Sponsor Message:
Civil Aviation Forum
My Starred Topics | Profile | New Topic | Forum Index | Help | Search 
IAG Posts €997m Loss For 2012  
User currently offlinethowman From United Kingdom, joined Jul 2004, 363 posts, RR: 3
Posted (1 year 5 months 19 hours ago) and read 6415 times:

As reported in FT

http://www.ft.com/cms/s/0/5e4985c2-8...78-00144feabdc0.html#axzz2MBjpJS00

Not good for IB - €896 operating loss (including impairment charge).

15 replies: All unread, jump to last
 
User currently offlinebueb0g From United Kingdom, joined Jul 2010, 642 posts, RR: 0
Reply 1, posted (1 year 5 months 18 hours ago) and read 6294 times:

And BA posts a 350 million Euro profit. Highlights just how bad the situation at IB is... I really feel for the employees, they're going to get completely shafted over things that are largely out of their control, but it does seem that there's no two ways about it, if IB is going to survive it needs to be restructured. 3,800 jobs is a lot, but is there another option?


Roger roger, what's our vector, victor?
User currently offlineLHRFlyer From United Kingdom, joined Apr 2010, 812 posts, RR: 1
Reply 2, posted (1 year 5 months 18 hours ago) and read 6173 times:

And yet the share price has gone up so the market was expecting this. I also suspect that as there was going to be bad news, there is an element of taking everything in one go in non-cash charges.

IAG is quite explicit that the risks in turning Iberia around are quite high:

"The Transformation Plan requires permanent structural change in the Iberia business to enable it to return to profitability and growth. The plan is being executed within Iberia’s own financial resources. Iberia failed to reach agreement with the unions before a deadline of January 31, 2013 and has therefore commenced the imposition of a 15 per cent capacity reduction, pay cuts and productivity improvements under new Spanish labour laws. Execution risks are high and include delayed implementation, widespread labour conflict, operational disruption, political interference, legal risk around testing new labour reforms and a lack of employee focus. The plan is managed by the Iberia Chief Executive Officer who reports regularly to the IAG Management Committee and Board."


User currently offlineAeroWesty From United States of America, joined Oct 2004, 20394 posts, RR: 62
Reply 3, posted (1 year 5 months 18 hours ago) and read 6136 times:

For those without access to the Financial Times:

(IAG) International Consolidated Airlines



International Homo of Mystery
User currently offlineVV701 From United Kingdom, joined Aug 2005, 7393 posts, RR: 17
Reply 4, posted (1 year 5 months 15 hours ago) and read 5650 times:

It is worth quoting here the aircraft numbers on order and option for IAG as a whole as detailed at the end of the link provided by AeroWesty - thanks. With my own comments (correct or incorrect?) in parentheses, they are as follows:

A319: 2 orders, 0 options (for IB?)

A320: 17 orders, 31 options (for BA and IB?)

A330: 8 orders, 8 options (for IB)

A380: 12 orders, 7 options (for BA)

B77W: 6 orders, 0 options (for BA including the two contracted for ten year lease from Air Lease)

B787: 24 orders , 28 options (for BA with "options" including 10 "purchase rights"?)

Reverting to the main body of the report it is notable that BA made an operating profit of €347 M despite operating the vast majority of the former BD timetable from 20 April to 27 October even where this resulted in operating two flights on the same route only ten minutes apart. Recognise here that BD's operations had been the main cause of the significant loss reported by Lufthansa Group in the previous year.

Finally if I am interpreting the report correctly - my accountancy knowledge is not great - it seems that the end cost of buying British Midland Group was €101 million - see Section 3 "Business Combinations" of the Report. This is well below the £172.5 million widely reported in December 2011. That price was the gross price before rebates agreed on the costs of disposing of both bmi Regional and bmiBaby.


User currently offlineLHRFlyer From United Kingdom, joined Apr 2010, 812 posts, RR: 1
Reply 5, posted (1 year 5 months 15 hours ago) and read 5599 times:

From the results announcement, if anyone was in any doubt as to the precarious position of Iberia:

"The Group’s finance lease for one A340-600 is subject to financial covenants which are tested annually. The Group has informed its lenders that it had failed to meet one of the covenants for the year to December 31, 2012. As a result of this covenant breach, one finance lease has technically become repayable on demand and $85 million (€64 million) has been reclassified from noncurrent to current. On February 14, 2013 the Group obtained a waiver from the lessors.

