Hi, good morning, everybody. Welcome to this result presentation. Want to share with you that the board of directors of 5G is extremely happy with the way the management is performing and managing this the company. Once more, we're happy to share with you very good results. We are one of the fewer lines worldwide to report an improved operating margin compared to 1 year ago.
And we are glad to present to you the highest operating margin from European Airlines. As far as the dividends is concerned, the AGM in you, the shareholders approving unit, our AGM a final dividend of $0.165 in respect to 2018. This makes a total of for last year, which is a 50% higher. And in addition, the AGM approved as well, the payment of special dividend of 1,000,000,000, equivalent to per share paid in early July. As far as the board is concerned, we're pleased to announce the election of 3 new board members at the AGM.
Steve Garnning as the CFO, which is going to be presenting to you today, Margaret Turrin and Javier Ferran, And I'm happy to welcome, the senior independent director of the board Alberto Terolfo, which is joining us today. It's fine. Hand over to Willy.
Thank you, Chairman, and, good morning, everybody. Very pleased you could join us this morning for a No, the good set of results. We continue to do what we promise. We're strengthening the platform, and you can see Evogene success and we'll see more of when Steve take you through the financial performance. Level has continued to expand its business out of Barcelona.
We've now opened the Amsterdam base well. And you're now seeing more tangible evidence of the investment that British Airbus is making in new products in addition to the new club lounge JFK in San Francisco. The 1st of the Airbus A350 1000 aircraft has been delivered and that's fitted with the new club oral suite I think a number of you have been able to see that. We're seeing strong performance on NPS, particularly at British Airways and Whirley. I'll take you through some of those issues later on in the presentation.
And when we look to growth, we're growing the business live in a very sensible manner, 3.4% growth on the North Atlantic, principally coming from investing in the strong network that we have, but expanding the network as well at British Airways, places like Charleston and Pittsburgh, level out of Barcelona to New York and the Erlungus Transatlantic performance continues to be very strong, having launched Minneapolis just recently. Unfortunately, because of ongoing delays with Airbus A321s from the Hamburg facility, which clearly has been unacceptable. We've had to postpone the launch of Montreal from Dublin until summer of next year. Level is also expanding our network into Latin America with the start of Barcelona, Santiago. And when we look at the growth on lax in America and black car caribbean region.
It's important to point out that some of that is actually into the caribbean through the, BA additional seating on the 777200s that are operation from Gatwick. And Europe for us has been good. Very strong performance on our domestic network We are slowing growth in dwelling through the peak summer to reflect the difficult ATC environment we anticipated, and that is having a positive impact both in terms of NPS, but equally, you'll see that it's setting, some of the EU 261 compensation costs that we would have seen, and we're investing that in resilience And we continue to take advantage of the strength of IAG in negotiating new contracts with the aircraft for both Boeing and Airbus, we've seen the orders for the 321 XL Ours for Erlingus and Iberia the order of the 77794 BA and the recent letter of intent with Boeing for 200 max aircraft. Financial performance, I think, is very solid. An increase as Chairman has said in the quarter from 1,000,000 last year to 1,000,000 on a pro form a basis, better results at BA and at well in flat Iberia and Erlingus and a positive unit revenue environment.
So, it's a good second quarter for us. We are maintaining our guidance for the year. It is unchanged and you can read it in the document there. And as the Germans had very pleased to see the AGM approve the final and special dividend and I thank all the shareholders who have written to me to thank us for the special dividend in particular. You'll see we're slowing down growth, as we had promised to do, so, particularly in the fourth quarter, and I'll take you through a more detailed presentation.
But before I do that, I'll hand you over to Steve who will take you through a a closer look at the financial performance. Steve?
So let me, can't you through the results as well as he says, operating profit for the quarter, SEK 960,000,000, that's up SEK 60,000,000 on last year. Constant currency is up GBP 52,000,000. So FX, not a big story at an operating profit level in Q2. In terms of capacity up 5.4%, as Willie was alluding to, when you Q1 would be the highest capacity growth, it's less growth in Q2 of 5.4 percent RPKs were up 6.6%, so seat factor low was up 2. In terms of passenger unit revenue at constant currency, up 1.1%, which is a turnaround from quarter 1, where we were down 1.4 sense of constant currency on rest.
So a 2.5 points swing quarter on quarter. And clearly, there was a benefit of Easter and other holiday timings in that number. And then finally on the slide non fuel unit costs, up 0.4 at constant currency. We strip out the, sort of non ASK driven businesses, Iberia, MRO, BA holidays, actually the underlying non fuel unit costs are actually down 1.7%. So overall, a strong performance, all with the backdrop of fuel price of fuel costs up fuel costs were up 1,000,000 in the quarter, so to grow profit in that context.
Was a good result. Let me take you through a little bit more as to what's been going on with the revenue because This is quite a turnaround in terms of how this graph looks compared to Q1. In Q1, all of the regions with the exception of domestic, are showing a negative RASK movement. And now as you can see, all regions have improved with the exception of LACAR. Let me just give you a quick answer around these domestics.
Domestic was the 1 strong region, in Q1. It continues to be strong. This is primarily driven through demand in the Canary's and the Blairic Islands because there is this price discount assistance that the residents are getting there. Really just alluded to in terms of Europe, it's a pretty good performance in Europe, both Iberia and dwelling had positive risk developments. If you looked at Q1, we were down 5.7% in Q1.
So to be down 1.1% is a good improvement in those numbers. In terms of Asia Pacific, all of our routes have improved on the quarter, with the exception of China mainland. And I think the main drivers of that is partly the Chinese economy, but primarily the amount of capacity that's going into that's being put into the market by the Chinese carats. With regards to a meter, also a very positive performance, sort of three points to highlight there. Firstly, India, our performance there has benefited from the demise of Jet don't have to worry about that.
Secondly, in terms of Nigeria, we did have some sort of turbulence in Q1, particularly with elections. Now where the other side of that, we're seeing Nigeria perform more solidly and also seeing South Africa perform more solidly as well. We have tuned capacity there. Iberia took capacity out. BA has taken capacity out, so there's been some degree of rationalization, but overall, Amica, a good performance.
Probably the one challenging area at the moment is Latin America and the Caribbean. Clearly Argentina and Brazil have been a drag on this region in terms of performance. We think we're seeing both of those bottom out at the moment. Maybe even some slight signs of improvement on Brazil with regards to Argentina, probably a bit too early to tell. Interestingly enough, the rest of that region is performing well.
