign currencies are initially recorded in the functional currency of the branch using the spot exchange rate ruling
at the date of the transaction. At each balance sheet date, monetary assets and liabilities denominated in foreign currencies are
retranslated into euro at the rate prevailing 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.
The net assets of foreign operations are translated into euros at the rate of exchange prevailing 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 until all or part of the interest is sold, when the relevant portion of
the cumulative exchange is recognised in the Income statement.
INTERNATIONAL CONSOLIDATED AIRLINES GROUP, S.A.
Notes to the financial statements continued
13
4. RECOGNITION AND MEASUREMENT ACCOUNTING POLICIES continued
4.10 Corporate tax
From 1 January 2015 onwards the Spanish entities International Consolidated Airlines Group S.A., Vueling Airlines S.A., Avios
Group Limited Sucursal en España , IAG GBS Limited Sucursal en España and IAG Cargo Limited Sucursal en España, filed
consolidated tax returns as part of the Spanish tax unity (0061/15, pursuant to title VII, Chapter VI of the Spanish Corporate Income
Tax Law set forth in the Law 27/2014 of 27 November 2014). Fly Level S.L. joined the tax unity on 7 November 2017. Yellow
Handling S.L.U. joined the tax unity on 17 October 2019. From 1 January 2020 Vueling and Yellow Handling S.L.U. ceased to be
part of the Spanish tax unity due to modifications in their shareholding.
Current tax assets and liabilities are measured at the amount expected to be recovered from or paid to the taxation authorities,
based on the tax rates and legislation in force.
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 the tax rates and legislation in force.
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.
4.11 Revenue and expense recognition
The Company presents the income from rendering management services to Group companies, dividend received from Group
Companies and financial income from financing granted to them as Revenue from operations.
4.12 Provisions
Provisions are made when an obligation exists for a present liability in respect of a past event and where the amount of the obligation
can be reliably estimated. Restructuring provisions are made for direct expenditures of a business reorganisation where the plans
are sufficiently detailed and well advanced and where appropriate communication to those affected has been undertaken at the
balance sheet date.
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 increase in the provision due to unwinding the discount is recognised as a finance
cost.
4.13 Long-term remuneration to personnel
The Company offers a defined contribution pension plan to all IAG employees. A defined contribution plan is a pension plan under
which the Company pays fixed contributions into a separate entity. The Company 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. Current service costs are recognised within the Income statement in the year in which they arise. At each
financial year end, accrued contributions payable are recognised in the Balance sheet.
4.14 Share-based payment transactions
The Company operates a number of equity-settled, share-based payment plans, under which the Company awards equity
instruments for services rendered by employees. The fair value of the share-based payment plans is measured at the date of grant
using an appropriate valuation model (note 17). The resulting cost is adjusted to reflect expected and actual levels of vesting, and
is charged to the Income statement over the vesting period.
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.
4.15 Dividends
Interim dividends are recognised when they are paid and final dividends are recognised when authorised in general meetings by
shareholders.
4.16 Related parties
Transactions between group companies, except those related to mergers and non-cash contributions of businesses where particular
regulations apply, including investments in group companies, are recognised at the fair value of the consideration given or received.
The difference between fair value and the transaction price is recognised either as a contribution or a dividend distribution. However,
the amount which is not realised in proportion to the percentage interest held in the group company is recognised as an income or
expense.
INTERNATIONAL CONSOLIDATED AIRLINES GROUP, S.A.
Notes to the financial statements continued
14
4. RECOGNITION AND MEASUREMENT ACCOUNTING POLICIES continued
4.16 Related parties continued
In the transactions where the aforementioned particular regulations apply, the values of the net assets received must be those that
come from consolidated accounts of the group or of the larger sub-group in which the assets and liabilities are included and whose
parent company is Spanish. If the aforementioned financial statements are not prepared under one of the exemptions considered
in the consolidation rules, the values to be used shall be those existing prior to the transaction in the separate financial statements
of the transferring or acquired company.
4.17 Classification of assets and liabilities between current and non-current
Assets and liabilities are presented in the Balance sheet as either current or non-current. The assets and liabilities are classified as
current when linked to the normal operating cycle of the Company.
When an asset or liability is not linked to the normal operating cycle but the Company expects the asset or liability to mature or
liquidate, or plans to dispose of the asset or liability within 12 months, then these are also classified as current when they are
maintained for the purposes of operations, or the instrument is related to cash and cash equivalents.
Any asset or liability whose use is restricted to beyond one year is classified as non-current.
5. LEASES
The Company has a property in Madrid which is leased from Iberia with an annual renewal. The contract has an option to review
the duration of the lease on an annual basis. The Company also has an office in London which is leased from British Airways. The
lease expires in 2025.
The annual cost of the leases is €617.000 (2022: €574.000). The amount of future minimum lease payment is €623.000 (2022:
€557.000) for less than one year and €484.000 (2022: nil) for between 1 year and 2 years.
6. INTANGIBLE ASSETS
€'000
1 January
Additions
31 December
2023
Cost
Computer applications in progress
-
6.472
6.472
-
6.472
6.472
Net book value
Computer applications in progress
-
6.472
6.472
-
6.472
6.472
7. PROPERTY, PLANT AND EQUIPMENT
€'000
Work-in-
progress¹
Total
Cost
Balance at 1 January 2023
83.046
83.046
Additions
43.901
43.901
Exchange adjustments
869
869
Transfer to Group companies
(65.830)
(65.830)
Net book value at 31 December 2023
61.986
61.986
Balance at 1 January 2022
8.156
8.156
Additions
112.383
112.383
Exchange adjustments
(3.537)
(3.537)
Transfer to Group companies
(33.956)
(33.956)
Net book value at 31 December 2022
83.046
83.046
1
Relates to pre-delivery payments made on aircraft.
There was no depreciation for the year to 31 December 2023 (2022: nil)
Capital expenditure authorised and contracted for but not provided for in the accounts was €2.305.811.000 (December 2022:
€3.203.419.000) in relation to fleet purchases. The capital expenditure is denominated in US dollars, and as such is subject to
changes in exchange rates.
INTERNATIONAL CONSOLIDATED AIRLINES GROUP, S.A.
Notes to the financial statements continued
15
8. EQUITY INVESTMENTS IN GROUP COMPANIES
The details and movement of individual items that comprise this section are:
€'000
1 January
Additions
31 December
2023
Equity instruments
Cost
8.185.959
(89.684)
8.096.275
Distribution received
(342.766)
-
(342.766)
Impairment
(270.003)
-
(270.003)
7.573.190
(89.684)
7.483.506
2022
Equity instruments
Cost
8.185.959
-
8.185.959
Distribution received
(342.766)
-
(342.766)
Impairment
(270.003)
-
(270.003)
7.573.190
-
7.573.190
8.1 Description of the main movements
Following a shareholder meeting of Vueling on 29 December 2023, Veloz (legally absorbed entity) and Vueling (legally absorbing
entity) completed a reverse merger in which Vueling absorbed Veloz by means of the block transfer of the entire assets of Veloz.
As a result of the merger, Veloz ceased to exist. The reverse merger was carried out in accordance with the provisions set forth in
Book One, on the Transposition of the European Union Directive regarding Structural Changes in Commercial Companies, of the
Royal Decree-Law 5/2023, of June 28th, with the Company exchanging all of the shares of Veloz in exchange for 14,775,037 shares
in Vueling of €1 nominal value. The deed executing the merger was filed for registration in the Mercantile Registry of Barcelona on
29 December 2023.
Prior to the reverse merger, the Company owned 100 per cent of the share capital of Veloz, which in turn owned 49.39 per cent of
Vueling, Iberia LAE (which the Company owns indirectly through its direct investment in Iberia Opco Holding) owning 50.10 per
cent and a further 0.51 per cent held by shareholders external to the Group. Subsequent to the merger, the Company holds a direct
investment in Vueling of 49.39 per cent, such that the investment in Veloz has been allocated proportionally to the shareholding.
This resulted in the following accounting impact: (i) the de-recognition of the direct investment in Veloz of €166,139 thousand; (ii) a
direct investment in Vueling of €37.961 thousand; (iii) an increase in the investment in Iberia Opco Holdings of €33.259 thousand;
(iv) an increase in the investment in British Airways of €5.235 thousand; (v) the recognition of a charge to the voluntary reserve in
equity of €89.305 thousand; and (vi) a charge of €379 thousand being recorded in Finance costs in the Income statement reflecting
the proportion relating to the non-controlling third party shareholders.
INTERNATIONAL CONSOLIDATED AIRLINES GROUP, S.A.
