Morning, and welcome to IAGS 2020 results call. It's been a busy year. So first of all, all of you and your families are well. I'm joined here today by Steve Kanik, Financial Officer. And we also have the OpCo CEO in Hidal.
We have John Doyle and Kimbellon in the office in London. Javier Sanchez, Marcos and Salvini are on the line. Donna Moriarty in Dublin and Daniel Anton. Lynne is here today in the current role at CIO 5ID Cargo, but announced yesterday that taking over from Donald and CEO of Arlingu from 6th of growth. So first of all, I want to thank Donald for the Ercel and Joseph, we have done in the more difficult situations that we have.
And I want to say congratulations to Liam. They will be available if you have any specific questions later. COVID-nineteen has consumed all of us in the last 12 months and almost everything we have done in February last year had been in response to the pandemic. Our top priority has been and continues to be the health and safety of our customers and our employees. I would like to thank all our people across the globe for their commitment, resilience the flexibility of this crisis.
The year started off well passenger demand rising by 5% up to the end of February, even while the pandemic was surging in China, coasting BA and Iberia to cancel their China flights from the end of January. Between March December, passenger demand fell by an unprecedented year of 87% due to the travel restrictions and quarantine requirements imposed by government around
the world.
Non passenger businesses performed much better
than the
passenger business. It was a record year for cargo in terms of revenue and we conducted over 4,000 cargo only flights. Other revenue streams, such as maintenance and loyalty, last year, but they were more resilient than the passenger vehicles. We responded weekly and decisively, the pandemic as shown on this slide. I won't go into all the actions
that
you can see that many of them will be covered by a team in this presentation, but I want to select a few highlights. Since April, more than half gas operating expenses as we have reduced capacity. We have undertaken labor restructuring, resulting in more than 10,000 people leaving the business, and we now have more flexible contracts. Iberian Boiling have benefited from government's follow scheme. Finally, we raised significant amounts of funding in the public capital market since the pandemic started, including EUR2.7 billion rights issue.
And as you know, we announced on Monday that we had finalized €2,200,000,000 of loans guaranteed by U. K. Export Finance. Our liquidity is currently around €10,300,000,000 including the U. K.
Loan, which is more than before the pandemic started. But we have not just focused on COVID-nineteen over the last 12 months. We have taken significant actions to enhance our long term strategic position, many of which are listed here in this slide. In terms of the customer proposition, our overall NPS improved by 10.9 points to 36.7. I know that it has not been a normal year with much reduced passenger volume, but we have been acknowledged for our COVID demonstrating that we remain committed to investing in our customer proposition.
Staying on the customer subject, I'm pleased to announce that IAG today has reached a long term agreement with Amadeus to distribute all our fare content via the latest new distribution capability, NDC technology. This is unique because all of our airlines are covered by the agreement and it is the first agreement of this of its kind with a GDS based on NDC standards. It demonstrates that the next phase of our digital distribution strategy that we launched in 20 27 is working. The benefits to IAG will be significant distribution cost savings, increased revenue, increased market share and an improved customer experience. IAE loyalty remained relevant in 2020 despite the lack of FlyOn.
Members continue to earn and redeem Adios points on non travel partners. ILG Loyalty renewed It's a multiyear agreement with American Express with £750,000,000 cash advance. New partnerships have been established with Banco de Santander in Spain, Sensory and Nektar in the UK and Barclays Premier Banking. And we expect more partnerships to be announced in 2021. IAGTech has maintained its investment in cybersecurity and improving the stability and performance of core systems.
We have continued to work on investments to achieve our net zero emissions goals by 2,050. Velocees received planning approval to construct a waste to jet fuel plant in the U. K. That is expected to produce sustainable aviation fuel from 2025. We also made an investment in Lancer Jet, another sustainable aviation fuel supplier.
And finally, we have started a partnership with CERO IVA, who is developing hydrogen propulsion. Iberia has renegotiated its planned acquisition of Aeruglopan, reducing their purchase price from €1,000,000,000 €500,000,000 and has also agreed to defer payment until 6 years after completion of the transaction, which is expected to be later this year. On Brexit, we implemented plans at the end of December to ensure that our EU airlines continue to comply with PU ownership and control rules, and we have secured flying rights. And then I hand over to Steve for your part.
Thanks, Luis. Good morning, everybody. Let me take you through the slides for the financial update. In this first slide, we just try and give you some of the headlines the key KPIs for the year. If you look in the top left quadrant, as you can see, the year, we sort of split down into 2 pieces.
The 1st 2 months of the year, January February, we've seen such a long time ago. We were performing well and ahead of plan. We'd come into the year in good strength. And then it became clear at the end of February that the pandemic had moved to Italy and was then spreading through Europe. And so March to December, you saw significant capacity cuts, particularly in Q2 in that initial lockdown.
We were only flying about 5% of our capacity compared to 2019. And then through the rest of the year, as the pandemic Sort of went to and fro and the intensity went up and went down. The restrictions moved and our capacity moved accordingly. So In Q3, we were flying at minus 78.6 percent and in Q4, minus 73.4%. So given that loss in demand, what you see on the right top quadrant is what our pre exceptional operating team resulted and it went from being a significant profit in 2019, €3,300,000,000 to a loss of €4,400,000,000 And associated with that was a significant cash burn.
And if you look at the bottom left quadrant, you can see Both our gross debt and net debt levels at the beginning and the start sorry, at the beginning and at the end of the year. So our actual Gross debt has increased £1,400,000,000 in the year, and our net debt has increased £2,200,000,000 However, despite this cash burn, we remain in a strong position in terms of liquidity. This has been the result of a lot of initiatives, including the capital raise during Q3 And most recently, the U. K. E.
F. Loan that we announced at the end of December and then fully finalized Monday of this week. And so much so that our liquidity, we finished the year at 10.3 percent ahead of the position that we started the year in, And it represents about 40% of 2019 revenues. If we go to the next slide and we'll just look at the Q4 and full year in a little bit more detail. You can see from this slide that probably the one bright spot in the year has been the cargo performance.
Revenues were up 33% in Q4 and up 17% for the full year. Although cargo demand was down, The drop in cargo capacity was more severe, and so made it quite a tight cargo market. We found during the year that actually we were Flying a number of aircraft, passenger aircraft for only cargo purposes. And sometimes, it was only the cargo that was justifying the aircraft. And then sometimes, we were putting passengers on as well, almost as a secondary business rather than the primary one.
And so it's been a strong year for cargo in 2020. If we look further at Q4, clearly a considerable loss of 1,165,000,000 In Q4, that is better than Q3. That's despite passenger revenue being down, but the cargo and the cost performance compared to Q3 were better. In fact, passenger revenue, if you look at it for the full year, fell 75.2%, load factor down 21% and unit revenues Down 27.8%. Interestingly, as the year evolved in the last few months, what we've seen is actually Long haul as a proportion of our business getting stronger than short haul.
And Luis will take you through a couple of slides on that later on today. But we have seen that the visiting friends and relatives segment has been particularly resilient on long haul and so has some of the premium business during the last couple of months of the year. This coupled with cargo are the segments that clearly we participate in more so than the low cost carriers. And then if you look at costs, costs fell 54.7% versus last year in Q4 And with €71,000,000 lower than Q3, despite operating 10% more capacity. And of that €71,000,000 reduction in costs, Q4 versus Q3, €59,000,000 of it relates to lower employee costs.
