Annual report and accounts 2016

More documents

Recommendations

Info

12 Our strategy Six core strategic objectives 1 2 3 Leadership in IAG’s main cities Leadership across the Atlantic Stronger Europe-to-Asia position in critical markets We achieve this by providing the broadest choice of destinations to our customers in our five main cities: London, Barcelona, Madrid, Dublin and Rome. Our performance in 2016 2016 saw a range of political and economic disruption across key IAG markets, resulting in a softening of underlying demand coupled with high overall industry growth. IAG’s operating companies have adapted to the new market environment by adjusting capacity, accelerating cost reduction programmes and leveraging technology and ancillary revenue opportunities to improve performance. IAG has continued to strengthen its leadership position in its main cities by focusing on profitable markets from Barcelona, Dublin, London, Madrid and Rome adding a total of 19 new destinations in 2016. Aer Lingus has looked to enhance its leadership position with 11 per cent Dublin capacity growth focused on longhaul destinations. IAG has also continued to enhance its position in London through expansion of operations into new airports with Vueling opening four new routes from Luton, and Cityflyer commencing operations from Stansted. We achieve this by providing the most comprehensive frequency and network proposition in collaboration with our oneworld partners American Airlines and LATAM Airlines Group. Our performance in 2016 As in IAG main markets, economic, political and security concerns continued to negatively impact underlying transatlantic demand in 2016. These concerns included: ongoing economic instability in Latin America, particularly in Brasil, political uncertainty across Europe following the UK’s Referendum vote to leave the EU and the Presidential election in America. At a currency level, the pound sterling depreciated 16.3 per cent against the US dollar and 13.6 per cent against the euro. Security concerns resulting from European terrorism events have also had significant impact on transatlantic performance with a softening of US originating traffic to Europe. In response to changing market dynamics, IAG has adjusted its capacity plans to focus on the most attractive return opportunities. IAG’s newest member airline, Aer Lingus, continued to strengthen its leadership position into North America, launching three new routes to Los Angeles, Newark, New Jersey and Hartford, Connecticut. British Airways also expanded its transatlantic operations, launching three new destinations: Lima, Peru; San Jose, Costa Rica; and San Jose, United States, and a new service from London Gatwick to New York JFK, while Iberia reintroduced its service to San Juan, Puerto Rico. We achieve this by increasing our direct network footprint, improving our product offering and leveraging our partners’ network reach. Our performance in 2016 IAG has continued to expand its presence into Asian markets with the reintroduction of Iberia services in 2016. Iberia launched two new services to Shanghai and to Tokyo after withdrawing from the region in 1998. Iberia’s new Tokyo service is supported by Japan Airlines through incorporation into the pre-established Siberian Joint Business. British Airways maintained growth into Asia with 4 per cent higher capacity driven by the full year of operations into Kuala Lumpur, increased frequency into Shanghai and increased utilisation of the higher gauged Airbus A380 aircraft into Singapore. IAG’s Europe to Asia proposition was further strengthened by the launch of a new Joint Business with Qatar, enabling greater IAG network reach and an expanded product offering into the Middle East, Asia and East Africa. IAG Cargo also continued to expand its Asian network options by introducing China Southern as a new partner in the Partner Plus Programme. See pages 14 – 15 for more about our performance indicators. INTERNATIONAL AIRLINES GROUP Annual Report and Accounts 2016