Notes to the financial statements continued
16
8. EQUITY INVESTMENTS IN GROUP COMPANIES continued
8.2 Details of investments
Information at 31 December on the Group companies, prepared in accordance with International Financial Reporting Standards, is
as follows:
Business
activity
Percentage
of
ownership¹
Capital
Reserves
Profit/(loss)
after tax for
the year
Total
shareholders'
equity
Operating
profit/(loss)
Net book
value
€'000
2023
€’000
Iberia
Passenger air
transport
Indirect
66.717
(91.550)
803.929
779.096
778.075
-
Iberia Opco
Holding
Holding
company
100%
10
2.294.733
15.192
2.309.935
(63)
2.421.807
Aer Lingus
Passenger air
transport
Indirect³
27.615
(58.132)
173.877
143.360
225.008
-
Vueling
Passenger air
transport
99,5%²
29.905
(732.785)
290.603
(412.277)
396.051
37.961
Aerl Holding
Holding
company
100%
760.000
526.791
(2.775)
1.284.016
-
836.000
LEVEL
Passenger air
transport
100%
185.003
(178.005)
5.678
12.676
(451)
-
£’000
British
Airways
Passenger air
transport
100%
290.000
1.149.000
1.161.000
2.600.000
1.431.000
4.160.632
IAG Cargo
Cargo air
transport
100%
-
7.219
1.009
8.228
2.977
-
IAG GBS
Business
services
100%
20.000
(30.411)
2.291
(8.120)
2.836
22.218
IAG Connect
eCommerce
platform
100%
-
4.208
117
4.325
125
4.888
Polish złoty '000
IAG GBS
Poland
Business
services
1%⁴
-
8.350
2.705
11.055
4.003
-
Other Group
companies
n/a
n/a
n/a
n/a
n/a
n/a
7.483.506
INTERNATIONAL CONSOLIDATED AIRLINES GROUP, S.A.
Notes to the financial statements continued
17
8. EQUITY INVESTMENTS IN GROUP COMPANIES continued
8.2 Details of investments continued
Business
activity
Percentage
of
ownership¹
Capital
Reserves
Profit/(loss)
after tax for
the year
Total
shareholders'
equity
Operating
profit/(loss)
Net book
value
€'000
2022
€’000
Iberia
Passenger air
transport
Indirect
66.717
(157.517)
215.979
125.179
257.182
-
Iberia Opco
Holding
Holding
company
100%
10
2.258.920
(2.680)
2.256.250
(180)
2.388.548
Aer Lingus
Passenger air
transport
Indirect³
28.015
707
(21.672)
7.050
45.345
-
Vueling
Passenger air
transport
Indirect²
29.905
(889.330)
119.463
(739.962)
186.779
-
Veloz
Holding
company
100%
33
213.929
(797)
213.165
(227)
166.139
Aerl Holding
Holding
company
100%
760.000
528.962
(2.171)
1.286.791
-
836.000
LEVEL
Passenger air
transport
100%
185.003
(182.871)
4.866
6.998
5.050
-
£’000
British
Airways
Passenger air
transport
100%
290.000
2.132.000
61.000
2.483.000
322.000
4.155.397
IAG Cargo
Cargo air
transport
100%
-
5.840
1.562
7.402
1.603
-
IAG GBS
Business
services
100%
20.000
(29.086)
(1.324)
(10.410)
2.375
22.218
IAG Connect
eCommerce
platform
100%
-
4.136
71
4.207
92
4.888
Polish złoty '000
IAG GBS
Poland
Business
services
1%⁴
-
5.932
2.418
8.350
3.667
-
Other Group
companies
n/a
n/a
n/a
n/a
n/a
n/a
7.573.190
1
IAG directly holds 90,02 per cent and 86,45 per cent of the economic rights in British Airways and Iberia respectively. The remaining
economic ownership of both companies is indirectly held by IAG through the cross-holdings between British Airways and Iberia.
IAG, including through British Airways’ shareholding, holds 49,9 per cent of the total nominal share capital and of 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 per cent of the economic rights in these two companies. The remaining shares, representing 50,1 per cent of
the total nominal share capital and of the total number of voting rights belong to Garanair, S.L., a Spanish company incorporated
for the purposes of implementing the Spanish nationality structure.
IAG, including through Iberia’s shareholding, holds 49,9 per cent of the total number of voting rights and 99,65 per cent of the total
nominal share capital in British Airways Plc, such stake having almost 100 per cent of the economic rights. The remaining nominal
share capital and voting rights, representing 0,35 per cent and 50,1 per cent respectively, correspond to a trust established for the
purposes of implementing the British Airways nationality structure.
2
IAG holds a total investment of 99,49 per cent in Vueling, 49,39 per cent held directly and 50,10 per cent held through its subsidiary
Iberia Opco Holding.
3
IAG holds 49,75 per cent of the total number of voting rights and almost 100 per cent of the economic rights in Aer Lingus. The
remaining voting rights, representing 50,25 per cent, correspond to a trust established for implementing the Aer Lingus nationality
structure.
4
IAG holds a direct investment of 1 per cent in IAG GBS Poland and an indirect investment of 99 per cent through IAG GBS.
INTERNATIONAL CONSOLIDATED AIRLINES GROUP, S.A.
Notes to the financial statements continued
18
8. EQUITY INVESTMENTS IN GROUP COMPANIES continued
8.2 Details of investments continued
British Airways’ registered office is at Waterside, PO Box 365, Harmondsworth, Middlesex, UB7 0GB, United Kingdom. The main
activity of British Airways is the operation of international and domestic air services for the carriage of passengers and cargo. In
addition it provides ancillary services, BA Holidays and aircraft maintenance services.
Iberia’s registered office is at Calle Martínez Villergas 49, 28027, Madrid, Spain. The main business of Iberia is the operation of
international and domestic air services for the carriage of passengers and cargo. In addition it provides ancillary services including
aircraft maintenance and handling services.
Vueling’s registered office is at Carrer de Catalunya 83, Viladecans, 08840, Barcelona, Spain. The main business of Vueling
consists of the the operation of international and domestic air services for the carriage of passengers.
IAG Cargo’s registered office is at Carrus Cargo Centre, PO Box 99, Sealand Road, London Heathrow Airport, Hounslow,
Middlesex, TW6 2JS, United Kingdom. The principal activity of IAG Cargo is commercial sales, support and management services
in the provision of air freight on the British Airways, Iberia and Aer Lingus networks.
IAG GBS’s registered office is at Waterside (HAA2), PO Box 365, Speedbird Way, Harmondsworth, Middlesex, UB7 0GB, United
Kingdom. The principal activity is the provision of business services to the IAG Group.
IAG GBS Poland’s registered office is at ul. Opolska 114, 31-323 Kraków, Poland. The principal activity is the provision of business
services to the IAG Group.
AERL Holding’s registered office is at Waterside (HAA2), PO Box 365, Speedbird Way, Harmondsworth, Middlesex, UB7 0GB,
United Kingdom. The principal activity is acquisition and holding of equity interests in Aer Lingus Group DAC and the management
and disposition of such equity interests.
FLY LEVEL S.L.’s registered office is at El Caserío, Camino de la Muñoza s/n, Iberia zona Industrial no 2, 28042 Madrid, Spain.
The principal activity is passenger air transport.
IAG Connect Limited’s registered office is at Dublin Airport, County Dublin, Republic of Ireland. The principal activity is the provision
of the Group’s inflight eCommerce platform.
In accordance with article 155 of the Spanish Companies Law (Ley de Sociedades de Capital), the Company has duly notified the
abovementioned subsidiaries of the acquisition of their share capital.
8.3 Impairment review
The principal equity investments in Group companies comprise British Airways, Iberia, Vueling and AERL Holding (the holding
company of Aer Lingus).
Basis for calculating recoverable amount
The recoverable amounts of Company’s investments 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 the pre-tax discount rate for each investment.
Annually the relevant operating companies 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. 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.
Impact of climate change on the Company’s investment impairment analysis
The Group’s Flightpath Net Zero climate strategy is long-term in nature and includes commitments that will occur at differing points
over this time horizon. To the extent that certain of those commitments occur over the short-term, then they have been incorporated
into the three-year business plans.
The Group adjusts the final year of 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. These adjustments are limited to
those that: (i) the Group can reliably estimate at the reporting date; (ii) only relate to the Group’s existing asset base in its current
condition; and (iii) incorporate expected 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 Company’s investment 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 of 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 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.
INTERNATIONAL CONSOLIDATED AIRLINES GROUP, S.A.
Notes to the financial statements continued
19
8.3 Impairment review 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 Company 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 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.
Given the inherent uncertainty associated with the impact of climate change, the Company and the Group have applied additional
sensitivities below to reflect a more adverse impact of climate change than currently expected. This has been captured through
both the downward sensitivities of the long-term growth rates, ASKs, operating margins and the increased fuel price sensitivity.