So there's significant ASK growth, but there's significant revenue, growth performance in that area. If you exclude Argentina Brazil. And then you turn around to North America, and you'd say there was a very disciplined and modest capacity growth in the quarter at 1.5%. And as you can see, a very solid rash improvement of 2.9% unit revenue improvement. So That's very good, particularly with new routes coming online such as Pittsburgh and Charleston in that quarter.
So overall, strong revenue performance in the, in the quarter and it sort of underpins the overall results. I'll turn now to non fuel unit costs and fuel unit costs As I said earlier, non fuel unit costs, up 0.4 at constant currency, if you strip out the non ASK driven businesses, actually an improvement of 1.7%. I don't think there's too much to point out on employee and ownership costs, both down at constant currency. Supplier costs are impacted to some degree by the non ASK driven businesses. So we see more engineering costs, particularly MRO related costs coming through.
And that's one of the reasons when you strip those out, you see the unit costs coming down rather than going up. With regards to fuel, fuel clearly is a story during the course of the quarter, up $245,000,000 in total, and so back in a drag on the overall performance of the business interestingly, when you look about the actual commodity price year on year, it actually happened in 2018, we had significant hedging gains in 2019. We had some modest hedging losses when you look at that overall, you'll see that the fuel build has gone up. Let's talk a little bit more about fuel. So this This slide basically sort of gives you a scenario based on our hedging book at the moment.
So a few observations here. We've we've based this scenario on 640 fuel, and you know as well as I do how volatile that is at the moment. I think it's a decent proxy. And we've based it on $1.11 to euro exchange rate. And what you can see is in half 2, so Q3 and Q4 remainder of this year, you can see that we're about 90% hedged.
And so when you play through that scenario, Our guidance for Q1, we were guiding at that point to GBP 6,200,000,000. So a slight improvement there. I think if you look out to the 4 quarters of 2020, you'll basically see that at a euro level, we're pretty much flat, slightly down in half 1, and we're certainly down 1 to 1.5 points in half 2. So that gives you a feel of where fuels going and where our hedge book looks at the moment. If I look at the that the business as a whole, operating margin 14.2 percent is very respectable with very good operating margin for the quarter.
Only 0.4% down despite the fuel headwinds and ROIC above 15% our target at 15.6%. All of the businesses have had a good performance in the quarter. A couple of things I would observe. If you're eagle eyed, you'll have seen that the Iberia return on invested capital is down a point or so. That's primarily driven by aircraft deliveries in the quarter, building up the capital base.
You'll also see the dwelling operating margin actually improved on the quarter, and that's partly due to the improved operational performance and resilience of the business, which Willie will touch on later on in the presentation. In terms of this next slide, it's, these are the half year numbers rather than quarter 2 numbers, and these are reported currency, not at constant currency. And what you can see here really is that the results were the complexion of these results was set in Q1. Overall, we were EUR 205,000,000 off of last year in Q1. Because we had GBP 60,000,000 better in Q2 with quarter, GBP 60,000,000 back in the second quarter, we're GBP 145,000,000 off versus last year for the first half.
And you can see that coming through on the operating result numbers. Also, if you look at that, an ultimate line at the bottom, you can see the CASK number, which includes the fuel price in it coming through, and you can see a significant increase there as I've touched on. Overall, the fuel bill for the half rather than the quarter was up GBP 499,000,000. So a significant improvement. So to in one sense, to only be 145 off year on year as a good performance.
If we look below the operating profit line, you can see the profit after tax was pretty much flat year on year and EPS slightly up. Only one item I would sort of bring to your attention here is the net currency retranslation credits. This is a 138,000,000 credit This mainly relates to FX hedging. We, we basically take out derivatives to hedge all of our dollar debt, payments going forward, including right of use assets. And clearly, we took out a number of derivatives around the start of the year.
At that point, the forward dollar rate was particularly strong, it was about 1.40 at that point. Since then, you'll know that the the forward rates have come off. And when we've marked these to market, we've had a significant gain in the quarter and in the half. And last slide for me, just looking at leverage, leverages have reduced, and improved primarily because we grow the cash during the first half of the year. So we're sitting there with GBP 8,000,000,000 of cash at the end of half 1.
That's pretty much consistent with the cash position, last this time last year as well. Interestingly enough, you'll know, as Willie alluded to earlier, that subsequent to this event, in July, we would then have paid out about GBP 1,000,000,000 of that with the dividend and the special dividend. So overall, a strong set of numbers, I'll now hand you back to William.
Thank you, Steve. So as I mentioned, we have
trimmed our
growth plans for the remaining part of the year. And so if that's in line with the comments we made at Q1, you can see that for Q4, we're now seeing 3.2% growth. That was originally, on the first presented this chart to full year results last year. It was 5.9%, which equated down from 3.7%, which was figure we gave you, to 3.2. And that's very much in line with what we said.
We would look for opportunities to trim the land capacity in increases to adjust to what we believe is appropriate for the demand environment that we're expecting in the 4th quarter and you will see that flow through into next year. So growth this year now planned at 5%, we had originally given you a figure 6.5%. So you can see we're, we're doing what we had said we would do, which was to look at the evolution of the year as we went through it and to take capacity out if we that that was appropriate. Our guidance remains unchanged. So our current fuel prices and exchange rates, we expect our 2019 operating profit before exceptional items to be in line with the 2018 pro form a passenger unit revenues expect be flat at constant currency and non fuel unit costs expected to improve at constant currency.
And just to reaffirm that we expect passenger unit revenue or constant currency to improve for the remainder of the year. So absolutely no change to the guidance that we had previously given you. Now you've seen this investment case many times, so we're not going to take you through it, but just to highlight a few issues as the Chairman has said really now have paid a total of 1,000,000,000 to our shareholders since 2015, and that includes 1.3 1,000,000,000 in 2018 in relation to 2018. And we calculated there are fantastic dividends yield of 8.2%. So if you were to have bought shares in the 28th February, that's what you would have thought.
So it's clearly a very strong dividend yield. Our cash priorities remain exactly as we said. We're going to reinvest in the business to support accretive organic growth we have a commitment to maintaining a sustainable dividend and any surplus cash that is not going to be used for inorganic opportunities and we're not pursuing anything at the moment will be returned to shareholders. And as we've said from many times now, it's only the manner in which we return that excess cash to shareholders that gets debated by the board. Now We've highlighted the problems with ATC.