And that's the benefit coming through of the restructurings That were carried out at BA and Aer Lingus earlier on. If we turn to the next slide, that gives you a sort of picture What was going at the operating profit level, pretty exceptional, let's look at the exceptional items that we and as you can see, items have amassed to €3,100,000,000 I've been through most of these items in previous presentations. But as you can see, £306,000,000 of this amount occurred in Q4. I just want to quickly touch on those. So there was a further £140,000,000 of impairments, primarily related to the closure of Level France in terms of impairing the aircraft there.
And also, there was some impairment of some dwelling aircraft also in the period. In terms of over hedging, as you know, we are flying considerably less capacity than originally anticipated. And hence, we have significant levels of derivatives that are no longer necessary. They're not matching the physical requirements, so they're over hedged. We've been booking this through the year.
You can see that, that over hedging charge has gone up by 95,000,000 Two factors really. 1, as we've looked out to 2021, our capacity expectations, we have lowered. As a consequence, we have more excess positions than we previously thought. And that has been slightly offset by the increase in the fuel price and the change in the exchange rates. And lastly, you can see a further €44,000,000 of employee costs, And these relate to the restructuring costs at Level France and also a small amount at Iberia.
If we go to the next slide, which shows you the summary performance of the airlines for the year, Not going to spend too much time on this chart. I think actually the next slide gives you a better insight as to 2020. But I will make a few key messages on the operating companies. In terms of welling, it was the business where the operating margin was the most negative of our 4 airlines. This is primarily exposure to focus on point to point.
And also that focus being in countries are most impacted by the pandemic, particularly Spain and Italy. And also, Welling doesn't benefit from the other revenue streams such as cargo or maintenance or handling. In terms of Aer Lingus, it was the 2nd most negative operating margin, reflecting what we've seen throughout 2020, which is the travel restrictions in Ireland have probably been the most restrictive probably almost anywhere in Europe this year. And as a consequence, for example, Aer Lingus did not benefit from any sort of summer opening, whereas some of the other businesses did. BA recorded an operating margin of minus 58.2%.
It did benefit to some from its transfer network and also the cargo performance, which, as I said earlier, was a record performance for the year. And lastly, in terms of Iberia, it was the least negative operating margin as it benefited from its strong domestic segment, It's Transfer Network and also its other businesses, the MRO and handling business, which also helped diversify it to some degree. As I just mentioned, I think the next slide gives us probably a better insight as to what's happened to IAG in 20 '20 rather than the income statement. This slide shows you a cash Bridge, which shows you the opening cash position for the year and the closing cash position for the year. And I'll just dwell on this slide for a little bit Because I think it explains our performance more accurately than anything.
So going from left to right, in the year, Clearly, we had a negative EBITDA figure of £2,300,000,000 and I've just given you a few highlights as to what was behind that. And if you look at working capital, trade receivables reduced €1,700,000,000 2 aspects to that. When we did the full year results in February last year, I mentioned that our trade receivables were Abnormally high. I'm glad to say we responded to that and got the money in during Q1. And also because business activity during the course of 2020 has been lower.
That's also caused the trade receivables to come down. If I look at sales in advance of carriage or deferred revenue, that's dropped 1,200,000,000 to €2,400,000,000 at the year end. This is primarily due to canceled flights leading to refunds. However, it's worth noting that in the €2,400,000,000 year end balance, about half of that relates to vouchers. So if we hadn't adopted the commercial policies to give vouchers on cancellations, We would have had a greater working capital unwind than we did.
And then in terms of loyalty, the £808,000,000 that's Primarily due to the American Express deal that we announced in July this year where they made a significant prepayment to us. Moving on, realized over hedging losses. So I just referred to earlier that We've had to book significant exceptional charges for over hedging, actually 1,700,000,000 in the year. And what this figure is showing, of that 1,700,000,000, we've paid out nearly €1,200,000,000 during the course of the year. So we're about 70% through that bill in terms of settlement.
In terms of pensions, 313, that's actually lower than you might have expected, but that's because of the pension deferral Agreement we reached with the trustees on the British Airways NAP scheme and we announced on Monday of this week. Then moving to across gross CapEx for the year, we paid out 1,900,000,000 in terms of gross CapEx and in terms of that, we'd originally guided you to 2.7 But due to a combination of some aircraft delays and also some further savings, We came in well below that of €1,900,000,000 Moving on, we have a number of sale and leaseback transactions that we Executed during the course of the year to the tune of about €900,000,000 And then we've made other disposals, which take you up to the 1,100,000. And then in terms of aircraft financing, 2 components there. We took out a bridge facility Roughly €900,000,000 during the course of the year. We've actually paid that back during the course of the year.
So it was in are out. And you can see that 2 columns along where it talks about repayment borrowings. And the other element is the WETC transactions that we have undertaken during the course of the year. And then in terms of non aircraft financing, 2 key components to that. The €1,000,000,000 Loans that we took out under the Spanish ECO program that Iberia and Vueling benefited from.
And also, we benefited from the U. K. COVID Credit Facility Program, the CCFF, The commercial paper program where we raised about €340,000,000 there. So that's the main reason for the non aircraft borrowing. And then just finishing a long repayment of lease liabilities, that's sort of business as usual.
Clearly, we've sought to negotiate with lessors and that number as low as possible. And then the rights issue that you're familiar with, all leading to the cash Position at the end of the year of €5,900,000,000 So I think that slide is worthy of taking a few minutes because I think it really shows the activity and the key impact of the virus and the key impact of management actions during the course of the year. If I go to the next slide, I've just mentioned that we finished the year with €5,900,000,000 cash. How does that fit into the overall liquidity position? Our liquidity at the end of the year, as I mentioned earlier, is €10,300,000,000 ahead of the year opening position.
In Q4, we announced that we were we'd had sort of approval in principle for the UK export finance loan of 2,200,000,000 you. Euros and then on Monday of this week, we announced that we've fully contracted it and we're in the process of drawing those funds. We also obtained a €75,000,000 facility from the Irish Strategic Investment Fund also in Q4. Facilities increased by the year end, partly because we took out the bridge facilities I referenced earlier, Which freed up some collateral, which meant that the BA revolving credit facility, the amount available under it had increased. Further actions that we've taken to help liquidity, we've agreed the pension deficit deferral, and we continue To look at other debt funding initiatives and see what other ways we can bolster Our liquidity looking forward.
Probably one last note on this slide is one of the things Worth noting is when we were doing the rights issue sizing, we did not anticipate that we would be able to do the U. K. Export finance agreements. So that was something that wasn't anticipated when we were doing the sizing of the rights issued. On the next slide, this sets out how the debt net and gross has evolved throughout the year.
And as you can see, gross debt has increased €1,400,000,000 in the year to €15,700,000,000 That splits between financial debt of about 3.5 1,000,000,000 and asset related debt of about 12,200,000,000. Of this increase, it's the financial debt That's gone up. Actually, the asset related debt is pretty much flat, if not slightly lower. So once again, this is The eco loan and the CCF coming through. So overall, net debt at the end of the year is €9,800,000,000 which is 2 point £2,000,000,000 higher than we started the year at.
On the next slide, which I won't dwell on in any detail, We thought it would be useful to show you the maturity of our debt positions over the next few years. The focus here is primarily financial debt. So it doesn't include aircraft leases. But I think 2 key messages here. It's relatively low levels of financial debt maturing over the next 5 years.