Key assumptions
The value-in-use calculations for each investment 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 investments the key assumptions
used in the value-in-use calculations are as follows:
Per cent
2023
British Airways
Iberia
Vueling
Aerl Holding
Operating margin¹
7-14
7-14
4-12
6-14
Average ASK growth per annum
3-9
5-11
1-6
2-16
Long-term growth rate
1,7
1,5
0,9
1,3
Pre-tax discount rate
11,2
12,4
14,3
10,9
Per cent
2022
British Airways
Iberia
Vueling
formerly
Veloz
Aerl Holding
Operating margin¹
5-13
5-10
0-10
4-12
ASK as a proportion of 2019
1,2
90-105
92-107
113-123
102-127
Long-term growth rate
1,7
1,5
1,4
1,6
Pre-tax discount rate
10,4
11,2
12,8
10,1
1
ASKs as a proportion of 2019 and operating margin are both stated as the weighted average derived from the multi-scenario
discounted cash flow model.
2
In prior periods the Group applied the average ASK growth per annum as a key assumption. Given the impact of COVID-19, the
Group has presented ASKs as a proportion of the level of ASKs achieved in 2019, prior to the application of the terminal value
calculation
Jet fuel price ($ per MT)
Within 12
months
1-2 years
2-3 years
3 years and
thereafter
2023
895
829
800
800
2022
867
809
780
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 investment, 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. The airlines’ network plans 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.
INTERNATIONAL CONSOLIDATED AIRLINES GROUP, S.A.
Notes to the financial statements continued
20
8.3 Impairment review continued
Pre-tax discount rates represent the current market assessment of the risks specific to each investment, 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 Group and the investment. 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 investors and loyalty scheme investors and the cost of debt is derived from both
market data structure and industry gearing levels derived from comparable companies. Investment 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 Company 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, UK ETS allowances and CORSIA allowances, respectively, per tonne of CO
2
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 investments 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 investment,
where applicable, which include reducing the operating margin by 2 percentage points in each year, reducing ASKs by 5 per cent
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 investments than that included in the
impairment models.
For the British Airways, Iberia, Vueling and AERL Holding investments, while the recoverable amounts are estimated to exceed the
carrying amounts by €19.803 million, €8.124 million, €746 million and €2.384 million, respectively, the recoverable amounts would
be below the carrying amounts when applying reasonable possible but not probable changes in assumptions in each of the following
scenarios:
• British Airways: (i) if ASKs had been five per cent lower combined with a fuel price increase without cost recovery of 32
per cent; and (ii) if the fuel price had been 37 per cent higher;
• Iberia: if ASKs had been five per cent lower combined with a fuel price increase without cost recovery of 29 per cent; and
(ii) if the fuel price had been 34 per cent higher;
• Vueling: (i) if ASKs had been five per cent lower combined with a fuel price increase without cost recovery of 16 per cent;
and (ii) if the fuel price had been 22 per cent higher;
• AERL Holding: (i) if ASKs had been five per cent lower combined with a fuel price increase of 23 per cent; and (ii) if the
fuel price had been 29 per cent higher without cost recovery
For the remainder of the reasonable possible changes in key assumptions applied to the British Airways, Iberia, Vueling and AERL
Holding investments and for all the reasonable possible changes in key assumptions applied to the remaining investments, no
impairment arises.
INTERNATIONAL CONSOLIDATED AIRLINES GROUP, S.A.
Notes to the financial statements continued
21
9. FINANCIAL INSTRUMENTS
9.1 Financial assets
Details of the Company’s financial assets at 31 December by nature and classification for measurement purposes is as follows:
At 31 December 2023
€'000
Financial assets at
amortised cost
Financial assets at
fair value through
Other
comprehensive
income
Total
Non-current assets
Loan receivable from Group company (note 16.1)
2.102.789
-
2.102.789
Investment in other equity instruments (note 9.1.2)
-
152.250
152.250
2.102.789
152.250
2.255.039
Current assets
Trade and other receivables (note 9.1.1)
201.084
-
201.084
Loan receivable from Group company (note 16.1)
25.824
-
25.824
Cash and cash equivalents (note 10)
1.354.219
-
1.354.219
1.581.127
-
1.581.127
At 31 December 2022
€'000
Financial assets at
amortised cost
Financial assets at
fair value through
Other
comprehensive
income
Total
Non-current assets
Loan receivable from Group company (note 16.1)
2.011.922
-
2.011.922
Investment in other equity instruments (note 9.1.2)
-
41.423
41.423
2.011.922
41.423
2.053.345
Current assets
Trade and other receivables (note 9.1.1)
215.354
-
215.354
Loan receivable from Group company (note 16.1)
91.885
-
91.885
Cash and cash equivalents (note 10)
2.141.257
-
2.141.257
2.448.496
-
2.448.496
9.1.1 Trade and other receivables
The breakdown of trade and other receivables at 31 December is as follows:
€’000
2023
2022
Current
Receivables from Group companies (note 16.1)
187.530
205.789
Other receivables
13.554
9.565
201.084
215.354
INTERNATIONAL CONSOLIDATED AIRLINES GROUP, S.A.
Notes to the financial statements continued
22
9. FINANCIAL INSTRUMENTS continued
9.1 Financial assets continued
9.1.2 Non-current investments in other equity instruments
Non-current investments in other equity instruments at 31 December is as follows:
€'000
2023
2022
Cost
Unlisted investments
152.250
41.423
152.250
41.423
Investment in Air Europa Holdings
On 15 June 2022, the Company entered into a financing arrangement with Globalia Corporación Empresarial, S,A, (‘Globalia’),
whereby, the Company 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 Company 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 Company 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 Company continues to recognise the 20 per cent share capital ownership of Air Europa Holdings as an Equity
investment (refer to note 2.3 for critical judgement applied in this classification).
At 31 December 2023, the fair value of the investment in Air Europa Holdings was €129.300.000, representing an increase of
€105.700.000 from the €23.600.000 recorded at 31 December 2022, with the fair value movement having been recorded within
other comprehensive income. The tax effect of this is a deferred tax liability of of €1.008.000 recorded in other comprehensive
income.
The Company, 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 Company 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 Company were able to obtain control over the operations
of Air Europa Holdings.
INTERNATIONAL CONSOLIDATED AIRLINES GROUP, S.A.
Notes to the financial statements continued
23
9. FINANCIAL INSTRUMENTS continued
9.2 Financial liabilities
Details of the Company’s financial liabilities at 31 December by nature and classification for measurement purposes is as follows:
€'000
2023
2022
Non-current liabilities
Bonds and other marketable securities
1.678.905
1.676.596
Convertible bond¹
725.835
595.716
Group companies (note 16.1)
-
209.000
2.404.740
2.481.312
Current liabilities
Trade and other payables (note 9.2.1)
39.976
29.939
Group companies (note 16.1)
226.704
417.755
Bond and other marketable securities
47.500
548.047
Convertible bond¹
9.281
9.281
323.461
1.005.022
1
The 2022 financial liabilities 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 Bonds and other
marketable securities. There is no change to financial liabilities.
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.
On 25 March 2021, two senior unsecured bonds were issued by the Group for an aggregate principal amount of €1,2 billion; €500
million fixed rate 2,75 per cent due in 2025, and €700 million fixed rate 3,75 per cent due in 2029.
In November 2015, the Group issued a senior unsecured bond of €500 million fixed rate 0.625 per cent raising net proceeds of
€494 million and due in 2022, which was redeemed at maturity in 2022 with no conversion to ordinary shares.
Details of the 2028 convertible bond
On 11 May 2021, the Company 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 Company 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 the Company. The Company also holds an option to redeem the convertible bond, in full
or in part, in cash in the event that bondholders exercise their right to convert the bond into ordinary shares of the Company.
The convertible bond is recorded at its fair value, which at 31 December 2023 was €735 million (2022: €605 million), representing a increase
of €130 million since 1 January 2023.
9.2.1 Trade and other payables
The breakdown of trade and other payables at 31 December is as follows:
€'000
2023
2022
Current trade and other payables
Various creditors
39.976
29.939
39.976
29.939
INTERNATIONAL CONSOLIDATED AIRLINES GROUP, S.A.
Notes to the financial statements continued
24
9. FINANCIAL INSTRUMENTS continued
9.2 Financial liabilities continued
9.2.2 Average payment days to suppliers
The information on average period for payment to suppliers in commercial transactions at 31 December is as follows:
Days
2023
2022
Average days for payment to suppliers
63
65
Ratio of transactions paid
67
65
Ratio of transactions outstanding for payment
42
40
€'000
2023
2022
Total payments made
33.989
36.825
Total payments outstanding
5.718
482
Information on invoices paid in a period shorter than the maximum period established in the late payment regulations
2023
2022
Total payments made
13.083
10.062
Percentage share of total payments to suppliers
38%
27%
Number of invoices paid
531
506
Percentage share of total number of invoices paid
36%
45%
9.3 Fair value of financial assets and financial liabilities
The fair values of the Company’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.
