International Airlines Group (IAG) plans to allocate an investment of nearly 13.5 billion euros to fleet and improvements in operations efficiency (IT) in the period between 2024 and 2026, in addition to optimizing the customer experience. This sum represents a planned expenditure of about 4.5 billion per year.
The aeronautical holding, which is made up of British Airways (BA), Iberia, Vueling, Aer Lingus and Level, explained today in the presentation of its expectations for the medium term that it will allocate 8,000 million euros to fleet renewal and another 900 millions to its growth. With this investment, the company seeks to increase its capacity in the coming years.
Thus, IAG expects its capacity to increase between 6% and 8% year-on-year in 2024. Afterwards, they expect growth to be between 4% and 5% per year, as the company has informed the Commission. National Securities Market (CNMV) on the occasion of the celebration of its ‘Capital Markets Day’.
Investment in technology
This growth in capacity is due to an increase in the use of the fleet, as well as the incorporation of new aircraft after the reduction committed in the pandemic, the group has detailed. Likewise, IAG projects that investments in information technologies will reach 1.7 billion euros in the period and 1.5 billion euros in improving the customer experience. These investments will be added to those that the group is already making to achieve the goal of using 10% of SAF (sustainable aviation fuel) in 2030.
IAG has explained to investors that it “will continue to strengthen its leadership positions in the world’s most valuable and growing aviation markets, aiming to achieve sustainable growth through its strong commercial brands, an attractive customer base and an approach “. disciplined capital allocation,” according to Europa Press.
It has also reiterated its commitment to the distribution of dividends – which it stopped paying in 2020 due to the impact of Covid-19 – once its balance sheet achieves a robust position and its investment plans are advanced. In this sense, he has indicated that he wants to “maximize total shareholder return through increased profits, an ordinary dividend and additional returns, backed by a solid balance sheet.”
Development of the Spanish business and investments in BA
Its strategy for the period 2024-2026 is based on four priorities, which are the group’s transformation plan, development of Spanish businesses, investment in British Airways (BA) and growth of the ‘IAG Loyalty’ loyalty program. The group has highlighted that Spanish airlines are reporting very efficient growth, focused on Latin America and facilitated by structural improvements such as, for example, the transformation processes of Iberia and Vueling.
IAG wants to continue strengthening its leadership in this region and expects its Spanish businesses to report an operating result of more than 1.5 billion euros in the medium term, thus achieving a better balance and greater diversification of profits in its portfolio. As for BA, it will invest more than 7 billion pounds (about 8 billion euros) between 2024 and 2026 in its transformation initiatives, including 750 million between 2023 and 2026 in improving its IT systems and another 100 million (114 million) between 2024 and 2026 in the development of a robust operation.
IAG also hopes to develop its loyalty program as it offers high margins, low capital growth and sustainable cash flows, with a less seasonal profit profile than airlines. Transformation initiatives are coordinated at a central level with the aim that each of the group’s businesses can reach their maximum potential.
IT IS FUNDAMENTALLY ABOUT PROJECTS TO IMPROVE EFFICIENCY OF OPERATIONS AND CUSTOMER EXPERIENCE AND, TO ACHIEVE THIS, IAG IS INVESTING IN INNOVATION, INFORMATION AND DATA TECHNOLOGIES, ALL SUPPORTED BY A CULTURE OF TRANSFORMATION, WHICH IS A KEY ELEMENT to ensure future resilience and sustainability.
IAG has insisted on its commitment to the strength of its balance sheet, discipline in capital allocation and planning for the future, which includes the ambition to achieve net zero emissions by 2050. In this way, it plans to report sustainable growth, with margins of between 12% and 15%, supported by transformation initiatives and a solid balance, as well as a profitability of between 13% and 16% throughout the cycle, parameters that they consider realistic and achievable in the medium term.
In addition, it expects its net debt in the period to remain below 1.8 times net debt/EBITDA, currently being 1.4 times, which gives it room for maneuver and flexibility. On the other hand, IAG has recalled that the completion of the acquisition of Air Europa is scheduled for the end of 2024, an operation that will have a limited impact on the group’s financial leverage ratios.