And before 2026, little variability And the amounts becoming due each year. We move to the next slide, which is on CapEx. As I touched on earlier, in 2020, we've guided you mid year that we would incur CapEx of £2,700,000,000 That's come through at 1.9 percent partly due to of the 9 aircraft delays during the year, 7 of them are CapEx related, 2 of them were related to direct leases. And so those 7 aircraft delays have benefited the CapEx number, but there's also been some underlying savings too. If you look forward into 2021, we previously guided you that gross CapEx would be 1,900,000,000 Our latest expectations are 1.7.
We're still holding that the fleet deliveries will only be 15 aircraft. So despite the fact that 9 aircraft have moved from 2020 into 2021, we've managed to move other aircraft that were scheduled for 2021 Half of the year into later periods. And so overall, it will still only be 15 aircraft deliveries in 2021. And just to be clear, although we're not guiding on 2022 CapEx today or the number of deliveries, there is not A huge bow wave in 2022 of deliveries. We're not expecting the number of deliveries in 2022 to be greater than 2020.
So good progress made on CapEx. And as you'd expect, we continue to negotiate and talk with the OEMs in a constructive manner. Last slide for me and then I'll hand back to Luis. In terms of Operating cash burn, we've used this slide several times before. Probably the best thing to do before I explain the numbers is just to explain the definition.
It seems every airline uses a different definition of cash burn. So this is not a net figure. These do not net revenue against costs, these are just absolute cost figures. So if you were looking for a net cash burn, clearly, it will be significantly lower than the balances on this slide. What is included in these numbers are normal operating expenses such as employee costs, fuel costs, handling, catering, landing fees, property IT, selling costs, lease payments, interest and also the over hedging cash outflows as well.
What's not included in these numbers is, as I say, any revenue or pension deficit payments, any working capital movements, debt payments or tax. And if that's the definition, a few comments In Q2, when we were running less than 5% capacity, our weekly cash burn was about €205,000,000 What we're guiding for Q1 is €185,000,000 and this is €30,000,000 per week reduction compared to Q4. Has to be said, we are running less capacity in Q1 than Q4. So that gives you a sense of what we think the cash burn may be during the course of the quarter. Those are the key messages I wanted to take you through.
I'll hand you back now to Lewis. Thanks, Steve.
So you have seen our overall passenger capacity in the 4th quarter was only 27% of the 2019 level. For the Q1 of 2021, capacity is likely to be less the 4th quarter at around 20% of the 2019 level. We have very low expectations for Easter, which as you know is normally a peak period for travel. The outlook beyond the Q1 remains highly uncertain. The vaccination programs in some of our main markets should lead to improving recovery in international air travel as the year continues, as long as they are joined by relaxation of border restrictions and quarantine requirements.
However, the pace of reopening international travel is still unclear. Should the situation worsen, you can be sure that we will take further actions to reduce expenses and boost liquidity. This low capacity and demand is driven the bookings that you can see in this slide. As you can see, bookings up to last week we're depressed at around 20% of 2019 levels. In this you can also see the 3 main UK lockdown periods over the last year between March May, November and from January onwards.
But when travel restrictions start to be relaxed, bookings recover quite quickly. For example, as some lockdowns were relaxed in early December, bookings for domestic flights in Spain and long haul flights briefly went up to around 40% of 2019 levels. And contrary to what some people think, long haul bookings have outperformed international short haul for IAG since September. This chart covers bookings up to February 21, the day before the U. K.
Government announcement of its 4 step plan to ease England's lockdown by end of June. In this slide, we can see that bookings at BA have surged since Prime Minister made known the U. K. Government lockdown exit plans on February 22. On the day itself, flight only bookings, bookings increased by over 60% and via holidays by 200% compared to the same time period a week ago.
There was an even stronger rate of bookings on February 23. For example, via holidays was up to 5 60% compared to the previous week. Booking activity has also been strong during the rest of the week. It's important that the conventional wisdom seems to be that long haul is the weakest segment currently, but that has not been our experience. Since July, the proportion of long haul total passenger flown has increased steadily for both VA and EBITDA.
Clearly, North America, Yes, largest long haul market has been weak due to street border restrictions, although North American routes have been fairly constant 15%, 20% of BA's total passenger revenue since July and approximately 10% for Iberia. But other long haul routes have been stronger, in particular, Latin America, West Africa and the Indian subcontinent. Visiting friends and relatives traffic is a significant component of the traffic on these routes, And this traffic has supported connected traffic despite local travel restrictions, for example, between North America and India. VFR is currently the strong customer segment and is more relevant to long haul than to short haul. Long haul leisure demand has proved to be just as pent up as short haul leisure, especially this winter outside of lockdown.
Caribbean, United Arab Emirates and Indian Ocean routes have been particularly strong for VA and the Caribbean for Iberia. Long haul is also being strongly supported by cargo. We fully support government's priorities to eradicate COVID-nineteen and protect our health and the health systems, and therefore, the need for travel restrictions and quarantine requirements. We are pleased that vaccination programs are proving successful in many of our markets by improving public health outcomes reducing risk levels. Overall, we are asking governments for a coordinated road map to a reopening of international air travel on which economic recovery depends.
This road map should include The Phase III removal of travel restrictions based on common standards as risk levels fall, the use of pre departure testing instead of quarantine requirements until completion of the packaging programs globally and the adoption of digital solutions to support verification and exchange of test and vaccination data. IAG and its airlines have been active in developing and testing digital health we are working with IATA on the IATA Travel Pass. And Via and Iberia, they are trialing the Vertifly app on all inbound routes to the U. K. These are multiple sources of complexity in the current largely manual processes for taking compliance before travel.
So we have different testing and quarantine requirements by country, different proofs that need to be shown by country like travel authorization forms, hotel bookings, etcetera, and different standards for test and vaccination certificates issued by medical labs all these differences make it very difficult for customers to understand. They also make it very difficult for airline staff to check for compliance to different requirements when these customers check-in. Digital solutions will therefore be vital to reduce this complexity and make the customer journey smoother. Inevitably, there will be multiple digital solutions being developed and tested in the short term. However, we are confident that there will be consolidation among these solutions in the medium term.
ILE cargo, as Steve showed before, has had a good year in terms of revenue, which increased by 33%. Overall, cargo volume declined by 35%, reflecting the reduction of the passenger network, which typically carried 95% of our cargo in Delhi halls up to 2019. We were already in a strong competitive position before the pandemic. We have a broad global network of more than 3 50 cargo destinations. We have an established product portfolio focused on products such as ConstantClimate Pharmaceuticals, Express and Secure.
And we have a strong customer relationship. But during the pandemic, supply chains have been disrupted, which have created new business opportunities and new customers for IAG Cargo. IAG Cargo has demonstrated in this period its stability and its response to these opportunities. Since the pandemic started, we have undertaken 4th ocean cargo only flights, equivalent to more than 100 flights per week. Just for information, 35% of IAEA's cargo in 2020 was carried on cargo only flights and 65% in the very whole of passenger flights versus the 95% in a normal year that I told you before.
Many long haul passenger flights have been enabled because cargo has made them cash positive. We have established a dedicated charter team also. And we have adapted passenger cabins to coverage rate, including temporarily taking seats out of several wide body aircrafts. One important thing, we have contributed to the transport of critical equipment and essential supplies, including vaccines during clinical trials and now supporting global vaccination programs. Our commitment to the environment is unchanged.