13 4 5 6 Grow share of Europeto-Africa routes We achieve this by leveraging shorthaul growth opportunities and strengthening our presence in core established markets. Our performance in 2016 Volatility continued across Africa in 2016 with ongoing geopolitical issues and suppressed commodity prices impacting traffic between Europe and Africa. North and West African nations were the most impacted by these issues and, as a result, IAG has proactively reduced its capacity into a number of destinations including Angola, Nigeria, Morocco, Tunisia and Uganda. In South Africa, IAG has continued to enhance its network with the reintroduction of Iberia’s service to Johannesburg (after an absence of three years) along with greater British Airways frequencies on the Airbus A380 into Johannesburg and the launch of a new London Gatwick service to Cape Town. Stronger intra-Europe profitability We achieve this by optimising our legacy shorthaul networks, maximising commercial collaboration between our business units and expanding our low cost carrier footprint. Our performance in 2016 IAG has continued to improve intra- European profit performance despite the impact of multiple external events (including terrorist acts, air traffic controller strikes) and Vueling’s operational disruption during the summer peak. The Group has achieved this through a range of initiatives covering customer satisfaction, operational delivery, revenue optimisation and cost control. Vueling’s summer disruption in Barcelona had an impact on its full year performance. After a comprehensive review, Vueling’s management has introduced a number of critical changes, including network rationalisation and overhaul of the airline’s fleet and crew basing strategies, to improve operational resilience. Overall IAG intra-European capacity grew by 7 per cent in 2016, incorporating a 9 per cent increase in capacity between home markets and the launch of 74 new routes. Commercial collaboration across the Group has also continued to strengthen with the successful integration of Aer Lingus, further expansion of the Avios loyalty proposition and partner ecosystem, and deepening of intragroup codeshares and combined marketing efforts. Competitive cost positions across our businesses We achieve this by leveraging our scale, integrating best practices and driving simplification and harmonisation across the Group. Our performance in 2016 Over the course of 2016, IAG renewed its focus on deepening and accelerating cost reduction programmes while at the same time ensuring customer value creation. At a Group level, IAG is driving the next level of efficiencies through its integrated platform within GBS (finance, procurement and IT) and maintenance. Group synergies have also moved beyond the traditional centralised functions within GBS to include IAG Digital, IAG Cargo and Avios with a clear objective to drive further efficiencies and value across the operating companies. At the operating company level, Iberia has commenced phase II of its “Plan de Futuro” focusing on further improving labour productivity and reducing overhead costs. British Airways has introduced “Plan4” which includes improvement of capital efficiency and overall cost competitiveness. In Barcelona, Vueling has commenced its “NEXT” business model enhancement programme focused on operational excellence and cost discipline and, in Dublin, Aer Lingus continues to deliver a range of productivity and cost initiatives to further improve its value carrier proposition and performance. Strategic report Corporate governance Financial statements Additional information www.iairgroup.com
Page 1 and 2: INTERNATIONAL AIRLINES GROUP The be
Page 3 and 4: Strategic report “2016 was a chal
Page 5 and 6: 3 Chairman’s letter A firm focus
Page 7 and 8: 5 Q A And, importantly, we have to
Page 9 and 10: 7 IAG combines the leading airlines
Page 11 and 12: 9 Operating highlights British Airw
Page 13: 11 Business model and strategy Maxi
Page 17 and 18: 15 The performance indicators prese
Page 19 and 20: 17 IT This year significant work ha
Page 21 and 22: 19 and additional summer aircraft a
Page 23 and 24: 21 This is why we have recently lau
Page 25 and 26: 23 Aer Lingus Making the most of ou
Page 27 and 28: 25 IAG Cargo Resilient performance
Page 29 and 30: 27 Risk management and principal ri
Page 31 and 32: 29 Risk Potential impact Management
Page 33 and 34: 31 Risk Potential impact Management
Page 35 and 36: 33 Financial overview A significant
Page 37 and 38: 35 However, continued weakness in t
Page 39 and 40: 37 Exchange impact before exception
Page 41 and 42: 39 By supplier cost category: Handl
Page 43 and 44: 41 Capacity 21% 11% 8% 60% Operatin
Page 45 and 46: 43 Cash flow € million 2016 2015
Page 47 and 48: 45 Sustainability Committed to our
Page 49 and 50: 47 UN Sustainable Development Goals
Page 51 and 52: 49 Aspect and link to SDGs Noise Wa
Page 53 and 54: 51 Air quality - electric tug trial
Page 55 and 56: “2016 has really tested the Group
Page 57 and 58: 55 I think we can be very proud tha
Page 59 and 60: 57 James Lawrence Non-Executive Dir
Page 61 and 62: 59 The Group operating companies Av