Three of the Group’s A340-600 operating leases are also subject to financial covenants which are tested annually. The Group has informed its lenders that it had failed to meet one of the covenants for the year to December 31, 2012. The remaining operating lease payments of $239 million (€181 million) will technically fall due within one year.

The Group has received notice from the lessor that two of the eight lending institutions have waived the covenant breach. The remaining institutions have provided positive feedback and are expecting their risk committees to formally waive the breach."


User currently offlineHeavierthanair From Switzerland, joined Oct 2000, 787 posts, RR: 0
Reply 6, posted (1 year 5 months 15 hours ago) and read 5592 times:

G´day

347 million (BA operating profit) minus 351 million (IB operating loss) equals 885 million net loss  Wow!     

That is per ATW article http://atwonline.com/airline-finance...ag-posts-885-million-net-loss-0228

Can someone explain the math here? I am definitely lost   


Cheers

Peter



"Two things are infinite: the universe and human stupidity; and I'm not sure about the universe." (Albert Einstein, 1879
User currently offlinejumpjets From United Kingdom, joined Apr 2012, 792 posts, RR: 0
Reply 7, posted (1 year 5 months 14 hours ago) and read 5469 times:

Quoting Heavierthanair (Reply 6):

347 million (BA operating profit) minus 351 million (IB operating loss) equals 885 million net loss

There is a whole bunch of expenses that are deducted after arriving at basic trading profit/loss before you get to profit before tax.

For example what are called exceptional [unusual and not generally expected to recur] charges such as the pension adjustment of 220m [presumably relating to the BA pension fund] approx and Iberia impairments of some 300m + which are accounting adjustments relating to values of non-trading assets and are deducted after arriving at trading profits.

Finance charges also then have to be deducted and in this case they amount to 264m

So as you can see operating profit before exceptional items are just the starting point in looking at the overall group profits.


User currently offlineVV701 From United Kingdom, joined Aug 2005, 7393 posts, RR: 17
Reply 8, posted (1 year 5 months 13 hours ago) and read 5239 times:

Quoting Heavierthanair (Reply 6):
Can someone explain the math here?

The €885 million figure is the loss AFTER TAX from CONTINUING OPERATIONS.

The equivalent loss BEFORE TAX was €997 million.

Costs and any benefits not related to the day-to-day operations of the airlines are not included in "operating costs" or "operating income" so are not covered by "operating profit (loss)". These likely include, for example, all the IAG central costs along with exceptional items.

In this instance I believe they include what are listed under "Exceptional Items" in the report, namely:

1. Restructuring costs associated with the Iberia transformation plan of €202 million

2. Impairment of goodwill from the acquisition of Iberia and certain intangible asset write-downs amounting to €343 million

3. The benefit realised in quarter 1 of the settlement of competition fines in the UK leading to a release of provision of €35 million

4. An exceptional credit of €7 million in the year related to aircraft lease hedges acquired upon the Iberia acquisition

as well as items already identified by others.

But I am not an accountant. Is their one out there. Help!


User currently offlinelightsaber From United States of America, joined Jan 2005, 12899 posts, RR: 100
Reply 9, posted (1 year 5 months 11 hours ago) and read 4522 times:
Support Airliners.net - become a First Class Member!

Wow...

IB must be restructured quickly. That is an immense amount of money to loose and yes, I saw how much was pensions related to BA. BA on its own would have squeaked by.

Quoting LHRFlyer (Reply 5):
The remaining operating lease payments of $239 million (€181 million) will technically fall due within one year.

Wow... Will IB pay or perhaps hand the aircraft back? They do need to shrink a little...