I would say is reinforced despite of COVID, our medium and long term targets are unchanged. We are on track to improve our carbon efficiency by 10% by 2025 compared to 2019. 20% decline in emissions by 2,030 and net zero emissions by 2,050. We have created a Board subcommittee focused on sustainability. And yesterday, we announced a new role at management committee level Carolina Martinoli will be Chief of Culture, Talent and Sustainability.
Management initiatives are aligned to climate targets. The right hand side of this slide shows our road map towards net 0 in 2,050. Gross emissions is the yellow line and net emissions, the lower that obviously, we look at 2020 was an unusual year due to the capacity reduction. But we have several levers to achieve this road map, including a more efficient fleet, sustainable aviation fuels, carbon offset and removals disruptive innovation. And now for my concluding slides Before we go to the Q and A session, first, a reminder that IAG had a strong position financially going into the pandemic.
In the 3 years prior to the crisis, we made operating margins of 13%, 40% and returns on invested capital of over 15%. The balance sheet and cash liquidity were also very strong. We also had and continue to have a proven business model and a strong strategic and competitive positions. And in addition to our financial and strategic strengths, The management team has taken control to mitigate the impacts of the crisis and secure our future. We have taken quick and decisive actions to minimize net cash outflows.
We have been active raising capital, including a successful rights issue and U. K. Export finance loan. Total liquidity of €10,300,000,000 currently is even higher than it was at the start of the pandemic. We have successfully lowered our cost base and made it more valuable.
We have successfully renegotiated the purchase price of Aeropa and deferred payment by 6 years. And we will continue to lead the consolidation of the European Airline sector. I am confident that IRU will emerge from the pandemic in a stronger competitive position. Our immediate priority is to navigate towards a meaningful return to service as soon as possible and to persuade governments to lay out roadmaps for reopening air travel, relax border restrictions and adopt common testing regime until the completion of vaccination programs around the world. And now we are ready for all your questions.
Thank And wait for your name to be announced. And as a further reminder, please note that you are restricted to 2 questions per participant. I would also like to remind you that unless speaking, please ensure that your line is muted. And our first question comes from the line of Savi Syth at Raymond James. Please go ahead.
Your line is now open.
Hey, good morning, everybody. You. Cash burn is lower than 4Q, but also 2Q and 3Q. So it's where you had maybe similar capacity production. So clearly there's some better Maybe cost execution here.
I was curious as you kind of ramp up for summer flying, do you expect some elevated cost in 2Q or is that cost Timing similar to when the capacity goes up and somewhat tied to that is the better kind of execution Changing your thinking on when you get back to 2019 unit costs, which I think you said when you get to 2019 capacity? And then my second question is, bookings have surged recently. Is it fair to say that your working capital and revenue development in 1Q It's so far tracking better than 4Q. Thanks.
In terms of sorry, the line is particularly bad. I'm not sure I've heard all of the questions. But in terms of if capacity ramps up during Q2 or Q3, Yes. There will be some incremental costs. There will probably be some incremental training costs, particularly for pilots, say, at VA And also some incremental maintenance costs.
But I don't think those will be a significant distortion in our numbers. So there will be some degree of ramp up. And in terms of when will unit costs start to look Similar to what we saw around 2019, if not a bit lower. I think that's when we get to sort of 90% -plus capacity compared to 2019. Difficult to know when that will be.
We've talked about not getting back to that point until 2023. But as we know, This pandemic has been somewhat uncertain. So it could have quicker, could take longer. Didn't hear the second question.
Sorry. 2nd was on just the booking. With bookings having surged, is your revenue and working capital development Kind of tracking ahead of what you saw in 4Q 'nineteen, so sorry, 4Q 'twenty. So all things equal, maybe a better all in cash Burn level in 1Q?
No, I would say Because we went in particularly the U. K, because we went into the 3rd lockdown, I think we would normally expect it to have had Significant inflow of bookings in Q1 like we would normally do a very large January sale. Because of the 3rd lockdown that was announced, that has probably dented consumer confidence in the very short term. I think what's interesting, as Luis alluded to, when the Prime Minister of the UK made these announcements on Monday and people started to get some confidence that the summer might well be open, we have seen bookings spike. As a consequence of that, I think if customer confidence continues to grow and there continues to be positive news flow, I think we will see an acceleration of bookings, and clearly, that will be working capital positive from that perspective.
But as you know, there's many twists and turns. So that seems to be the direction of travel at the moment, but a lot is dependent on the news flow and customer confidence.
Makes sense. All right. Thank you very much.
Thank you. And your next question is from the line of Daniel Oresca at Bernstein Research. Please go ahead. Your line is open. And please be reminded Apologies.
Please be reminded to mute your line when not talking.
Thanks very much. I hope that's the case. Good morning, everybody. 2 then, if I may. Maybe one a little bit longer out.
We're in the recovery, but going forward, What are you doing to limit the risk that your short haul profitability in the upcoming years? Kind of given the shift in consumer and connecting and business travel kind of preferences, That doesn't escalate and basically eats up what happens on long haul. As you mentioned, long haul is kind of the core of your business, But there is a high probability that short haul will be a lot of a lot worse for you. So kind of how are you thinking about that? And then secondly, could you give us some color Once and when the Europa deal gets approved by the EC, kind of what are the next steps for your Spanish assets, kind of Iberia after Erste And then plus UX, kind of how does that look in a year's time in the Spanish market?
Thanks.
Good morning. Thank you for the questions. When we look at scenarios, we consider 2 key factors: the willingness to travel and also the ability to travel. We have seen in 2020 that there is a strong willingness to travel once restrictions are that's what we have seen when we have lockdowns and even after the announcement of the Prime Minister this week. So the willingness of the people is present across the three broad reasons for travel, visiting friends and relatives, leisure and business.
But it's true that the fit that the demand returns within those segments is tied to the level of travel restrictions that we have in place. We have seen that, for example, the people that they want to see friends and relatives, they can tolerate in some ways more easily restrictions over their travel or freedom of movement at other destination. But the case, for example, of customers wanting a holiday or rate, they can tolerate part of that, but the inability to spend some time at the destination and to have some freedom you limit the bookings that we have from that segment. And in the case of traveling for work, I think, first of all, the different companies and the individual both need to be affecting the risk are traveling during the pandemic period. But I we think that after these quarantines are removed, there are a lot of customers that are willing to travel, and we know that it's not the same and we have learned during this year to do business with teams or students, and there are a lot of activities that require face to face meetings.
So in summary, I would say that as the VFR traffic is strong and some long haul markets have a big part of this traffic, CataVision long haul is working and it's working in some time better than in the short haul. About the Europa, you know that we closed a deal November 2019. This year we have reached a new agreement with new price with new conditions of payment. In this period of time, Europa had the support from the Spanish government and that support has attached conditions. So first of all, we need to negotiate with the Spanish government these attached conditions because we need to have the freedom to manage the company.
And after that agreement that we hope we can reach, we will need competition approval. All this process it's expected by the second half of this year. I think that is going to be more close to the end of the year that to the beginning of the half.
Okay. Thanks. And did I understand you correctly That you're expecting the level and structure of business travel kind of post crisis to revert essentially to pre crisis levels As long as people are able to travel?