It continues to be a major issue, although we have seen a slight improvement in 2018 versus 2019. I have to give credit to euro control, but also we've got to take some credit ourselves because we have moderated our planned growth, particularly at welling, to remove the biggest problem areas that we witnessed last year. Now that does entail quite a bit of replanning of the network, but I think it was absolutely the right thing to do. So although the environment has improved versus last year, it's still very, very poor. Relative to where we would expect it to be historically and relative to the targets that have been set, for ATC providers across Europe.
Europe control through their new director general layman Brennan is making a difference and has come up with a number of initiatives that is improving the environment for airlines, but it's still not good enough, and we continue to call for ANF piece providers to make adequate provision of manpower to deal with the planned, ATC environments that we expect to see in 2020, 2021 and beyond. Some of these issues can be addressed through additional resources Some of them, require a more strategic approach to be taken by European Governments. And we will continue to lobby in a united fashion through our association, the association of European Airlines, and we believe we are being effective in the lobbying action we have. Have we turned to Vueling because Vueling got badly hit last year, as you know, and encountered significant ATC disruption to its network largely because of the core performance in Marsave where we had a number of strikes. We've redesigned the network in, but significant resilience plans in place, and that is proven to be effective.
We've seen a 19 point improvement in our Net Promoter Score on time performance has improved by almost 6 points. And flight cancellations are down over 80% versus last year. And you looked in a number of other European airlines highlight the reduction in the number of flight cancellations. That is down to a lot of actions that the airlines are taking and dwelling in particular has contributed and to a slight improvement in the ATC environment versus last year. I'm pleased to say that based on euro controlled statistics for the period that is available.
Unfortunately, we don't have it right up to the end of June, showed that, dwelling improved from being number 31 out of the top 50 to number 12. So it's not just reflected in the internal metrics that we're looking at. It's also very much evidenced by the, data that Euro Control is providing us. So we avoided quite a significant amount of the additional EU 261 compensation that we paid last year, but that's been invested in the resilience. So you can see there additional backup aircraft, additional crews.
So we're operating in a suboptimal fashion to reflect the, ATC environment, but absolutely the right thing to do for the business. And we will continue to look at how we can strengthen that resilience as we go forward. Level, you will have seen that, Luis, Guygo is now responsible for level chairman. So the level of management team reports into Luis, and I think they will benefit from the significant experience that Luis has in the low cost We've had some significant milestones. We've now carried more than 1,000,000 passengers as of July of this year, and we've expanded to 8 long haul and 21 short haul destinations.
We put the 4th A330-200s into, Barcelona with new the nations from Barcelona to New York and to Santiago. And Level France celebrated its 1st anniversary level Vienna also celebrated its 1st anniversary. And we've now started the Barcelona base with 3 aircraft serving 7 destinations. So, We're very pleased with the performance, particularly so with the performance of Barcelona, although as we highlighted previously, the results have been impacted as a result of the depreciation of the currency China, but Barcelona is still proven to be very effective. Some initial issues that we had to deal with in Paris but the operation is now solid and robust.
And we're seeing some of the shakeout that you would normally expect from the competitive environment there. So, pleased with the way level is developing and very pleased with the guidance that Luis will be able to bring to that going forward. Now, I just wanted to clarify issues in relation to aircraft orders. What you see there is, the capital market day presentation that we gave you, just to remind you that the recent aircraft orders that we have announced including the LOI with Boeing is absolutely consistent with the plan, the aircraft deliveries that we gave you at Capital Markets Day. Impact, as you can see from this, we still have a number of outstanding aircraft to be decided on.
So we're pleased so far with what we've ordered, but there is more work that we need to do. Disappointed, as you've heard me say previously, with the performance of Airbus, very poor delivery from Hamburg on the A321. And it's not just for us, as you know, I'm sure by now, you've heard every airline that is, excited about taking a 321 LR expressed huge disappointment about the delays that they're encountering. We need AirPUS to improve their performance and they need to get working on that very quickly because quite honestly, the delays that we're seeing are just completely unacceptable, and it is impacting on the growth plans that we have. That's particularly true of what we want to do with Herlinda's on the transatlantic.
We're having very, very constructive discussions with Boeing And the LOI that we signed talked about deliveries between 20232027, we're actually looking to see if we can get some of those deliveries in 2022. And the engagement with Boeing has been very positive and very construction. But the simple message is that all of this is consistent with what we said we would do when we gave you the fake plans at Capital Markets Day. Now my favorite subject, Cheetso Expansion. And, you know, if you doubted my views on Heathrow, I want to just reassure you that I'm right and they're wrong.
There is absolutely no way that Heathrow can spend in line with the promises that they've made, and we will expose, the comments for being untrue as when they make them. The total cost of expansion is now $32,000,000,000. If we just focus on what was originally talked about internal packaging and being able to do it. And we're particularly concerned, the amount of money that is now being spent in advance of getting approval. So they will have embedded about 1,000,000,000 of additional cost in the Heathrow RAB before they get approval.
Now the regulator needs to step in. This is completely unacceptable. The costs are, you know, are out of control and, we still, challenge Heathrow to demonstrate that they can do it So the government needs to be very focused on this. I have to be honest, I was very pleased with the commitments from the former secretary of transport, Chris Grayling, who I think was really good on this. I know he's been criticized for other issues.
I can't criticize him at all. Us. He got this message and got it very clearly. The only way we can support Heathrow expansion is that it's done in a cost efficient manner and that is impossible by what we see at the moment. So, we're going to be spending quite a bit of time, with the regulator and with the government on issue.
And this is before you get into the issue of climate change and the commitments that the government has made. We're absolutely committed to play our parts to improve the performance of our airlines and within the industry to influence the industry. We were influential in getting IATA to agree or get the industry through IATA to agree to long term targets. We're still the only, industry to have agreed these long term targets We're looking to continue to improve our carbon efficiency in advance of 2020 when we've committed to carbon neutral growth. And then a 50% reduction in net emissions by 2050.
We're doing that through ongoing improvement in the performance of our business through operational measures. We're improving our performance by taking delivery of new aircraft our, carbon efficiency of 2018 was 91.5 grams of CO2 per passenger kilometer. And we have a target of 87.3 by 2020, which we're on track to achieve. We're also investing in sustainable biofuels. We're absolutely convinced that this is a real possibility and we're prepared to put our money, to support the development of the infrastructure and also to give the commitment to take the product.
And that should give encouragement to, other investors. And we're calling on the government to set up an office for sustainable aviation fuel to really drive the investment in this area because we believe there is a real opportunity. And through the, Corsaia, which is the IKEO platform. It's the Global First and the only industry to have a solution on climate change at an industry level. And this will see industries a aviation reducing it.