Page 63 and 64: 61 The Board Secretary is Álvaro L
Page 65 and 66:
63 Induction programme New director
Page 67 and 68:
65 Other statutory information Dire
Page 69 and 70:
67 The significant shareholders of
Page 71 and 72:
69 Report of the Audit and Complian
Page 73 and 74:
71 ICFR, which is a Spanish Corpora
Page 75 and 76:
73 The Committee’s responsibiliti
Page 77 and 78:
75 Report of the Safety Committee D
Page 79 and 80:
77 Despite a growth in share price
Page 81 and 82:
79 The table below summarises the m
Page 83 and 84:
81 Malus and Clawback Provisions Th
Page 85 and 86:
83 Service contracts and exit payme
Page 87 and 88:
85 Annual Remuneration Report Commi
Page 89 and 90:
87 Additional explanations in respe
Page 91 and 92:
89 IAG PSP Award 2014 The IAG PSP a
Page 93 and 94:
91 Statement of Voting The table be
Page 95 and 96:
93 IAG’s total shareholder return
Page 97 and 98:
95 The second performance condition
Page 99 and 100:
97 Incentive Award Deferral Plan Th
Page 101 and 102:
Strategic Financial Statements Repo
Page 103 and 104:
101 Consolidated statement of other
Page 105 and 106:
103 Consolidated cash flow statemen
Page 107 and 108:
105 Consolidated statement of chang
Page 109 and 110:
107 the Income statement. All other
Page 111 and 112:
109 b Other interest-bearing deposi
Page 113 and 114:
111 Employee leaving indemnities an
Page 115 and 116:
113 IAG has initiated a project to
Page 117 and 118:
115 For the year to December 31, 20
Page 119 and 120:
117 7 Auditors’ remuneration The
Page 121 and 122:
119 For the year to December 31, 20
Page 123 and 124:
121 c Reconciliation of the total t
Page 125 and 126:
123 13 Property, plant and equipmen
Page 127 and 128:
125 16 Intangible assets and impair
Page 129 and 130:
127 Basis for calculating recoverab
Page 131 and 132:
129 19 Trade and other receivables
Page 133 and 134:
131 2 Floating rate euro mortgage l
Page 135 and 136:
133 depending on whether the employ
Page 137 and 138:
135 At December 31, 2016 the Group
Page 139 and 140:
137 27 Financial instruments a Fina
Page 141 and 142:
139 The carrying amounts and fair v
Page 143 and 144:
141 December 31, 2015 Financial ins
Page 145 and 146:
143 31 Other reserves and non-contr
Page 147 and 148:
145 Defined benefit schemes i. APS
Page 149 and 150:
147 d Fair value of scheme assets A
Page 151 and 152:
149 e Present value of scheme liabi
Page 153 and 154:
151 33 Contingent liabilities and g
Page 155 and 156:
Spanish corporate governance report
Page 157 and 158:
155 Indicate the most significant m
Page 159 and 160:
157 Explain any significant changes
Page 161 and 162:
159 B. SHAREHOLDERS’ MEETING B.1
Page 163 and 164:
161 C.1.3 Complete the following ta
Page 165 and 166:
163 Individual or corporate name of
Page 167 and 168:
165 When reviewing board appointmen
Page 169 and 170:
167 C.1.10 Indicate what powers, if
Page 171 and 172:
169 Selection of directors In ident
Page 173 and 174:
171 C.1.20 ter List any business re
Page 175 and 176:
173 C.1.31 Indicate whether the con
Page 177 and 178:
175 C.1.36 No Outgoing auditor Indi
Page 179 and 180:
177 C.1.42 Indicate and, where appr
Page 181 and 182:
179 C.2 Board committees C.2.1 Give
Page 183 and 184:
181 f. To establish the appropriate
Page 185 and 186:
183 F. Other responsibilities: a. T
Page 187 and 188:
185 c) Steps taken during the year:
Page 189 and 190:
187 C.2.2 b) Functions The main fun
Page 191 and 192:
189 D.4 List any relevant transacti
Page 193 and 194:
191 E.2 Identify the bodies respons
Page 195 and 196:
193 Main risk Government interventi
Page 197 and 198:
195 Audit and Compliance Committee
Page 199 and 200:
197 The financial risk assessment i
Page 201 and 202:
199 F.3.2 Internal control policies
Page 203 and 204:
201 F.4.2 Mechanisms in standard fo
Page 205 and 206:
203 6. Listed companies drawing up
Page 207 and 208:
205 21. The board of directors shou
Page 209 and 210:
207 37. When an executive committee
Page 211 and 212:
209 52. The terms of reference of s
Page 213 and 214:
211 IAG Remuneration Policy complie
Page 215 and 216:
213 Director Enrique Dupuy de Lôme
Page 217 and 218:
215 Strategic Report Corporate Gove
Page 219 and 220:
217 Name and address Principal acti
Page 221 and 222:
219 Associates Name and address Han
Page 223 and 224:
221 Strategic Report Corporate Gove
Page 225 and 226:
223 Operating margin Overall load f
Page 227 and 228:
225 In 2015, the definition of inve
Page 229 and 230:
227 Sustainability indicators Indic
Page 231 and 232:
Shareholder information Registered
show all

Annual report and accounts 2016

Create successful ePaper yourself

Delete template?

Save as template?