Yes. I think that it's going to take time, as we have always said. We consider that in 2023, 2024, we can come back we have in 2019.
Okay, very clear. Thanks very much for that.
Thank you. And your next question comes from the line of Jarrod Castle at UBS. Please go ahead. Your line is now open.
Thank you very much. 2, of course. Firstly, just in terms of the manner that people are going to travel at the moment. Obviously, you're trying to do travel passports and digital options, but there's also the hurdle of testing in a number of markets. And it's pretty expensive in terms of PCR tests, €100 plus or €100.
So do you think These tests will disappear over time or is it going to be an additional cost for the customer to bear and will that impact future volumes for a number of years. Then the second question is just on fuel. I can't seem to find a fuel hedging ratio. I know you put you. The policy you kept the policy, but you suspended your hedging.
So where are you actually hedged, especially over summer, Just given the recent increase in the fuel price and when will you continue to hedge thinking beyond 2021?
The first question, we see that vaccination is in the future. It's true that vaccination is not going to be here for all the countries soon. So we consider that in the meantime, a testing regime is necessary. And I agree that it had to be affordable. So I think we are advancing in that direction.
Also, we consider that the health but apps that have been developed and we are developing are going to help the customers, as I said before, to know what they are required to travel and to show that they comply with all their regulations. So I think the future is vaccination, health path. And in the meantime, we need testing regime to do the bridge. And for sure, we need that testing regime to be affordable.
Just picking up on the fuel hedging position, just a couple of thoughts. One of the things We're not doing at the moment taking out any more fuel hedging positions. We are reviewing Our fuel hedging policy for the future, clearly, given the level of over hedging that we have at the moment, we can take a bit of time to do that. So we're not actually entering into more hedges. So probably the last guidance that you had is probably to some degree indicative of the hedge position that we had.
You're right. With regards to the increase in prices since the year end, I think when we mark to market for the year end purposes, the spot price for jet was about 4.40 at that time. I think today it's probably at about €550,000,000 So you're absolutely right. As that price goes up, the settlements on those hedging positions will reduce to some degree. So there should be some benefit in the cash flow numbers as a consequence of that.
Thanks. I guess, do you think you've got the correct hedging for summer then depending how demand comes back?
Say it again, please.
Do you think you've got the correct hedging for summer then depending if things open up, I guess, you. Are you too under hedged?
No. I think we've got an adequate level hedging at the moment. But it would seem premature to be trying to take out more positions on a sort of speculative basis. We don't know how the markets are going to open up. So We've basically been taking a sort of speculative position, and that's not the purpose of our fuel hedging policy.
It's very much to try and match our expected demand. And clearly, it's very difficult to know what demand is at the moment.
Okay. Thanks very much.
Thank you. And your next question comes from the line of James Hollins
Yes, Meny, thanks. First one is for Shaw and if he's on. I was just wondering what BA's plans were at Gatwick this summer. Or are you going to leave Gatwick alone given your I think you've got a slot swaver, meaning you don't have to use those slots. And maybe if Sean wants to tell us what he's looking forward to getting his teeth stuck into now he's Head of BA.
And the second one is on restructuring. Just wondering if you could let us know whether BA and Aelinas are basically fully done on there, particularly staff restructuring. And then on dwelling and Iberia restructuring, I was wondering if, first of all, confirm they benefit from the air tape until the end of May and what the plans and restructuring are after that? Thank you.
Great. Thank you. Yes, in relation to Gatwick, I suppose a bit like the rest of our network. We're waiting to see what the summer holds and we're going to work with the government over the next 6 weeks on making the most of the task force that's been set up. So I think our network decisions will kind of follow that process, but we are operating long haul operations out of Gatwick.
We're operating long haul and short haul out of Heathrow, and we're just looking to optimize you, both of those portfolios in the short term, and we'll make a call when we know more about the demand environment over the summer. In relation to restructuring, I think over the medium term, it's fair to say that BA has taken a lot of restructuring. We've got 9,000 100 less employees in the company today than we did a year ago. So I think we are very much kind of right sized for the kind of we have over the next number of years. You.
When we look ahead over the summer, I think we have been using furlough quite flexibly and adapting our cost to be as variable as they can. And again, we will work hard to make sure that all of our costs are variable with capacity over the coming months. And we look to look at whatever levers we have in terms of voluntary measures if we need to kind of reduce our employee overheads, measures if we need to kind of reduce our employee overheads as we navigate through the next 3 to 6 months. In terms of what I'm looking forward to having got over at the helm of the EA, I think we've got a very exciting platform now to build from. The company reacted very quickly to the crisis and took some very tough decisions.
I think that leaves us in a position to recover and recover very effectively. I think we do see evidence of real pent up demand as we saw this week when confidence comes back and when governments enable us to travel. And I do think that we want to be part of leading aviation and leading the U. K. Economy out of the pandemic because the Britain wants Global Britain is open for business.
I think aviation is a critical sector. BA is well poised to do that. And we have some very exciting plans to probably rebuild The airline coming in the next year or 2. But as I said, the platform is strong. And I think the opportunities to build on that are very exciting.
Yes. Can you just follow-up on the Spanish airplane dwelling Iberia benefiting through the end of May and plans on restructuring after that from an out? Thanks.
As you said, the plan now is approved until the end of May. It's true that the Spanish government is considering to extend the Earte and that's the consideration that we have right now. It's a very useful tool to adjust the cost to the variability of the demand that we are having. We hope we can continue with the Air Threat team. In the case, we don't have an Air Threat team.
We will need to take all the actions to reduce the employee costs to try to continue reducing our cost base that is so important in these circumstances.
Okay. Cool then.
Thank you. And your next question comes from the line of Jamie Robotham at Deutsche Bank. Please go ahead. Your line is open.
Morning, everyone. Questions for Steve, I think. First topic is cash. Steve, are there any timing effects that might offset the benefit from new bookings through working capital in the first half and staying on cash. In terms of that €2,200,000,000 undrawn committed aircraft facilities on Slide 11, Is that finance that you could call upon tomorrow?
Or is it intended to finance some of the EUR 1,700,000,000 CapEx you mentioned on Slide 14. I just wanted to try and get some clarity on any refinanced CapEx for 2021. And second topic is equity. Consensus seems to have about EUR 2,000,000,000 net loss for IAG in the first half of twenty twenty one. Value of equity at year end was down at €1,300,000,000 Would it matter if that figure went negative at the interims?
And any thoughts around plans to deal with that, if it would? Thanks.
Thanks, Jamie. I think I heard the first and the third. The second one was a bit unclear. In terms of cash timing effects, I think the only significant That I think comes through in the first half is the repayment of the CCFF. I think that's in the first half of the year.
So I would be factoring that into my cash flows. I think in terms of the negative equity from An accounting perspective, I don't think that is an issue as far as I can tell. Jamie, can you repeat the second question? The line's not been great this morning. I didn't quite get it all.
Sure. I'll do my best, Steve. On Slide 11, you show EUR 2,200,000,000 of undrawn committed aircraft facilities. I was trying to understand, is that finance that you could call upon now? Or is it intended to finance some of the 2021 CapEx, the €1,700,000,000 you mentioned on Slide 14?
And linked to that, you. In 2020, you financed a lot of your CapEx. I was just trying to sort of understand what the plan is for how much CapEx could impact cash in 2021. Thanks.