The net emissions by 2,500,000,000 tons from 20 2035. And this is through investment in quality and measurable carbonate this is very much the focus of the industry. We want to ensure that we're playing our part, and we're absolutely determined do so. Now just a couple of, 2 issues before I wrap up. You will know that, the permitted maximum notice was issued I think most of you are familiar with the background to this, to ensure that we can retain the operating licenses of the airlines.
It must be a it must be able to demonstrate majority ownership and effective control by EU Nationals. And like all listed airlines, we've had this provision in our bylaws. It's been in by law since we created, IAG in 2011. We announced the permitted maximum notice on 11th February 2019 when our non EU shareholding had reached 47.5. So we keep this under review.
And we intend to remove the permitted maximum when possible. I can't give you any guarantee around when that would be, but this is under a constant review, and the board spent quite a bit of time yesterday, just considering the current position and the options that are available to us. And turning to Brexit, I'm not going to rehearse the first couple of bullet points there because you will know the back around to us. I would say that we remain confident that a comprehensive air transport agreement will be reached between the EU and take. But the important point is the next bullet point, as required by the EU, we submitted through all of our individual airlines the plans on ownership and control to the national regulators in Spain, Ireland, France, and Austria.
And these regulators have confirmed that the plans would satisfy EU ownership and control rules in the event of the no deal Brexit. The EU Commission has been notified about the remedial plans by the national regulators. The plans don't require EC approval, but clearly, C has the commission has the right under EU law to investigate and where appropriate requests the regulators to implement corrective act measures, but I'm pleased that the National Regulators in Spain, Ireland, France, and Austria have acknowledged that our plans satisfy, EU ownership and controller rules. And just to wrap it up, we strongly have the belief that our what was unique and maybe will not be unique going forward as everybody seems to want to copy our structure, but this does drive innovation and superior returns for our shareholders. We've got a strong portfolio of world class brands.
We've got global leadership in our markets. We take advantage of the integrated platform that we have, we've delivered on non fuel unit costs. And at Capital Markets Day this year, we're going to give you which I think is more important actually is the adjusted non fuel unit cost because as we've seen more and more of our business in non ASK related activity. I think what you really do want to see is, how are the underlying airlines performing, particularly in this area? So we're going to go back and give you information on our performance on 2011 to date.
In November on an adjusted non fuel unit cost basis. Strong performance in second quarter of 2019, very pleased with on track to meet our financial targets. We have an investment grade balance sheet. We're paying dividends. We're pleased with the response from our shareholders, and we're maintaining our guidance unchanged for 2019.
So all in all, I have the same, pleased with what we've achieved far this year. Clearly, there's a lot of work that we need to do, but we're demonstrating our ability to respond quickly to any changes in the extra environment adjusting capacity as appropriate and have to be, take this opportunity to thank the team at Welling for the actions that they have taken to stabilize the performance. It wasn't up there making the challenges that they faced next year, but they've demonstrated that they know how to operate in difficult environments and the measures that they've taken are delivering very positive results for our customer and for the business. So on that side, I'm going to hand back to Andrew. Andrew will check us through the Q and A side.
Thank you, Willy and Steve. Yes, it's time for Q and A, you'll see in the, in the seat rests, there's a microphone. So if you want to ask the questions, stick your hand up and I'll pick you. And then if you pick up the mic, and then answering it so in asking your question, if there's a gray button, you press that down and you keep it down on the red light shift. And we've got all the OpCo CEOs here and most of the management committee teams.
So feel free to ask your questions to whoever he wants.
It's James Hollins from Exane. A few for me, please. Just firstly, you didn't mention the premium is leisure trend. I was wondering if you could sort of if ideally give us some data on how those are tracking and particularly obviously at Q3 is more leisure quarter, whether you think Q3 RASK can be up or whether just H2 as a whole? Secondly, Willy, you were quite ambiguous on Heathrow.
I was wondering, if you're right, and obviously your campaign goes to plan, what do you think will actually happen? I mean, both in terms of this, the UK government, will they just say, okay, fine. This is a this is a hiding to nothing, guilty platform, etcetera. Let's just cancel it. And secondly, what the CAA might say in terms of those tariffs, obviously they've been, I think, relatively okay so far saying they should be kept flat through the process, but just some more views because obviously you're closer to them than I am.
And then probably one for Alex, obviously BA versus the union, so it's Nil at half time, near all full time, near all that extra time. I was wondering how we're looking as we go into penalties.
Questions, as you know, we don't break out the premium and leisure, but just to say premiums performing very well. Transatlantic premium, in particular, Erlengus Transatlantic premium really, really good. So, we're saying, good performance across the network with the exception of the areas that, Steve had highlighted, if you take out the Argentina and Brazil in Latin America, the rest of, that area is actually performing very well for us as well. So the areas that we had identified previously, Argentina, Brazil, South Africa and then China. And China, I think, is a combination, as Dave said, it's a supply issue with a lot of additional And I think that reflects the second issue, which is, trade, because I think you're seeing a switch in some capacity that would have gone across the Pacific is now going into Europe.
So you're seeing capacity being redirected. You're seeing a slowdown in some areas because a lot of capacity is not coming online for various reasons. But with those exceptions, the rest of the network, arms well, and it's performing well both in premium and in leisure. And you can see in the IMO, as stated mentioned, as you know, that UK point of sale was good. So I said again on the radio and TV interviews that I've done this morning, we're not seeing any evidence of the Brexit impact.
We can't quite honestly, we cannot identify any impacts. Now I've paired what Eleria said and what others have said, and, and it may be that we're not as exposed to the whole of the UK in the way that they would be a business, as a much heavier weighting towards London and the Southeast So that could be one explanation for us, but we're not seeing any, impact on, bookings or the pro form a bookings going forward in terms of the disability that we have. On the 3rd runway, I'm sorry I wasn't clear enough, this is a really, really important issue, and it's not just important for us. It is important for us. I don't try and hide that fact, but it's important for UK PLC.
Because if you remember, Heathrow is out there trying to calm people that this is good for the UK POC. It's not, it's good for them. And then only. And to be honest with you, we're not going to allow us because they've got away with this for too long. They promise on time and on bunches It's clearly, you know, neither on time nor on budget.
And it's gone so far off budgets, but we've got to call them out. You know, when they're they're saying we can still do this for $14,000,000,000, but they don't mention that that $14,000,000,000 gives you 0 terminal infrastructure And actually to get the full value out of their own way, you have to spend $32,000,000,000. These are outrageous figures. And, we really do need people to wake up to what's going on here because if we don't stop it now and force them either to deliver to the original plans that they have, or stop them, you know, what we're going to be left with was, is the most expensive piece of infrastructure that will be underutilized because you're not going to get people coming in here, if the costs are driven up as they will be based on this ridiculous investment profile that Heathrow is looking at. So, you know, they should be honest and admit at this stage that they can't do it.