Level 3: Inputs for the asset or liability that are not based on observable market data. The principal method of such valuation is
performed using a valuation model that considers the present value of the dividend cash flows expected to be generated by the
associated assets.
The fair value of cash and cash equivalents, other current interest-bearing deposits, and trade and other payables and receivables
approximate their carrying value largely due to the short-term maturities of these instruments.
The fair values and carrying amounts of the Company’s financial assets and liabilities at 31 December 2023 are as follows:
2023
Fair value
Carrying
value
€'000
Level 1
Level 2
Level 3
Total
Total
Financial assets
Loan receivable from Group companies
-
2.128.613
-
2.128.613
2.128.613
Equity instruments
-
-
152.250
152.250
152.250
Financial liabilities
Bond and other marketable securities¹
2.373.395
-
-
2.373.395
2.461.521
Loan payable to Group companies
-
209.137
-
209.137
209.137
INTERNATIONAL CONSOLIDATED AIRLINES GROUP, S.A.
Notes to the financial statements continued
25
9. FINANCIAL INSTRUMENTS continued
9.3 Fair value of financial assets and financial liabilities continued
The fair values and carrying amounts of the Company’s financial assets and liabilities at 31 December 2022 were as follows:
2022
Fair value
Carrying
value
€'000
Level 1
Level 2
Level 3
Total
Total
Financial assets
Loan receivable from Group companies
-
2.103.807
-
2.103.807
2.103.807
Equity instruments
-
-
41.423
41.423
41.423
Financial liabilities
Bond and other marketable securities¹
2.483.003
-
-
2.483.003
2.829.640
Loan payable to Group companies
-
617.704
-
617.704
617.704
1
Bond and other marketable securities includes the convertible bond.
Bonds and other marketable securities, with the exception of the IAG €825 million convertible bond due 2028 which is measured at
fair value, are measured at amortised cost. Loans with Group companies are measured at amortised cost.
Level 3 financial assets reconciliation
The following table summarises key movements in Level 3 financial assets:
€'000
2023
2022
Opening balance for the year
41.423
17.708
Additions - other
5.088
2.115
Addition of Air Europa Holdings
-
21.730
Gains recognised in Other comprehensive income
105.700
1.870
Impairment
-
(1.950)
Exchange movements
39
(50)
Closing balance for the year
152.250
41.423
10. CASH AND CASH EQUIVALENTS
The cash and cash equivalents as at 31 December is as follows:
€'000
2023
2022
Cash at bank
151.605
147.200
Cash equivalents
1.202.614
1.994.057
1.354.219
2.141.257
There are no restrictions on the use of the amounts included in these captions.
At 31 December 2023 and 2022, the Company had no outstanding bank overdrafts.
INTERNATIONAL CONSOLIDATED AIRLINES GROUP, S.A.
Notes to the financial statements continued
26
11. EQUITY – CAPITAL AND RESERVES
11.1 Share capital
At 31 December 2023, the share capital of the Company amounts to €497.147.000, divided into 4.971.476.000 ordinary shares of
the same class and series and with a nominal value of 0,10 € each, fully subscribed and paid.
Details of shareholders and their equity based on their declararion at 31 December is as follows:
Per cent
2023
2022
Significant shareholders:
Qatar Airways (Q.C.S.C.)
25,143
25,143
Hargreaves Lansdown Plc
4,023
-
Capital Research and Management Company
5,001
-
Other shareholders
65,833
74,857
100
100
The share capital and premium for the Company is as follows:
Number of shares
Share capital
Share premium
'000s
€'000
€'000
At 31 December 2023: Ordinary shares of 0,10 € each
4.971.476
497.147
7.770.439
At 31 December 2022: Ordinary shares of 0,10 € each
4.971.476
497.147
7.770.439
11.2 Reserves and prior year results
Details of movements through reserves for the years to 31 December is as follows:
€'000
1 January
Appropriation
of prior year
profit/(loss)
Vesting of
share
based
payments
Redemption
of
convertible
bond
Reallocation
of legal
reserve
Reverse
merger of
Veloz and
Vueling
31
December
2023
Legal reserve
99.429
-
-
-
-
-
99.429
Other reserve
222.821
50.586
2.030
-
-
(89.305)
186.132
322.250
50.586
2.030
-
-
(89.305)
285.561
2022
Legal reserve
205.799
-
-
-
(106.370)
-
99.429
Other reserve
12.841
51.359
(9.785)
62.036
106.370
-
222.821
218.640
51.359
(9.785)
62.036
-
-
322.250
According to the Spanish Companies Law, the legal reserve is not distributable to shareholders until it exceeds 20 per cent of the
share capital, and may only be used in the case that no other reserves are available to offset losses. This reserve may also be used
to increase the share capital in excess of 10 per cent of the increased capital stock.
As permitted by the Spanish Companies law, the Company may decrease its share capital without granting its creditors the right of
objection legally contemplated in connection with such capital reduction if it records from unrestricted reserves a reserve for
redeemed capital for an amount equal to the nominal value of the cancelled shares. This reserve can only be used if the same
requirements as those applicable to the reduction of share capital are met.
Other reserves include a Redeemed capital reserve of €70.478.000 (2022: €70.478.000) associated with the decrease in share
capital relating to cancelled shares and a Share capital reduction reserve of €796.813.000 (2022: €796.813.000) associated with a
reduction in the nominal value of the Company’s share capital in 2020.
INTERNATIONAL CONSOLIDATED AIRLINES GROUP, S.A.
Notes to the financial statements continued
27
11. EQUITY – CAPITAL AND RESERVES continued
11.3 Equity – valuation reserve
A breakdown of movements through the valuation reserve for the years to 31 December is as follows:
€'000
1 January
Valuation adjustment
31 December
2023
Fair value movements on other equity investments (note 9.1.2)
1.870
104.692
106.562
Currency translation differences
(12.873)
2.135
(10.738)
(11.003)
106.827
95.824
2022
Fair value movements on other equity investments (note 9.1.2)
-
1.870
1.870
Currency translation differences
(1.229)
(11.644)
(12.873)
(1.229)
(9.774)
(11.003)
The currency differences include the impact of converting the functional currency of the UK branch into the Company’s presentation
currency.
11.4 Treasury shares
The Company has authority to acquire its own shares, subject to specific conditions. The treasury shares balance consists of shares
held directly by the Company. A total of 3.208.000 shares (2022: 8.100.000) were issued to employees during the year as a result
of vesting of employee share schemes. During the year the Company purchased 42.000.000 shares, which are held as treasury
shares. These shares were purchased at an average price of €1,83 per share. At 31 December 2023 the Group held 55.845.000
shares (2022: 17.053.000) which represented 1,12 per cent of the issued share capital of the Company.
€'000
1 January
Purchase of
treasury shares
Share-based payment
scheme vesting
31 December
2023
Treasury shares
(28.012)
(76.716)
5.395
(99.333)
(28.012)
(76.716)
5.395
(99.333)
2022
Treasury shares
(24.000)
(22.674)
18.662
(28.012)
(24.000)
(22.674)
18.662
(28.012)
11.5 Other equity instruments
The detail of balances related to other equity instruments at 31 December is as follows:
€'000
1 January
Equity instruments
movement for the
year
31 December
2023
Share-based payments charge (note 17)
301.526
51.916
353.442
Vesting of share-based payment
(226.214)
(8.385)
(234.599)
75.312
43.531
118.843
2022
Share-based payments charge (note 17)
262.732
38.794
301.526
Vesting of share-based payment
(213.511)
(12.703)
(226.214)
Redemption of convertible bond (note 9.2)
62.036
(62.036)
-
111.257
(35.945)
75.312
INTERNATIONAL CONSOLIDATED AIRLINES GROUP, S.A.
Notes to the financial statements continued
28
12. TAXES
12.1 Current taxes
12.1.1 Tax receivables and payables
The detail of balances related to tax assets and liabilities at 31 December is as follows:
€'000
2023
2022
Corporate income tax receivable from Tax Authorities (net):
Spain
6.886
22.023
UK
676
670
Total corporate income tax receivable
7.562
22.693
Intercompany payable relating to UK corporate income tax
(16.812)
(8.332)
Provisions for taxes
(600)
(600)
Social security payable
(25.532)
(20.848)
Value added tax receivable
4.315
4.246
(31.067)
(2.841)
12.1.2 Reconciliation of accounting profit for corporate income tax
The reconciliation between the accounting profit and tax (charge)/credit is as follows:
€'000
2023
2022
(Loss)/profit after tax for the year from continuing operations
(22.749)
50.586
Current tax
2.630
12.530
Deferred tax
(1.561)
(978)
Impact of rate change
121
(356)
Adjustments in respect of prior years
9.501
2.992
(Loss)/profit before tax
(12.058)
64.774
Permanent differences
(8.261)
11.837
Timing differences
8.061
2.974
Taxable (loss)/profit
(12.258)
79.585
INTERNATIONAL CONSOLIDATED AIRLINES GROUP, S.A.