Yes. So in the 2.2, there's a mixture of items. So there's some undrawn WTC funds to go against aircraft. There's also the Airbus backstop facility as well, Which is against aircraft. So some of that is to set against aircraft rather than it's generally available.
So it's a mixture in that 2.2 figure. In terms of the 1.7 CapEx number that we've guided, you. 1,300,000,000 of that relates to fleet. Some of that's sort of embodiment type work. Some of it's for core assets.
And clearly, the level of financing that we can do on that will partly depend on the strategy we take and partly depend on the How open markets are. So we've done quite a few sale and leaseback transactions. We've done a couple of WETC transactions in 2020. So the ultimate loan value that we'll get on those will depend on which strategy we go down. Clearly, we'll be looking to finances as much as possible of the fleet figure.
What that number or what that Centages will probably depend on our financing strategy and also how the markets are developing.
Got it. Thanks, Steve.
Thank you. And your next question comes from the line of Muneeba Kiani of Bank of America. Please go ahead. Your line is now open.
Good morning. In your press release, you mentioned the base case scenario of Capacity ramp up from the Q1 of this year till Q1 of next year. Can you talk about what that scenario has For the Q3, and what's the flexibility to ramp up capacity faster if there is demand? And then secondly, can you quantify the revenue and cost impact from the Amadeus NDS agreement that you've just announced.
Maybe if I take the first two And maybe Marco or Luis will take the Amadeus one. In terms of the base case, When we're doing our going concern assessments, we have to come up with a base case and a downside case scenario. And as you rightly say, In the IMR that we've sent out, I think the base case is showing minus 43% All the way out to March 2022. Clearly, to get into the details of what we're assuming in that, I think, probably gives it more substance than there is. We are not giving guidance this year on capacity because we don't know how it's going to play out.
We don't know how the pandemic will develop and we don't know how the restrictions related to the pandemic will develop. So We have to come up with a base case for the purposes of accounting. But I wouldn't want to get into details on that because We're really not certain enough as to what's possible. To the second point of your question, which is what's our ability to ramp up, which I think is a good question. Our view on that is you We can ramp up pretty quickly.
It varies by OpCo. I think BA could ramp up to about 70% of 2019 by the summer. I think welling can ramp up much quicker than that and can probably get up to almost one 100% of capacity. So our ability to ramp up if there was demand and restrictions and regimes allowed, we could make the most of a strong summer period by putting a lot of capacity into the market.
Okay. And I think the second question, we are not disclosing now the numbers about Maybe, Marco, you can talk a little about the benefits of the agreement.
Indeed. Hi, everybody. This is Markus speaking. So Indeed, we don't disclose, of course, the deal is subject to full confidentiality. Nevertheless, there are both significant benefits, Both from a revenue and a cost perspective.
In terms of cost, the NDC will allow structural reduction in our distribution this is not about the temporary discount. It's a new technology methodology that we use to distribute our content that brings with it a structural reduction in our distribution cost. But at the same time, there is a very, very significant revenue opportunity With that because as you know, the NDC technology, which is a communication standard to distribute to retail our products and services allow us to have much richer content. So elements like ancillaries will be able to be distributed In a much more effective manner and also additional context such as, for instance, now additional pricing points. So So the possibility to distribute more pricing points beyond the fare structure that currently is the limitation of the legacy technology allows To increase our competitiveness and generates revenue opportunities.
Thank you. And your next question comes from the line of Carolina Dores at Morgan Stanley. Please go ahead. Your line is now open.
Hi, good morning, Erika, everyone. I guess I wanted To get some more visibility on your success in shipping CapEx savings, which areas that went and on the negotiations with the lessors For reducing leasing payments, I mean, how much of that is actually a haircut to OpEx and CapEx and how much of OpEx and how much is It's actually deferred payments. And if I may, a follow-up on Muneeba. Your downside scenario pre UK Sport facility was 36%, declining in capacity. If you could have an update of what the downside scenario is now with the facility included, it will be helpful.
Thank you.
I'm going to disappoint you with these answers. In terms of the Negotiations that we have with the OEMs and what relates to aircraft and what relates to payments, I think that's Heavily commercially sensitive. So I wouldn't be disclosing those figures because they're commercially sensitive. The second question I didn't quite catch, which was?
So the downside scenario at the time of you announced the rights Issue for 2021 was assumed a 36% decline in capacity versus 2019. But as you mentioned, Steve, that didn't include the U. K. Export facility. So what is your downside scenario?
And I appreciate it, Cisco, but what is the downside scenario that you're working now for 20 1, so we can get a sense of when you're up to when you're to what level your liquidity is covering you. Your cash flow needs.
I understand. Yes, it's a good question. I think maybe going back a step or 2, When we did the when we were doing the capital raise and we were sizing it, we came up with a commercial downside case, as you know, That had a lot of different assumptions in it, including capacity outlook, but a lot of other assumptions, the ability to finance aircraft, what we call unit revenues would do, etcetera. And we looked out and we found the sort of trough point in our cash. And then we sort of sold that back to 20% of next 12 months' revenues.
And that's how we came up with the initial sizing. Since we did the capital raise, there's been a number of variances, unsurprisingly, as to what took place. So for example, with the commercial downside case that we used, we didn't anticipate that there would be a 3rd lockdown. We anticipated a second lockdown, but not a third one. Alternatively, there's been some positive developments, which would be, As you rightly say, we got the U.
K. Export financing and that wasn't in our thinking at the time. Also when we did the commercial downside case, we didn't assume that there would be vaccines, and that's a positive as well. So there's a number of variances clearly looking out. It's still difficult to see how that's going to play out.
The only piece of Information I would give is compared to our commercial downside case at the end of December, we were ahead of that from a cash perspective. So we were better than the commercial downside case at the end of December, despite the fact that we'd gone into a 3rd lockdown of that situation. But I hope that gives you a bit of a feel for where we're coming out.
Yes, it does. Thanks. That's helpful.
Thank you.
Thank you.
And your next question comes from the line of Neil Glynn at Credit Suisse. Please go ahead. Your line is now open.
Thank you. Good morning, everybody. So the first question just on encumbered assets. You mentioned within the presentation asset finance and lease liabilities of EUR 12,200,000,000 and I see PP and E of EUR 17 point on the balance sheet. So I'm just wondering, is something around €5,000,000,000 a decent way to think about unencumbered assets?
Or is there some other hidden value to think about? And then a second question, if I could ask Lynn, if that's possible. It's great to see the move to sunny Dublin, but I'm just interested in Your successors' opportunity for IAG Cargo, given the obvious uptick in e commerce Penetration on the growth prospects there, is this an opportunity to leverage that to expand IAG Cargo's presence Possibly with partners like Qatar, given that you don't operate your own?
So if I go first, Neil, I'll need to spend a bit more time. Our unencumbered assets are not up £5,000,000,000 considerably less than that. I think when we look forward as to what assets are available to maybe do further financings or securitizations, the obvious places we would look potentially are with regards to our slot portfolio, which is very strong And another assets that we have in the business such as the loyalty business, I think I'm happy to take this one on bilateral basis, but no, the unencumbered assets are not anywhere near €5,000,000,000
Okay. Neil, if I pick up your cargo question. First thing to say is in the seasonally medium term, I think we're is all about getting the group's aircraft up in the air and supporting the reestablishment of the passenger network, The kind of core sponsors, passenger and cargo flying. So that's where all of our near term effort is going. But you're right, there's The general outlook for cargo and product development is strong.