And maybe if there's somebody else that could do it better than them, there are others who are interested, we have more confidence than some of the others who have expressed an interest in developing the structure, and maybe that's what should be done. But the CAA can't turn a blind eye to this, and the government can turn a blind eye to it. And we don't expect them to do that. And we don't believe they will do that. Returning to be a before Alex comments, let me just repeat what I've been saying to people.
I don't like giving running commentaries when there's negotiations ongoing, but personally, I do need to acknowledge, I think do a great job. They're very professional. You know, we know they have issues that have upset them. But if I look at the pay offer that BA has made, I think it's a generous and I think it's a fair offer. This is being managed by BA.
I'm not involved in this I won't be involved in it. This is for Alex and his team to resolve, but I'm pleased to say that some of Alex's team and representatives of BA spent a day yesterday with VA and maybe Alex you can update us on what's going
Not a great deal more than that. I was going to say it's hard to tell if we're in the first half, second half over time or penalties. I think the conversations continue. It's important that our team continues to be with them. They spent all day long yesterday.
They may be together tomorrow, etcetera. So I think it's best not to comment very productive discussions. And, if there's something certain about a football game, is it, it ends. And, this will also end.
At some point, and we're looking forward to that.
Ireland's got good track records and penalties. We lost some penalties to Spain, which obviously we have to do from time to time, but We have done well on penalties and other competitions, but, anyway, it's for Alex to deal with. But, yes, I'm pleased we do have to acknowledge by the way that BOPA has not served any notice of industrial action at this stage. That's not to say they won't, but they haven't at this point, which I think is a positive as well. On the, the data, there's quite a detailed explanation it's on page 26.
I'm just looking for it now, yes, page 26, note 17 on contingent liability. So I think the best thing I can do is to point you to that, because, there is a formal appeal process, which we will follow, and we've been very clear, we will, pursue this vigorously But I think it'd be wrong for me to rehearse the arguments that we're going to make, given that the first step on that is that we make representations to the ICO and, that, that will be done in the coming weeks. And you're asking the ICL to mark own homework in one degree. So there is an appeal process that follows that and we've outlined some of that. So maybe the answer to the question you ask is, is what the best coverage if I refer you to, page 26 of the report.
On, the environment in carbon, yes, you're seeing that the price of carbon is increasing. We factored that in. So going forward, it's currently embedded in fuel price. We will continue to embed it into fuel price, but we will give you more visibility if you wanted on that. Our gross submissions for the group last year was 29,990,000 tons of CO2.
So we expect gross emissions to continue to grow. It will stabilize because of the investments we're making, but the focus will continue or will turn to net emissions because we'll be all setting some of those gross emissions through the various schemes that we're involved in. But we're fully committed to that, and we're not arguing about it. We think it's the right thing for the industry We believe that in the short term, there isn't a simple solution for aviation. So therefore, aviation needs to use some of its money to provide incentive to others.
And we'll only do that where these are real carbon reduction where we want to make sure that the investments that's made by the industry are quality reductions. I think that's what everybody wants to see. We're not seeing any consumer pushback at the moment. There's clearly greater awareness, in relation to the issue. I keep giving this statistic and it is important, but 80% of all emissions from the aviation industry are from flights in excess of 1500 kilometers.
And there is no alternative. And as you know, a lot of people don't have an alternative option when it comes to travel. So there are options for some, but for a lot of people, there aren't any alternatives. And, you know, Michael O'Leary and says it more color friendly than I do, but Ireland is an island, and I think we'll continue to be an island. And, there is not many easy ways of getting off the islands without flying.
So what we've got to do is recognize that there will be a need for people continue to travel by air, we've got to make sure that that's done in a as efficient way and, that we play our part to ensure that we reduce our environmental impact. And it's great to say that, you know, Reiner and everybody else is highlighting what it is they're doing. I think that's a positive for the industry. On capacity, you're right, we'll give you more detail, but at Capital Markets Day, but we said this before, we admitted we got Q1 wrong and you could have seen some of that in Q4 of last year. We tried some new things through Q4 and Q1 didn't work.
We've built the additional space. As you know, we, we had RPKs in excess of ASKs, but it was at a significant yields impact and unit revenue impact. We've stabilized that. We're now into positive unit revenue and we'll be positive unit revenue for the rest of this year in Q3 and Q4. But we recognize that, some of the initiatives we tried were not going to repeat, and that means our Q4 ASKs have come down 3.2 and that you see that flow through into Q1 and beyond.
So I think you'll see us as you would expect to moderate the capacity plans from the headline figures that we gave you at at Capital Markets Day last year.
I'm going to take a question that's just been sent in email from Neil Glyn of Credit Suisse, unfortunately couldn't make it because of the evacuation of the bank station. That's a question for Steve and one for Willie. And by the way, if anyone else is out there, we couldn't get here. Just email me a question and I'll pass it on. On cash flow, Disposal proceeds of 1,000,000 were strongly up year on year.
Is this all sale and leasebacks? And what does it imply for net CapEx in FY2019? And does this explain why the lease repayments have doubled 1,000,000 in the first half. And then a question for Willie, I guess, or even allied UK point of sale, given the weakness of GBP, how you're thinking about trying to stimulate point of sale in the rest of Europe and the rest of the world?
Yes, I think, on the UK point of sale, it's clearly something that we have levers that can be operated that maybe other businesses can't. And what we've seen previously, when you see a weakening pound, the flow of traffic changes, so there's nothing new in this, where we witnessed it back in 2016, and we saw significant devaluation of the pound. And we see it in other areas where we see currency devaluation. So a great example of that was Argentina, where Argentina was 60% Argentina point of sale until they devalue the current see there, it's now switched into Europe point of sale because Argentina becomes a very attractive destination with its evaluation that has taken And we have the ability to do that. So we have the levers within our, revenue management teams that, they can put to adjust traffic flows and take advantage of what should be increased inbound traffic into the UK I've heard a lot of people now talk about this as being an option, and particularly London, right, because I think London the UK clearly has a lot to offer, from a tourism point of view.
And also, going forward, I think, for a business point of view, when there's a bit more clarity around what's happening with Brexit. So we're reasonably relaxed, we clearly will have a translation impact as we've seen before, but you guys understand all of that given the BA profitability via revenue being profitability. But in terms of the business, you'll see us, putting a greater bias towards the non sterling points of sale. And, we've been able to manage that situation very well in the past.