Notes to the financial statements continued
29
12. TAXES continued
12.1 Current taxes continued
12.1.3 Reconciliation of accounting profit to taxable profit for corporate income tax
2023
2022
€'000
Total
Total
(Loss)/profit before tax
(12.058)
64.774
Tax at the standard rates in Spain (25%) and the UK (23,5%) (2022:19%)
2.716
(13.767)
Permanent differences increasing the tax charge
-
(2.326)
Permanent differences decreasing the tax credit
2.416
-
Share based payments
(573)
413
Adjustment in respect of prior years
(9.501)
(2.992)
Impact of rate change
121
356
Current year tax asset not recognised
(5.870)
-
Prior year tax assets not recognised
-
4.128
Tax charge
(10.691)
(14.188)
From 1 January 2015 onwards the Spanish companies International Consolidated Airlines Group, S.A., Vueling Airlines, S.A, Veloz
Holding, S.L.U., Avios Group Limited Sucursal en España, IAG GBS Limited Sucursal en España and IAG Cargo Limited Sucursal
en España filed consolidated tax returns as part of the Spanish tax unity (0061/15, pursuant to title VII, Chapter VI of the Spanish
Corporate Income Tax Law set forth in the Law 27/2014 of 27 November 2014). Fly Level S.L. joined the tax unity on 7 November
2017. Yellow Handling S.L.U. joined the tax unity on 17 October 2019. Vueling and Yellow Handling S.L.U. were excluded from the
Spanish tax unity since 1 January 2020 due to modifications in their shareholding. IAG will be responsible for filing consolidated tax
returns on behalf of the other companies that belong to this tax unity.
In 2023 there was a merger between Veloz Holding, S.L.U. and Vueling Airlines, S.A. pursuant to Structural Changes in Commercial
Companies legislation. The merger had retroactive accounting effect as of 1 January 2023. No tax liability arises a result of the
merger, as the transaction has been carried out under the tax neutrality regime. Further information is provided in note 8.1.
12.1.4 Taxable (loss)/profit
The taxable profit for the year to 31 December arises as follows:
2023
2022
€'000
(Loss)/profit before tax
(12.058)
64.774
Spain
7.867
77.544
UK
(19.925)
(12.770)
Permanent differences
(8.261)
11.837
Timing differences
8.061
2.974
Taxable (loss)/profit
(12.258)
79.585
12.2 Current provisions and tax audits
€'000
2023
2022
Provisions for taxes
600
600
600
600
Under prevailing tax regulations, tax returns in Spain may not be considered final until they have either been inspected by tax
authorities or until the four-year inspection period has expired. A tax provision in the balance sheet of €600.000 (2022: €600.000)
has been made as a result of potentially varying interpretations of the tax legislation applicable to the Company’s transactions.
Under prevailing tax regulations, tax returns in the UK may not be considered final until they have either been inspected by tax
authorities or until the six-year inspection period for discovery assessment has expired. In December 2016 the UK Tax Authority
opened an audit into corporate income tax for the year to 31 December 2014. Audits into subsequent years have since been opened
each year for all years up to and including 31 December 2020. As the UK branch is part of the Group’s UK tax group, the tax
provision relating to the UK tax audit is included in “Corporate income tax receivable/(payable) with group companies - UK” in the
balance sheet.
INTERNATIONAL CONSOLIDATED AIRLINES GROUP, S.A.
Notes to the financial statements continued
30
12. TAXES continued
12.3 Deferred tax asset
The detail and movements of balances related to deferred tax assets at 31 December is as follows:
Variations reflected in
€'000
1 January
Income
statement
Equity
Exchange
difference
31 December
2023
Temporary differences on share-based payments
3.731
1.591
-
59
5.381
3.731
1.591
-
59
5.381
2022
Temporary differences on share-based payments
2.464
1.333
-
(66)
3.731
2.464
1.333
-
(66)
3.731
The deferred tax asset has been booked at the UK tax rate. On 3 March 2021 the UK Chancellor of the Exchequer announced that
legislation would be introduced in the Finance Bill 2021 to increase the main rate of corporation tax from 19 per cent to 25 per cent
from April 2023. On 24 May 2021 the increase in the rate of corporation tax in the UK was substantively enacted, which has led to
the remeasurement of deferred tax balances where these unwind after April 2023.
12.4 Deferred tax liability
The detail and movements of balances related to deferred tax liability at 31 December is as follows:
Variations reflected in
€'000
1 January
Income
statement
Equity
Exchange
difference
31 December
2023
Temporary differences on Air Europa shares revaluation
-
-
(1.008)
-
(1.008)
-
-
(1.008)
-
(1.008)
12.5 Unrecognised tax assets
At the balance sheet date, the Company has €100.840.000 of unrecognised tax losses that arose in Spain in 2014 (before the tax
unity was formed), 2020 and 2023, and €8.799.000 of unrecognised deductible temporary differences that arose in Spain in 2015
and 2016.
Unrecognised tax losses
€'000
2014
8.284
2020
69.076
2023
23.480
TOTAL
100.840
Unrecognised deductible temporary differences
€'000
2015
6.191
2016
2.608
TOTAL
8.799
12.6 Tax related contingent liabilities
The Company has certain contingent liabilities, across all taxes, which at 31 December 2023 amounted to €100 million. No material
losses are likely to arise from such contingent liabilities. As such the Directors do not consider it appropriate to make a provision for
these amounts. Included in the tax related contingent liability is the following:
INTERNATIONAL CONSOLIDATED AIRLINES GROUP, S.A.
Notes to the financial statements continued
31
12. TAXES continued
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. As at the date of these financial statements, the Company is
considering its position and whether to appeal the judgment 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.
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 19.
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. This applies prospectively 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. Under the legislation, the Company is liable to pay a top-up tax for
the difference between the effective rate per jurisdiction and the 15 per cent minimum rate. The impact on the Company is not
expected to be material.
13. INCOME AND EXPENSES
13.1 Revenue
The Company’s activity as described in note 1, is the acquisition, ownership, management and disposal of shares or other equity
interests in other companies and provision of management services to those companies. Details and distribution of the revenue for
the year to 31 December, from continuing operations by geographical segments can be represented by the following information:
€'000
2023
2022
Revenue from operations
Rendering of services to Group companies
(note 16.1)
71.991
71.226
Receivable from debt with Group companies
(note 16.1)
177.002
109.827
248.993
181.053
€'000
2023
2022
Revenue by area of geographical sale:
UK
180.903
133.668
Spain
57.725
36.895
Rest of the World
10.365
10.490
248.993
181.053
INTERNATIONAL CONSOLIDATED AIRLINES GROUP, S.A.
Notes to the financial statements continued
32
13. INCOME AND EXPENSES continued
13.2 Finance income and costs
The breakdown of finance income and cost is as follows:
€'000
2023
2022
Finance income
Receivable from third parties
54.504
10.767
54.504
10.767
Finance costs
Payable interest on convertible bond and other securities payables
(61.043)
(79.680)
Payable to third parties
(2.579)
(13.034)
(63.622)
(92.714)
Changes in fair value of financial instruments
Net change in fair value of convertible bond
(130.119)
151.165
Net fair value losses on financial assets at fair value through profit and loss
-
(35.270)
Net fair value losses on derecognition of financial assets and recognition of other
equity investment
-
(43.000)
(130.119)
72.895
Impairment and losses on financial instruments
Impairment and loss on disposal of other equity investments
-
(1.950)
-
(1.950)
13.3 Employee costs
The breakdown of personnel expenses is as follows:
€'000
2023
2022
Wages, salaries and other costs
Salaries and wages
45.526
43.353
Share-based payments charge (note 17)
10.376
8.722
Social security costs
Social security
6.624
4.955
Other social costs
3.394
2.888
65.920
59.918
The Company offers a defined contribution pension plan to all IAG employees. The contributions paid into the defined contribution
scheme during the year to 31 December 2023 totalled €3.394.000 (2022: €2.888.000), and have been recognised as Other social
costs.
INTERNATIONAL CONSOLIDATED AIRLINES GROUP, S.A.
