It will distribute dividends once the balance sheet reaches “a robust position”
The aeronautical holding IAG expects to obtain more than 1.5 billion euros of operating profit in its Spanish businesses in the medium term, while also highlighting its commitment to distributing dividends to its shareholders once its balance sheet reaches a “robust position” and their investment plans “are advanced.”
These are some of the strategic priorities that the management team of the aeronautical holding company will present this Tuesday at its Capital Markets Day in the medium term for the company.
The company thus plans to take advantage of Spanish businesses since Spanish airlines are reporting “very efficient growth” with a focus on Latin America. For this reason, IAG wants to continue strengthening its leadership in this region.
During the event, all the transformation initiatives with which IAG hopes to “obtain sustainable growth, achieve one of the best margins in the industry and maximize long-term total shareholder return” will be addressed. The estimated capex between 2024 and 2026 is 4.5 billion euros per year.
This includes the objective of achieving an operating margin of between 12% and 15%, the expectation of obtaining a return on invested capital of between 13% and 16%, as well as maintaining leverage (net debt/Ebitda). less than 1.8 times throughout the cycle.
IAG’s outlook for the full year 2023 remains unchanged. During the event, as reported by the company, no comments will be made about the current and future situation of the business.
“Our transformation and investment plans will drive profound change across all of our businesses, increasing our efficiency and providing a market-leading customer experience. The execution of our strategy will allow us to deliver sustainable growth and profitability to our shareholders,” said the CEO. of IAG, Luis Gallego.
The CEO of the aeronautical holding company led by Iberia and British Airways, and the financial director, Nicholas Cadbury, will be accompanied by members of the IAG Management Committee, as well as other executives from the group’s operating companies.
The management team will address key aspects of the business such as IAG’s positioning in the world’s most potential aviation markets, the strategy to achieve sustainable growth through its trademarks, its customer base and its disciplined approach to the allocation of capital.
The growth of non-capital-intensive activities, such as agreements with other airlines in high-growth markets, will also be analyzed, as well as the transformation of their businesses “to improve customer satisfaction, generate sustainable operating profits and achieve “one of the best margins and profitability in the industry”
The objective is to obtain more than 1,500 million euros of operating profit from Spanish businesses, as explained in the note issued to the National Securities Market Commission (CNMV).
During the event, investment plans in sustainability as a driver of long-term value creation in the sector will also be put on the table, as well as those planned to maximize total return for the shareholder through increased profits, an ordinary dividend and additional returns for the shareholder, “backed by a solid balance sheet.”
MORE THAN 8,000 MILLION IN INVESTMENT FOR BA
The transformation of British Airways is another of IAG’s pending points. The company considers that it “has a great opportunity” to continue advancing, so it will invest in it to improve its customer service and strengthen its operations.
Specifically, the British airline will invest 750 million pounds (858.89 million euros) between 2023 and 2026 in improving its information technology systems and another 100 million pounds (114 million euros) to strengthen its operations.
In total, and including the increase in fleet, British Airways will invest more than 7,000 million pounds (8,016 million euros) until 2026 for its transformation initiatives.
The group’s plans also include developing IAG Loyalty, its loyalty program, which offers high margins, growth with low capital requirements and sustainable cash flows. Additionally, the profit profile is less seasonal than that of airlines.
ALMOST 9,000 MILLION INVESTMENT IN FLEET
Regarding the fleet, IAG expects to allocate around €8 billion to fleet renewal and €900 million to its growth. In this way, it will increase its capacity between 6% and 8% by 2024 and between 4% and 6% until 2026.
The project presented to investors this Tuesday also includes the investment of 1.7 billion euros in information technology, while the cost of improving the customer experience will be 1.5 billion euros.