Yes. In terms of the doubling of repaying leases, I presume, Neil's referring to the cash flow statement. Page 11 at the IMR. And really what you're seeing here is the move from the pro form a report, the statutory reporting last year to the press 16 reporting. So really, all you're seeing is the payment split in a different way.
Before those payments would have gone through the operating profit after exceptionals. Now they come out of there and they're split between the interest payments and the repayment of leases. So it's a reclassification item. It's not a change in the expectation in overall lease payment costs. In terms of CapEx guidance, I think we've been clear on our guidance when we did the reclassification, net CapEx will be between 2.6% and 2.7% and we'll update that guidance when we get to Capital Markets Day.
Damian, can you remember to press the, I think, as a gray button, otherwise they can't be heard on the webcast.
Hopefully that works. Damian Brewer from RBC. Two questions, please. First of all, on cargo, historically, seen as lead indicator, and the data there have been quite weak. There's some debate about whether that's really the case this time.
Can you elaborate a little bit more about what you're seeing there? And in particular, whether any sort of industries or customers in general, which are causing the, I guess, disruption in weak pricing? And then, secondly, don't really want to mention it, but the sort of B word Brexit, given what our politicians are talking about, could you elaborate a little bit more about how you're about contingencies? For example, how much of the BA fleet is depreciated or near fully depreciated? How much flex there is around there and how you're thinking about the sort of treasury function in the event of another current seat evaluation?
On cargo, for some time now, probably I'd say maybe 8, 9 years, the there's been a significant, change in cargo and passenger performance And we no longer see cargo as the lead indicator because where we've seen, cargo change, we've seen passenger continue. So we do look at this quite a bit. And in fact, so just recently, we spent quite a bit of time to challenge ourselves again. Has has this become an indicator? We don't believe it is.
It is an indicator of trait, but you know, the environment in which we're operating, freight is one of the inputs, but you can't read anything into car go performance or read across anything that we're seeing in car go performance to the passenger performance. And that's been the case for at least 8, maybe 10 years now, I think, and I also has acknowledged that as well. But, Lynn, I don't know if you want to comment on any cargo specifics
Yes, can do. So the cargo market is in a different environment than the passenger market for sure. And the the overall market decline that we saw in Q1 has continued into Q2. Q1 started with weakness in Asia, the time we get to Q2, we're also seeing weakness in Europe. In the market, which is the summer segments holding up very well.
The perishables are holding up well, constant climate holding up pretty well. And we are seeing declines in some sectors that may be of interest, Automotive, for example, and sort of the high-tech, we're seeing declines there. But it's a mixed bag for us in cargoes at the moment.
And on Brexit, you'll know that we're currently operating 33 or as of the end of June, 33, 747, and clearly they're nearly all some of them are very close to being fully depreciated. But in effect, you've got a fleet of 33, 7.7.7 that are, you could sayer depreciated. And we've also got a number of 777200s, the early deliveries of the 777200s, effectively fully depreciated. So in relation to the long haul, there's quite a significant bit of flexibility there. And on the short haul, a lot of flexibility with the, the aircraft that are leased, which is a feature of the business that we always look at to ensure that we have flexibility, and we've got flexibility to move aircraft around the group as well.
So, at this point, we're we can't tell you what's going to happen after the 31st October in same way. So you're not going to tell me, but we're planning our basis, our plans are based on, there being a, a sensible Brexit, whether that's, yeah, so that's not a Howard Brexit. In the event of Howard Brexit, we will review our plans and you would expect to change that. But, at this stage, we're very, comfortable with the flexibility that we have, not just within the BA fleet, but right across the airlines in the group, we've got a lot of flexibility. I think we're actually very well positioned relative to a number of our competitors.
And, what you've got to look out, and we do look at this, our relative position, we're extremely strong relative to some. And anything that's, is going to impact on us is going to have huge disproportionate impact on a lot of airlines out there who are in a very weak position today. So you look at the strength of our balance sheets, our cash our fleet. Everything about the structure of our organization, our ability to respond quickly. We've all been here before.
We've gone through a number of shocks. We know what to do. We've done it before. We do it better this time and we do it better than anybody else, and we've got the flexibility have, and most importantly, the determination. So, you know, it's, I hope we don't have to prove But if anybody doubts, we'll be able to demonstrate what it is we can do.
But I think you're going to be looking to a lot of other airlines to see how they're going to, survive, to be honest with you, given where they are at the moment, or they're likely to be in the event of significant weakening in the economic environment. Yes. Treasury, well, not too much
to say. Clearly, We've seen the devaluation of sterling even from when we were looking at the guidance for Q1. And clearly, we had to factor that in when we made the decision to hold guidance this time around. And clearly, we have a huge sterling profit stream that if there's a devaluation of sterling has an impact of the euro level. So undoubtedly the case, but we've seen this before in 2016 when the referendum result came out there significant devaluation then.
And, we had a bit of a playbook established at that point. And one of the benefits of BA is more than 50% of its revenue is on sterling denominated. And because we've got strong point to point business as well, we do have the ability to reemphasize the point of sale mix that we have and and emphasize the inventory availability to the other end of route. So yes, could there be some initial turbulence? Yes, there could be.
I think we've got the ability to adjust. Yes, I do. So those will be some of the factors we consider.
Hi, good morning. It's Ashika from Barclays. Three questions, if I may. Maybe firstly just touching on the Disaction Environment in Europe. I think you've obviously said that you think a large part of the improvement has been because of the investment in resilience in dwelling and by other airlines.
I mean, obviously, there have been a lot less strikes this year as well. Much of the improvements you think is just simply a function of that? And maybe just a bit of color as to what you think Euro Control has done that has been particularly good. That would be helpful. And then maybe second question on the transatlantic capacity growth into the winter is quite clearly quite benign.
Large part of that, it seems to be the function of what some of the other low cost long haul operators have done in terms of putting back on the capacity, but maybe you could give us a sense of your conversations with the joint venture partners around the more mature capacity growth and how that's kind of playing out into the winter next year? And then finally on the capital markets, Damien, you've mentioned the E cost guidance. And the change in the definition there, is there anything else that we can expect at the Capital Markets Day, maybe something on level financials potentially?