Notes to the financial statements continued
33
14. FOREIGN CURRENCY
IAG is a Spanish Company with a UK branch which has a pound sterling functional currency. The breakdown of assets and liabilities
of the UK branch, all denominated in pound sterling, is as follows:
Pound sterling '000
2023
2022
Assets
Property, plant and equipment
59.082
72.631
Investment in other equity instruments
43.439
39.039
Current tax receivable
583
586
Deferred tax asset
4.646
3.263
Amounts owed by Group companies
93.664
117.499
Other receivables
45.234
44.265
Cash and cash equivalents
45.492
226.681
292.140
503.964
Liabilities
Other taxes and social security
21.424
13.947
Accruals and others payables
30.782
27.285
Amounts due from Group companies
20.623
212.816
72.829
254.048
The Income statement, all denominated in ‘000 pound sterling, of the branch is as follows:
Pound sterling '000
2023
2022
Revenue
57.977
52.691
Finance income
5.088
4.654
Employee costs
(48.774)
(44.739)
Other costs
(28.868)
(21.105)
Finance costs
(2.714)
(2.765)
Loss for the year before tax
(17.291)
(11.264)
15. FINANCIAL RISK MANAGEMENT
The nature of the Company’s business model and its ability to pay dividends to shareholders means the Company is primarily
exposed to capital and credit risk.
Counterparty risk
The Company 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. 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 carrying amount of financial assets represents the maximum exposure to counterparty risk.
Foreign currency risk
The Company undertakes external foreign exchange derivatives trading activity to mitigate the exposure arising from potential
dividends received in currencies other than the euro.
Liquidity risk
The Company 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 Company had no committed revolving credit facilities as at 31 December 2023 (2022: $50 million (€47 million) denominated in
US dollar which expired in November 2023).
Capital risk
The Company’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.
INTERNATIONAL CONSOLIDATED AIRLINES GROUP, S.A.
Notes to the financial statements continued
34
16. RELATED PARTY TRANSACTIONS
The Company has the following related parties at 31 December:
Nature of relationship
British Airways Plc
Other Group companies
Iberia Líneas Aéreas de España S.A. Operadora
Other Group companies
IB Opco Holding, S.L.
Other Group companies
Vueling Airlines, S.A.
Other Group companies
IAG Cargo Ltd
Other Group companies
IAG GBS Ltd
Other Group companies
IAG GBS Poland Sp. z o.o.
Other Group companies
Aerl Holding Limited
Other Group companies
Aer Lingus Group DAC
Other Group companies
Avios Group (AGL) Limited
Other Group companies
IAG Connect
Other Group companies
FLY LEVEL S.L.
Other Group companies
FLYLEVEL UK Limited
Other Group companies
Qatar Airways (Q.C.S.C.)
Significant shareholder
Key management personnel
Directors and Management Committee
16.1 Related entities
The following transactions took place with related parties for the financial years to 31 December:
€'000
2023
2022
Revenue from operations
Rendering of services to Group companies
71.991
71.226
Receivable from debt with Group companies
177.002
109.827
Purchases of services
Purchases from Group companies
7.877
4.062
Costs
Payable on debt with Group companies
5.764
14.993
December balances
2023
2022
Receivables from related parties
Amounts owed by Group companies
187.530
205.789
Loan receivable from Group companies
2.128.613
2.103.807
Payables to related parties
Amounts owed to Group companies
17.567
9.051
Loan payable to Group companies
209.137
617.704
INTERNATIONAL CONSOLIDATED AIRLINES GROUP, S.A.
Notes to the financial statements continued
35
16. RELATED PARTY TRANSACTIONS continued
16.1 Related entities continued
The details of the loans receivable from Group companies is as follows:
Amount outstanding 31
December
Finance income
€'000
2023
2022
Due date
Interest rate
2023
2022
AERL Holdings
-
69.964
2023
3 year mid swap vs 3 months
EURIBOR +4,00 per cent
1.900
2.732
AERL Holdings
73.218
-
2025
5.66 per cent fixed
1.354
-
British Airways
1.648.425
1.643.828
2026
3 months EURIBOR + 4,60
per cent
132.952
87.461
Aer Lingus
-
-
2023
3 months EURIBOR + 4,70
per cent
3.853
3.440
Aer Lingus
-
-
2022
3 months EURIBOR + 4,70
per cent
-
366
Aer Lingus
-
-
2023
3 months EURIBOR + 2,90
per cent
-
347
Iberia Opco
Holding
81.006
77.922
2026
margin 3,5 per cent fixed
3.404
3.388
Iberia Opco
Holding
325.964
312.093
2026
12 months EURIBOR + EBIT
component
33.539
12.093
2.128.613
2.103.807
177.002
109.827
During 2023 an new loan agreement was entered into with AERL Holdings which replaced the existing loan. The outstanding
balance as at 31 December 2023 was €73.218.000.
Prior year movements:
In February 2022, Iberia Opco Holding borrowed €300.000.000 from IAG to strengthen its capital. The outstanding balance as at
31 December 2023 was €325.964.000 (2022: €312.093.000).
During 2022 Aer Lingus repaid the principal and interest outstanding totalling €154.442.000 to the Company. The outstanding
balance as at 31 December 2022 was nil.
INTERNATIONAL CONSOLIDATED AIRLINES GROUP, S.A.
Notes to the financial statements continued
36
16. RELATED PARTY TRANSACTIONS continued
16.1 Related entities continued
The details of the loans payable to Group companies is as follows:
Amount outstanding 31
December
Finance costs
€'000
2023
2022
Due date
Interest rate
2023
2022
Vueling
109.069
109.044
2024
1,20 per cent
1.308
1.308
Avios
-
211.753
2023
2 year GILT
+ 1,25 per cent
1.161
2.854
Iberia
-
-
2022
6 months euro
mid swap rate
+ 1,75 per cent
-
860
Iberia
-
100.506
2023
5 year euro mid swap
rate +1,95 per cent
1.152
2.210
Aer Lingus
-
-
2022
5 year euro mid swap
rate +2,00 per cent
-
1.981
Aer Lingus
-
-
2022
5 year euro mid swap
rate +2,00 per cent
-
2.273
Aer Lingus
100.068
100.068
2024
5 year euro mid swap
rate +1,03 per cent
1.086
1.142
British Airways
-
40.541
2023
5 year euro mid swap
rate +2,00 per cent
316
1.034
British Airways
-
55.792
2023
5 year euro mid swap
rate +2,00 per cent
741
1.331
209.137
617.704
5.764
14.993
In June 2023 the Company repaid to Avios the principal and interest outstanding of €216.270.000. The outstanding balance as at
31 December 2023 was nil.
During 2023 the Company repaid to Iberia the principal and interest outstanding of €101.658.000. The outstanding balance as at
31 December 2023 was nil.
During 2023 the Company repaid to British Airways the principal and interest outstanding of €97.390.000. The outstanding balance
as at 31 December 2023 was nil.
On 28 December 2023, the shareholders of Vueling approved the reverse merger between Veloz and Vueling, whereby Vueling
absorbed the assets and liabilities of Veloz. Accordingly, the €109.044.000 loan payable from the Company to Veloz became a loan
payable to Vueling.
Prior year movements:
In April 2022, the Company repaid to Iberia the principal and interest outstanding of €201.411.000. The outstanding balance as at
31 December 2022 was nil.
In December 2022, the Company repaid to Aer Lingus the principal and interest outstanding of €204.730.000. The outstanding
balance as at 31 December 2022 was nil.
Ordinary transactions with Group companies were carried out on an arm’s length basis in accordance with the Group’s transfer
pricing policies. Outstanding balances that relate to trading balances are placed on intragroup accounts with payment terms of 90
days.
INTERNATIONAL CONSOLIDATED AIRLINES GROUP, S.A.
Notes to the financial statements continued
37
16. RELATED PARTY TRANSACTIONS continued
16.2 Board of Directors and Management Committee remuneration
A breakdown of the remuneration received by the Board of Directors and Management Committee for the years to 31 December is
as follows:
€'000
2023
2022
Board of Directors
Salaries (fixed and variable)
4.419
4.442
Benefits in kind
259
527
Life insurance policies
12
9
4.690
4.978
Management Committee
Salaries (fixed and variable)
12.686
13.570
Benefits in kind
2.244
2.163
Life insurance policies
33
29
Pension contributions
42
15
Share-based payments
-
869
15.005
16.646
The pension obligation outstanding, which represents the transfer value of the accrued pension was €3.501.000 (2022: €4.480.000)
for the Management Committee.
Information regarding share-based remuneration can be found on the Report of the Remuneration Committee in the Group Annual
Report and Accounts 2023.
At 31 December 2023 and 2022, no advances or loans had been given to members of the Board of Directors.