Lightsaber



Societies that achieve a critical mass of ideas achieve self sustaining growth; others stagnate.
User currently offlinetimboflier215 From United Kingdom, joined May 2005, 1323 posts, RR: 1
Reply 10, posted (1 year 5 months 10 hours ago) and read 4004 times:

Quoting lightsaber (Reply 9):

Quoting LHRFlyer (Reply 5):
The remaining operating lease payments of $239 million (€181 million) will technically fall due within one year.

Wow... Will IB pay or perhaps hand the aircraft back? They do need to shrink a little...

The rest of LHRFlyer's post would indicate to me that the lessors are prepared to ignore the covenant breach, and assume that IB are able to maintain their repayments. But a pretty embarrassing situation for IB/IAG.


User currently offlineAeroWesty From United States of America, joined Oct 2004, 20394 posts, RR: 62
Reply 11, posted (1 year 5 months 9 hours ago) and read 3821 times:

Quoting lightsaber (Reply 9):
That is an immense amount of money to loose and yes, I saw how much was pensions related to BA. BA on its own would have squeaked by.

While the results don't look good on paper, these are mainly accounting charges which shore up the balance sheet. IAG stock was actually up almost 8% today on the news.

On top of what's categorized as special items, there's the loss on BA's side for integrating BMI which isn't split out, and included in BA's net figure. Those costs won't be repeated again in 2013. I don't know what IAG will eventually do, but closing down Iberia and having it re-emerge under entirely new terms is apparently one of the items open for discussion, so the numbers on IB's side are being taken seriously.

Overall, traffic rose 4.4% on a 2.8% capacity increase, and yield rose 7.6%. Those aren't numbers for a company whose trajectory is heading for the toilet, and why the markets responded in kind.



International Homo of Mystery
User currently offlinesteve6666 From United Kingdom, joined Sep 2003, 399 posts, RR: 0
Reply 12, posted (1 year 5 months 6 hours ago) and read 3078 times:

OK, accountant here.

The main thing to distinguish here is what IAG claim is non-recurring. Amortisation/impairment of goodwill and intangibles is charged in arriving at operating profit, but in this case IAG is basically saying this is non-recurring. And they have a point.

So to do the maths:
BA recurring operating profit: 347m
IB recurring operating loss: (351)m
Central costs: (balancing item) (19)m
Recurring operating loss (23)m

After this will come the various either non-operating or exceptional (one-off) items. Under good old UK GAAP, "exceptional" items were basically only allowed under three very restricted situations, which I can't remember and in any case IFRS I think has pretty much abolished those criteria. So take your own view.

Pensions: (266)m
Other non-operating charges (118)m (balancing item)
Iberia restructuring (202)m
Iberia intangibles impairment (343)m
Other stuff (45)m (can't be bothered to find)
Loss before tax (997)m
Plus: tax credit 112m
Net loss: (118)m

So it's really a case of taking a view on what you think of those items:
a) Pensions. Under IFRS, you have to take the pension scheme surplus or deficit to the balance sheet. This surplus or deficit is calculated as the difference between the schemes assets (valued at market value) and its future liabilities (which are discounted at the rate of a good quality corporate bond). Now, if you have a large scheme with members on average many years from retirement, you would hope that the assets will grow in value at a rate faster than the annual return on a good quality corporate bond. So in other words, you would "expect" most schemes to show an accounting deficit. Equally, if you have a big scheme there is quite a large leverage effect when stock markets move. So a big charge on either BA or IB pension scheme is not a huge surprise. And stupidities like this is one of the things David Tweedie (who pretty much wrote IFRS) has a lot to answer for.

b) IB restructuring. This is only a provision, so the cash has not yet gone out the door. Again, there are criteria for recognising restructuring provisions, which if I remember right basically amount to being demonstrably committed to executing the restructuring. One-off? Hmmmmmmm I remember looking at the Cadbury accounts when Kraft were looking to buy them in 2009, and they had had "one-off" restructuring charges in every year since 2003.

c) Intangibles impairment. Under IFRS you don't amortise goodwill or other intangibles, but do an impairment review to see whether the earnings support the value of the intangibles. And if they do not, you write them down. So - one-off, yes probably. (I don't believe it gets written back). Non-cash - definitely. And presumably they have adopted pessimistic assumptions regarding the recoverable value of the intangibles, so as to make future impairment charges smaller and less frequent (ie, reduce the value of intangibles as much as possible now.)



eu nasci ha dez mil anos atras, e nao tem nada nesse mundo que eu nao saiba demais
User currently offlinelightsaber From United States of America, joined Jan 2005, 12899 posts, RR: 100
Reply 13, posted (1 year 5 months 6 hours ago) and read 2849 times:
Support Airliners.net - become a First Class Member!