Yes, I think as I said, we have to give credit to Euro Control that being much more proactive, in terms of proposing solution to the problems. And I think there's good evidence to support them being given an even stronger authority over the management of the network as we go forward. But what they have proposed and what's being implemented is different routines to avoid the known pinch point So there's a lot of traffic has been taken out of Carl's route, which was an own pinpoint last year and continues to be So we're avoiding that. There's been a change in the payment structure because previously, the ANSP, the error navigation service provider got paid on the basis of the file's flight plan, not the flown flight plan. So you'd file to fly through a place like Carls, or Marce, and then end up bypassing it.
They still got paid. And the problem there is twofold. 1, you're paying people for not providing a service, but two, the people that were giving you the service weren't getting paid for us. So they weren't there was no incentive for them to take on the additional workloads. That's changed.
And I think, you know, there are 2 very tangible measures that Euro Control have taken that will make a big difference. So now you're seeing traffic bypassing these pinch points. There's an incentive for the neighboring ATC providers to take that because they're going to get paid for that work. And clearly now, you know, you hopefully, the ones that aren't performing will start suffering from a financial point of view. But also, what Europe control has asked airlines to do.
And I think there is good adherence to this is to fly the flight plan that you've given, you know, I know from past experiences, as a pilot, you're always looking for shortcuts, which is great if, you know, when home a little bit early. The problem is that does add to the workloads of the, HCC providers and in an environment where they're already stretched, these, what are considered the right thing to do is actually causing problems, you know, knock on So they've encouraged us to just for everybody's behavior. It was always expected that most airlines would, but there would be one particular airline that wouldn't places that they are creating, because it's in everybody's interest to do so. So it's all playing to a situation where there's still a lot of ATC restrictions in place. The problem has not gone away.
But when you consider that there's been growth traffic. So Europe is handling more traffic this year than it did last year. There's been a reduction in the overall delays. And there has been a reduction in the strikes, you're right, but also there have been actions that can kick in if strikes are, a feature that we see going through. So it's a combination of a number of issues, but it is proven to be effective on transatlantic capacity, I need to point out that Erlungus is not a party to the joint business, so we can't have any discussions with our joint business partners in relation to what their linguist is doing and they can't participate.
So the only thing we can say is what makes sense publicly. So I can't give you any information beyond what you will have read publicly because, that would be inappropriate. But what we see and what I think everybody is, there is moderation in the capacity plans that people have. Transatlantic continues to be a very healthy environment I think the fact that a number of the so called low cost airlines disappeared is evidence of that's a, that's a challenging business to get right. We believe long haul low cost is a potential profitable segment the industry, but it's only going to be profitability of low cost.
And a lot of these airlines just didn't have a low cost. It's only not a low enough cost to be profitable. And there's still, anybody who thinks they can do us, we just look at their call space and we know they can't. So I think the, situation that we're seeing there is reasonably good. On Capital Markets Day, it's a bit early to give you some details where we're talking about the plans for that at the moment.
As I said, one area where I think you would get value is getting greater visibility on what we call the adjusted non fuel unit costs, how we measure that and going back and looking at the performance because that's really a more accurate assessment of the underlying performance of the airlines. And it is being, as Steve gave you the figure, 1.9% improvement in adjusted non fuel given costs for the half and 1.7 for the quarter. So these are having a big impact and, I think more visibility around that would this year. So we'll definitely do that for Capital Markets.
Thanks. Jamie Rowaffen from Deutsche Bank. 3, please. Firstly, going back to ownership and control, So the country regulators, are happy with your plans. And as you've said, you don't really need a blessing from the EC.
So Would it actually be terribly radical just to push ahead with those plans anyway, thus rendering the ownership structure at the IAG parent co level irrelevant allowing you to lift the permitted maximum? Secondly, you talked a bit about the weakness in to mainland China, but Asia Pac in general look very strong in 2Q with the SKs up 7% and the yield up to What's driving that? Is there a bit of sort of Asia point of sales strength there? And also, it looks as though there is growing quite strongly to Asia. Could you talk a bit about what's going particularly well there in 2Q?
And then thirdly and finally, this might be a long shot, but going back to BA and the unions, I appreciate you don't want to talk too much given the ongoing negotiations, but some of the numbers going around in the press talking about, if we get into into the unfortunate situation of strikes, there's a suggestion of 1,000,000 cost, is that a crazy number, or is it a sensible rule of thumb?
Okay. On the shipping control, it's always important to remember that we don't just fly within the EU. There are lots of other jurisdictions around the world, and the structure we have in place has satisfied them. And I think there's been a fixation around the EU issue, but there's a lot of countries around the world that don't even recognize this concept of EU ownership and control. And that's one of the things we've got to bear in mind as well.
So we're looking at this I think, certainly Capital Markets Day, we'll have a lot of clarity, because, prime minister said it's all going to be resolved by the 31st October, and of course, we believe him. So, we'll be able to talk about that. On Asia Pac Iberia's growth is obviously, it's off a small base. Well, Luis is here. I don't know if you want to comment, Luis, but maybe before you comment, Luis, if anything you want to say about?
The only couple of things, just to repeat, all routes, you know, so it wasn't specific, all routes except that China mainland routes, improved core chunk quarter. Probably what was encouraging was we saw Hong Kong improved to some degree, and that had been a challenging market environment. So It was across the board, and we saw some improvement in Hong Kong, which was encouraging. I don't know, Luis, but he wants to add
to that.
And in the case of every other page, it's very small we are only flying to Tokyo and Shanghai? And we have increased the number of frequencies to Tokyo from 3 to 5. That's the reason of the huge increase that you see there.
And, on VA, what VA, I think the figure that's been quoted was in a submission that VA made the court as part of their appeal. It was, 1st of all, was specific to VA and it was specific to an anticipated type of, industry there can be many different forms of industrial action. The point I would make is obviously, what might be negative and would be very negative for BA. Obviously, it will be positive for other airlines in the group, and we will use other group assets. So when we look at it from an IAG point of view, different to how we look at it from a BA point of view.
But I can't put a figure on it because we need to understand what form of industrial actin is being taken. So when and if they do serve notice, we'll then, you know, put an appropriate mitigating plan in place VA will do whatever they can do to assist the customers and the rest of the group will do what they can do to take advantage of the unfortunate situation and support and help BA in their efforts to look after customers. So we'll wait and see.
Yes. Hi, Malte Schulz from Commerzbank. Just to be a bit more clear also on on your expectations beyond, I mean, we've already talked a little bit on Asia, on North America, but on the rest, it's like a bit in Africa, India, what do you expect that to benefit more from the Jet Airways demand? And maybe also on your a little bit on your ex fuel cost outlook for the rest of the year. Should we just the sync effect, it will decline in a more straightforward way, or is there a lower decrease in costs anticipated for the rest of the year?