The members of the Board of Directors of the Company and persons related to them are as defined per Article 229 of the Spanish
Capital Companies Act approved by Royal Decree 1/2010 dated 2 July, amended by Law 31/2014 dated 3 December, amending
the Spanish Capital Companies. They have also confirmed that they have not engaged in activities on their own behalf or on behalf
of others that involve effective competition, whether actual or potential, with the Company or that in any other way places them in
permanent conflict with the interests of the company.
17. 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.
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.
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.
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.
INTERNATIONAL CONSOLIDATED AIRLINES GROUP, S.A.
Notes to the financial statements continued
38
17. SHARE-BASED PAYMENTS continued
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.
Share-based payment schemes summary
Outstanding at 1
January 2023
Granted
number
Lapsed
number
Vested
number
Outstanding at
31 December
2023
Exercisable
31 December
2023
000s
000s
000s
000s
000s
000s
Performance Share Plans
4.973
-
2.156
215
2.602
1.038
Restricted Share Plans
8.499
4.967
1.104
225
12.137
-
Full Potential Incentive Plan
5.039
923
1.115
-
4.847
-
Incentive Award Deferral
Plans
909
447
7
901
448
-
19.420
6.337
4.382
1.341
20.034
1.038
Outstanding at 1
January 2022
Granted
number
Lapsed
number
Vested
number
Outstanding at
31 December
2022
Exercisable
31 December
2022
000s
000s
000s
000s
000s
000s
Performance Share Plans
8.740
-
1.954
1.813
4.973
851
Restricted Share Plans
3.140
6.478
592
527
8.499
-
Full Potential Incentive Plan
4.946
1.025
932
-
5.039
-
Incentive Award Deferral
Plans
2.105
-
22
1.174
909
-
18.931
7.503
3.500
3.514
19.420
851
The weighted average share price at the date of exercise of options exercised during the year to 31 December 2023 was €1,74
(2022: €1,56).
In 2023, there were no equity-settled share-based payment plan grants made with a fair value determined using the Monte Carlo
method of valuation.
The Company recognised a share-based payments charge of €10.376.000 for the year to 31 December 2023 (2022: €8.722.000).
A credit of €51.916.000 (2022: €38.794.000) representing the total Group charge was recognised in Reserves including no deferred
tax entry (2022: no deferred tax entry). Group companies are recharged for the grants made to employees of those Group
companies.
18. OTHER DISCLOSURES
18.1 Employee numbers
Number of employees at year end
Average number
Professional category
Men
Women
Total
of employees
2023
Management Committee
9
3
12
11
All other employees
76
51
127
118
85
54
139
129
2022
Management Committee
9
3
12
12
All other employees
76
47
123
121
85
50
135
133
There are no employees with a certified disability greater than 33 per cent.
At 31 December 2023, the Board consisted of 11 people, including 6 men and 5 women (2022: 11 people, including 6 men and 5
women).
INTERNATIONAL CONSOLIDATED AIRLINES GROUP, S.A.
Notes to the financial statements continued
39
18. OTHER DISCLOSURES continued
18.2 Audit fees
The fees for the audit of the Company’s financial statements, the audit of the Group consolidation and non-audit services provided
to the Company by the auditor KPMG Auditores S.L. are as follows:
€'000
2023
2022
Fees for the audit of the financial statements
1,936
1,652
Other audit related services
671
496
All other services
-
1,022
2,607
3,170
Information on services provided to the Company and its subsidiaries by KPMG and other network firms is included in the Group’s
consolidated financial statements.
18.3 Contingent liabilities
There are a number of legal and regulatory proceedings against the Company in a number of jurisdictions which at 31 December
2023, where they could be reliably estimated, amounted to €53.5 million (31 December 2022: €3 million). The Company 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 12.
Included in contingent liabilities is the following:
Air Europa Holdings acquisition break-fee
On 23 February 2023, the Company 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
Company terminates the agreement at any time prior to completion, then the Company 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 financial statements, the Company 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 Company does not consider it appropriate to record a provision for the break-fee.
18.4 Information on environmental issues
The undersigned, as Directors of the Company, hereby state that the accounting records relating to these financial statements do
not contain any item of an environmental nature that should be included pursuant to point 5 of the Valuation Standard 4ª Financial
Statements, or Section 3 of the Spanish National Chart of Accounts (Royal Decree 1514/2010, of 16 November). Please refer to
the Group Consolidated Statement of Non-Financial Information within the Group Annual Report and Accounts 2023 for Group
disclosures on enviromental matters and climate change.
19. POST BALANCE SHEET EVENTS
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 revocation
of Royal Decree-Law 3/2016 impacts the Company's use of historic tax losses.
Prior to the introduction of Royal Decree-Law 3/2016, the Company was permitted to offset up to 70 per cent of its 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.
Had the loss limitation been 70 per cent, the tax paid to the Spanish tax authorities, would have been up to approximately €16
million lower. The Company expects to record an associated current tax credit, with a corresponding receivable from the Spanish
tax authorities. The Company is currently assessing the potential interest due, if any, from the Spanish tax authorities arising on
this receivable.
INTERNATIONAL CONSOLIDATED AIRLINES GROUP, S.A.
Management report for the year to 31 December 2023
1
MANAGEMENT REPORT
International Consolidated Airlines Group, known as International Airlines Group or IAG is the parent company of British Airways,
Iberia, Vueling, Aer Lingus, IAG Cargo, IAG GBS, AERL Holding, LEVEL and IAG Connect. The Group was formed on 21 January
2011 when the merger between British Airways and Iberia was completed.
Business review
IAG is a Spanish registered company with the majority of its Board meetings held in Spain. IAG operates a head office through its
UK branch in London, with an average staff of 129 (2022: 133) managing key support functions for the Group. The Company’s
focus is on the Group strategy, synergies, digital and connectivity, and support of finance, legal and communications functions as
well as the administration of the Company.
Costs in relation to work carried out for the operating companies of the Group are recharged back to those companies.
It is expected that the Company will remain relatively small within the Group, whilst continuing to provide support to the operating
companies where required and providing leadership of the Group strategy.
Our purpose is to connect people, businesses and countries, and we hold innovation, commitment, care for people, responsibility,
pragmatism, execution, ambition and resilience as key values that enable us to fulfil our purpose.
IAG creates value through a unique model that enables our airlines to perform in the long-term interests of our customers, people,
shareholders and society – knowing that success in each reinforces the others.
IAG, as the parent company, actively engages and works collaboratively with its portfolio of operating companies, sharing best
practices and talent, overseeing intra-Group coordination and managing central functions that drive synergies and value to the
Group. Its independence from the operating companies enables IAG to implement a long-term strategy for the Group that is aligned
with our purpose and values, as well as set performance targets for the operating companies, track their progress and efficiently
allocate capital within the Group.
IAG’s three strategic imperatives are:
• Strengthening our core;
• Driving earnings growth through asset-light businesses; and
• Operating under a strengthened financial and sustainability framework.
These imperatives are achieved through a series of strategic priorities:
• Growing our portfolio of global leadership positions and strengthening our portfolio of world-class brands and operations;
• Developing IAG Loyalty and leveraging our strategic airline partnerships; and
• Managing our balance sheet, allocating capital in a disciplined manner, and being an industry leader in sustainability.
The Board believes that IAG can achieve its purpose and vision by promoting the Group’s key values. In 2023, the Board reviewed
how these values are embedded in the organisation and how this is linked to the ongoing work on corporate culture and on people.
The Board considers the work and focus on corporate culture and values to be essential elements in the transformation and
execution of the Group's strategy.
By connecting people, businesses and countries, the Group is able to provide the jobs, prosperity and cultural benefits that travel
has always created. While a number of important new initiatives and projects have been launched during the year, there is more to
be done to achieve the aspirations the Group has set for itself.
Finance review
Income statement
Revenue derived from charging the airline companies for the services that IAG provides to them totalled €72 million for the year to
31 December 2023 (2022: €71 million). Such services cover financial control over treasury policy, treasury support including
hedging, financing and refinancing, major capital investments, co-ordination and delivery support of the synergies, strategy and
general management of the Group. Revenue from services in 2023 was in line with 2022. Revenue also includes finance income
received from lending provided to operating companies within the Group. Finance income from debt with Group companies in the
period was €177 milllion compared to €110 million in 2022, reflecting increased interest rates.
The Company did not receive dividend income from its operating companies during the year (2022: nil).
The Company’s expenses are split between employee costs, services received and other operating expenses.
Employee costs for the year were €66 million (2022: €60 million). The increase in employee costs is due to salary increases as well
as an increase in the share based payment and social security charges.The share-based payment cost was €10 million for the year,
compared with €9 million in 2022.
Services received largely relate to supporting the activities of the key departments. Other expenses reflect the cost of operating the
IAG offices and IT costs, as well as the costs supporting the Group’s market listings with the CNMV and UKLA. Operating expenses
increased to €48 million in 2023 from €32 million in 2022, largely in relation to IT and digital services.