We are having some really positive dialogues with some airline partners to Play where we can't play on our own. But also, we put our attention back onto our strategic plan, Some of our investments in infrastructure, some of the digital investments we're making will support us, I think, coming through this pandemic really strongly at the end.
Thank you, Robert.
Thank you. And your next Question comes from the line of Stephen Furlong at Davy. Please go ahead. Your line is now open.
Yes. Good morning. Can I just go back to the base case in this going concern comments? I mean, rightly, you make assumptions that unit revenue will be below 2019, that was a bit more mix related. Maybe it's one for Sean.
Could you talk about because I know VA in the past been very Successfully reconfiguration programs and how big that will play going forward in unit revenue with things like World Traveler Plus. And the second question is just I know at the start you asked answered the question, Steve, in terms of unit costs, probably you have to look at when it comes back, when the volumes come back years 2019 levels. But I'm just wondering about all the restructuring, surely, if you do get back to 2019 volume levels, that unit costs have the potential to be below or even significantly below where they were in 2019. I know for double Air France gave a KLM gave a comment I'm not looking for a number, but I would have thought with the restructuring that the plan maybe to get back below 2019 levels. Thank you.
Okay. I'll let Sean talk a little bit about Cabin reconfiguration for British Airways. But before I do, picking up on your 2019 Non fuel unit costs or unit costs and how they will develop, my expectation is that when we do recover back to sort of 2019 levels that our unit cost performance should be better. That's certainly some of the work we've already done is moving us in that direction. But as Luis said in his presentation, we're not done with costs.
We continue to look to take further costs out. So it would be our expectation to be below the 2019 levels. But we've still got more work to do to get there. Clearly, the restructurings that we've done in 2020 have given us a good start into that position.
Yes. I think The cabin reconfiguration program is ongoing. And if you remember the logic of it was to kind of basically optimize the footprint of our long haul aircraft. And I was going to do that in 3 ways. One was to probably make sure we had the right alignment of FERC capacity.
We have implemented more AFS cabins and reduced the footprint of 1st. But the load factors of the performance of that cabin was performing very well in 2019. And we were looking then obviously to upgrade the Business Class product, which we are midway through. We have about 28% of our fleet now has the new club world suite and the net promoter scores are very high with that product. I think the exciting development is when you mentioned the World Traveler Plus, that's a very successful product and we are increasing the number of seats that are available for sale in World Traveler Plus materially.
And I think that plays well to the kind of development of the market over the next couple of years because we do anticipate that corporate travel will lag other segments like BFR and leisure. And World Traveler Plus is a very strong leisure product and it's very popular. So I think things like the retirement 747s have actually accelerated the development of that product mix. And I think it actually worked very well with the kind of trajectory of recovery that we anticipate. And the other thing I would just add to that is in terms of things like leisure, to be a hubless business is a very strong franchise that we have.
And that as well is a lever we can use commercially to kind of play into demand space as we see coming back more strongly in the next 12 to 18 months.
Okay. Thanks, Sean. Thanks, Steve.
Thank you. And your next Question comes from the line of Andrew Lobbenberg at HSBC. Please go ahead. Your line is open.
Good morning, everybody. Can I ask two questions? One, can I ask about fleet? A little bit curious to see Where you are on the letter of interest, which is all a bit dated now for the MAX acquisition, And obviously, Air Europa sits with some MAXs and MAX orders. So what are you thinking about short haul fleet and MAXs?
And then second question, I'd quite like to draw the attention to the South Atlantic where we haven't had very much discussion. And obviously, you. The acquisition of Aeropar plays a big part in what your plans are. But if we look at the Latin American competitors, most of them are in Chapter 11. And the Alliance configurations there are unstable or open.
So how do you see your prospects for gaining share, gaining competitive position, improving the competitive position on the South Atlantic? Where do you expect your partnerships to lie in that market?
Okay. So in the first question, we continue having the option of the 7 37 MAX is something that we need to consider for the future. As we explained before, we are hoping that the demand is coming back on 2023, the demand that we have in 2019. In the meantime, we need to adjust the size of our fleet to that demand. But we consider, have said before that 737 MAX is a 2 aircraft.
It's flying right now and it's alternatives that we have for the future in our narrow body fleet. And about Aeropas, I think the deal is we explained before that it's very important from the strategic point for the group. In order to maintain a proposal that we have for our customers between Europe and Latin America. It's true that we have some competition there that they are suffering in the same way that I think everybody, we are suffering this context, but some of them are in a worse situation. So we consider that this deal is going to give us the possibility to be a stronger in that market to offer a better proposal in terms of network to our customers.
So we continue to meet it with the deal. I think we will have more all opportunities and that the map of the future of Latin America is not going to be the same map that we have in 2019.
Thanks. Can I just build on that, but you don't have an alliance partner in Latin America at this time, and yet We thought that alliance partnerships were important for this industry? Would you aspire to have 1 in the future?
We have now still agreements with LATAM. For example, we have joint businesses in Peru and Ecuador. It is true that if the area of operation happens, as we hope, we need to reconsider the strategy study in the region, but we have other alternatives apart from developing the relationship with LATAM.
Okay. Thank you.
Thank you. And your next question comes from the line of Joel Qui at Liberum. And just as
Two questions for me if I can. Firstly, on transfer traffic. Do you think that recovers faster or slower than point to point? I can certainly see restrictions on certain origin and destination flows constraining that, but equally opportunities to replace TINA long haul routes? And secondly, could I just ask for some clarification on minimum or target Liquidity as a percentage of revenue, do you have a do you actually have a figure?
I think there was a reference of 20% for 2019 revenue In something like this, you can. But is that actually your sort of threshold level, please?
Okay. On the liquidity target, as you rightly say, we've tended to use 20% of revenue. At the moment, our view in this over the course of the pandemic, given the uncertainty, is to bolster liquidity as much as possible and not to be too tied to a percentage. So that continues to be the case. With regards to your first question on transfer traffic, It's certainly the case during the course of Q4 that the transfer business has been helpful.
But really, I don't think there's a general view that sort of says it's going to recover slower or quicker. I think it really just depends where the restrictions are and how your network fits are and how your network fits to those restrictions. So it's been a help in Q4. I don't know whether you can actually draw a conclusion that says, By definition, it's going to go quicker,
I think, is where the restrictions are.
Thank you. And your next question comes from the line of Alex Paterson at Peel Hunt, please go ahead. Your line is open.
Good morning, everybody. Just on the sort of longer term cost, You mentioned that they would be lower eventually after capacity returns and you mentioned lower distribution costs as part of that. Can you say what other areas you think the savings will be made in? Is it, for instance, lower staffing ratios? Do you think you.
Supplier costs could be reduced, something like that. And then just on forward bookings, you've mentioned that long haul bookings are Running ahead of short haul. Is that because the bookings are for periods further ahead? So are they sort of 9 or 12 months out Rather than short haul being near term, what's the sort of difference there? And then finally, I'm just trying to understand the sort of magnitude of the uptick in bookings.
Where you've seen this surge this week, are those bookings at a normal level or a normal level for the capacity that you're flying? Or are they better than that for this for the week that's just finishing now.