The rest of the network, as I said, as Steve highlighted, India and jet, there's not going to be a quick solution to jet. I know there's still people thinking about trying to re incarnate jet. I can't see that happening personally. So, there's always been strong demand into and out of India that continues to be the case. There has been some, traffic, additional capacity put into the market, but it's clearly performing better as some sort of the demise of Jet and the rest of the network.
Again, with the exception of the routes that we've highlighted, it's performing well. The areas that we've been very much focused on and have been challenging ourselves is in relation to specifically Argentina and Brazil. We are seeing evidence of Argentina stabilizing in Brazil, maybe improving a little bit, So we're probably at this point more optimistic about Brazil than we are about Argentina, but it's still, you know, it's still way off where we had to expect it to be And in relation to China, we don't see anything changing there because, it's clear that the trades between the U. S. China, that doesn't look like it's going to be solved anytime soon.
So, the China Chinese carriers are clearly looking to put the sheet, whether it makes sense for them. The other side of that obviously is though that there aren't that many aircraft being delivered into China. And I think this is going to be an issue. We've seen some figures that very surprising in terms of what should have gone into China and now won't go into China. So, the supply of aircraft environments is clearly challenged by the grounding of the MAX at the moment.
So when we look at all of the moving parts, the general environment that we're seeing at the moment is quite good, and we don't see that changing quickly. What is clearly changing is the global economic environment, which is softening, but it's still positive. And we've operated in worse economic conditions spend this. So, we're looking at where we need to trim capacity, but we're also looking at where we think there will be opportunities. And we're particularly looking at where we see vulnerable competitors as well, because I don't believe all of the airlines that are operating today will be operating this time next year.
And we're in a position to take advantage of that as well. So, on cost, given that we're reducing our capacity, it clearly makes the challenge of, improving your non fuel unit costs harder, but we're continuing to say say that we, we say the unit revenue improving and the non fuel unit costs being flat, at a constant currency basis for the rest of this year. And that's on the back of the reduction in the capacity that we've seen.
I've just got another questions by email from Andrew Lobbenberg of see. First question regarding the LatAm joint business, what is the timeline and plan to get that operational given the decision by the Chilean? I Supreme Court. And then secondly, on London Airport expansion, very clear about your thoughts on Heathrow, what are your views with each on, Gatwick's plan, London Gatwick's plan to use the emergency runway as a second run rate.
So on LATAM, you clearly, we were disappointed with the decision of the court, and we continue to discuss the options available to us with land, maybe, Luis, you've got it?
Yes. As you know, the restriction we have right now is Chile, and we are evaluating if we can develop the JV in the rest of the countries. We are now trying to find out if we can do that or if it's very complex to develop it that way, but that's the situation we have right now.
And John, cashwick was clear what cashwick had demonstrated is that they can expanded a much more, realistic price. I've always argued that the economic case for an expansion at Gatwick is much lower than its Heathrow. But if Heathrow's third run rate is costing as much as we believe it is now, then that significantly improves the economic case for Gatwick because the problem Gatwick would have placed is that if you build a third run rate, Heathrow, they will lose customers from Gatwick. That's what they history tells you that the operators at Gatwick will look to move into atrial, and then there'll be a hole in the Gatwick capacity, but if Heathrow isn't expanded, then I think there's a huge opportunity for Patrick, and they clearly demonstrated that they have a much more sensible approach to expansion. As I was sitting there, I was thinking, did I give the guidance wrong in relation So if I think I may have said non fuel unit costs platinum, it's non fuel unit costs improve.
Thanks, Steve. You're supposed to interrupt me, correct me. That's your job now.
You got it wrong with it.
So, David
Okay, yes. Two questions. Steve, the pro form a gearing falls to or fell to 1.2 under IFRS 16 and your predecessor had told us he thought it would be inefficient to go below one point two times. I just wondered if you shared that view. And then secondly, just curious if you've got any thoughts about how much money you might be putting into pension schemes are top up next year?
I think it's just over 800 this year, but maybe falls next year.
With regards to whether it's official or not, I'll leave and repay to his thoughts on that one. Clearly, one of the things I've enjoyed over the last month or so from being in the role is, doing our initial bond issuance and it's been very helpful to have an investment grade credit rating as a business to be able to do that. We got particularly good coupon rates on the 1,000,000,000 we raised, it was a 0.5.1.5. So getting the leverage at the right level is important for us, I do have a sympathy with what Enrique is saying that going too low isn't capital efficient. In terms of pension schemes, Two things to mention there.
Really, the first one is on both of these or one of these is well documented in the IMR with regards to the apps pension scheme, We've reached agreement with the trustees, which we're now awaiting court blessing on, and we're hoping we will get that in Q4. The consequence for the company of that agreement would be we'd be putting no more cash into that scheme effective 1st January this year. So that would be a big way, big progress and big development from where we were previously, we were putting in GBP 55,000,000 a year, plus we were putting in a cash sweep element as well. So that's good progress, but we're waiting the court blessing, and hopefully that will be Q4. In terms of NAPP's pension scheme, which is the one we closed the Future accrual last year, previously had a deficit of CHF 2,700,000,000, it'll probably be appropriate for me to give too much guidance because we're in the middle of, negotiating this with the trustees as we speak.
Actually, the regulatory deadline was 30th June for this. So we've gone past the deadline. We're having good constructive talks, but they're vigorous talks as well. And we hope to try and achieve clarity and agreement by the end of September. But I think from my perspective and the way we're entering into these negotiations is having closed the scheme to future accruals are real positive.
It derisks the scheme. And I also look at the quality of the covenant that BA has, which is stronger. So part of what the company is saying when it's going to those, discussions is that needs to be reflected in whatever the deficit recovery payments are.
Questions in the room? I've got one further question on the email from Johannes Braun of mine first. And, he says, I have questions for Lewis. On Latin American weakness to what extent does the strong growth A roper play a role? And how do you view the longer term impact from a potential Air France KLM a euro for joint venture.
I think that's when you said the two countries that we are suffering are Argentina and Brazil. The rest of the countries are behaving well. I think now we have an advantage in the course structure that we have in Iberia. That's the reason we are growing. And I think we are competing very well with all the other companies that are putting additional capacity in this environment.
So I think that, we are not worried about that. Our main concern is Argentina. They're going to have a general elections at the end of October, And I think it's going to be a time where we hope the situation is going to be recorded.
Thank you very much everyone for coming. We refer to the Capital Markets Day several times today. That's November 8th. So hopefully all of you can join us then.