Quoting timboflier215 (Reply 10):
The rest of LHRFlyer's post would indicate to me that the lessors are prepared to ignore the covenant breach, and assume that IB are able to maintain their repayments.

For one A346, that was clear. I'm not certain about the other 3... So I question if IB is going to shrink a little. Somewhere they must cut costs and it will hit revenue a bit.  
Quoting AeroWesty (Reply 11):
IAG stock was actually up almost 8% today on the news.

   We're losing money but making it up in volume!  
Quoting steve6666 (Reply 12):
OK, accountant here.

Thank you for taking the time to put the numbers together in a *far* more understandable form.

Quoting steve6666 (Reply 12):
Hmmmmmmm I remember looking at the Cadbury accounts when Kraft were looking to buy them in 2009, and they had had "one-off" restructuring charges in every year since 2003.

Hence why I do not like such charges. For they can occur again and again or else be used to pad future years (take the expense in a bad year to boost bonuses later).

Lightsaber



Societies that achieve a critical mass of ideas achieve self sustaining growth; others stagnate.
User currently offlineVV701 From United Kingdom, joined Aug 2005, 7393 posts, RR: 17
Reply 14, posted (1 year 5 months 4 hours ago) and read 2623 times:

Quoting AeroWesty (Reply 11):
While the results don't look good on paper, these are mainly accounting charges which shore up the balance sheet. IAG stock was actually up almost 8% today on the news.

The reason why the stock jumped was hidden away in the Accounts:

"After exceptional items operating loss for the year not including Iberia restructuring and impairment was €68 million, compared to our guidance in November of €120 million."

So the results were €52 million better than IAG had led the markets to expect less than four months ago.


User currently offlinejumpjets From United Kingdom, joined Apr 2012, 792 posts, RR: 0
Reply 15, posted (1 year 4 months 4 weeks 1 day 18 hours ago) and read 1674 times:

Quoting lightsaber (Reply 13):
Hence why I do not like such charges. For they can occur again and again or else be used to pad future years (take the expense in a bad year to boost bonuses later).

Under IFRS once a provision has been set up the movements in that provision year on year have to be analysed in the notes to the accounts so it can't be used to fudge the in year trading results.

I expect Kraft prepared their accounts under US rules and they may not have the same requirement which would make massaging the figures a little easier - but still naughty.


Top Of Page
Forum Index

This topic is archived and can not be replied to any more.

Printer friendly format

Similar topics:More similar topics...
DL Posts $1.96B Loss For Q2 posted Mon Jul 19 2004 19:15:37 by ConcordeBoy
Jet Airways Posts Huge Loss For 2002-03 posted Mon Nov 17 2003 06:36:47 by Gamps
US Posts $541 Mill Loss For 4th Quarter posted Thu Jan 29 2009 10:44:24 by IliriBDL
SkyEurope Posts Loss For 3Q 2008 posted Tue Sep 2 2008 13:38:41 by Andrej
B6 Posts 4Q Loss, 18m Profit For 2007 posted Tue Jan 29 2008 06:04:45 by Crogalski
JetBlue Posts $22 Million Loss For Q1 posted Tue Apr 24 2007 20:38:36 by Crogalski
Delta Posts $300 Million Loss For January 2006 posted Fri Mar 3 2006 04:16:02 by Nycfly75
JetBlue Posts 4Q Loss, Warns For 2006 posted Wed Feb 1 2006 15:48:58 by TOLtommy
UAL Posts $56 Million Net Loss For August posted Thu Sep 23 2004 19:24:10 by Iowaman
UAL Corp Posts US$459M Loss For Q1 posted Thu Apr 29 2004 20:57:03 by Singapore_Air