I think I can take the first one. The effort we are doing is an effort that is not only in the label part of the business. It's through that as Steve said before, in 2020, we needed, 1st of all, to stop the bleeding. So we have started a lot of actions inside the group and the different operating companies to diminish the outflow of cash. But We are now in the process to reduce all the costs in all areas of the company because we understand that this crisis is not similar to previous ones, and we are going to have an aviation sector that is going to be different after all this.
So we are attacking all the cost structure that we have, not only labor, suppliers, ownership. And we are putting a special focus also to try to have an increased ratio of variable cost because this guidance has shown that we need to be flexible. And that's the exercise we are doing right now. And I think that we will arrive to 2023 in a better position if we compare with the situation that we have in 2019 because I would say there is uncertainty about how it's going to be the demand at that point how it's going to be the behavior of the customer. So the second question?
Yes. So In terms of long haul bookings, the reason they've been so strong, particularly, I think, in Q4 has been the strong and resilient, there's been friends and relatives demand and also some degree of premium leisure has come through and that continues to be the case. Whether there's a distinction between short haul and long haul and whether long haul is booking further out, I don't think that is the case. What's happened since the Prime Minister's announcement on Monday is we've seen A surge in bookings, as Luis referred to, but that is short haul and long haul. In fact, I would say the short haul bookings have been stronger than the actual the long haul bookings.
And they're particularly strong in the Q3 period, unsurprisingly, because people are gaining confidence that they think there's going to be a summer. So I wouldn't say there's a sort of core distinction between long haul and short haul Given this recent surge in the news and the improvement in consumer confidence, prior to that announcement, The reason long haul was better was because of the more resilient VFR demand and also because of the ability to use your network to transfer people over the hubs, which was also helpful from a demand perspective.
Thank you. And can you just say sort of In relation to the capacity that you're flying, are the bookings that you've had in the last week back to a sort of a normal level? Or are they still lagging behind what you'd expect at can't live here? Thank you.
Yes. Sean here from BA. I can take that. I think in the Q2, Q3 period, The bookings since the announcement were ahead of last year. So we saw that in the short haul segment.
And if you look beyond, say, the May period, we saw an uptick versus the year before, and it was booking into the capacity that we published.
Great. Thank you.
Thank you. And your next question comes from the line of Francisco Rodrigo at Banco Sabadell. Please go ahead. Your line is open.
Yes. Hello. Thank you for the call. I have a couple of questions. The first one would be again related to costs.
I don't know if you could give us any sense on how much of all these restructuring costs on the personnel side could be, let's say, sustainable let's say, forward and therefore could be retained. And the second one would be more on the cash flow. And I would like to have a sense on What level of activity would you need to have to be breakeven cash flow? I don't know if it's fair to say that around 40% to 45% of activity compared to 2019 could give you this possibility of being cash flow breakeven. Thank you.
About the first question, I think we have started this crisis in a different situation in the different operating companies of the group and for that reason, the solution we are giving to the labor restructuring is different as I explained before. For example, in the case of Iberia, you know that we have a transformation program since 2013. We reduced the employee cash in 35%. So when we arrived to this crisis, we had an issue about the number of people working in the company because of the demand that we had that it was much lower. So the imperative measure there was to try to adjust the size of the labor force to the number of flights that we were flying.
And in that sense and the situation was similar in Boeing. In that sense, the forward looking, the ERT we have been explained, it's the right vehicle to do that because you can adjust the production of the people to the production. In the case of VA, for example, we arrived in a different situation because we needed to adjust in one side, the size of the labor force to the number of flights that we're going to fly. But also we've had a situation that in some qualities of the company, the conditions were above the market. So we needed also to be more productive.
So all those measures that we have improved are going to be a fruitful and are going to be there in time because as we said, we are now more efficient. We have more flexibility in the contract, and we can achieve more productivity. I know Sean, do you want to expand in that?
No, I'd agree. I think we as well as adjusting the workforce to meet the new capacity outlook, we do have a more productive and efficient cost base in which to build forward. And we have more flexibility in the business model as well. So I would echo what Luis is saying.
On the second question with regards to sort of what percentage capacity would get you to sort of cash, Maybe cash from net from operating activities positive. I wouldn't give a percentage Because it depends on a number of different factors, what the pricing is, what the load factor is, what the mix of the business is. Well, what I would say is, If we see consumer confidence come back, we will see pent up demand and high bookings coming through would be our expectation. There is pent up demand and people's savings levels and incomes are such that, that would generate further activity. I know BA did a survey recently, which sort of said of its regular customers, over 1,800,000 of them have missed out on at least one trip last year, if not several.
We do think there's a lot of pent up demand out there. So if there's consumer confidence, we'll start to see bookings coming through. That would be the 1st part of getting the cash flow positive. The second part will be on the EBITDA, which would be when people then can start to actually fly those bookings, which you. If the summer opens up, which is our hope and expectation, then you would expect to see there the cash generation improved significantly.
Will that go positive then? We'll have to wait and see because there's too many variables. But I think those are the dynamics that are going to drive us to cash positive generation.
Thank you. And your next question comes from the line of Guilherme Macedo at Caisse Bank. Please go ahead. Your line is open.
Hello. Thank you for taking my question. Just one, if I may. In terms of your net year to emission targets, was there any change in your path to get there, maybe in terms of relative offsets in market based measures? Thank you.
Your question, Tujik. Can you repeat, please?
Yes. In terms of your net fuel to emission targets, Was there any change in your path to get there to the net 0 CO2 emissions by 2015? And then what's In terms of relevance of offsets and marketplace measures?
I said at the beginning that I think this crisis after this crisis, our commitment with sustainability and we know just it of net zero emission in 2,050 is even deeper than the one that we had before. So now what the target that we have is a further improvement to 80 grand CO2 per passenger kilometer by 2025, which is an improvement on our previous target of carbon neutral growth on 2020. By 2,030, we target a 20% net reduction in emissions compared to 2019. And by 2,050, we target a reduction of 50% CO2 gross emissions versus 2,005. And I said before that with the 4 measures that we are working on it.
We will achieve the target of net 0 CO2 emissions in 2,050.
Okay. Thank you very much.
Thank you. And your final question comes from the line of Johannes Braun at Sysl Europe. Please go ahead. Your line is open.
Yes. Thank you. Just one left basically. I think when you announced the Air Europa deal, I think you mentioned that one of the rationales for the deal is to develop the Madrid Hub As a real competitor to the likes of Paris, Frankfurt and Amsterdam, and I was wondering whether you could elaborate a little bit how big that opportunity really is And what your competitive advantage is against Lufthansa, KLM, Air Force to take away transfer traffic from them?
Okay. I think the rationale that we are playing at that time that is the rationale that we maintain is that if Madrid wants to compete with a big hub in Europe, we need volume. And if we add the long haul fleet of Aeropa and the long haul fleet of Iberia, we reached an amount of long haul aircraft similar, for example, to the number of KLM in Amsterdam. So I think if we want to have 3 60 degrees hub in Madrid to price to some destinations that now are not possible because we don't have the scale. This operation is key for Maricap, it's key for the thing, it's key for the customers because they are going to have have better network.
They are going to have more competitive prices. They are going to have access to a wider loyalty program. So All those are the benefits of this operation that, as I said, I think is fundamental for the Madrid Hub.
Thank you. And there are no further questions. Please continue.
Okay. So if we don't have any more questions, thank you very much everybody for being here today. I hope next time we can do the meeting face to face. Take care in the meantime. Okay, and see you next time.
Thank you very much.