Finance costs payable on debt with third parties of €64 million (2022: €93 million) include interest expense on bonds.
The loss before tax for the year was €12 million (2022: profit €65 million).
2
The tax charge of €11 million (2022: €14 million charge) reflects:
• UK tax on the tax adjusted profits of the Company’s UK branch at the tax rate of 23,5 per cent (2022: 19 per cent);
• No Spanish tax credit being recognised on the tax adjusted losses of the Company’s head office; and
• adjustments in respect of prior years.
The loss after tax for the year was €23 million (2022: profit €51 million).
Balance sheet
IAG’s primary assets are its subsidiaries. IAG’s investments in British Airways and Iberia were created at the time of the merger on
21 January 2011 and amounted to €6.208 million. At 31 December 2023, IAG held an investment of €4.161 million in British Airways,
€2.422 million in Iberia, €836 million in AERL Holding, €38 million in Vueling, €22 million in GBS and €5 million in IAG Connect,
totalling €7.484 million (2022: €7.573 million). It also holds an investment in Cargo. The decrease in the year is due to the merger
between Veloz and Vueling.
2023 Bond repayment
In July 2023, the 4 year €500 million fixed rate 0,5 per cent unsecured bond was repaid.
Treasury shares
At 31 December 2023 the Company held 55,8 million shares (2022: 17,1 million).
During the year the Company purchased 42 million shares, and a total number of 3,2 million shares vested in relation to share-
based payment schemes. The total number of the Company’s treasury shares as at 31 December 2023 accounts for 1,12 per cent
(2022: 0,34 per cent) of the total issued capital at that date.
Dividends
No dividends were proposed by the Board of Directors during the year.
Post balance sheet events
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 revocation
of Royal Decree-Law 3/2016 impacts the Company's use of historic tax losses.
Prior to the introduction of Royal Decree-Law 3/2016, the Company was permitted to offset up to 70 per cent of its 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.
Had the loss limitation been 70 per cent, the tax paid to the Spanish tax authorities, would have been up to approximately €16
million lower. The Company expects to record an associated current tax credit, with a corresponding receivable from the Spanish
tax authorities. The Company is currently assessing the potential interest due, if any, from the Spanish tax authorities arising on
this receivable.
Research and development
The Company does not undertake any research or development activity.
Financial risk management
The nature of the Company’s business model and ability to pay dividends to shareholders means the Company is primarily exposed
to capital and credit risk. The Company’s objectives when managing capital are to safeguard the Group’s ability to continue as a
going concern, to maintain an optimal capital structure in order to reduce the cost of capital and to provide future returns to
shareholders.
Principal risks and uncertainties
The Company has continued to maintain its framework and processes to identify, assess and manage risks. Throughout 2023, it
has monitored the evolution of the risk landscape, as a result of internal and external changes, particularly considering how risks
combine to create increased threats, and re-assessing the potential likelihood and severity accordingly. In assessing its principal
risks, the Company has considered the status of the financial markets, geopolitical and economic risk and government changes,
people engagement, and securing talent and expertise to deliver cultural change. No new principal risks were identified through the
risk discussions and assessments. The Directors of the Company believe that the risks and uncertainties described below are the
ones that may have the most significant impact on the day to day operations of IAG as a parent company. These risks are considered
by the IAG Management Committee as part of its wider consideration of Group risks under the IAG Enterprise Risk Management
framework. Management remains focused on mitigating risks, where appropriate or feasible, whilst recognising that such risk events
may not be so easily planned for and that mitigations are more responsive in nature. The list is not intended to be exhaustive.
Cyber-attack and data security
The risks from cyber threats continue as threat actors seek to exploit any weaknesses in defences particularly through social
engineering and human behaviours, with the threat of ransomware attacks on the Company or its suppliers remaining high and
increasing in the year with heightened geopolitical tensions. The Company could face financial loss, disruption or damage to brand
reputation arising from an attack on the Company’s systems. The Company continues to improve its cyber security posture either
through IT transformational change or additional monitoring through tools as well as better understanding the risk presented by its
suppliers. There is significant oversight of critical systems and suppliers to ensure that the Company understands the data it holds,
that it is secure and regulations are adhered to.
3
Financial risk and interest rate risk
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 of existing floating rate debt, as well as for
new financing. The failure to manage the financial counterparties credit exposure arisen from cash investments and derivatives
trading may result in financial losses. The Company is exposed to non-performance of financial contracts by counterparties, for
activities such as money market deposits, fuel and currency hedging. 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.
Group Governance Structure
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. IAG could face a challenge to its ownership and control structure. IAG will continue to monitor regulatory
developments affecting the ownership and control of airlines in the UK and EU and will continue to encourage stakeholders to
normalise ownership of airlines in line with other business sectors.
IT systems and IT infrastructure
The dependency on IT systems for key business and customer processes is increasing and the failure of a critical system may
cause significant disruption. Obsolescence within IAG’s IT estate could result in service outages and/or operational disruption or
delays in implementation of transformation activities. IAG’s Group IT and digital function, IAG Tech works with the Company to
deliver digital and IT change initiatives to enhance security and stability. System controls, disaster recovery and business continuity
arrangements exist to mitigate the risk of a critical system failure
Non-compliance with key regulation and laws
The Company is exposed to the risk of individual employees’ or groups of employees’ inappropriate and/or unethical behaviour
resulting in reputational damage, fines or losses. Failure to meet legal or regulatory standards may result in breach with the potential
to hurt or impact our employees, or third parties, and lead to reputational damage, fines or losses to the Company. The Company
has clear frameworks in place including comprehensive Group-wide policies designed to ensure compliance. There are mandatory
training programmes in place to educate employees in these matters, including training in respect of the IAG Code of Conduct
framework. Compliance, human resources and legal professionals advise the Company as needed.
People risk
Our people, their engagement and cultural appetite and mindset for change are critical to achieving our transformation plans. Our
people and leaders are a critical enabler of the Company’s current performance and future success. The Company may fail to
attract, motivate, retain or develop its people with critical skillsets not being in place to execute on the required transformation. The
Group is also at risk of our people not being engaged or not displaying the required leadership or cultural behaviours. The Company
is focused on staff well-being and people morale and motivation, including supporting agile and hybrid working models. Enhancing
leadership capability, delivering on the Group’s diversity and inclusion plans, succession planning and plans for improving
organisational health and employee engagement mitigate these risks.
Reputation
As a listed entity in Spain and the UK, and as owner of British Airways, Iberia, IAG Cargo, Vueling, Aer Lingus, Avios and LEVEL,
the Company is exposed to reputational risk and consequent impact to the Group’s brands. The Company’s Investor Relations and
Media Relations teams work with stakeholders to understand their concerns or update on specific matters.
Tax
The Company 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. The Company may be subject to higher levels of taxation as
governments seek to redesign the global tax framework and rebuild public finances. 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 in accordance with the tax strategy, by the IAG tax department and overseen by the Board
through the Audit and Compliance Committee. The Group takes expert advice on tax matters as required.
The Annual Corporate Governance Report is part of this Management Report but has been presented separately together with the
Group Annual Report and Accounts. This report has been filed with the CNMV, together with the required statistical annex, in
accordance with the CNMV Circular 2/2018, dated June 12. The Annual Corporate Governance Report and the statistical annex
are also available on the Company’s website (www.iairgroup.com).
The Non-Financial Information Statement in response to the requirements of Law 11/2018, of 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).
ANNUAL CORPORATE GOVERNANCE REPORT AND
DIRECTORS REMUNERATION REPORT
The 2023 annual corporate governance and directors’ remuneration reports of
International Consolidated Airlines Group, S.A., prepared according to Circular 3/2021,
of 28 September, of the Spanish National Stock Exchange Commission are part of this
Management Report and, from the date of the publication of the 2023 Financial
Statements, are available in the Spanish National Stock Exchange Commission
website and in the International Consolidated Airlines Group, S.A. website, being
incorporated by reference to this report as appropriate.
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
FORMULATION OF THE INDIVIDUAL FINANCIAL STATEMENTS AND OF THE INDIVIDUAL MANAGEMENT
REPORT FOR THE YEAR 2023
The Board of Directors of International Consolidated Airlines Group, S.A., in compliance with the provisions of Article 253
of the Capital Companies Law and of Article 37 of the Commercial Code, proceeded to formulate on 28 February 2024 the
individual financial statements and the individual management report of the company for the year to 31 December 2023,
in single electronic format according with the Commission Delegated Regulation (EU) 2018/815 of 17 December 2018.
In witness whereof, the members of the Board of Directors of International Consolidated Airlines Group, S.A. signed below
on 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